IMPACT OF COVID 19 ON RETAIL

SECTOR OF VIETNAM
I. Introduction
Though the country stands among the most resilient economies against this pandemic due to proper
approach to Covid-19 containment, Vietnam has suffered loss worth billions of dollar when key economic
sector such as tourism or commodity exports were affected by the global supply chain disruption.
Especially, global economic downturn also put pressure on the retail sector, which represents the interface
between business and consumer. In 2020, Vietnam experienced the lowest retail sales in 9 years as the
growth of total revenue of retail industry slid to 2.6% from 9.5% of the previous year (Vietnamnews,
2021). As retail performance went low under the preventive measures such as travel restriction, it is
forecasted that Vietnam retail sector will keep facing difficulty in the future. That being said, this
situation offers a challenge of economic recovery even in the post-pandemic phase (Barua & Samaddar,
2020), since the performance of the retail sector corresponds closely with manufacturing industry. To
acquire a proper understanding of this depression in retail sector, this study aims to investigate how
Covid-19 has impacted the retail sector. This motive of the study is expressed through the specific
research question as follows:
Research question: Which are the major drivers affecting growth of retail sector in Vietnam during
Covid-19 pandemic?

II. Literature review:

According to Tran and Nguyen (2021), retail sector plays a key role in every economy as it serves as the
interface for supply and consumption of commodities. Therefore, retail sector literally relates to a wide
range of stakeholders, including not only providers of goods and services but also the consumer as well.
Williams (1997) described retail industry as an interconnected hub for different economic entities to
interact for economic value creation. However, because of its exposure to multitude of players, the retail
sector became more vulnerable to the environmental changes, especially when these changes amplify
their impacts through influences on different stakeholders at once (Bradtner et.al, 2020). As the Covid-19
pandemic can be considered as a universal economic event which left its enormously negative impacts on
different economic entities, the depression of retail sector was hence inevitable. Accordingly, Tran and
Nguyen (2021) claimed that the measures taken to prevent the spread of pandemic affected not only the
supply side when manufacturing operation was disrupted but the travel restriction also compressed the
demand for consumption. With both supply and demand side became exposed to the negative impacts of
Covid 19, the impact on retail sector was two-fold
When it looks further into the drivers of retail sector, Mohsin et.al (2021) argued that the mechanism of
impacts mostly concentrates on the consumption side. Accordingly, while many industrial zone remains
open, it was the drop in consumption or demand side driving the loss of retail sectors (Mohsin et.al,
2021). This idea was supported by Islam and Mumtaz (2016) who found that consumer confidence should
be the most important driver of retail performance. Brodeur et.al (2020) proposed that the disruption of
global supply chain merely induced the price of certain goods to go higher so revenue of retail sector
should not see much reduction. From economic point of view, this is true when retail sector mostly
comprises necessary goods which feature low elasticity of demand. On the other hand, the falling
consumer confidence driven by the pandemic caused direct hit to the aggregate demand of commodities
(Brodeur et.al ,2020). This leads to significant fall in revenue of certain retailed products. This viewpoint
can be connected to the study of Lau et.al (2020) as the author found that consumer confidence should be
the first indicator to respond with existence of economic event as Covid-19. However, Teresiene et.al
(2021) claimed that each economy has different exposure to Covid-19 and different structure of retail
industry so it hard to draw conclusion on the impact of consumer confidence. For this point, it came to the
hypothesis that:
H1: Lower consumer confidence significantly decreased the growth of Vietnam retail sector in Covid-19
Also studying the impact on retail sector from consumer perspective, Victor et.al (2021) however argues
that economic factors such as unemployment rate, inflation rate or interest rate are more effective in
predicting the revenue of retail sector. Among those, Victor et.al (2021) found out that inflation measured
by CPI tends to pose the greatest impact since this indicator is highly sensitive to the policy response of
government in supporting the economics amidst economic crisis. This relation was supported by
Sathyanarayana and Gargesa (2018), who claimed that high inflation means depreciated value of money
so people need to pay more for the same quantity of goods. This condition, however, contradicts to the
depressed spending in economic crisis. This relation proposes that
H2: Higher inflation significantly decreased the growth of Vietnam retail sector in Covid-19
The search of past research papers shows that the performance of retail sector should rely on a wide array
of factors. From consumer perspectives, only a few indicators matter. The involvement of consumer
confidence and inflation were proven in a number of studies, yet the conclusion appears to be
heterogeneous in certain papers. Besides, many studies are from foreign studies, while a number of
domestic study such as that of Tran and Nguyen (2021) concerned more about exploratory research of
situation, rather than confirming on the driving factors. This leaves the room for the study in Vietnam.

