Zara poses big challenges to Vietnamese fashion industry

The image of Vietnamese people queuing up at the cash register at Zara on opening day showed that the young fashion industry faces new challenges.

“Zara’s prices are reasonable. It is not a bad idea to pay 30 percent more for high-quality branded products such as Zara’s,” Tuan Hoa said, showing the two dresses she bought on her Facebook page.

An analyst said the good pricing policy has allowed Zara to compete well in all the markets where it is located.

Credit Suisse estimates that Zara cut prices for its products by 36 percent over 18 months prior to November 2015.

“The prices are reasonable, the design is fashionable and the materials are good,” said Trong Nguyen, a designer.

Sources said it was highly possible that H&M would follow Zara’s move to come to Vietnam with two first shops in Hanoi and HCMC.

Vietnam’s Suboi, a rap singer, has been chosen to represent H&M. Analysts believe that the fashion brand would be in Vietnam by early 2017 at the latest.

Meanwhile, the presence of Forever 21 (F21) in Vietnam, expected this year, will also stir up the public.

Zara’s great initial success in Vietnam has prompted Inditex, the Spanish group that owns Zara, to bring other brands it owns -  Bershka, Pull & Bear, Stradivarius, Massimo Dutti and Oysho – to Vietnam as well.

Vietnamese fashion brands will have to compete with many strong foreign fashion brands.

According to Sun FDS Holdings, the Vietnamese fashion retail market is estimated to have value of $5 billion and growth rate of 10-15 percent per annum.

The rapid increase of the middle class in Vietnam, (33 million middle-class people by 2020, according to the World Bank) makes the country a promising market for high-street fashion brands.

While the domestic market is very attractive, only 20 percent of Vietnamese enterprises exploit the market.

Vietnamese fashion brands can be divided into two groups. The first one, comprising An Phuoc, N&M (Thoi Trang Viet Company), TT-up, San Sciaro and Manhatan (Viet Tien), targets high income earners and office workers.

The second comprises Ninomaxx, PT2000, Blue Exchange, Viet Tien’s Smart Casual, Viet Long and Viet Thy.

High retail rent is one of the biggest problems for Vietnamese fashion brands. According to CBRE Vietnam, a real estate service provider, the rent in the second quarter of the year was about $100 per square meter a month in the central business districts.

Nam Lich / vietnamnet