Retail M&As Get Fiercer

1:41:52 PM | 10/5/2019

The Vietnamese retail market continues to catch the attention of investors because of continuous, repetitive volatility in the past years. After the retreat of big names like Metro, Oceanmart and Fivimart, merger and acquisition (M&A) deals continue to take place.

Some years ago, retail M&As remained quite strange to many. At that time, businesses regardless of their scale sought their own customer segments. The cooperation between SaigonCo.op - the owner of Co.opMart chain - and Singapore retailer NTUC FairPrice was considered the most famous deal.

The retail M&A storm has really raged since 2014 when many giants jumped into the market. Besides, other world-leading corporations planned to enter the Vietnamese market. Vingroup rocked the market with many supermarket acquisition deals across the country. Since then, a series of big names had to say goodbye to the market like OceanMart, SapoMart and Metro. Besides, the market also witnessed the entry of the big names like Emart, Aeon and Lotte.

In August 2017, Mobile World Investment Corporation (MWG) acquired Tran Anh Digital World Joint Stock Company. After that, MWG gradually launched promotions and converted all stores to the new brand. Tran Anh’s business results were integrated into Dien May Xanh chain.
After the divorce of Aeon and Fivimart as a result of different direction, thinking and vision, Vingroup immediately made a purchase of Fivimart to increase its retail market share. In September 2018, this deal was completed and VinCommerce Service Joint Stock Company officially controlled all 23 Fivimart supermarkets. After this deal, Fivimart was renamed to VinMart.

In early April 2019, a rare retail M&A deal was seen in Vietnam when Shop and Life Joint Stock Company, owner of Shop&Go convenience stores, proposed to sell all 87 convenience stores to VinCommerce for only US$1.

At the same time, GS 25 Vietnam, a retailer from South Korea, also completed procedures to take over Zakka Mart - a series of convenient stores operated by Zakka Joint Stock Company. Zakka Mart has 49 convenience shops open until 10:00 p.m. The deal value was unrevealed but all stores and employees of Zakka Mart will be transferred to GS 25 Vietnam in May 2019.

The boom of convenience stores has affirmed many big names like 7-Eleven, CircleK, GS25 and Lawson, or financially viable, richly experienced retail brands like Vinmart +, Co.opMart, Satrafood and Bach Hoa Xanh. Particularly, Vinmart+ stores are dominating. However, the performance of convenience stores has not brought about desired results. Some leading domestic retailers are facing enormous pressures from offsetting long-term loss, although this reality has not been made public.

According to economic experts, competition among convenience stores is still very intense in the coming time because of so many competitors vying for the huge market share.

Ms. Dinh Thi My Loan, Chairwoman of the Association of Vietnam Retailers (AVR), said, to ensure competitive health, retailers must importantly have human resources, financial resources, strategies, skills and technology. Besides, selecting retail spaces is the first and most important factor for retailers to reach consumers and ensure revenue for survival.

A Ho Chi Minh City-based retailer said, in addition to administrative costs and other operating costs, rental prices have risen an average of 300-400% over 3-5 years ago. The average rental price in Binh Thanh and Go Vap districts is VND40 million per month and a well-located space may reach VND90-100 million. Retailers are currently competing for important positions and this is for cash-rich retailers.

The Vietnamese retail market is considered an ideally profitable investment, especially after a series of foreign retailers made inroads into Vietnam and hold 50% of the market share.

Luong Tuan