Fast fashion competition bursting at the seams in Vietnam

By Ngan Anh   October 23, 2017 | 05:16 am PT
An increasingly wealthy population has global designer brands looking to stitch up the market.

Nguyen Minh Ngoc jostles for space in a Mango store as she rummages through a dizzying array of marked-down clothes in search of a perfect blue sweater for the upcoming winter.

It's a routine shopping excursion for Ngoc, who admits to spending at least VND4 million (some $180) per month in Mango, Ninewest, Zara, Forever21 and H&M, while ignoring home-grown labels like Nem, Blue and PT2000.

“I’m more inclined to foreign brands because of their quality. I don’t mind spending more if the quality is better,” the 28-year-old PR worker said.

In the past, Ngoc either bought clothes on overseas trips or ordered them online. This obsession with foreign brands among young customers like Ngoc has emboldened global brands to open outlets in Vietnam.

Last month, the opening of Swedish giant H&M’s first store in Saigon attracted around 4,000 shoppers. The firm will open its second outlet in Hanoi on November 11. 

By setting prices for selected items at 15-20 percent less than its stores in Malaysia and Singapore, Zara has triggered a craving for fashion in Vietnam.

Its cousins, Stradivarius, Pull & Bear and Massimo Dutti, have also dipped into the market of over 90 million potential Vietnamese customers. Other brands like Mango (Spain), and Nine West and Old Navy (U.S.) have also stepped foot into the country.

Japanese giant Uniqlo and American brand Forever 21 are also expected to arive soon. Fast Retailing, the operator of Uniqlo, began recruiting staff in Hanoi and Saigon in May to launch stores in several cities.

There are some 200 international fashion brands in Vietnam, accounting for more than 60 percent of the market share.

Lucrative market

An increasing middle-class population has made Vietnam a magnet for international fast fashion brands.

Vietnam’s economy has experienced rapid growth in recent years, and average annual income reached $2,200 last year, according to the World Bank.

The so-called "middle and affluent class" earning $714 a month or more in Vietnam will double to 33 million people, about a third of the population, by 2020, the Nikkei Asian Review reported, citing the Boston Consulting Group.

Customers are well aware of the latest fashion trends and have a desire to buy fast fashion brands, which refer to those that mass-produce and sell inexpensive clothing by rapidly copying the latest trends.

"The from brands like Mango, H&M and Zara suit me because their designs are simple and modern, and their prices are reasonable," Le Thu Trang, a student from Hanoi University, said.

Trang, 22, also likes to wear Zara and H&M clothes. “The two brands occupy nearly half of my wardrobe. When they open outlets in Hanoi, I will definitely visit them,” she said.

Shoppers at a mall in Hanoi. Photo by VnExpress/Ha Phuong

Shoppers at a mall in Hanoi. Photo by VnExpress/Ha Phuong

Change to survive

Le Viet Thanh, CEO of local brand K&K Fashion, said some local retailers are worried about international brands penetrating the domestic market. “They are big enterprises with strong financial backing. They have the ability to launch promotions that could stitch up local rivals.”

Pham Thai Binh, head of retail at consulting firm Savills, said competition in the local fast fashion industry is heating up, and most of the key players are foreigners. Domestic fashion retailers need to be more sensitive to changes in consumer behavior in order to stay in the game, he said.

Le Quoc An, former chairman of the Vietnam Textile and Apparel Association, said the entry of foreign brands could be a big challenge to local fashion retailers such as Ninomax, Blue, Foci and PT 2000.

But in the long term, local brands should be able to hold their own as long as they adopt business strategies with cheaper production costs.

Echoing him, an industry insider said: “Competition is good for everyone. Local brands just need to step up.”

The story of how coffee chains Highlands and Trung Nguyen have stood their ground despite Starbucks' attempted invasion has proved there is room for everyone, he said. Homegrown coffee chains like Highlands and Trung Nguyen have beaten foreign rivals by being more attuned to local tastes and limited budgets.

Serial shopper Ngoc said that better value would make her rethink her opinion of Vietnamese products.

“If Vietnamese brands could improve their quality, I would think about shopping at local shops again,” she said.

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