Expensive Space Wrecks Retail Market

In 2008, the Vietnamese retail market was on the top of GRDI list because it had over 85 million consumers and pledged to open the retail market from the start of 2009, a magnet to global retailers and distributors. But, expensive retail space, weak infrastructure and unprofessional services has made the Vietnamese retail market less attractive in the eyes of foreign investors. In the ranking table, Vietnam is far behind regional countries like Indonesia or the Philippines.

 

The Ministry of Industry and Trade said total retail sales of goods and services in the first five months of 2011 were estimated at VND762.7 trillion, up 22.5 percent year on year. According to A.T. Kearney, Vietnam is expected to have a market of 89 million consumers with revenues of US$113 billion in 2012. However, macro-economic instability like inflation and public debt, coupled with unclear recovery following the global economic crisis, cause multinational companies to take a more conservative approach to expansion in Asian markets, Vietnam in particular. Currently, South American retail markets such as Brazil and Chile are catching the fancy of giant retailers.

 

Vietnam opened its retail market to wholly foreign-invested retailers as of January 1, 2009. Nguyen Nu Tuyet Hong, Deputy Director of TNS Market Research Company, said: After Vietnam joined the World Trade Organisation (WTO), modern retail accounted for 15 percent of market share in 2009, 17 percent in 2010, and 21 percent in the second quarter of 2011. Large scale retailers are expanding their outlets in Vietnam. For example, Big C now has 14 hypermarkets, while Metro Cash & Carry also has 13 retail outlets. However, the number of large scale foreign distributors in Vietnam is still modest. In 2011, some retailers like Tesco (UK) or FairPrice (Singapore) signalled their plans to penetrate this market.

 

A representative from Parkson Vietnam Company admits that the development of Parkson Vietnam commercial centre system has not met expectations because of limited retail infrastructure. However, Parkson Vietnam’s sales keep rising steadily on high purchasing power.

 

According to research released by Knight Frank, rental rates fell slightly in the early months of 2011. Average occupancy rates of retail space in business districts and suburban districts are 92 percent and 83 percent, respectively. Mr Nicholas Holt, Associate Director of Knight Frank Vietnam, said: The retail property market declined slightly in the first quarter of 2011 when retailers become more cautious and sought more affordable rents. However, the situation will be brighter in 2012.

 

Richard Leech, Managing Director of CB Richard Ellis (Vietnam), said: Some trade centres started lowering rental rates since the fourth quarter of last year. In the first quarter of 2011, total supply tumbled 11.8 percent on quarter to nearly 105,000 square metres.

 

The supply of retail space also increased. Recently, the Savico Megamall Centre in Long Bien District, Hanoi and Mo Market Trade Centre in Hai Ba Trung district, also in Hanoi, were recently opened. Melinh Plaza also announced plans to expand the space. Vincom revealed bold plans to open 10 shopping centres across the country with a total retail area of over 1 million square metres in the next five years.