Fierce competition in retail market

30-Nov-2019 Intellasia | Nhip cau Dau tu | 6:02 AM Print This Post

The research results of Bao Viet Securities Company (BVSC) published in September 2019 showed an unexpected fact that VinMart is the dominant brand in the supermarket and convenience store market with the total number of stores accounting for 53 percent of market share, far ahead of the two domestic rivals Bach Hoa Xanh and Co.opmart with respectively 13 percent and 12 percent market share.

With the desire to affirm the position of Vietnamese businesses on home ground, Vingroup has possibly used a non-compromise expansion strategy. This group, with its huge financial capacity, has merged a series of domestic and foreign brands such as acquiring Ocean Mart supermarket chain, acquiring 39 Vinatexmart across 19 provinces and cities of Vietnam National Textile and Garment Group, acquiring the chain of 23 Fivimart supermarkets, and most recently acquiring the chain of 87 Shop & Go stores for only one US dollar.

As of September 2019, Vingroup was taking the lead in the number of stores with more than 100 supermarkets and 2,346 convenience stores; followed by Bach Hoa Xanh and Saigon Co.op with respectively about 500 stores and 460 stores. “It is expected that by 2025, the system will have more than 300 VinMart supermarkets and nearly 10,000 VinMart+ stores, covering all 63 provinces and cities across the country,” said Thai Thi Thanh Hai, general director of VinCommerce Company.

With the fast development of local rookies, the oldest market member Saigon Co.op has begun to change tactics to assert its brand by acquiring the French retail Auchan. Then, Saigon Co.op has also expanded new sales formats to suit customers’ needs.

“Mini supermarkets and convenience stores are very flexible, allowing us to quickly cover the network, especially for the markets in the North where we faced numerous difficulties in opening large models such as hypermarkets or supermarkets,” said deputy general director of Saigon Co.op Tran Lam Hong.

In 2012, Saigon Co.op was the champion which accounted for the most market share of supermarkets and convenience stores in Vietnam. Now, new entrants like Vingroup has increased market share to 27%, making the market share of Saigon Co.op to decrease to 47%. In addition to VinMart, many other rivals are also rising. For example, August 2019 recorded the strongest expansion ever of Bach Hoa Xanh. The chain now has 322 stores in 15 provinces in the South (except for HCM City), accounting for 44 percent of total number of Bach Hoa Xanh stores. Two stores were opened in one day, equivalent to the booming period of chain.

How much room is left?

According to report of Q&Me, the retail sales in Vietnam market reached 142 billion US dollars in 2018, the highest level ever recorded. That is expected to reach 180 billion US dollars in 2020. The compound annual growth rate (CAGR) was 13%. In particular, Hanoi and HCM City are the two cities with the strongest growth in modern sales channels. Hanoi and HCM City alone accounted for one third of total revenue (HCM City accounted for 22%, while Hanoi accounted for 11%). “With growth rate of retail industry always being 1.5 to two times higher than the GDP growth of the country, investing in retail is investing in the future of the economy in Vietnam,” stated the report of Military Commercial Joint Stock Bank Securities Company (MBS).

According to assessment of McKinsey, Vietnam’s modern retail sector is expected to grow rapidly in the next five years, especially for the “not a square metre” stores such as e-commerce, which has an average annual growth rate of 25.8 percent in the period of 2018-2023, doubling that of any other country in the region.

Although there is a lot of room left, the fierce competition in the retail market of Vietnam in recent years has made many domestic and foreign businesses to leave the market. The withdrawals of many European supermarket groups in Vietnam over the past five years such as Casino Group from France, Metro Group from Germany are the clearest evidence.


Category: Business, Vietnam

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