Capturing consumer trends: Key to increasing competitiveness in retail

DNHN - Changes in consumer spending are presenting challenges and fluctuations, forcing businesses to adapt their strategies to better engage consumers, provide appropriate solutions, and create customer satisfaction.

Vietnamese consumers tighten spending

In a volatile environment, understanding consumer needs and shopping habits, as well as predicting and keeping up with consumer trends, has become increasingly challenging for businesses. Staying updated with market research data and analyzing changes in consumer behavior can help companies find the right solutions, thereby enhancing competitiveness and achieving success.

According to data from the General Statistics Office on May 29, total retail sales of goods and consumer service revenue in May 2024 slightly decreased by 0.1% compared to the previous month due to reduced consumption and travel demand after a long holiday.

The total retail sales of goods and consumer service revenue at current prices in May 2024 was estimated at 519.8 trillion VND, up 9.5% compared to the same period last year. Notably, food and foodstuff increased by 9.9%; household goods and equipment by 9.0%; apparel by 9.3%; accommodation and catering services by 17.0%; and travel services by 34.3%.

In difficult economic conditions, Vietnamese consumers are making significant adjustments, such as reducing unnecessary spending, limiting purchases, or changing their spending methods to manage with a tighter budget. These changes pose many challenges and require businesses to adjust their strategies to effectively engage consumers and provide suitable solutions.

At the "Vietnam Consumer Trends" forum organized by the Institute of Brand Strategy and Competition Research (BCSI) on June 19, Ms. Dang Thuy Ha, Director of Customer Behavior Research at NielsenIQ Vietnam, noted that consumers are reducing spending from short-term to long-term. Specifically, 66% of consumers chose to cook at home in Q3 2023, compared to 60% in Q4 2023, and 62% in Q1 2024. Additionally, 50% reduced purchases of luxury items, and 31% postponed major expenses.

Remarkably, to cope with rising costs, consumers are seeking online deals to cut down on grocery expenses and prioritizing physical and mental health.

“Businesses need to be flexible, quickly adapt, innovate, and reassess their business strategies to align with current consumer needs and trends”, Ms. Thuy Ha suggested.

Ms. Nguyen Phuong Nga, Director of Kantar Vietnam's Business Division, pointed out that it has become increasingly difficult for brands not only to retain consumers but also to attract them. Post-Covid-19, consumers have developed new shopping habits, reducing the frequency of shopping but using more channels, with an increased average spending per trip. The shopping frequency has decreased by 15% compared to the pre-Covid period.

This shift makes customer attraction and loyalty more challenging for businesses due to less frequent consumer interactions.

Ms. Thuy Ha remarked, “Vietnamese people have many concerns, such as economic growth, job security, and pollution. Nearly 40% of Vietnamese consumers are cautious with spending due to uncertainties ahead. Despite positive economic signals, consumers still have many worries. How do they manage spending and save? In fact, 94% have changed their shopping habits in fast-moving consumer goods. Additionally, saving electricity and reducing unnecessary household expenses help manage family budgets. These are prominent trends in Vietnamese consumer behavior, similar to trends in the Asia-Pacific region, where consumers prioritize online shopping for savings.”

In recent years, retail channels have shifted from traditional to modern online platforms, especially in urban areas. Modern specialty stores have also seen significant growth. Mother-and-child chains and health and beauty stores have expanded, leading retail growth overall.

Despite efforts in communication and store expansion, major retailers face significant challenges in customer retention. A report by Kantar indicates that the market share of the top five modern retailers, Co.op Mart, Central Retail, Winmart, Bách Hóa Xanh, and Winmart+, has been gradually decreasing over the years.

Experts at the forum agreed that retail businesses face many challenges in optimizing supply chains, pricing, and adapting to online business trends, which create competitive pressures.

The rise of modern shopping options offers more choices for consumers, making it challenging for brands to keep up with all trends, customer behaviors, and technological advancements.

The boom of E-commerce

At the forum, Mr. Ta Manh Cuong, Head of Trade Promotion Department, Ministry of Industry and Trade, emphasized that the shift in shopping channels from traditional to modern online platforms, especially in urban areas, presents both opportunities and challenges for businesses.

To survive and thrive, Cuong suggested that businesses need to understand domestic and international consumption regulations, identify trends and behaviors by product category, and design and develop new products that meet consumer preferences.

Ms. Nguyen Phuong Nga added that despite significant improvements, five out of ten consumers believe that Vietnam's economy is struggling and that this situation will last at least six months to a year. Consequently, Vietnamese consumers increasingly view seeking online deals as an effective way to reduce grocery expenses. Thus, businesses should focus on leveraging e-commerce channels to boost sales.

Ms. Thuy Ha highlighted that e-commerce is growing due to increased internet usage and improved logistics systems. More international logistics companies are entering Vietnam, and local companies are investing heavily in domestic development. Consumers seek savings and convenience, which drives e-commerce growth, with an annual increase of around 30%. Initially, e-commerce was limited to sectors like travel, education, and apparel, but now fast-moving consumer goods are widely available online, indicating that nearly everything, including cars, can be sold online.

Beyond e-commerce, digital transformation is crucial for retail growth, according to Mr. Le Hung Cuong, representing FPT Digital. Businesses must find ways to retain loyal customers by changing shopping methods, enhancing convenience, providing unique experiences, and focusing on product quality and sustainability.

“Developing new technologies and embracing green transitions offer opportunities for comprehensive transformation, such as data-driven hyper-personalization to help customers understand their needs and investing in AI to promote virtual shopping”, Mr. Cuong concluded.

Bao Bao