Vietnam Market Watch: Thai Imports, Growing US trade, and the Emergence of E-commerce
Domestic Products Face Strong Competition from Thai Goods
A new report from the General Department of Customs (GDC) states that exports from Thailand to Vietnam were valued at US $ 7.5 billion in the first 11 months of 2015. This marks an increase of around 17 percent compared to the same period in 2014. The Thai goods that are flooding local markets include fruits, sweets and home appliances. These goods are available in traditional markets as well as convenience stores and prominent supermarkets. Vietnam’s Ministry of Industry and Trade said that Thailand ranks second in terms on volume of imports.
Multiple shop owners in Vietnam say that customers have shown a preference for Thai products. Reports indicate that consumers prefer such goods due to their perceived high-quality, durability, affordability, and superior design. In addition, numerous Thai products are also cheaper than imports from the US and Europe. Industry experts believe that retailers from Thailand will aggressively expand in Vietnam given the market and demand for Thai goods. While the news bodes well for Vietnamese consumers, a number of Vietnamese suppliers are preparing strategies to counter the expansion of Thai products.
US is Vietnam’s Top Trade Partner
The US recently became Vietnam’s top trade and investment partner. Bilateral trade, that started 20 years ago, was valued at US $ 36.3 billion in 2014 and is estimated at around US $ 40 billion as of 2015. The US is now the largest importer of Vietnamese goods – including, garments, electronics, rice, footwear and fish amongst many others.
The results bode well for most of the export-driven sectors of the Vietnam economy. However, the Trans Pacific Partnership (TPP) may adversely affect the garment and footwear sectors. Under the TPP obligations, Vietnam will have to import raw materials from TPP members to enjoy the tax benefits of the TPP. This places a constraint on companies in the garment and footwear sector as they currently procure nearly 70 percent of their raw material from China, a non-TPP member.
Despite such concerns, the US believes that trade with Vietnam is set to grow further. Trade analysts say that the TPP will boost and consolidate trade between US and Vietnam, despite a few sectors facing a potential downturn.
Online Retail in Vietnam to Double by 2020
The Vietnam E-commerce Association expects online retail sales in the country to double by 2020. The revenue from the sector is projected to hit US $10 billion by 2020. Nguyen Thanh Hung, Vice Chairman of the Association said that the online retail market has completed its first phase of development, by ensuring a technological infrastructure, legal codes and competent workforce. The market is not prepared for the second phase of growth. Hung says that the sector will grow at a rate of more than 30 percent in comparison to the current 25 percent.
Industry analysts say that 75 percent of the E-commerce market is based in Hanoi and Ho Chi Minh City. However, judging by the accelerated rate of development in the sector, the industry is expected to expand to other cities and regions as well and nearly increase five times in size. The E-commerce market is flourishing and the market conditions are ripe for investors targeting the e-commerce retail space.
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