Retail segment: the lucrative pie

12-Feb-2019 Intellasia | Dau tu Chung khoan | 6:00 AM Print This Post

Stephen Wyatt, general director of JLL Vietnam shared with Dau tu Chung khoan newspaper that the recent penetration of foreign retailers into Vietnam has made the retail market more competitive. The retail pie will be a war and only retailers with right strategy to meet the market depand can gain market share.

The total retail sales of consumer goods and services as of September 2018 of Vietnam increased by 11.3 percent over the same period of 2017/ In fact, the retail market is on the rise in Vietnam with great attraction to foreign businesses. Many famous retailers from Japan, Thailand, South Korea and France have “flooded” into Vietnam to compete for market share.

It is worth to mention the important milestones in the Vietnamese market of foreign retailers. In late 2014, Berli Jucker Plc (BJC) took over Metro Cash & Carry Vietnam at a price of 655 million euros. It was the largest mergers and acquisitions (M&A) deal at that time, marking the presence of Thai businesses in the retail market of Vietnam. Not long after that, another giant from Thailand Central Group also acquired Nguyen Kim and then BigC.

In October 2015, Emart South Korea’s leading retailer officially set foot in HCM City with the launch of a shopping mall worth 60 million US dollars. In addition, Lotte Market has been fairly successful in the city with 11 supermarkets and this number is expected to increase to 60 stores by 2020.

Most Japanese investors see Aeon’s success in Vietnam is a positive sign. Aeon has opened four commercial centers in Vietnam and expects to increase this number to 20 by 2020. Meanwhile, Saigon Centre in HCM City welcomed the presence of the key tenant Takashimaya in July 2016

With the launch of three additional Simply Mart stores in HCM City, AuchanSuper the French retailer also has plan to open an addition of 17 supermarket chains by the end of 2019 and 20 stores by 2020 in Northern provinces.

Big fashion brands such as Gap, Mango and Topshop have become the top choice of many young Vietnamese. In early September 2016, Zara opened the first flagship in HCM City, and then Hanoi. Not only Zara, H&M also completed procedures to join Vietnam’s market in 2017.

Vo Thi Khanh Trang, Head of Research Department at Savills HCM City said that the core factor of the development of Vietnam’s retail strategy is the rapid change in behavious of consumers. This forces retail developers to understand and graps the trend to come up with the ideas of developing the project infrastructure as well as reasonable structure of tenants.

Sharing similar view, report of JLL pointed out that the growing available income, the urbanisation rate and the rise of the middle class have promoted Vietnam to become one of the most active emerging economies in Southeast Asia. In addition, the increasing number of international tourists and the further improvement have made Vietnam a lucrative pie for many retailers. In this context, the supply and demand for retail space were positive in HCN city and Hanoi in the third quarter of 2018, signalling a positive prospect for retail space market from now to the beginning of 2019.

However, in the context when the competition is increasing, many projects were closed or cut retail space, particularly the department store segment. Many commercial centers said had to renovate the architecture, constantly refresh and offer different discount programmes and events to attached shoppers thereby improving business situation. The development of e-commerce is also a challenge for retail space developers.

In the race to gain market share, many people are worried about the “disadvantageous” position of domestic investors compared to theprogress of big businesses from Japan and Thailand. JLL’s CEO said that it is indispensable to have concerns because modern consumers have a smart shopping retailers to do high-quality shopping, and quality and diversified models will be the priority criteria of choice. However, these two criterias are the advantage of foreign retailers, while it is the disadvantage of many domestic retailers.

Under the plan to develop supermarket network and commercial centers of the Ministry of Industry and Trade by 2020 with vision to 2030, the porportion of retail sales via supermarket network as well as commercial centers by 2018 only accounted for 30 percent in 2018 and 45 percent in 2020. Currently, traditional retail channel still accounts for very large proportion nationwide, particularly the areas which do not belong to Hanoi and HCM City.


Category: Business, Vietnam

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