Physical Stores Play a Vital Role in an Omni-channel Strategy

As Vietnam’s retail sector undergoes a dramatic transformation, driven by shifting consumer behaviors and the rapid adoption of e-commerce, international brands seeking to enter this dynamic market face a crucial question:

What role do physical stores play in a successful strategy? 

At Asia Circles, we believe that for most brands, an omnichannel approach is always key, and the role of physical stores cannot be understated. 

In this article, we’ll provide a brief overview of two physical retailers that dominate Vietnam’s Health and Beauty sector and how they use an omni-channel approach to achieve success.

Finally, we look at the 4 key reasons we recommend international brands prioritize a physical presence in these stores, alongside their e-commerce strategy.

1. Pharmacy Chains: Quick Look
2. 4 Reasons international brands need bricks and mortar
3. Summary and Key Takeaways

Pharmacy Chains: Quick Look

• The Vietnamese health and beauty sector has emerged as a frontrunner in the race to capture the hearts and wallets of consumers.
• Pharmacy chains are rapidly expanding their store networks, Guardian currently operates 105 retail stores across Vietnam, while Watsons has expanded to over 100 stores since entering the market in 2019.
• The key to these chains’ success lies in their ability to seamlessly integrate online and offline channels, creating a cohesive omnichannel experience that caters to the evolving needs and preferences of consumers.
• Both stores have invested heavily in their e-commerce presence, operating online stores on popular platforms like Shopee and Lazada, as well as their own websites and apps.
• However, the companies recognize that physical stores remain the backbone of their strategy, providing a tangible touchpoint for customers to engage with products and receive personalized advice.

In short, while the dazzling rise of e-commerce might grab all the headlines, fundamental attitudes remain biased towards in-store purchases:

• 53% of respondents prefer to purchase beauty and care products in-store
• 18% prefer to purchase online
• 17% utilize both online and in-store channels
• 12% do not have a preference between online or in-store

Preferred Channels for Health and Beauty in Vietnam — Statista, 2023

4 Reasons international brands need bricks and mortar

There are several compelling reasons why brick-and-mortar stores are indispensable for international brands looking to succeed in Vietnam’s retail market. Here’s our top 4:

1. Brand Trust 

Physical stores play a pivotal role in building brand trust, particularly important for international brands entering a new market like Vietnam. In the health and beauty sector, where product quality and safety are paramount, consumers often seek the opportunity to test and experience products before making a purchase.

Established pharmacy chains like Watsons and Guardian have positioned themselves as trusted retailers, stringently curating high-quality products. By securing a physical presence in these stores, international brands can leverage the pre-existing trust and credibility associated with these renowned retailers. This association is crucial, as 96 percent of Vietnamese consumers surveyed by PwC said they are willing to spend more money on products from reputable companies with strong business ethics.

2. Developing Customer Relationships

Physical stores play a vital role in building customer relationships and providing personalized service. In Vietnam, where personal connections and face-to-face interactions are highly valued, the human touch offered by in-store staff cannot be replicated online. 

Live-streaming and KOL marketing can be a great way of demonstrating product uses. However, knowledgeable sales associates can offer tailored recommendations, answer questions, and provide a level of service that goes beyond the transactional nature of e-commerce. 

This is particularly important in the health and beauty sector, where customers often seek advice on sensitive topics like skincare concerns or health issues, and may not feel comfortable asking for advice via social media or livestreams.

3. Omnichannel Logistics

As e-commerce surges in Vietnam, with revenue projected to reach $15.2 billion by 2025, physical stores play a critical role in ensuring seamless and efficient product delivery. Saigon Co.op exemplifies this, having leveraged its brick-and-mortar network to efficiently process online orders during the COVID-19 pandemic, despite a 4-5 times increase in telephone orders and a tenfold increase in e-commerce visits.

Integrating physical stores into the e-commerce logistics chain also caters to evolving consumer preferences, with 42% of Vietnamese consumers preferring to buy online and pick up in-store according to PwC’s 2021 consumer insights survey.

This enhances the shopping experience, reduces shipping costs, and minimizes delivery failures. Moreover, the presence of physical stores for returns and exchanges reinforces brand trust and credibility.

As e-commerce grows, brands that successfully integrate their physical stores into the logistics chain will be well-positioned to offer seamless, convenient, and trusted shopping experiences, fostering long-term customer loyalty in Vietnam’s rapidly evolving retail landscape.

4. Local Market Adaptation

Physical stores offer an invaluable platform for international brands to gather feedback and insights crucial for adapting to the Vietnamese market. By engaging with customers through experiential marketing initiatives, such as in-store beauty treatments, makeovers, health check-ups, and consultations, brands can gain a more profound understanding of local preferences and needs.

These experiences not only create a sense of excitement and encourage repeat visits, but also provide opportunities for brands to showcase freestanding display units (FSDUs) tailored to the Vietnamese market. By presenting products in a culturally relevant and appealing manner, brands can effectively communicate their identity and values to local consumers.

Moreover, the direct interaction with customers in physical stores allows brands to gather real-time feedback on product offerings, pricing, and promotions. This valuable information can be utilized to refine marketing strategies, optimize product assortment, and improve overall customer satisfaction.

Summary and Key Takeaways

Vietnam’s retail landscape is undergoing a dramatic transformation, with e-commerce on the rise. However, physical stores remain crucial for international brands seeking to establish a successful omnichannel strategy. Here’s why:

• Traditional trade channels still account for 75% of total retail sales in Vietnam (Nielsen, 2019)
• Health and beauty retail market is projected to reach $14.42 billion by 2025 (Euromonitor, 2021)

Physical stores are essential for:

• Building brand trust and credibility
• Providing personalized service and experiences
• Serving as hubs for omnichannel fulfillment and logistics

Key takeaways: 42% of Vietnamese consumers prefer to buy online and pick up in-store

1. Physical presence is vital for showcasing products, building brand awareness, and fostering trust
2. Integrating physical stores into the e-commerce logistics chain enhances convenience and customer satisfaction
3. Experiential marketing in brick-and-mortar locations drives engagement and long-term loyalty

As Vietnam’s retail sector continues to evolve, brands that invest in a strong physical presence while leveraging digital channels will be best positioned to capture the hearts and wallets of Vietnamese consumers.