Vietnamese retail market – still a good pie for foreign giants

Global prestigious brands such as Lotte, Central Group, Aeon, and Circle K have made bold investment the Vietnamese retail market. (Photo: VietnamPlus)

Hanoi (VNA) – Global prestigious brands such as Lotte, Central Group, Aeon, and Circle K have made bold investment the Vietnamese retail market thanks to the country’s rapid economic growth and an increase in income and consumption.

The General Statistics Office’s figures revealed that the retail market scale has rapidly increased in recent years, with an average growth rate of more than 10 percent per year. The market expanded from 70 billion USD in 2010 to 130 billion USD in 2017, and it is expected to rise to 180 billion USD in 2020.

The country’s retail market has significant potential, considering Vietnam’s population of more than 93.7 million, 69 percent of whom are between age 18-50, and a rapid increase in household spending at 10.5 percent per year on average to reach 714 USD per month next year.

Not only large domestic corporations are investing big in the market, foreign players are moving to set foothold and gain market share in Vietnam.

Illustrative photo (Photo: VietnamPlus)

Foreign giants plan to expand operation in VN

According to Le Viet Nga, Deputy Director of the Domestic Market Department under the Ministry of Industry and Trade, total retail sales enjoyed two-digit growth during 2015-2017. Last year, the revenue was estimated at nearly 4.4 quadrillion VND (over 191 billion USD), a year-on-year surge of 11.7 percent.

Vietnam’s retail market has developed strongly in recent years, with a large amount of foreign investment poured into the market.

In the first months of 2019, Ryohin Keikaku – a Japanese firm that runs household product and apparel chain Muji – announced its decision to establish Muji Vietnam Ltd., Co. in the Southeast Asian nation.

IKEA, the Swedish home furnishings retailer, plans to build a retail centre and warehouse in Vietnam, with total investment of about 450 million EUR (505 million USD), aiming to provide home interiors to the nation.

Firms currently in Vietnam also plan to expand their operations.

Japan’s Aeon, for example, will pour another 5 billion USD into 30 large-scale commercial centres in Vietnam, while Lotte of the Republic of Korea (RoK) will open an additional 60 Lotte Mart supermarkets in 2020.

Thailand’s Central Group, which owns the Big C supermarket chain, will inject another 500 million USD to open 500 convenience stores in the country in the next five years.

Vietnamese retailers should try to seize the lion’s share

Stronger presence of foreign retailers has posed great pressure on domestic players.

Nga said that weak competitiveness is a major difficulty of domestic retailers, noting over 90 percent of them are small and medium-sized while foreign firms are capable and have internationally-standardised governance and operating systems.

Besides, merge & acquisition deals allowed them to enter the Vietnamese market as quickest as they want, Nga highlighted.

Deputy Director of the Domestic Market Department Le Viet Nga (Photo: VietnamPlus)

Another challenge come from local macro-economic management where a legal framework formed for retail market development has yet to be complete and comprehensive, and the efficiency of policies and legal regulations in the field have yet to be strictly implemented in the localities.

Meanwhile, Editor-in-Chief of the Economic and Forecast Magazine Le Xuan Dinh said that the industry lacked competitiveness and professional management of value chain while control of product quality still failed to meet demand.

Under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam will remove limitations on the opening of more retail stores after the deal comes into force for five years in 2024. That is the reason why experts said Vietnamese market is expected to boom with participation of both traditional distributors and major e-commerce groups like Amazon and Alibaba.  

As multi-channel will be a major trend of the Vietnamese market in the coming time, economists suggested competent ministries and agencies set long-term goals and plans to support domestic retail firms, helping them catch up with the e-commerce development trends.

On the other hands, local enterprises must make efforts themselves to develop stronger value chain and distribution channels so as to be able to compete with foreign rivals./.