Expensive retail premises push merchants against the wall

The owners of the fashion shops on Nguyen Trai, Hai Ba Trung and Nguyen Dinh Chieu streets in HCM City complain that the retail premises rentals now amount to 40-50 percent, or even 60 percent of the retail prices, the highest ever rentals so far.

“The retail premises rent for street-front shops have become overly high, but I still “have to eat humble pie” and accept such high rents. If I don’t accept such a high rent, the premises would be leased to others immediately,” Ngo Thi Bau, the owner of Foci, a fashion brand, complained.

“We have been making every effort to build up our fashion brand for nearly 10 years, and we cannot set up our shops on small alleys,” she added.

Low purchasing power, high premises rents both burden retailers

“N” related that she had rent a 42 square meter kiosk on the second floor of Vincom shopping mall, where she had been selling fashion products until the shopping mall’s management board asked her to move to another place.

N does not feel satisfactory with the new kiosk, located on the ground floor B2, which fronts the stairs. She believes that the new kiosk is located disadvantageously, because few people visit the place. However, she cannot find any better place to move to.

One year ago, when signing the contract on renting retail premises with Vincom, she agreed to the provision that the shopping mall has the right to move the retail premises. So, if N does not lease retail premises here any more, she would lose the deposit money.

“I have been doing business in the central area of HCM City for the last 20 years, but I have never felt such big difficulties in looking for retail premises,” N said.

N once set up her stalls at Intershop, but she cannot return there, because the shopping mall, which got burned and the re-construction has not been kicked off. Meanwhile, Eden is still under construction, while Parkson, Diamond and Zen Plaza only accept the clients who trade products of well-known brands.

Only Vincom accepts small merchants like N. Therefore, despite the high rents, she still accepted to lease the premises, accepting losses over the last year.

District 1 is considered the commercial hub of HCM City. However, it is not easy to find retail premises in the area. Kumho Asiana Plaza Saigon has closed its doors and shifted the business model. After that, Lucky Plaza also followed the move in July 2011.

Some small merchants, who once rent kiosks at Lucky Plaza, have moved to Taka Plaza on Nam Ky Khoi Nghia Road, where they have to pay the rents double than that at Lucky Plaza. It is clear that they will have to accept losses for some more time to find loyal clients before they can make profits later.

Bao, the owner of a jewelry kiosk, said that she spent 10,000 dollars to obtain a kiosk there. However, as the sales went too slowly, she has transferred the kiosk to another merchant at just 4000 dollars.

It is expected that three retail centers will be put into operation in 2011, including The Crescent, Bitexco Financial Tower and The Manor which can provide 36,000 square meter of floor area.

Struggling to live

Bau of Foci said that the purchasing power of fashion products is just equal to 1/3 of that in the last year. Meanwhile, the retail premises rents have been increasing.

In the first six months of the year, the total retailed goods and services increased by 21-22 percent over the same period of the last year. However, if not counting on the price increases, the actual figure would increase by 7 percent only, a modest growth rate if compared with that of the previous years, at 15-20 percent, according to Dinh Thi My Loan, Secretary General of the Vietnam Retailers’ Association.

The low purchasing power and the high premises rent both have forced retailers to raise the sale prices.

With the rent of 3000 dollars a month, every day, a retailer has to pay 2.1 million dong at minimum. Previously, when 5-7 products were sold a day, buyers had to pay 300,000 dong for premises rent. Meanwhile, as the demand is low, and only 10 products are sold a week, the cost for premises would be nearly one million dong. – SGTT

Tags: vietnam retail industry, Vietnam retail market