Customers shop at a Vinmart supermarket in Hanoi (Photo: VNA) Hanoi (VNS/VNA) - As thecountry’s consumption demand increases to match national economic progress,more and more foreign retailers are entering the Vietnamese market to a warmwelcome from buyers, while Vietnam’s domestic brands look for their own growthstrategies against the newcomers.
Regarding the rising trend of foreign firmsgaining market share in Vietnam, reports from the Ministry of Industry andTrade (MoIT) stated that at the moment, there are roughly a thousandconvenience stores across the entire country, plus a few hundred supermarketsand shopping centres. These figures are considered too little for a populationof 90 million and demand rising everyday.
This is even more disconcerting when putinto perspective, as there is approximately one convenience store per 69,000Vietnamese citizens, compared to one per 21,000 in China and one per 1,800 in theRepublic of Korea as at the end of 2016.
Le Viet Nga, deputy head of MoIT’s DomesticMarket Department, stated that convenience stores had received a good receptionin the market, and were on their way to becoming the fastest growing retailsegment, with double digit growth in 2017.
‘Convenience stores are the new and moderntrading channel, selling products with clear origins and offering good customerservice. As such, they allow small- and medium-sized enterprises manyopportunities to approach buyers in a direct manner,” said Nga.
According to the MoIT, investors are alsofavouring convenience stores since their return on investment is much higherthan traditional supermarkets or hypermarkets, while initial investment is muchlower.
Furthermore, business licences forconvenience stores and mini-marketplaces are easier to obtain than forsupermarkets, since retail outlets of less than 500sq.m are not subject to theeconomic needs test (ENT), Nga commented.
As such, foreign entities are quick tosniff out potential customers and can easily infiltrate the Vietnamese marketthanks to their advantages in terms of capital, business strategy and anestablished global distribution chain.
Furthermore, as Vietnam is full of freshproducts available year round at relatively cheap prices and populatedresidential areas, convenience stores can easily meet demand by supplyingconsumers with a variety of products at small neighbourhood outlets.
Recently, well known names such as thePhilippines’ Shop&Go, US’ Circle K and Japan’s 7-Eleven have approachedVietnamese consumers with great success. Their strengths lie in convenience, interms of both time and location, first and foremost, followed by affordableprices and a customer-friendly environment.
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Other stores specialising in householditems and fashion accessories that have populated Vietnam’s retail marketinclude China’s Miniso and Ilahui since late 2016, and Daiso since 2008. Theexplosion of such brands has steered consumers towards the rising conveniencestore trend.
In less than a year, more than 100 suchconvenience stores have opened in Hanoi, HCM City, and other major cities in Vietnam,with some even reaching out to more remote areas. The model caters to lower-and middle-class shoppers with a variety of convenient and affordable goods.
The MoIT reports that more than 70 percentof convenience stores on the market, as well as 17 percent of malls andsupermarkets, 15 percent of mini-marketplaces and 50 percent of online shoppingchannels belong to foreign companies.
Indigenous forte
Despite the crowded sector, domestic brandssuch as VinGroup and Saigon Co.op are gaining market share, though there is adearth of other notable names.
VinGroups’s retail section, VinCommerce,was crowned the fastest growing retailer in Vietnam in 2016. The company’sretail network now has a store count of over 930, including a variety ofVinmart supermarkets, Vinmart convenience stores, Vinpro electronics stores,and VinDS consumer lifestyle specialty stores, all over the country.
Additionally, Saigon Co.op General DirectorNguyen Thanh Nhan said that his company was looking to increase the number ofCo.op Smile stores to 300 by the end of 2017, compared to the mere 20 outletsin 2016.
Traditional retail channels still accountfor 72 percent of the market but this number is forecasted to decline to just60 percent in 2020, as stated in reports by the MoIT.
Speaking on this matter, L. ChaitanyaKishore Reddy, Research Director and Representative of TNS Vietnam, advisedVietnamese producers and distributors to focus on supplying buyers with thevalues that they need, which at the moment is convenience and efficiency.
Reddy also said that the VietnameseGovernment must help enhance the distribution chain from input to output,especially with smaller producers, and encourage larger businesses to unifysmall- and medium-sized distributors within the national retail value chain.-VNA
VNA