III. Data analysis:

3.1. Descriptive statistics
 Summary of variables
120 16.00%
100 14.00%
12.00%
80 10.00%
60 8.00%
40 6.00%
4.00%
20 2.00%
0 0.00%
18 19 19 19 19 19 19 20 20 20 20 20 20 21 21
ov- an- ar- ay- Jul- ep- ov- an- ar- ay- Jul- ep- ov- an- ar-
N J M M S N J M M S N J M

Retail growth CPI

Consumer confidence index

The above chart shows the visual display of variables used in the research model. It can be seen that the
trend of CPI was stable at more or less 100. Comparatively, Consumer Confidence Index was far more
volatile. The maximum value was 64.4 compared to 104.73 of the maximum. Visually, it can be seen that
consumer Confidence Index fell significantly since January of 2020, right after the outbreak of Covid in
the world and in Vietnam. Specifically, from an average of 100 in the pre-pandemic period, Consumer
Confidence Index fluctuated around 80 since the first case was found in the early of 2020. The similar
pattern can be seen in the Growth rate of Vietnam Retail sector. From around 95 in 2019, the sector
varied largely afterward. The figure even bottomed at 0.4% in April 2020, before recovering in the second
half of 2020. In general, it looks like the occurrence of covid 19 has caused significant changes to both
consumer’s confidence and the growth of Vietnam retail sector, with a downward trend.

3.2. Correlation analysis

Pearson's Correlations
Variable CPI Consumer confidence index Retail growth
1. CPI Pearson's r —
p-value —
2. Consumer confidence index Pearson's r -0.606 —
p-value < .001 —
3. Retail growth Pearson's r -0.579 0.884 —
p-value < .001 < .001 —
For correlation analysis, it was found out that retail growth held strong correlation with both CPI and
consumer confidence index. The Pearson’s correlation coefficients were found at -0.579 and 0.884,
respectively. This indicates a potential significantly negative relation between retail growth and CPI,
while that with Consumer Confidence Index could be a significantly positive relation.
3.3. Regression analysis
As in regression test, the model constructed from CPI and Consumer Confidence Index renders a
high R2 of 0.785. This is a high goodness of fit as the model can explain 78.5% difference in
retail growth in the time of study.

Model Summary - Retail growth

Mode
R R² Adjusted R² RMSE
l
H₀ 0.000 0.000 0.000 4.055
H₁ 0.886 0.785 0.769 1.950

The importance of prediction model is confirmed by a high F-score of nearly 50, with P-value of
below 0.001. So the model is significant to give explanation.

ANOVA
Model Sum of Squares df Mean Square F p
H₁ Regression 374.065 2 187.033 49.176 < .001
Residual 102.689 27 3.803
Total 476.755 29
Note. The intercept model is omitted, as no meaningful information can be shown.

In regression coefficient, the relationship between CPI and Retail Sector Growth has a P-value of
0.546 > 0.05. Therefore, this relation is insignificant at the confidence of 95%. The coefficient of
regression is at -0.127 which is negative. Therefore, the increase in CPI or higher inflation
should cause the growth rate of retail sector of Vietnam to fall. Nevertheless, because the impact
is insignificant, the hypothesis H2 should be rejected. Probably, the stable inflation in Vietnam
was responsible for the irrelevancy of inflation measured by CPI
For Consumer Confidence index, a P-value of less than 0.001 was retrieved so Consumer
Confidence Index should be an important driver to the changes of Retail Sector Growth. The
positive coefficient at 0.253 also indicates a positive relation between the independent and
dependent variable. This can be interpreted that 1% decrease in consumer confidence index
should be attributed to 0.253% decrease in the growth rate of the retail sector. This result
supports the hold of hypothesis H1. This conclusion supports the finding of Lau et.al (2020) on
the role of Consumer confidence in promoting the growth of firms in the retail sector amid
Covid-19. In implication, it is possible to conclude that the drop of retail sector growth since the
beginning of the Covid 19 was generated by the decline in Consumer Confidence which
responds negatively to the spread of pandemic. Therefore, policy should focus on improving the
confidence of consumers
Coefficients
Unstandardize Standard
Model Standardized t p
d Error
H₀ (Intercept) 9.200 0.740 12.428 < .001
H₁ (Intercept) 0.114 22.960 0.005 0.996
CPI -0.127 0.207 -0.069 -0.611 0.546
Consumer confidence
0.253 0.034 0.842 7.501 < .001
index

