September 9, 2017 4:13 am JST

After years of sewing casual fashion, Vietnam tries it on

With local incomes rising, brands like H&M rush in to capture demand for quality

ATSUSHI TOMIYAMA, Nikkei staff writer

Swedish casual fashion retailer H&M will open its first Vietnamese store in the same Ho Chi Minh City mall where Spain's Zara did so a year ago.

HANOI -- International casualwear brands are rushing to set up shop in Vietnam, as the longtime production hub for the apparel industry blossoms into a big fashion market amid economic growth that lifts incomes.

Fast fashion on the rise

Sweden's H&M Hennes & Mauritz debuts its first H&M store in the country Saturday, boasting hundreds of square meters on two floors of downtown Ho Chi Minh City's Vincom Center shopping mall. A wide range of men's, women's and children's clothes will line the racks, along with footwear, bags and other goods. The lineups of branded products will offer a welcome change for customers used to the many Hanoi and Ho Chi Minh City shops that handle imports of multiple foreign brand products.

Zara, operated by Spain's Inditex, likewise staged its Vietnam debut in that complex last September with a store occupying a large swath of two floors. The two retailers combine to make the Vincom Center mall an emblem of casualwear's growing popularity in Vietnam.

The Spanish chain's offerings are more expensive in Vietnam than in Japan, and may carry prices up to double of what one would find at Vietnam's street markets. A woman from Hanoi bought 10 million dong ($440) worth of clothes including dresses and shoes for her daughter in elementary school. "I like how fashionable the design is," the woman said. "It's expensive, but it's good quality. I bought some for friends, too."

Zara plans to open a second location, this one in Hanoi, as soon as next month.

Fast Retailing, the Japanese operator of Uniqlo, began recruiting staff in Hanoi and Ho Chi Minh City in May. The company mainly sought college students on track to graduate, setting off speculation that it is planning to launch stores in several cities starting with Ho Chi Minh. U.S. apparel corporation Gap opened its first Vietnamese Old Navy outlet in Ho Chi Minh City in June and added a Hanoi location in early September, with a third store to come within the month.

From maker to buyer

China's rising labor costs accelerated a shift toward outsourcing production of sewn goods to Vietnam, where wages were roughly half as much. Many powerful businesses operate in the country, including Vietnam's Garment 10, which has teamed with Japanese textile and apparel company Aoyama Trading, and the An Phuoc garment maker group, which supplies designer brand Pierre Cardin. Textiles contribute more than 10% of Vietnam's gross domestic product and serve as the country's second-biggest industry.

But attention is shifting from the country's producing to its purchasing. Vietnam once heavily valued price, with cheap and low-quality goods often sold there, but consumers increasingly focus on quality. This was prompted in part by a pollution incident at a steel plant in the central province of Ha Tinh that killed large numbers of fish.

Vietnam's total retail sales increased 10.2% in 2016, marking half a decade of growth in or around double-digit territory. Per-capita GDP reached $2,300, reflecting rising purchasing power. More expensive products that offer higher quality and more brand appeal are selling well.

Organic vegetables may cost three to four times higher than street market produce, but that does not spoil their soaring popularity. Specialty shops such as Bac Tom sell the veggies, as does Vingroup -- the country's No. 1 real estate developer -- through its VinEco brand. Foreign-made diapers also sell, including Japanese offerings such as Kao's Merries or Unicharm's Moony lineup, despite prices at least double those of locally made versions. Overseas casual apparel brands aim to capture just this sort of demand.

Rising wages mean Vietnam eventually will lose its sheen as a production hub. But the purchasing power of its increasingly sophisticated population of about 93 million oozes appeal.

Illicit competition

The burgeoning market for casual fashion must also contend with so-called B-grade goods misappropriated from factories. These items sell at many retailers and are roughly equal in quality but about half the price.

Such shops generally carry castoffs from the likes of Zara and Gap that were damaged or not made to specifications. Some simply have the brand name removed from their tags. Retailers buy these goods directly and sell them on the cheap.

Those "lesser-quality" items, seen as leftovers from exporting, have taken hold with the populace. Local plants making sewn products, shoes, leather goods and the like sometimes will "deliberately dirty a certain proportion" of output to sell on the black market for profit, said one Hanoi-based source working in procurement.

Such moves are often a desperate attempt to stay afloat by plants forced to swallow harsh terms imposed by foreign companies. But to ensure healthy market growth, a response from the government and other bodies likely will be needed.

FAST RETAILING CO., LTD.

Japan

Market(Ticker): TKS(9983)
Sector:
Industry:
Retail Trade
Apparel/Footwear Retail
Market cap(USD): 31,350.6M
Shares: 106.07M

AOYAMA TRADING Co., Ltd.

Japan

Market(Ticker): TKS(8219)
Sector:
Industry:
Retail Trade
Apparel/Footwear Retail
Market cap(USD): 1,999.48M
Shares: 55.39M

Kao Corp.

Japan

Market(Ticker): TKS(4452)
Sector:
Industry:
Consumer Non-Durables
Household/Personal Care
Market cap(USD): 29,038.8M
Shares: 495M

Unicharm Corp.

Japan

Market(Ticker): TKS(8113)
Sector:
Industry:
Consumer Non-Durables
Household/Personal Care
Market cap(USD): 14,216.6M
Shares: 620.83M
Asia300

Vingroup JSC

Vietnam

Market(Ticker): STC(VIC)
Sector:
Industry:
Finance
Real Estate Development
Market cap(USD): 5,696.94M
Shares: 2,637.71M

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