Convenience stores enjoy boom in Vietnam

HCM City (VNA) - Convenience stores and minimarts have become increasingly popular in the country, with more than one third of households shopping there regularly, according to some analysts’ estimates.

If they reduce their prices further, they would have even more opportunities to grow, they said.

Le Viet Nga, deputy head of the Ministry of Industry and Trade’s domestic market department, said convenience stores have got a good reception from the market, and now make up the fastest growing retail segment with double-digit growth.

“This is a modern trading channel, selling goods with clear origins and having good management. Convenience stores offer good opportunities for small and medium-sized enterprises and farmers to bring their products into the market.”

According to the ministry, investors are also favouring convenience stores since their return on investment is much higher than traditional supermarkets or hypermarkets and investment is lower.

Besides, getting licences for convenience stores and minimarts is much easier than for supermarkets since opening retail outlets of less than 500sq.m is not subject to the economic needs test (ENT), it said.

Traditional retail channels still account for 72 percent of the market but this is forecast to reduce to 60 percent by 2020.

In China, there is one convenience store for every 21,000 people, while the figure is 1,800 in the Republic of Korea and 69,000 in Vietnam, meaning there is immense potential for the segment to grow in the country, it said, adding that the steady increase in incomes and changes in consumer behaviour are other big factors.

The number of convenience stores more than doubled in 2012-14 to 348. The number of minimarts went up from 863 to 1,452.

In 2015 and 2016, convenience stores continued with their impressive performance, with local and foreign players like Saigon Co.op, Satra, Vingroup, B’s mart, Shop&Go and Circle K beefing up their presence as shoppers eyed convenience while a robust economy increased their spending power.

For instance, Saigon Co.op, which owns Co.opmart, Co.opXtra and Co.op Food, last year launched Co.op Smile, a new retail model.

Saigon Co.op General Director Nguyen Thanh Nhan said plans are in the works to increase the number of Co.op Smile stores to 200-300 by the end of this year from just 20 outlets last year.

Satra, which has a joint venture with Heineken in Vietnam, also plans to expand its retail system, with a focus on developing its convenience store chain Satrafoods to create a distribution channel for its subsidiaries like meat producer Vissan and Vietnamese producers in general.

This year it will open 55 Satrafoods stores, including 10 in the Mekong Delta city of Can Tho alone, raising the total number to 172.

According to the ministry, foreign enterprises have a 70 percent market share of convenience stores, 17 percent of malls and supermarkets, 15 percent of minimarts and 50 percent of the online shopping channel.

According to insiders, the biggest disadvantage for convenience stores and minimarts is their higher prices compared to supermarkets, traditional markets, and grocery stores.

To improve their competitiveness, they must reduce prices and sell quality local products, they said.

Vu Vinh Phu, chairman of the Hanoi Supermarkets Association, said domestic producers and distributors should develop closer links to cut intermediary costs.

According to the Global Retail Development Index (GRDI) from consulting firm A.T. Kearney, Vietnam has been in the top 30 most attractive retail markets since 2008.-VNA