A gloomy future for traditional groceries

By Tran Anh - Jul 20, 2018 | 07:54 AM GMT+7

TheLEADERAccording to a recent survey by Nielsen Vietnam, consumers' spending now tends to increase on larger items such as travelling, motorbikes, phones and home appliances.

A gloomy future for traditional groceries
Traditional groceries in Vietnam are not confident in their business performance in the future

According to a recent survey conducted by Nielsen Vietnam with 800 traditional groceries which sell over 30 types of goods, their level of confidence in the retail sector and their business performance was low in the last two years, especially in urban areas.

Accordingly, the confidence index of traditional retailers fell slightly to 68 points in the first quarter of 2018, compared with 69 points in the first quarter of 2017.

The Retail Confidence Index (RCI) is considered on an average 100 scale. If the index is above 100, retailers are confident. If the index is below 100, retailers are not confident.

The index of traditional Vietnamese retailers is below 100. This figure indicates that they are not optimistic about the potential of the retail market, and need more support to boost the purchasing power at their shops.

Besides, 46 per cent of the surveyed groceries responded "bad" to the retail sector. When asked about business performance, they showed an even more pessimistic view when 52 per cent said that the situation would not go on well in the future.

Traditional retailers have expressed a keen interest in consumers' purchasing power, consumer flows to their shops, and competition from other retailers.

Nguyen Anh Dung, Executive Director of the Retail Measurement Services at Nielsen Vietnam, said that while the consumer confidence index (CCI) continued to rise, the RCI was rather stagnant. This contrast means that the optimism of consumers did not lead to an increase in consumer purchasing power in the traditional trade channel.

"Consumers' spending is now pouring into bigger targets, which are experiencing strong growth, such as travelling, motorbikes, phones, home appliances," Dung said.

With more than 1.4 million shops in Vietnam, the traditional trade channel is the largest regarding both the number of shops and its revenue contribution to the fast-moving consumer goods (FMCG) sector. In urban areas, it accounts for about 83 per cent of the total revenue, equivalent to nearly $10 billion, in the FMCG sector.