Foreign investors enliven retail market

24-Mar-2017 Intellasia | Bao Dau Tu | 6:00 AM Print This Post

Foreign retailers are rushing to expand their market share in Vietnam, with a clear formation of the Japan-Thai-China triad.

Aeon Mall retailer from Japan has cooperated with BIM Group to invest a second shopping mall in Hanoi. This 200 million US dollar project (equivalent to 4.5 trillion dong) is located on a 9.5 hectare area invested by BIM Group in Ha Dong district (Hanoi). The project is scheduled to be open in the fourth quarter of 2019.

This is the fifth shopping malls of Aeon in Vietnam, after the firm successfully tested the model of commercial centre which combines shopping and entertainment. Up to now, Aeon Vietnam has spent nearly 600 million US dollars in these five centers, but the firm said it will continue to expand its cooperation and acquire existing supermarkets in the domestic, aiming to open 100 supermarkets.

Aeon has promoted operations in Southeast Asia and realised its business plan in Vietnam by purchasing 30 percent stake of Fivimart and 49 percent stake of Citimart in 2014. Joining the Vietnam’s market in 2008, Aeon has constantly been growing. The first deal of this group was the cooperation with Trung Nguyen to open the convenience store chain G7-Ministop.

The goal of Aeon is to launch 20 shopping centers and supermarkets across Vietnam by 2020. Globally, the group has a total of nearly 16,500 centers and stores.

Meanwhile, Aeon’s compatriot Takashimaya is creating a whirlwind of shopping in the heart of Hochiminh city by launching a chain of flagship stores with 58 brands first time appearing in Vietnam, 61 brands first time appearing in Hochiminh city, and 31 Japanese brands in Saigon Centre.

This is a busy commercial centre was established by a joint project between Takashimaya Joint Stock Company, its subsidiary – Toshin Urban Development Company, Keppel Land (Singapore) and two other state-owned firms of Vietnam. This is the city’s busiest shopping area and is also part of the urban development planning, which intersects many important transport routes in the future such as metro, and express way ring route.

Retailing is an area where mergers and acquisitions (M&A) activities are very exciting, accounting for nearly 30 percent of the three billion US dollars of M&A deals in the first half of 2016. The value of M&A deals in Vietnam in 2016 was estimated at six billion US dollars, up by 15 percent compared to 2015.

Saigon centre is the third destination of Takashimaya after Singapore and China. In the future, the urban construction strategy of Takashimaya group will also be expanded to other overseas locations. The traditional spirit of “confronting the challenge” with the motto “customer is king” are considered the guideline of Takashimaya in developing the chain of retail outlets in overseas, with focus on Southeast Asian countries.

Takashimaya is considered one of the oldest established shopping centers in Japan. Founded in 1831 in Kyoto, from a clothing store, Takashimaya so far has 17 commercial centers in Japan, and four in Singapore, Shanghai (China), Taipei (Taiwan), and Vietnam.

In addition to the retailing business, Takashimaya is also conducting a variety of business activities such as real estate management, construction and design. In particular, real estate management is the second core business of the group.

The Japan-Thailand-China triad

The domestic market in the recent time has become more familiar with the competition of retail giants from Thailand, Japan and South Korea in the promising market of Vietnam. According to the Global Retail Development Index of A.T. Kearney in 2016, in the top 20 potential markets, there are six Asian countries. Among them, China, India, Malaysia and Indonesia topped the list, Vietnam ranked the 11th and the Philippines ranked the 16th. Moreover, the distribution and retail market of Vietnam has been open after Vietnam joined the World Trade Organisation (WTO) and a series of Free Trade Agreements (FTAs).

Particularly, China has recently made an official entry into the Vietnamese market. Typically, Miniso Group signed a franchise agreement with Le Bao Minh Group and announced the opening of 12 stores in major cities of Vietnam in 2016.

Although many people think Miniso as a Japanese company, it is actually a joint venture between a Japanese partner and a Chinese giant. There are many questions raised about this venture, because Miniso has only four stores in Japan but up to 1,110 stores in China, and its real owner is Chinese (Ye Guofu).

If searching on Google, you can see that Ye Guofu is one of the 33 richest youngsters being under 40 years old in China. The precursor of Miniso was the Aiyaya brand, established by this businessperson in China in 2004.

In addition, in April 2016, Alibaba, China’s largest e-commerce corporation acquired for one billion US dollars to make a quick penetration in the Southeast Asian market, including Vietnam. Global market analysts believed that with the acquisition of Lazada, Alibaba will invest heavily in advertising campaigns, promotions and quickly and massively bring Chinese goods into Vietnam.

Meanwhile, domestic retailers in Vietnam also have noticeable movements, such as the continuous expansion of Mobile World Group to 1,000 locations, or the plan to open an addition of 70-80 Vinmart supermarkets and 1,500 Vinmart+ stores in 2017 of Vingroup. Especially, Vingroup has started to develop commercial centers (including Vinmart, VinPro, VinDS, etc.) to suburban districts in order to gradually increase network coverage. The group plans to expand the presence of Vinmart and Vinmart+ to at least 30 provinces and cities nationwide in 2017. However, Vingroup was not successful with the technology retail chain Vinpro+ and had to re-integrate the chain into the Vincom shopping retail system.

Nevertheless, analysts still believed that Vietnamese retailers are not ready to compete. The market pies are now mostly in the hands of Thai, Japanese, South Korea and Chinese. “Vietnamese goods have yet to find a positive direction. The fact that we see is a consequence of the process in the game where the winner has a long-term vision and thinking”, said Nguyen Phi Van, Chairwoman of Retail & Franchise Asia.

According to Van, foreign investors land in Vietnamese market for many reasons. Any enterprise with a regional or international vision, whether large or small, is very good at mapping the market expansion. They do it based on the economic development orientation of a country and the ecosystem’s development orientation of an industry, along with the internal development efforts of each enterprise. Such direction has helped them succeed in conquering the market. “Is that what Vietnam is missing?”, Van questioned.


Category: Business

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