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Last updated: Friday, March 16, 2018


Retail Sector Sees Highest CAGR Growth

Posted: Saturday, March 10, 2018

The Vietnamese market is witnessing robust growth of the retail sector. In the list of the 500 fastest growing companies in 2018 (FAST500 2018), this sector recorded a stunning growth in three straight years from 2013 to 2016, expanding nearly 30 per cent over the 2012 - 2015 period, and was among three industries with the highest CAGR growth, according to information released by Vietnam Report Joint Stock Company.

Top 10 FAST500 companies in 2018 include Masan Resources Corporation; Khang Dien House Trading and Investment Joint Stock Company; F.I.T Group Joint Stock Company; Transport and Industry Development Investment Joint Stock Company; VietJet Aviation Joint Stock Company; T&T Group Joint Stock Company; Golden Gate Trade Services Joint Stock Company; Hai Dang Joint Stock Company; National Payment Corporation of Vietnam; and Pan Group Joint Stock Company.

Many companies plan business expansions
With the framework of FAST500 2018 rankings, Vietnam Report also conducted a corporate growth survey over eight years from the first announcement in an effort to portray the broader picture of Vietnamese businesses, the most important factors contributing to corporate success and business orientation in 2018.

According to the report, in the 2013 - 2017 period, the average compound annual growth rate (CAGR) of Top 500 fastest-growing companies in Vietnam (FAST500) reached 46.4 per cent, up from 42.4 per cent in the previous period, showing that the business growth is quite stable. This is a good signal, bringing higher growth expectations in the next period.

By enterprise type, all three sectors saw high and stable CAGR growth rates. Notably, the State-owned enterprise sector had a CAGR growth of 38.7 per cent, an increase of 5 per cent over the period from 2012 to 2016, indicating that there are significant improvements in business performance, a positive plus for equitisation process.

By industry, the Vietnamese market witnessed a strong rise of the retail sector in recent years. In addition, agricultural, telecommunication, information technology and mechanical engineering sectors maintained their growth momentum with an average CAGR of over 50 per cent. Leading the rankings by number was the construction, building materials and real estate sector, accounting for 29 per cent of total businesses ranked. Arguably, these numbers partially illustrate part of the current market picture with a potential growth driven by emerging sectors such as real estate and retail, which are expected to be “promising land” to draw strong investment for the national economy.

Most businesses expressed optimism with business results in 2017 (62.9 per cent of respondents said revenue in 2017 increased over 2016 and more than 60 per cent said the profit after tax was higher). More than 70 per cent of respondents planned to expand business scales in 2018.

On the other hand, enterprises said domestic and regional market growth was the biggest contributor to business growth in the five years from 2013 to 2017. FAST500 companies stated that the development potential of the domestic market and regional markets together with improvements in investment, business and regulatory environments facilitated business growth in recent years. In addition, the expansion of existing markets, the development of new product lines and the branch-out of new market segments were also important factors.

Dealing with rising input costs
In 2018, businesses are seeing three biggest external barriers to growth: rising input costs, the rise of competitors, and administrative procedures. They pay particular attention to input costs, mainly because of high prices of inputs and rising competition in business sectors (with corresponding growth of 60.5 per cent and 52.6 per cent).

Many experts said that competition will be fierce among industries on attractively potential markets and opening incentive policies for foreign businesses. At the same time, the upcoming trend will be the link of big firms to create synergised value. As a result, FAST500 businesses said that the two biggest rivals to be noticed this year are top domestic firms (50 per cent of respondents) and multinational corporations from developed countries actively entering the Vietnamese market (41.2 per cent of respondents).

In the face of intertwined challenge and competition, 83.8 per cent of businesses said they will prioritise profit-to-revenue growth in current markets and then enhance productivity and expand into new markets with respective agreeing respondents at 59.5 per cent and 51.4 per cent. As for raising growth prospects, 73 per cent of businesses determine that the quality of products and services is the key factor that needs to be noticed in the coming time.

Regarding good-performing industries in the next three years, top 5 prospective sectors are organic agriculture, information technology, clean technology, retail, and tourism - hospitality. This also shows upcoming development trends when companies gradually step up investments to upgrade clean and environment-friendly technologies, integrating in processing and manufacturing industries and directing tourism development.

Better legal environment drives growth in 2018
In business feedback in previous years, reducing tax and accelerating administrative reform are first solutions expected by enterprises. But in 2018, most expected an improvement in legal environment to better support business. As for the Vietnamese business community for the time being, improving the business investment climate will help businesses move towards growth and ensure rapid growth coupled with sustainable development.

2017 left many imprints on the Vietnamese economy, featured by high economic growth and improved macroeconomic fundamentals. This is the basis for supporting enterprises to develop and maintain their growth in 2018. Economic indicators and business feedback also show that the economy is growing more stably. However, pressures will still come from different directions against Vietnamese businesses since their added value and competitiveness are low. To create outstanding breakthroughs, growth driven by internal resources of enterprises is a prerequisite but the government support is also very important. In 2018, many policies and laws are expected to create more favourable conditions for all business forms, especially small and medium-sized enterprises (SMEs).

Quynh Anh

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