Retailers following “expansionism” in Vietnam’s market

Though Vietnam has fallen five grades from first to sixth in rankings of the attractiveness of the retail market, retailers, both foreign and Vietnamese, are still trying to set up more retail points in Vietnam.

Foreign retailers reaching out to small provinces

In 2010, Metro Cash & Carry opened three big distribution centers in three provinces of Binh Dinh, An Giang and Binh Duong. In early 2011, the distributor from Germany opened a new distribution center in Vung Tau City. General Director of Metro Cash & Carry Randy Guttery, has said that the retailer will open more distribution centers in other provinces in the time to come because the business in small provinces is as good as the business of the first eight centers of Metro in big cities of HCM City, Hanoi, Da Nang, Hai Phong and Can Tho.

The French retailer Casino Group also tried to expand its network in 2010, reaching out to provinces of Nam Dinh, