Vietnam’s thriving retail market

Vietnam has been one of  the most potential markets for retail expansion. Can local companies rival foreign retailers?

Editorial

According to A.T. Kearney, Vietnam ranked 6th in the Global Retail Development Index (GRDI) in 2017. The GRDI is an annual study that ranks the top 30 developing countries for retail expansion worldwide. The country with the highest scores is the most potential retail market. The ranking signals that Vietnam is one of the most attractive markets for retail investment.

Source: A.T. Kearney

Foreign retailers are pouring into Vietnam

Up to now, Japan’s Family Mart has 130 stores in Vietnam, and it plans to open another 700 stores by 2020. Japan’s 7-Eleven entered Vietnam in June this year. It will open 100 stores in three years and 1,000 stores in the coming decade. South Korea’s Lotte Mart plans to open 60 stores in Vietnam by 2020. Meanwhile, South Korea’s GS25 will launch its first shop in Ho Chi Minh City by the end of 2017. It is planning to open 2,500 stores in ten years. Japan’s Takashimaya plans to open a 15,000-square-metre store in HCM City.

Sources: Hanoi Times, Vietnam Net, VN Express, VIR

Together they opened more than 100 new convenience stores within one year.  Why are foreign retailers favouring Vietnam’s convenience store market?

There are 800 supermarkets, 150 shopping malls, 9,000 traditional markets and about 2.2 million retailers in Vietnam. Convenience stores and mini-marts are the fastest-growing segments in this market.

Investors can get a much higher return on convenience stores than on traditional supermarkets or hypermarkets, and the initial investment is much lower. Furthermore, it is easier for investors to obtain business licenses for convenience stores and mini-marketplaces than for supermarkets.

There remains large potential for the future growth of Vietnam’s retail market

Vietnam has a population of 96 million. There are currently 1,765 convenience stores in Vietnam. That is to say, there is approximately one convenience store per 54,400 Vietnamese citizens. To put this into perspective, there is one convenience store per 24,900 persons in China, one per 2,300 persons in Japan and one per 2,100 persons  in South Korea as at the end of 2016.

Source: VN Express

Vietnamese prefer to shop in convenience stores. More than one-thirds of households in Vietnam has shopped in convenience stores at least once in the past year. The growth rate of modern distribution channels from April 2016 to March 2017 was 7.7%, higher than the growth rate of 6.1% of the traditional distribution channels. Vietnam’s trade ministry estimated the country’s retail market would hit US$179 billion by 2020, a jump of 52% from last year.

Local brands need to take efforts to compete with foreign retailers

More than 70% of convenience stores in Vietnam belong to foreign companies. Although local brands such as have more stores than foreign names, their market share is much lower.

Source: Slide Share

To compete with foreign brands, Vietnamese producers and distributors should focus on meeting customers’ requirement. Convenience and efficiency would be the top demands for convenience stores.

Meanwhile, the government should take actions to help local brands. It needs to help turn the distribution chain from input to output. It should also encourage larger businesses to unify small and medium-sized distributors within the national retail value chain.