It’s not easy to make big money with shopping malls

Shopping malls have been mushrooming in Vietnam in the last few years, because real estate developers believe they can bring fat profit. However, the troubles that occurred recently show that it is not so easy to earn the money.

No reasonable solution has been found to the dispute between the management company of Kumho Asiana Shopping Mall in District 1 in HCM City and the retailers, who lease retail premises here.

Since the opening, the shopping mall has always been quiet with very few visitors and buyers. The retailers have to pay leasing fee and management fee monthly, while they cannot sell their products.

The company that manages Kumho Asiana released a notice some days ago, saying that the retailers can terminate their leasing contracts before the due date. However, they will not get back the deposit money.

The Retailers admitted that the company’s bad management was the main reason why such a big shopping mall in a good location in the city, cannot attract buyers.

In early October, Saigon Paragon in District 7 in HCM City, also had to close down. Le Hoai Anh, General Director of Kim Cuong Corporation, the management company of the shopping mall, admitted its bad management.

“A lot of problems arose, making the business worse than expected. We have never managed a shopping mall before,” she said.

Though analysts have warned that HCM City is facing the oversupply of retail premises, real estate developers are still rushing to build shopping malls. According to the HCM City Industry and Trade Department, there are 102 supermarkets and 28 shopping malls in the city. It is estimated that by 2013, HCM City will have 740,000 square metre meters of retail premises, or double the current amount / space.

However, real estate developers have been warned that it will be not easy to run shopping malls.

The development of the retail market is closely linked to the development of the middle- and upper class in the society, the people with demand for luxury goods. “A lot of shopping malls have fallen into difficulties, because they only sell luxury goods. As the result, people come there on weekend just to visit rather than to make purchases,” said B.M.T, Director of a toy company.

Tham Tuck Choy, Director of Parkson Vietnam supermarket chain, said the sales of the chain increase by 30 percent per annum, but the growth rate is still below the target. The main customers of his supermarket chain include tourists (5 percent), expats (10 percent) and local customers.

He said the purchasing power has increased in each group, but the increases are not the same for all groups.

At present, the leasing fees of the retail premises in District 1 in the central area of HCM City are between $70 and $120 per square metre per month, including VAT and service fee. In general, retailers have to share profit with leasers. Retailers pocket 75-78 percent of sales, while leasers can get 22-25 percent.

A lot of shopping malls, especially the ones located in the suburb areas of the city, have been reportedly unprofitable. Some of the malls have shut down and the owners of the malls are considering selling their assets to other investors.-Tuoi tre

Tags: vietnam retail industry, Vietnam retail market, Vietnam shopping malls