Rising above Covid-19: the 2020 winners of Vietnam's economy

by Anh H. Nguyen



The novel Gone with the Wind, widely considered one of the Great American Novels, tells the story of one sprightly Scarlett O'Hara and her struggles during the Civl War, and after that, the Reconstruction Era. It also features one of the most iconic male characters of modern literature: Rhett Butler, who has a seemingly endless vault of great quotes that he likes to spring on an exasperated Scarlett. In one of such musings, he famously says: "I told you once before that there were two times for making big money, one in the up-building of a country and the other in its destruction. Slow money on the up-building, fast money in the crack-up."


This sentiment has been echoed many times before and since then, albeit in slightly less cynical ways. The core idea is that even in times of crises, when everything seems bleak and hopeless and 99% of people suffer, 1% will still prevail. Sometimes it is due to luck, sometimes it is not. The Vietnamese have a similar saying: "There is always opportunity hidden in peril." It is up to resourceful parties to see and seize that opportunity when they can. After almost a full year of living with Covid-19 and adjusting to "the new normal", the people of Vietnam have seen many downs, but there are still a few ups. What are those?


The black swan effect


When the Covid-19 pandemic debuted at the beginning of this year, probably very few could predict its severity and longevity. Its drawn-out run shows no signs of ending any time soon and right now, even with new vaccines on the horizon, the outlook does not seem so bright. Although the government and people of Vietnam has done a wonderful job keeping it under control and beating it time and time again, the virus has been devastating to many businesses and industry. And that is considering Vietnam is, in essence, a blissful haven compared to other countries still getting wreaked by Covid-19 day in, day out. The collective damage to the global economy is, to put it simply, incalculable.


The Covid-19 pandemic, in its extreme suddenness, extreme gravity, and extremely unusual nature, could be classified as a "black swan event". To qualify as a black swan event, an incident must satisfy a few criteria, such as being high-profile, unpredictable, rare, and having major, impossible-to-compute consequences. While they are extraordinary outliers, black swan events play large, dominating roles in history. And while they could be explained in hindsight, they often come as a surprise. Whether the Covid-19 pandemic fits this description to a T is still a matter of debate (many argue that a global pandemic was bound to come sooner and later, therefore not really a shock), the scope of its impacts could not be questioned. What truly sets this event apart from other crises in the past is the unexpected way it incapacitates some supposedly bulletproof industries and lifts other, less prominent ones.


In Vietnam, the Covid-19 pandemic has shown people better than any class or book how public policies could affect their lives. Thanks to the government's timely, decisive, and prudent responses in 2020, the country fares better than most countries in terms of public health. Vietnam is also one of the few countries that enjoy a positive GDP net growth in 2020. While still less than it could have been, Vietnam's growth is among the highest in the world, a testament to the country's successful containment of Covid-19 and the resilience of its people.


After sporadic hiatuses, people are now out and about (with masks) as life goes on in Vietnam


However, while the repercussions of Covid-19 in Vietnam are not as pronounced as in the US, for example, they still turn the nations' economy upside down for a while. The state of affairs was given a good shake, and just like bits and bobs getting tossed inside a barrel during a storm, some float to the top while some settle at the bottom. And the winners are...


E-commerce and food delivery services


Before the pandemic, traditional retail was undoubtedly king in Vietnam. Store-based sales account for 98% of the total retail data. As soon as social distancing measures were implemented in waves across Vietnam, though, people truly took the "stay home, stay healthy" message to heart. Visitors to malls and shops dropped until they were forced to close anyways by the government. Indoor dining also underwent great distress, especially during the lockdown periods. When restrictions were lifted, many restauranteurs and retailers found they could not go back to business since the expenses of rent and maintenance alone had crippled them. Many prime shopping streets in Hanoi, Saigon, and Da Nang, once vibrant with throngs of shoppers day and night, were awash in "For Sale" banners following the waves of Covid-19.


Highly desirable locations sat vacant for months


However, this depressing situation did catalyze the rise of e-commerce. Due to either government's mandate or personal precaution, 50% of consumers have reduced the frequency of their visits to public markets, and 25% have increased their online shopping. Many F&B business owners also pivoted to home delivery to stay afloat. Retailers and F&B business owners found e-commerce and home delivery easier to break into and manage due to the lower cost overall. And as life in Vietnam adopts a sense of normalcy again, the boost that e-commerce and food delivery got from the first and second quarters of 2020 still stays. The convenience of online shopping may not convert the consumers of Vietnam totally, but it does introduce them to a new, reliable option that they will summon from time to time. Online shopping may never replace physical stores, ever, but the pandemic gave it an edge, and sometimes, that is all it takes.


