E-commerce more than just cosmetics

Some of the more conservative customers find it difficult to adapt to new purchasing methods

Looking into the mirror at a modern retail store selling beauty products in Ho Chi Minh City, 26-year-old Thuy Lien is trying on different shades of lipstick to select her favourite. Meanwhile, an employee is eagerly inviting her to try on new brands and enthusiastically gives plenty of detail about the products.

At the same time, 24-year-old Kim Nga is online, looking for sun cream for sensitive skin. She decides with a swipe.

Like other Vietnamese ­people up and down the country, Lien and Nga are enjoying shopping for beauty products through modern trade and e-commerce channels.

Modern retail

Watsons, the leading health and beauty brand in Asia and Eastern Europe, announced last Thursday that it is entering into the Vietnamese market with the launch of its first flagship store in Ho Chi Minh City.

The company plans to open at least 50 outlets across Vietnam over the next five years. It intends to bring its full expertise to Vietnam in order to create a unique and exciting shopping experience through its online and offline platform, Rod Routley, regional managing director in Asia of A.S. Watson Group, stated at a press conference.

“As the flagship brand under the A.S. Watson Group, we are backed by a global supply network which enables us to offer exciting new products from international renowned brands, while our own quality brand and exclusive products will also be available to Vietnamese consumers to provide a choice of products to the increasingly savvy customers in the country,” he said.

The first flagship store covers approximately 239 square metres of Bitexco Tower, and hopes to create a modern health and beauty shopping experience. Showcasing a wide range of skincare and make-up brands, the store will have over 6,000 products on offer which will be complemented by its online store featuring 8,000 goods. The group currently operates over 7,200 stores across Asian and European markets, offering a wide range of quality health and beauty products. Vietnam is the 13th operating market of Watsons.

Its latest foray reflects the competitive landscape of the nation’s health and beauty market where modern retail chains such as Medicare and Guardian have already secured strong footholds. Coming to Vietnam in 2001, Medicare was the first beauty, health, and wellbeing retailer in the Vietnamese market. Meanwhile, Guardian is a retail chain operating under Dairy Farm Group, a leading pan Asian retailer.

As of December 2018, Medicare had a network of 80 modern stores nationwide. Whilst Guardian has opened more than 74 stores in Hanoi and Ho Chi Minh City, and the southern provinces of Dong Nai and Vung Tau since its debut in 2011.

According to a report by market research firm The Nielsen, health, beauty, and modern drug stores have rapidly expanded nationwide, doubling over the past two years. As retailers in the sector continue to expand and invest in improving their stores to attract shoppers, the future outlook for this channel is set to further accelerate.

An emerging market

Indeed, health and beauty is one of the fastest-growing retail segments in Vietnam thanks to rising consumer demands and increased levels of disposable income. Market research and business intelligence provider Statista found that revenue in the domestic cosmetics and personal care market amounted to $1.62 billion in 2018. The market is expected to grow with an annual growth rate of 8.6 per cent between 2018 and 2021. Among them, the largest segment is skin care which held a market volume of $595 million in 2018.

According to Valéry Gaucherand, managing director of L’Oréal Vietnam, the country’s cosmetics market is very dynamic, reaching double-digit growth in some categories. The amount spent on beauty per capita remains low in comparison with neighbouring countries like Thailand or China. The strong development of a young Vietnamese middle-class gives a good potential for brands that bring high-quality and innovative products to consumers, and for brands who know how to engage digitally with both men and women. Therefore, the market has great potential for future growth.

Bart Verheyen, commercial director of Medicare, said that the modern retail channel relating to the health and beauty sector has always been small in Vietnam. However, the sector has been enjoying rapid growth with more brands joining the scene. Indeed, Medicare has seen faster growth compared to the market average over the past few years.

“Medicare covers a whole range of items, including food supplements, pharmaceuticals, make-up, cosmetics, skin care, and personal care, with over 6,000 stock keeping units. We are constantly looking for distributors and partners to expand our product offerings and introduce new beauty brands to local consumers,” he added.

Meanwhile, Pawin Sriusvagool, general director of Guardian Vietnam, pointed out that opportunities exist in the Vietnamese market which will soon have around 30 million people categorised as middle class. This means that the size of the market is potentially huge, and when coupled with more sophisticated buying behaviour, this makes Vietnam an emerging market for such brands.

He further noted that channels in the sector are increasingly switching from traditional methods such as opening small outlets which have been quite popular in the past. New channels focus on independent shops which have enjoyed a boom in recent years, while modern trading is increasingly about gaining trust from customers. E-commerce is also becoming a fast-growing channel for businesses. It is apparent that these trends reflect the shift from bricks and mortar stores to an omnichannel strategy as the shopping habits of consumers continues to evolve.

Omnichannel

According to Routley of Watson, the country has a reputation for being a highly connected and trend-aware market. Therefore, the group will roll out an e-commerce platform combined with advanced technology to bring a personalised and attractive offer to the increasingly modern Vietnamese consumers. The physical and online stores will ensure consumers like Lien and Nga can enjoy 24/7 access to a wide range of products anywhere through its website, mobile app or stores.

“With a long-term vision for the market, we will invest in stores, online, and digital communication in order to form close relationships with Vietnamese customers,” he said, noting that the online and offline channels will complement each other.

In contrast, Verheyen of Medicare stressed that offline channels still play an important role in health and beauty retail. One of the key beauty trends in Vietnam is premiumisation. With higher standard of living, consumers tend to seek advice when purchasing premium products. Offline channels can therefore give an insight into products so customers can find out information in person.

There is also a more complex lifestyle regime emerging among Vietnamese consumers who prefer to buy a range of products for their routine such as day and night cream, face masks, and toner. Customers like Lien and Nga wish to be more educated in what they need and will often seek advice from offline brands to gain a better understanding.

According to The Nielsen, traditional outlets like small-format stores will continue to be an important part of daily life for Vietnamese consumers. Modern trading will continue to grow and attract more consumers with more added-value services, whilst e-commerce will be a new channel that complements the other sectors.

Today’s shoppers are ­incorporating digital touch points along the entire purchase path, from reviewing products online to using smartphones as personal shopping assistants in store. As a result, health and beauty retailers can no longer think of their online and offline channels as completely ­separate entities.