In the final days of 2015 a number of commercial centers and supermarkets opened their doors with the expectation of recording bumper sales and making a mark on Vietnam’s retail scene.

After five years of searching for the right investment opportunity in Vietnam, on December 28 Emart (owned by Shinsegae from South Korea) officially opened its first hypermarket, Emart Go Vap, in Ho Chi Minh City.

With total investment of $60 million it includes a supermarket on an area of 6,000 sq m, which sells various items such as fresh produce, household goods, electrical equipment, and fashion items, among others, and an area with restaurants, an amusement park, and a children’s education area, etc.

Emart will build its second retail center in Tan Phu district, Ho Chi Minh City, when its application for a construction license is issued. 

On December 26, meanwhile, Saigon Co.op officially opened Co.opmart Nguyen Binh in the city’s Nha Be district. This is its 32nd Co.opmart in the city and its 80th nationwide.

Earlier, on December 24, three commercial centers - Vincom Mega Mall Thao Dien in Ho Chi Minh City, Vietnam Vincom Plaza Tri in northern Phu Tho province, and Vincom Plaza Long Xuyen in the Mekong Delta’s An Giang province - all opened. Vincom now has 16 commercial centers to in nine cities and provinces.

The third Aeon Mall from Japan’s Aeon, which opened in Hanoi on November 11 on an area of 120,000 sq m, also created a buzz in the country’s retail market. The giant Japanese retailer said that it aims to have 20 commercial centers and supermarkets in Vietnam by 2020.

Conversely, other giant retailers are looking to withdraw from the market. France’s Casino Group plans to sell Big C, while the plans of Thailand’s BJC to sell it Metro chain are still in the finalizing stage.

This suggests that, for now, Vietnam’s retail market is not a “promised land” for all players. But the comings and goings at least mean 2016 will be a year of much interest. 

Lack of creativity

According to the General Statistics Office, the retail sales and consumer services market in 2015 saw a lot of activity, especially, as noted above, in the last month of the year.

Distribution networks were strengthened and expanded in number, as were the number of supermarkets and specialized stores around the country.

Many players explored new sources of goods and researched consumers’ tastes in order to meet demands both in quantity and quality.

The management and implementation of policies for commercial centers were conducted in a timely and effective manner.

Stable market prices for essential goods, along with rapid growth in production, contributed to boosting commercial activities in the country and stimulating consumption.

As a result, total revenue of retail goods and consumer services in December was estimated at VND294.7 trillion ($13.1 billion), a 3.3 per cent increase against November and 9 per cent year-on-year. 

“Vietnam’s retail market in 2015, continued to be vibrant with various types of products made available, most notably the number of imported products,” said Mr. Vu Vinh Phu, President of the Hanoi Supermarket Association.

“However, it was also difficult to manage quality, price and trade fraud, which are quite complex matters.”

In his view, retail planning is often illogical. For example, there were three supermarkets built within one kilometer of each other in Hanoi’s Thai Thinh Street, of which only Lotte Mart is effective, Hapro has closed, and the domestic supermarket is only barely staying in business.

Having watched Vietnam’s retail market for many years, Mr. Vaughan Ryan, Managing Director of Nielsen Vietnam, said that 2015 was a reality check for Vietnam’s retail sector.

“Fast-moving consumer goods (FMCG) has stalled or, some may say, stopped altogether,” he said.

“The organic growth in double digits we have seen in the last decade has been replaced by somber levels of growth around the 2 to 4 per cent mark.”

In his view, this is a major challenge for retailers as well as manufacturers and forces them to change their approach.

They can no longer push growth by increasing prices without thinking about their consumers. The beverage industry, in particular beer and soft drinks, has seen significant growth, with a large emphasis being on customer engagement at the point of purchase, Mr. Ryan added. It was a challenging year, he concluded, with a lack of creativity in the market.

External competitors

Mr. Phu said that the competition between domestic retailers and foreign retailers is fierce.

“Although the number of locations where domestic retailers are present is huge, competitive solutions are yet to be adopted,” he said.

“Meanwhile, the solutions of foreign retailers may not be many but they have strong strategies to acquire market share.” He sees this as cause for alarm among domestic retailers.

Mr. Pham Dinh Doan, Deputy Chairman of the Vietnam Retailers Association, is of a similar mind.

He believes that Vietnam’s retail and distribution enterprises remain weak and bear many limitations.

This was shown in three important points: a shortage of financial resources to grow into large-scale chains; a lack of ability and experience in managing and applying high technology in management; and an absence of brand and long-term connections, cooperation, and support from partners and customers.

Foreign companies, meanwhile, have a range of ambitious plans in place.

“Obviously, with financial strength and experience foreign corporations possess numerous advantages compared to their domestic counterparts,” Mr. Doan said.

“What should be done now is not discussing how to protect domestic enterprises but how to take advantage of integration in order to bring more advantages to Vietnam’s enterprises and its economy.”

VN Economic Times