Despite the outbreak of the Covid-19 pandemic, Vietnam is expected to remain one of the fastest-growing economies in Southeast Asia. This is due in large part to its early and decisive containment efforts, as well as robust and resilient economic fundamentals.
But that is not to say that retail will return to business as usual after the crisis. Within a few short weeks, Covid-19 has resulted in social distancing across Vietnam, isolating people in their homes and shutting down parts of the economy.
"From a retail sector perspective, products that were once basic needs have now become priority human needs, which need to be delivered without the high degree of physical, in-person interaction", says Vu Duc Nguyen, consumer industry leader, Deloitte Vietnam.
Delivering this entails a mindset shift for many retails players. Before the onset of Covid-19, the retail sector did not need to think too hard about how to serve basic human needs. The focus then was primarily on investing in offerings to serve the Vietnamese consumer across varying levels of sophistication, and clearly articulating value propositions and brand associations.
But as retailers and consumers alike heightened their focus on safety aspects in the wake of the Covid-19 outbreak, they have moved to minimise physical interactions and maximise digital interactions. This has resulted in an accelerated shift towards omnichannel purchasing behaviours, as e-commerce channels are increasingly used as a substitute for physical shopping activities.
Results from Deloitte's recent report on retail in Vietnam shows that more than half of Vietnamese consumers have reduced their frequency of visits to supermarkets, grocery stores, and wet markets, while 25 per cent of them have increased their online shopping, as a result of the pandemic.
Higher levels of omnichannel purchasing behaviours have been observed as a result of the Covid-19 outbreak, as consumers look to stock up on groceries and daily necessities. Retailers should capitalise on this momentum to drive expansion and increase penetration rates when moving into the post-Covid world.
The Covid-19 pandemic had resulted in an abnormal spike in the Vietnamese consumers’ expenditure on FMCG products in the first quarter of 2020, as the sector hit double-digit growth for the first time in seven years.
This was due in part to stocking up behaviour, as consumers rushed to purchase staple products, such as fresh food and essential packaged consumer goods, in response to social distancing measures.
However, preferences for different retail channels differ by region. In urban areas, where there is greater availability of larger retail formats, shopping cart sizes were larger as consumers sought to limit travel and contact. In rural areas, however, where traditional trade channels remain dominant, consumers made more trips.
Overall, all channels witnessed rapid growth. This is an indication that the pandemic has inadvertently encouraged omnichannel shopping behaviours.
The Covid-19 pandemic has accelerated Vietnam’s shift towards omnichannel purchasing behaviours. While many retail brands had already embarked on digital transformation and e-commerce initiatives even before the pandemic, recent lockdowns and social distancing measures have pushed them to find ways to engage their consumers more actively and effectively online.
As a significant proportion of consumer spending goes digital, both brick-and-mortar and e-commerce retailers will need to rethink their consumer experience strategies in the new normal.
Although some degree of renewed interest in brick-and-mortar shopping when lockdowns are expected to be eventually lifted, retailers will need to understand that the consumer psyche and habits may have permanently evolved. For a start, there could be some consumer aversion to physical contact in a store setting, as well as a greater focus on convenience and digital experiences.
For brick-and-mortar retailers, this means the need to invest in the appropriate digital technologies to create optimal consumer experiences. This could include, for example, unmanned retail concepts, as well as the use of scan-and-go technologies that enable consumers to scan products and pay for purchases through contactless means.
In terms of e-commerce, players will need to examine how they can sharpen their fulfilment proposition. While the Covid-induced rush for online purchases resulted in some initial hiccups to delivery and fulfilment, retailers will need to address this in the longer term. Specifically, they will need to focus on ensuring transparency and flexibility, for example, by enabling consumers to track their deliveries or pick their own delivery timeslots.
As the Vietnamese consumer’s journey transforms to comprise a larger number of online touchpoints, e-commerce and brick-and-mortar players should also find opportunities to collaborate on omnichannel marketing activities, while augmenting one another’s understanding of how consumer price sensitivities and concepts of brand appeal have changed as a result of the Covid-19 pandemic.
Some retailers will emerge weaker from the crisis, while others will emerge much stronger. Ultimately, this crisis signals an accelerated and irreversible shift towards omnichannel retailing that is likely to permanently redefine the consumer experience. Without exception, every player will need to adapt, change, and innovate their practices to remain relevant today and in the future.