Food delivery workers (or "shippers") were kept busy this year because of Covid-19


Convenience stores


The convenience stores of Vietnam have been a force to reckon with for a while, but the pandemic and its reverberations did accelerate their growth, which was already quite healthy to begin with pre-Covid-19. Unlike other shops and malls, convenience stores were classified as "essential suppliers" and thus, were not forced to close even during the most stringent lockdown. Already situated in areas with high footfall traffic, with "convenience" as their main selling point, those stores acquired a remarkable amount of new customers during the first few months of 2020. 7-Eleven, for example, implemented a highly successful program to ship face masks to customers within 30 minutes, which earned them both praises and profit. Due to the second wave and increasingly drastic measures to contain Covid-19, March was probably the most intense, gloomy month this year for many Vietnamese citizens, including retail owners, but it was when the customer base of convenience stores reached its peak. In that aspect, convenience stores are similar to e-commerce.


March was long past, but people's fondness in convenience stores does not seem to wane. The momentum induced by the pandemic was an unplanned bonus, but convenience stores, like e-commerce, have successfully captured the interest of new customers and turned them into loyal fans. More robust expansion would likely follow soon.


In times of inconvenience, people naturally turn to the easiest option


FMCG and supermarkets


Before Covid-19, it seemed like both the FMCG and supermarket segments of Vietnam have reached a kind of equilibrium in terms of growth. Some may go so far as to call it stagnation. In 2019, the rate of supermarket expansion even decreased slightly. But new standards and habits prompted by Covid-19 changed everything.


-People started to navigate towards supermarkets and hypermarkets more than the traditional wet markets and mom-and-pop stores. Why? Since larger grocery stores offer better varieties and bigger quantities of products, people rationalized that shopping there could help them minimize their travel and contact. Large supermarkets are also perceived as more hygienic and more rigorous with safety standards.


-Panic and precaution following news of Covid-19 cases and predating lockdown brought about stockpiling behaviors. Empty shelves and shopping carts full of staples were common sights. Uncertainty is bad for business in general, but not in this case, when people expected to be immobile in their homes for extended periods of time. Limited movement + reduced income + imminent catastrophe are the ideal recipe for survivalism.


-As the result, people's frequency of visits to supermarkets increased to once every 10 days on average. The pandemic also did the unthinkable: it made Vietnamese people more willing to try out grocery omnichannel shopping. Telephone orders increased 5 times while visits to online grocers increased 10 times!


-The FMCG sector saw rapid, double-digit growth for the first time in 7 years.


People were flocking to supermarkets in the early days of the pandemic. This excessive phenomenon has disappeared for now, thankfully.


Healthcare and wellness


They say a healthy man would wish for a thousand things, but a sick man only wishes for one. Health is truly the greatest gift of all, without which, all the wealth in the world cannot bring true happiness. It makes sense that in times of prevalent sickness and despairing news of death all over the world, people would be more cognizant of their physical well-being and focus more on maintaining it.


At the beginning of Covid-19, a huge surge in the demand of face masks, and to a lesser extent, hand sanitizers and disinfectants, became so disconcerting that the government had to step in. Several scandals of "price gouging" by pharmacies, people smuggling health supplies across borders, or selling sub-standard face masks made the news regularly. Since then, the craze has subsided, but the positive effects and healthy habits have thankfully persisted. Vietnamese people now consider masks a part of their normal outfit, wash their hands diligently, and take greater care to keep their homes clean, well-lit, and well-aired. The sales of hygiene products and household cleaning products therefore has risen dramatically: hand soap and bar soap both hit double, even triple-digit growth, for example. Even tangentially related products such as body soap and mouthwash enjoyed soaring sales.


Millions of face masks have been purchases this year, perhaps more than the last ten years' consumption combined.


Here in Vietnam, people have also taken the mantra "Health also comes from within" to heart. The older generation in particularly put a lot of stock into folk medicine and nutritional supplements such as ginseng or ginkgo biloba. With the arrival of Covid-19 and impending sickness, this mindset is even more intensified. The Vietnames government did a great job educating and informing the citizens about the ins and outs of Covid-19 symptoms and prevention and one big deal about surviving Covid-19 is strengthening the immune system. As such, Vietnamese people have allocated more spending towards nutrition and healthcare products such as vitamins, antioxidants, probiotics, herbs, oils, honey, and other specialty dietary supplements.


Conclusion


Every cloud has a silver lining. Even as Covid-19 continues to spread its gloom across the world, there are still many brights spots in the economy landscape of Vietnam. Only time will tell whether these hopeful contenders could continue their winning streak, but to other retailers: do not despair, buckle up, and enjoy the ride. 2021 promises recovery and optimism for all.



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