Nguyen Kim Targets US$2 Billion

While an appalling tragedy befalls electronics business, with many retailers and distributors driven into bankruptcy or downscaling, the Nguyen Kim electronic appliance centre system raked in revenues of VND7,000 billion (US$350 million) in 2011, an increase of 30 percent from 2010 . Not only that, Nguyen Kim set a target at US$2 billion in the next three years, based on his new ambitious strategies.

 

Nguyen Kim electronic appliance centre system caught the public attention with revenues of over US$350 million in 2011, seeing a growth of 35 percent over 2010. The shopping centre chain maintains annual sales growth of 40 - 60 percent. It has recently opened six new shopping centres in the southwest region and the Central Highlands in addition to 10 existing ones.

 

Nguyen Kim started with electronics appliance business very soon. In the 1990s, not long after Vietnam accelerated the doi moi (renovation) process, electronic appliances were traded in free markets in big cities. In 1996, the founder of Nguyen Kim seized the opportunity to open the first professional electronic appliance shop on Tran Hung Dao Street, in the heart of Ho Chi Minh City. He introduced a novel business model at that time: Only selling genuine products, written warranty.

 

This model was very advanced in Vietnam at that time because it was indeed a “one stop shop." The Nguyen Kim model also consists of six electrical - electronics appliance categories like Best Buy.

 

Nguyen Kim opened two new shopping centres in 2007, one more in 2010, and five more in 2011. In early April 2012, the company inaugurated six new centres. The firm is ambiguous to open dozens of new shopping centres by 2015.

 

All product lines bring a profit margin of 10 percent, said Vu Thu Muoi, Senior Vice Financial Manager and Board of the Board of Directors. But, this model still has difficult problems to be resolved.

 

The first and foremost is scale pressures. Muoi analysed that although the return margin is 10 percent, this business requires enormous expenditures on space, operation and logistics. These also weaken many companies after a time doing this business in the time of economic slowdown.

 

Nguyen Kim has a formula for space development. A shopping centre has an area of 3,000 m2 at a street corner and in densely populated area. The company spends VND50-200 billion to complete a centre. The priority of retail space is orderly as follows: ownership, long-time leasing from the government, partnership with land owner, and long-term leasing. Nguyen Kim said it does not choose retail spaces inside shopping malls, usually called as shop in shop as its rivals.

 

With its long development history, Nguyen Kim is the distributor of leading brands like Sony, Panasonic, Toshiba, Sanyo, JVC, Sharp, LG, Samsung, HP, IBM and Intel. In terms of competitive advantage, this system has more financial supports than its rivals. With its popularity, Nguyen Kim shops attract 80,000 visitors a day.

There are no official statistical data on Nguyen Kim’s market share as well as other traders of electrical and electronics appliances in Vietnam. They are running hundreds of electronic appliance centres across the country but a few of them are successful - a sign of hardship in this business. With more than US$350 million revenues and 5,500 employees, average revenue to an employee was US$65,000. With the plan to bring revenues to US$2 billion a year in the next one or two years, Nguyen Kim needs to holds annual growth of 50 percent.

 

The road to the destination of US$2 billion is not that simple when Nguyen Kim is placed in a market full of challenges and competition. The southern region now has the presence of northern retailers in addition to local ones because of easier business conditions. In the northern region, Tran Anh supermarket chain also added six stores in 2012, hoping to run 20 stores by 2015. Besides, there many other rivals ready to rebound when the market gets warmer. And, by 2015, the retail market will be wholly open to foreign retailers.

 

Nguyen Kim is expanding in both depth and dimension. In term of depth expansion, the company is trying to increase revenues of categories it deems more potential. Ms Muoi said in 2011, three out of six categories brought in double growth from 2010, namely mobile devices, IT devices, and entertainment devices. However, these categories account for just 30 percent.

 

"In the future, Nguyen Kim will raise the proportion of these items to 50 percent and we will focus on implementing several investment, sales and marketing projects and programmes for them," she said.

 

Meanwhile, Nguyen Kim is taking steps to expand product categories in accordance with “one stop shop” standard. It will build entertainment centres in its shopping centres. The latest move is the eight-storey Nguyen Kim Thu Duc shopping centre in the downtown of Ho Chi Minh City. This facility, apart from electronic appliance centre, includes 4D cinema, restaurants, do-it-yourself supermarkets, one-price stores and others.

 

The company will expand e-commerce system. Online shopping currently accounts for small proportion of its revenues because Vietnamese buyers prefer direct buying.