Vietnam’s Fashion Retail Sector
Vietnam fashion market is growing fast & has more room for growth
The Vietnam fashion market is currently valued at US$5.34 billion (2020), going doubled in a period of only 5 years, with a ’15-’20 CAGR of 14%. The two major product categories are Apparel (54%) and Footwear (33%), showing strong growth with ’15-’20 CAGR of around 15%. During COVID-19, the market’s retail value decreased slightly but is expected to recover soon.
In addition to the steady growth, the market is expected to grow even more in the future given favorable sentiments from consumers. In a 2019 survey of 1,000 correspondents studying the future expectation on spending of Vietnamese consumers, the Clothing & Footwear segment is remarked as the most promising segment with 50% of people surveyed reported to increase spending on this category, while the majority pattern for other segments is to maintain spending.
Emerging consumer trends
There are two major consumer trends impacting the fashion market, namely ① the prevalence of online fashion shopping and ② the switch of consumers to branded fashion.
Consumer trend ① shows the increasing favor of consumers to shop for fashion items online. As of 2020, eCommerce (EC) is one of the major shopping channels for fashion, occupying 26% of fashion total sales volume. In addition, according to a Nielsen survey, 61% of respondents when being asked reported to have bought fashion items online, far more than the next category’s figure, which is 45% for beauty & personal care products.
This consumer behavior is also backed by revenue contribution of different product categories on EC. In 2019, Fashion is the second highest segment contributing a total of $1 billion to EC revenue, coming just after Electronics & Media with a revenue of $1.2 billion. The segment is expected to enjoy high growth, with an estimated ’17-‘25 CAGR to be 20%, the highest among other key segments.
Players in the online space are continuously coming up with ways to overcome the online fashion shopping barriers (e.g. sizing & quality issues), with livestreaming and body measuring app playing an important role. Livestreaming, which originally comes from social media platforms like Facebook is now adopted on most EC platforms like Shopee or Lazada. The tool brings out an interactive element when allowing buyers and sellers to interact directly with one another and diminishing several issues while shopping for fashion online, since buyers can actually see what they will get before deciding to buy.
ABODY.AI, a rather new start-up founded in 2019 is attacking a major pain point of fashion lovers when shopping for fashion items online – size. The startup provides sellers with a tool to provide an end-user’s body measurement by analyzing her body’s photo. It also has comprehensive size database of different brands and can map body measurements of an end-user with different brands’ size charts, since someone with a size S in one brand can be an M in another. According to the founder, ABODY.AI’s mission is to help companies translate real body measurements to the language of tailors.
Consumer trend ② considers the changing preference of consumers product-wise. Unbranded products imported from China or VNXK (locally manufactured products imitating branded ones) are still making up a majority of Vietnamese fashion market, occupying 76% of the market’s retail value. On the other hand, branded fashion is considered to be quite modest with only 24% of the market value. However, given its significant growth of 24% (’15-’20 CAGR) in comparison to a mere 11% of the unbranded segment, it is clear that consumers are rapidly switching to branded category. This trend is driven by higher income of the population and the fact that consumers are well educated by brands & fashion trends. Several international fashion brands are entering the Vietnamese market, with some remarkable names being Zara, H&M, and Uniqlo. Local brands are also a force to be reckoned with, with one of the market leaders - Viet Tien, recording a revenue of US$360 million in 2018. Both international and local brands are rapidly expanding their store coverage to meet ever-increasing customer expectations.
The endorsement can easily be observed looking at the below image with consumers spending hours waiting in line to buy products from international brands on their opening days. This clearly shows the attention and favor brands receive from Vietnamese fashion lovers.
Startup’s initiatives to capture market trends
Some startups are quick to point out the market dynamics and provide solutions that capture both the trend of online shopping & branded products. Drobebox (est. 2020) can be an example. Acknowledging that the market is having a soft spot for branded fashion and the fact that women want to change their clothing daily, Drobebox adopts a cloth-renting model that is famous in countries around the world, such as Singapore with Style Theory or the US with Rent the Runway. According to its founder, Mr. Son Tang, Drobebox’s addressable market is 40% of the total fashion market, which is over US$2 billion. This is estimated basing on the fact that 40% of clothing purchased are not in regular use, and instead of buying those, renting is an ideal alternative.
Drobebox’s main value propositions are the lower trial-and-error costs incurred for fashion lovers and the great savings it provides. This model promises low trial-and-error costs, meaning instead of buying an item and putting it away because one does not like it, the person can now actually experience the product and decide to buy it (at a much lower price) or move on to other items. In addition, Drobebox also lets users wear several outfits at a fraction of the cost, equal to a huge saving compared to them having to buy 30 outfits per month.
Technology is also an advantage of Drobebox. By using an online app powered by Artificial Intelligence (AI), users can receive relevant clothing suggestions, place orders, receive rented items, and return the used items without having to clean them at their convenience. According to Drobebox’s founder, their AI can predict a customer’s taste with 95% accuracy after her 3rd order. Drobebox is currently partnering with several local fashion brands and using its system to predict trends that can be beneficial for brands in the future.
The future of Vietnam fashion market
Vietnam fashion market has great potential, given not only the growing market size and favorable consumer trends, but also the world’s top manufacturing capability. Textile is the top No.2 export product of Vietnam in terms of value that reached US$35 billion in 2020 (slightly decreased due to COVID-19), with main markets being high quality standard ones like the US, EU, and Japan. It is a pity that this capability has yet to serve the domestic market.
About the Authors
The article is co-authored by a DI consultant team
Hoang Thi Tram Anh, Manager
