Vietnam is considered one of the countries having an attractive retail market. The interest from retail groups in the world is becoming a challenge for domestic retailers. The risk of domestic retailers becoming weaker in the race for market share with foreign firms is becoming clearer.
The fear of "losing the game"
The risk of "losing the game" is shown most clearly in the retail market, opportunities for Vietnamese businesses in this segment are increasingly shrinking. According to Savills Vietnam, in the 3rd quarter of 2013, about 4 commercial centres and supermarkets in Hanoi will have to close down for restructuring or changing business model. They are Hang Da Galleria and 3 big supermarkets which are Ba Dinh, Ha Dong and Dong Da.
Commercial centres located in the prime location are also facing difficulties. Cua Nam Commercial Centre has a high rate of unoccupied booths. Cho Mo Centre has to delay opening ceremony due to few tenants. Mipec Mall in operation for a long time but has few tenants so it has to restructure itself and allows Lotte Mart to rent the entire 4 floors with a total area of 20,000m2.
Ho Chi Minh City markets are facing the same problem, as the number of visitors is big but the number of buyers is small, while the cost of the retail business is growing steadily.
Foreign enterprises capture the market
According to many economists, Vietnam's retail market still has room for growth for several more decades, because Vietnam has a young population and high population density. In fact, sales of retail businesses in Vietnam have been increasing at double-digit rates. After researching the market in Vietnam, many foreign investors such as Auchan and Aeon have vowed to spend millions of USD opening supermarkets in Vietnam, competing with those already having a certain market share like Big C, Metro, Parkson and Lotte.
According to the director of a real estate company, a retail giant is quietly surveying the area around the eastern and southern Ho Chi Minh City to prepare for the opening of stores in 2-3 years. And of more than 30 Japanese firms recently surveying Vietnam market, the majority are retail businesses.
The “rushing” Japanese retail businesses to Vietnam market was predicted earlier. In the conference “Vietnam market in Japanese companies’ view”, Brainworks Asia noted that from 2013 onwards there will be wave of Japanese enterprises mainly in the service sector coming to Vietnam.
Besides, it is worth mentioning those from South Korea, Thailand and Germany. Recently, Berli Jucker Plc (BJP), a retailer of Thailand is confident that it needs only 3 years to reach 10 billion baht revenue (equivalent to about VND6,800 billion), and to realise this ambition, it has acquired 42 Family Marts in Vietnam.
Mr Vu Vinh Phu, Chairman of Hanoi Supermarket Association, said that foreign retailers are stepping up investment in Vietnam, which demonstrates the attraction of the market. Now supermarkets are becoming an indispensable buying channel.
The Ministry of Industry and Trade has approved the development plan for supermarkets and commercial centres network. This approval, according to CBRE Vietnam, has created impetus for investors. Accordingly, by 2020, the country is striving to have around 1,200-1,300 supermarkets and 180 commercial centres. The government also encourages enterprises of all economic sectors to get involved in this sector. It is forecast that by 2020, the share of retail sales through supermarkets and commercial centres will account for about 45 percent of total retail sales of social commodities. "This is a factor to attract investors, especially foreign investors," CBRE said.
Being a potential market makes the retail market a place of the stiff competition for market share, in which, Vietnam enterprises still face disadvantages due to less capital, lack of experience in the business sales and market development. However, many local businesses are confident when faced with foreign enterprises.
Si Son
Vietnamese
