Markets & Prices
Last updated: Tuesday, January 17, 2017
Giant Foreign Retailers Flood into VietnamPosted: Wednesday, January 04, 2017
Many retailers from Thailand, Japan and South Korea have opened distribution systems in Vietnam and vied for bigger bites in this high potential market. The competition among the domestic and foreign distributors is becoming fiercer. And, the advantage seems to be in the hands of foreigners.
Massive influx of foreign retailers
The advent of South Korean retailers outnumbered Thai counterparts. In 2016, South Korea’s leading retailer Emart launched a US$60 million shopping centre in Ho Chi Minh City and opened 11 other stores. The firm expects to expand its network to 60 stores in Vietnam by 2020.
Mr Ko Sang Goo, President of K&K Global Trade Company (owner of the K-Mart system) and President of the South Korean Society in Hanoi, said that, with a population of over 90 million, Vietnam has a strong potential retail market. In the coming time, K-Mart will not only distribute South Korean products in Vietnam but also distribute Vietnamese agricultural and seafood products in South Korea.
K-market now has four supermarkets in Hanoi and nine supermarkets in Ho Chi Minh City. It is negotiating with Vingroup Joint Stock Company to open 100 K-food stores in Vietnam.
Lotte Group is planning to open 60 supermarkets in Vietnam by 2020. Meanwhile, Thailand's TCC Group also acquired Metro for EUR655 million.
Japanese investors have also made big investments in Vietnam. Aeon Co., Ltd of Japan plans to build 20 Aeon malls in Vietnam. To date, the group has invested US$500 million in the Southeast Asian nation, mainly to build Aeon malls. Its trade centres often have individual retail area of over than 40,000 square metres on 100,000 square metres of total usable area. Aeon expects that each centre will attract 12-14 million customers a year.
In addition to shopping malls, Aeon will also boost business with supermarkets in which it holds stakes such as Citi Mart and Fivi Mart and plan to increase points of sale from 30 to 100 in the next three years.
Recently, Takashimaya, a retailer from Japan, said it will open a 15,000-square metre store at Saigon Centre in Ho Chi Minh City, its first facility in Vietnam.
Mobile World Group, a leading retailer of mobile devices in Vietnam, also plans to open food stores next year and increase its investment in Dien May Xanh consumer electronics chain.
According to the supermarket and commercial centre network development plan to 2020, with a vision to 2030, approved by the Ministry of Industry and Trade of Vietnam, retail revenue via supermarkets and trade centres makes up for 30 per cent of total retail revenues in 2015 and will rise to 45 per cent by 2020.
Currently, Vietnam has nearly 9,000 traditional markets, 800 supermarkets and more than 1 million retail outlets operated by individuals. Many experts predicted that spending at retail stores and trade centres will rise to 40 per cent by 2020 from 25 per cent at present.
Remarking on domestic retailers, Mr Vu Vinh Phu, Chairman of the Hanoi Supermarket Association, said that only Saigon Co-op and Vingroup can compete with foreign rivals. Such names as Intimex, Fivimart and Hapro are seemingly fading in the eyes of consumers.
Foreign-led retailers tend to grow strongly thanks to their financial strength, well-known brand and well-arranged business. They penetrate the Vietnamese market by acquiring local retailers. In fact, many domestic retailers received a lot of government incentives and support for development but they then sold themselves to foreign retailers.
In this unequal race, the key to Vietnamese companies is to focus on linking production and supply chains and uniting producers - distributors, distributors - distributors, wholesalers - retailers. In addition, retailers need to improve the quality of goods, prestige and customer satisfaction about their products and services.