Malls are a relatively new phenomenon in Vietnam — and unlike their dying cousins worldwide, they still see their glory days being ahead of them. But, Katie Jacobs asks, do they have the ingredients for lasting success?

 

‘Dead mall’. Sounding like the name of a new indie-rock band, it is actually the term used to describe the phenomenon afflicting hundreds of shopping malls across America. Here in Vietnam, however, the mall scene is surging. As a recent trip to the new Lotte Center mall in Hanoi revealed, Hanoians can’t get enough of the glimmering lights, rolling escalators and omnipresent sales assistants. But do Vietnamese malls really have it all?

 

The Hypothesis

 

When setting out to write this article the question was clear — with a decline in retail and growing pressure from global e-commerce, what are local mall investors doing to fight competition and ensure profitability? I quickly realised, however, that understanding the global shopping mall industry was not nearly so simple, nor the correlation between rising online spending and declining in-store shopping so direct. As I delved into the research it became clear that not all shopping malls around the world are in decline (although many of them are), and just because a slew of new high-end malls are opening in Vietnam, it doesn’t mean they are all successful.

 

So, as Vietnam ventures further into the development of mall culture, how will investors ensure profitability in the face of rising e-commerce?

 

The Theory of Evolution

 

Despite eye-catching headlines proclaiming the “Death of the American Mall” (The Guardian, Jun. 14, 2014) and websites such as deadmall.com, 2014 saw a resurgence in optimism, with many economists and retail specialists claiming “the mall will not die”.

 

Shopping malls have long been a quintessential part of the world’s suburban culture. From their post-World War II heyday to the rapidly changing shopping environment of the past decade — these blocky monuments of shiny consumerism hold a firm place in suburban life. The smaller and weaker may be dying out, but the strong are, as Charles Darwin would have predicted, evolving and adapting to a changing environment.

 

Despite the rise in online shopping, the majority of consumers worldwide still visit brick-and-mortar stores to purchase luxury products. Moreover, ‘anchor stores’ — large department stores such as Bloomingdale’s and Macy’s — continue to drive the majority of foot traffic. In the US, anchors are so vital that shopping malls without them are considered ‘dead’.

 

To ensure the consumers keep coming, however, developers are re-creating malls as destinations, not just places to shop. In addition to the usual movie theatre, entertainment and lifestyle options such as expansive gyms, luxury spas and high-end restaurants are becoming standard.

 

“New malls are more ambitious, promising a big day out, not just a new pair of jeans,” reported The Economist in February 2013. Making this model pay, however, is the challenge — one that’s especially relevant in Vietnam. Malls need to be more than a popular hangout; they need to keep people coming back and, most importantly, spending money.

 

Evaluating E-Commerce

 

 

In the past decade, online shopping and e-commerce have become easier, cheaper and more secure. Increasing numbers of consumers are turning away from brick-and-mortar stores and logging online to find what they need. Even my grandmother in rural Australia bought online recently. Instead of driving to several stores to find a specific battery for her vacuum cleaner, she was able to get exactly what she wanted in minutes. And it was cheaper.

 

And slowly but surely, e-commerce is coming to Vietnam. The Vietnamese Ministry of Industry and Trade’s 2013 Index reported that the country is leading the e-commerce market in Southeast Asia.

 

At a Nov. 25 press meeting, Sean Preston, Visa country manager for Vietnam, announced that 19 percent of payments from Vietnamese cardholders are via e-commerce. A figure that Visa predicts is set to rise — “As the internet and smartphone become an integral part of daily life for Vietnamese, there will be a growing trend where consumers spend more time and money shopping online.”

 

Executives at Vingroup, the country’s leading property developer and mall operator, agree. In February 2014 the company announced the upcoming launch of VinEcom, an e-commerce website that will offer a range of products aimed at consumers throughout Vietnam. In a recent interview, former VinEcom director Le Thi Thu Thuy, predicted that “annual e-commerce transactions in Vietnam may increase to as much as US$15 billion (VND320 trillion) in the next six years”.

 

In Search of Consumers

 

Although Vietnamese malls increasingly incorporate the same destination environment of entertainment, dining and accommodation being employed half a world away, the local market is lacking the two crucial pillars that have ensured successful malls abroad remain profitable. Unlike the US, where consumers still buy high-end products in-store, the wealthy Vietnamese shoppers interviewed for this article insisted that they never shop in the luxury stores found in many local malls. Instead, Vietnamese consumers are increasingly buying luxury brands online and abroad. Also unlike the US, Vietnam does not yet have anchor stores to ensure consumers return to the mall.

 

While researching this article I met with acquaintances working in well-paid office jobs in Hanoi. I already knew from previous conversations that the women were keen shoppers, but I was surprised to learn just how attached they are to online buying. “We probably shop online nearly everyday,” said one of the three young women — whose names are being kept anonymous, since they all admitted to shopping during work hours and did not want to get in trouble with their manager. “I never go to malls to shop,” agreed another, “or if I do it’s only to window shop.”
All agreed that clothes and accessories in Vietnam were poor quality and overpriced. “We prefer to either shop online for cheaper clothes or buy luxury items when we travel abroad,” said the third woman, who confessed to having a weakness for high-end American fashion brands.

 

Last year, I visited Royal City in Hanoi soon after it opened. I remember it clearly because the place was a mad house. It was a hot summer day, pouring rain, and the mall was full of people trying to escape the weather. The ice-skating rink was hopping, there were lines for the movie theatre and I saw more than one group donning swimsuits on their way into the underground water park. Restaurants were crowded and it was impossible to find a free table for lunch. The shops, however, were quiet. Of the few people browsing the racks, even less were purchasing.

 

“Royal City is an ideal shopping, entertainment and recreational destination,” Vingroup’s former vice-chairwoman Le Thi Thu Thuy said at the opening in July 2013. Although Vincom seems to have scored on the entertainment and recreational front, from observation, retail is lagging. In theory, while rising wealth and growing disposable incomes mean that consumers are shopping more than ever, Vietnam’s malls seem to be struggling to capture this market.

 

This does not mean that retail stores in Vietnamese malls are doomed to fail, but it does mean that investors and mall designers need to push the bar higher to create better and brighter without skimping on quality. The potential is there, but if they succumb to pitfalls of high prices and low quality, they risk what I have come to think of as the ‘indie-band syndrome’ — Dead Mall.

 

Katie Jacobs

Katie is a freelance writer focusing on environment, travel and anything else that comes her way. When not writing she works in international environmental development. Her greatest loves are her dog Marmalade, her husband and ice-cream - in that order.

Website: www.katielaurenjacobs.com/

1 comment

  • Comment Link macca macca Feb 18, 2015

    Interesting read, I personally feel that credit card culture and online shopping will increase massively in the next two years. As Vietnamese learn to trust online transactions safety and also postal services improve, the only people in malls will be teenagers wanting to hang out on an a.c. environment.

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