Markets & Prices

Last updated: Thursday, April 18, 2019


Race for Retail Share

Posted: Tuesday, April 02, 2019

More than 10 years after joining the World Trade Organization (WTO), the Vietnamese retail market has made great leaps and bounds. Foreign investors have invested a lot in this sector but Vietnamese retailers and brands are still weak and fragile. How they can grow in the future remains a big question.

Big market

According to the Organization for Economic Cooperation and Development (OECD), Vietnam is expected to have 44 million middle-class people by 2020 and 95 million by 2030.

The rapid growth of the middle class population will increase the demand and the size of the retail market in the future. This is also the reason why Vietnam's retail market is a lucrative ground for major world retailers.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is set to officially come into force in 2019 and this historic pact will strongly impact many sectors, including manufacturing, trade and service. Definitely, Vietnam will have to quickly open the door for goods and services from partner countries from now on, meaning that Vietnamese retailers must compete more fiercely right in the domestic market.

Ms. Le Viet Nga, Deputy Director of the Domestic Market Bureau under the Ministry of Industry and Trade, said, Vietnam's retail market has grown very quickly in recent years. In 2015 - 2017, total retail sales of consumer goods and services increased by 10.5 - 10.9% annually. In 2018, the value was estimated at nearly VND4,400 trillion (US$191 billion), 11.7% higher than in 2017, the highest annual growth in five years.

In addition, Vietnam’s retail market has huge potential and opportunity for robust growth as it has a large population of more than 93.7 million people, with 60% aged 18-50. The spending level of a Vietnamese household will rise 10.5% a year to US$714 per month by 2020. Meanwhile, the coverage rate of modern retail systems in Vietnam is lower than many countries in the region. Vietnam’s retail market share reaches only 25% of total retail sales, compared with 33% in the Philippines, 34% in Thailand, 60% in Malaysia and 90% in Singapore. “This is a prerequisite for Vietnam's retail market to develop in the coming time,” she said.

Potential barriers

Mr. Vu Vinh Phu, former chairman of the Hanoi Supermarket Association, said Vietnam’s retail market is not just a story of development but full of shortcomings. To really stand firm with their feet, retailers must focus on three core matters: Speed ​​(accelerating technological application to business and management to quicken effective business - consumer connectivity), brand (achieved through product quality) and prestige to customers. In addition, they need to pay attention to service quality and business culture.

Ms. Nga said, the pie of the Vietnamese retail market has been bitten by many foreign brands such as Lotte, Central Group, Aeon, Circle K, K Mart, Auchan and Family Mart. With well-made marketing strategies, well-trained employees and abundant finance, foreign retailers have continuously promoted their market expansion strategies in the Vietnamese market. This shows that the race for market share in the Vietnamese retail sector is extremely fierce.

In fact, Vietnamese companies still have a profit to take. According to the Ministry of Industry and Trade, an average of 100,000 people need a hypermarket and a trade center, every 10,000 people need a medium sized supermarket, and 1,000 people need 1-3 convenience stores. This is the gap for Vietnamese retailers to fill in to expand their market shares. Combined with other advantages in supply sources and consumer knowledge, they are embracing ample opportunities for development.

Ms. Dang Thuy Ha, Northern Director of Nielsen Vietnam, a market research company, said, consumers will use modern ways of shopping like online with trusted stores and multichannel marketing with different experiences. Retailers can also offer their own sales channels incorporated with technology to bring new experiences to customers.
Mr. Nguyen Tien Vuong, Deputy General Director of Hanoi Trading Corporation (Hapro), warned that while Vietnam's retail market has strong potential, it is highly competitive. If Vietnamese retailers do not have active integration and well-made investment strategy, they will lose the lion’s share to foreigners.

Anh Phuong

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