Consumers’ belt tightening hits businesses

The 31-year-old marketing employee says he has been waiting for discounts to find cheap clothes and cooking at home to reduce expenses.

A survey by market research company NielsenIQ Vietnam found 62% of consumers chose to cook at home in the first quarter of the year to save money, a three point increase from the previous quarter.

Some 16% of respondents said they spent less on grocery shopping and 50% refrained from buying luxury goods, both up seven percentage points.

This tightening of belts has had a visible effect on businesses.

“Well-known brands still sell but much slower than before,” Han Sovy, director of public affairs at online fashion shopping site Cosmodern, says. “Some smaller brands that recently launched have temporarily ceased operations.”

PCS, which operates gymnasiums and provides personal training services, reported a decline in its first half performance. Its founder and CEO Trong Nhan says: “People are cutting their spending, especially on non-essential activities like sports and fitness training.”

According to a report released earlier this month by the HCMC Union of Business Association (Huba), 30.4% of businesses in the city saw lower sales in the second quarter while 57% reported no growth. Some 64% pointed to “lower consumer demand” as their main challenge.

A Huba official said at a HCMC people’s committee meeting earlier this month: “Retail sales have not grown much due to weak demand as many consumers have seen their income reduced. Overall, businesses are facing difficulties due to low market demand.”

The country’s unemployment rate rose slightly in the second quarter, which could have affected household incomes.

The Business Confidence Index tracked by the European Chamber of Commerce in Vietnam (EuroCham) decreased from 52.8 in the first quarter to 51.3 in the second. “Spending levels and business activities show positive signs, but not uniformly across sectors,” EuroCham said in a report.

In the first half of the year, retail sales of consumer goods and services grew by 5.7% year-on-year, lower than the 8.8% rate seen in the same period last year, according to the General Statistics Office.

But experts are optimistic that consumer spending will improve in the second half, though it will need businesses to find ways to stimulate demand.

Nhan says his firm is focusing on enhancing service quality and staff expertise to retain and attract customers. Sovy says several brands on their website plan to launch cheaper collections and run more discount programs.

Nguyen Cao Ngoc Dung, senior manager at NielsenIQ Vietnam, recommends that retailers should pay attention to their products, prices, and promotions.

Prices are a major concern for consumers when buying a product or service, her firm’s research shows.

Businesses can also target international tourists to boost sales, experts suggest.

According to the General Statistics Office, Vietnam received over 8.8 million foreign visitors in the first half of the year, a 58.4% increase year-on-year and 4% up from pre-Covid years.

Service booking platform Klook Vietnam saw demand from these tourists in the first six months jump 1.7 times from a year earlier.

Its CEO Nguyen Huy Hoang says the firm ran numerous promotions to spur demand during the peak summer season and partnered with lenders and credit providers to provide discounts during weekends.

In HCMC, authorities are seeking solutions to support businesses and boost tourist spending.

Following a directive issued earlier this month by Phan Van Mai, chairman of its people’s committee, government agencies are working to speed up public investment, address businesses’ difficulties and explore ways to extend international visitors’ stay in the city.