IV. Reflective statement

The study was taken in quantitative approach to evaluate the impacts of key economic factors on
the growth rate of Vietnam retail sector. This is an advantage as quantitative study has strength
in confirming the relation in a large sample pool (Balnaves & Caputi, 2001). Another plus point
of this study was that data was collected from highly reliable databases including Trading
Economics or Ceicdata for the highest accuracy. The use of quantitative techniques as
descriptive statistics, correlation and regression allowed me to obtain a comprehensive
understanding of how the growth of retail sector has been driven by different factors. Through
the conclusion on relationship and pattern of data, I therefore could draw conclusion on whether
Covid-19 had significant impact on retail sector through its influences on the changes of
predictors such as CPI or Consumer Confidence Index. However, the weakness of this approach
lies in the logic, as I did not prove whether Covid 19 made statistically significant impact on
Consumer Confidence Index. If I had chance, I would have used t-test to compare the
significance of difference of the variable before and after the occurrence of Covid-19. I should
have used more variables related to Covid-19 spread such as number of active cases or death
cases by Covid-19 to evaluate the impact of Covid-19
Besides, although the research model retrieved a high goodness of fit, the results could have been
higher if I expanded the number of variables. According to the studies such as that of Victor et.al
(2021), variables such as unemployment rates or interest rate could also be important economic
indicators for evaluating retail sector performance. However, to assure the focus of the study in
the given time constraint, I only used two variables which were found to be significant drivers in
various studies. This exclusion could have lowered the model accuracy.
Lastly, while the research model helped me to find consumer confidence, represented by
Consumer Confidence Index, as the important driver of the retail sector growth, it did not reach
to the implication on how policy should improve such indicator for supporting the growth of the
retail sector. Perhaps, another limitation came from the technical error in retrieving Consumer
Confidence Index. Accordingly, while collecting data for this variable, I found that Consumer
Confidence Index can be measured through three different angles: Confidence on Future Macro-
economic situation, Confidence on future household and Confidence on individual situation
(Intage, 2021). While each index represents different perspective to Consumer Confidence, I
obtained the confidence on individual situation for belief that consumer confidence should firstly
refer to the individual reflection of consumers. However, the exclusion of the other aspects may
cause error in data representation. In the future study, I should have averaged the three indices to
acquire a better representativeness of data for the Consumer Confidence index

V. Conclusion
In conclusion, to examine the impact of Covid-19 on retail sector of Vietnam, the quantitative
confirmatory study was conducted to response to the research question: Which are the major
drivers affecting growth of retail sector in Vietnam during Covid-19 pandemic? From literature review, it
was found that inflation and consumer confidence are major factors influencing demand for consumption
and thus potentially affect the growth of retail sector. However, research finding with data collected from
Vietnam confirmed that only consumer confidence matters in reasoning changes of retail factors. As the
level of confidence has declined sharply since the outbreak of Covid-19, the growth of retail sector
flopped correspondingly. However, limitation in logic of analytic technique left certain room for
improvement. To clearly estimate the statistical impact of Covid-19, more direct comparison on impact
before and after the event of Covid-19 would be necessary

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Appendix:
CPI Consumer confidence Retail growth
index
Apr-21 104.52 70.85 9.77%
Mar-21 104.56 89.95 6.84%
Feb-21 104.84 85.69 7.83%
Jan-21 103.27 86.18 8.65%
Dec-20 103.45 65.59 6.78%
Nov-20 103.03 72.3 6.22%
Oct-20 103.11 74.42 5.44%
Sep-20 103.02 67.27 4.81%
Aug-20 102.89 64.4 4.02%
Jul-20 103.06 69.64 3.58%
Jun-20 102.64 76.77 3.40%
May-20 101.97 68.6 1.16%
Apr-20 102 69.54 0.40%
Mar-20 103.6 77.76 7.67%
Feb-20 104.35 95.95 9.84%
Jan-20 104.52 94.8 10.65%
Dec-19 103.25 92.88 12.68%
Nov-19 101.82 97.64 12.68%
Oct-19 100.85 102.32 12.77%
Sep-19 100.27 99.23 12.61%
Aug-19 99.95 100.75 12.51%
Jul-19 99.67 96.88 12.55%
Jun-19 99.5 100 12.51%
May-19 99.59 92.66 12.74%
Apr-19 99.1 94.37 13.21%
Mar-19 98.79 100 13.39%
Feb-19 99 104.73 13.57%
Jan-19 98.21 102.5 13.06%
Dec-18 98.12 98.1 12.41%
Nov-18 98.36 97.2 12.26%