A trading centre in HCM City (Photo: VNA) Hanoi (VNS/VNA) - The shift toward e-commerce due to the COVID-19 pandemic hasbrought challenges to Vietnam’s retail property market, according to Savills Vietnam.
“COVID-19 has posed serious challenges within the real estate market, inparticular for retailers. The market has witnessed many businesses havingto foreclose or reduce operations to remain afloat," Tu Thi HongAn, director, Commercial Leasing HCM City, Savills Vietnam, said.
According to The Korean Times, the Korean E-Mart supermarket brand was acquiredin May by Truong Hai Thaco Auto Corporation. Facing unprecedented challengesduring its six years of operation in Vietnam, the brand struggled to expand andlimited itself to just one location. It was believed that E-Mart struggled tofind an ideal location that would match its requirements, Savills Vietnam said.
This is not the first time a foreign brand has struggled and eventually lost inViet Nam’s harsh retail market. Before this, several foreign retailers likeMetro and Casino Group had to back away, as well as the French supermarketchain Auchan was forced to be acquired by Coop, a local retailer.
Through the deal to secure a 5.5 percent stake with a price tag of 400 million USDin Vietnam’s Masan Group and VinCommerce (ownership of VinMart andVinMart ) by joint consumer-retail platform Crown X by Alibaba and BaringPrivate Equity Asia (BPEA), just a day before the E-Mart acquisitionannouncement, the untapped potential of Vietnam’s retail sector is shownvividly through its attraction to foreign companies.
Once this deal is completed, VinCommerce (a subsidiary acquired by Masan)will be one of the largest suppliers of the Lazada e-commerce platform (ownedby Alibaba).
Through these transactions it is clear the retail landscape in Vietnam ischanging, as the line between online and offline shopping continues to fade.
A report from the Vietnam E-Commerce and Digital Economy Agency(iDEA) said that 53 percent of purchases were done online in 2020 and theretail sector was given a bright forecast.
According to Fitch Solutions, Vietnam currently holds the fourth place inSoutheast Asia's fast growing e-commerce sector, and the average householdspending is predicted to rise up to 9.5 percent per year, an increase of 0.5percent from an earlier forecast. Consumer spending categories are alsoexpected to regain momentum in 2021.
According to the National Development Plan for E-Commerce 2021-2025, up to 55percent of the Vietnamese population will make purchases online.
An also said: "This simply reflects how business is a competition forsurvival of the fittest in our evaluation. As the retail sector in HCM City isstill seeing the arrival of many foreign brands within the food andbeverage (F&B), fashion and accessory industry, it shows that many foreignbusinesses still see huge upside potential of the Vietnamese market."
“Despite the ongoing challenges of COVID 19, retail performance indicatorsare contrary to the current state of the market. Total revenue of theretail sector continues to rise as e-commerce becomes more popular and foreignbrands enter the market,” she added.
Total revenue from mobile e-commerce transactions is estimated to reach 7billion USD in 2021 and up to 10.2 billion USD in 2023, according toSavills.
Meanwhile, Hoang Nguyet Minh, director of commercial leasing, SavillsHanoi, said: “International retail brands see Hanoi as an expansion market. Apremium shopping mall or a high-end hotel retail area has more appeal to thesetenants than regular shop-houses or standalone projects.”
Foreign investors are helping accelerate growth of modern retail. The Ministryof Industry and Trade reported their already significant positions with 17 percent ofshopping centres and supermarkets; 70 percent of convenience stores; 15 percentof minimarts; and 50 percent of online shopping and TV shopping channels.
The rapidly growing middle class is approaching an inflection point fordomestic consumer spending growth, with GDP per capita approaching 3,000 USD.That shows significant retail potential, according to Savills Vietnam.
According to JLL, Socar Mall – the first mall in Thu Thiem is set toopen in the third quarter of 2021 and expected to bring 38,000 sq.m to theretail property market. Meanwhile, the retail podium of some completedmixed-use developments is still looking for tenants and have yet todefine opening dates.
In HCM City, vacancies continue to be constraint given limited newsupply, meanwhile rents are flat as the impacts of pandemic are still lingering.
In Hanoi, Vincom Mega Mall Smart City with a total area of about 40,800sq.m plans to enter this market in the second quarter of 2021. Thiswill be the largest shopping centre in Nam Tu Liem district and isexpected to become a new destination for residents in the area.
Given new supply and expected high occupancy rates due to developers' goodtrack record, while other malls recorded tight vacancy, coupled with theexpected control of COVID-19, Hanoi’s retail property market expects to pushdown the vacancy rate to a single-digit level./.
VNA
