The Hanoitimes - there remains large potential for the future growth of Vietnam’s retail market, given by the country’s large population with rising income and improved living standards.
The competition in the Vietnamese retail market is continuously heating up as both domestic and foreign retailers are boosting expansion plans, while some distribution networks have even been taken over by others.
The market has recently seen the disappearance of the Fivimart supermarket chain after a decade of operation. Vingroup’s retail arm, VinCommerce, in October acquired 100 percent of the Fivimart supermarket system from its operator, Nhat Nam Joint Stock Company, to own all 23 Fivimart supermarkets nationwide.
VinCommerce is now Vietnam’s largest retailer
After the takeover, all Fivimart supermarkets have been renamed to VinMart, the supermarket brand of Vingroup.
According to VinCommerce, the deal will help the firm expand its retail network. VinCommerce is now Vietnam’s largest retailer, with some 100 VinMart supermarkets and 1,400 VinMart+ convenience stores. It expects to raise these figures to 200 and 4,000 by 2020, respectively.
Another domestic retail giant, Saigon Union of Trading Cooperatives (Saigon Co.op), has also enlarged its operation, with a recent launch of a new Co.opmart supermarket in the Mekong Delta province of An Giang. Saigon Co.op currently has 99 Co.opmart supermarkets nationwide, and will this year open four to five more Co.opmart and Co.opXtra supermarkets and 10 Co.op Food convenience food stores in Ho Chi Minh City and Hanoi.
Besides domestic retailers, foreign retail firms operating in Vietnam have also planned to enlarge their network size in the country. In mid-November, Thailand’s Central Group, which owns the BigC supermarket chain in Vietnam, opened the GO! My Tho commercial center in Tien Giang Province’s My Tho City. The group had earlier announced plans to inject an additional US$500 million into Vietnam to launch 500 new retail outlets in the country over the next five years.
Meanwhile, other giant retailers have set ambitious targets. Japan’s Aeon Group expected to have 20 Aeon supermarkets in Vietnam by 2025, while South Korea’s Lotte Group is aiming for 60 Lotte Mart supermarkets in the country by 2020.
As for the convenience store segment, VinMart continues its dominance. Mobile World Investment Corp has set a target to increase the number of its Bach Hoa Xanh food stores to 500 by the end of this year from the current 405.
Further, both newcomers 7-Eleven and GS25 have plans to open thousands of convenience stores in Vietnam over the next decade while Family Mart outlets is expected to expand to 700 by 2020 from the current 130 outlets.
Vietnam has been one of the world’s most attractive markets for retail investment, ranking sixth in the Global Retail Development Index (GRDI) of A.T. Kearney.
According to trade expert Vu Vinh Phu, there remains large potential for the future growth of Vietnam’s retail market, given by the country’s large population with rising income and improved living standards.
Mapping out the country’s trade development, the Ministry of Industry and Trade also forecast that the annual growth rate (excluding the price factor) of the total revenue from retail sales of goods and services for the period from now to 2020 will average at 13 percent per year, and rise to 14 percent in 2021-2025, reaching VND5.8 quadrillion (US$255.5 billion) by 2020 and over VND11 quadrillion (US$484.58 billion) by 2025.
However, experts also said that it will take time for retailers to take back investment capital in their stores soon as the competition in the market is becoming fiercer.
A senior executive of Family Mart said it requires long term capital to get investment returns from the retail business. In China, investors make a profit after 17 years, while retailers in Thailand and South Korea have to wait eight years.
Sharing the same view, Phu said that big retailers will reap fruits in the future if they can survive difficulties and accept losses for the first several years.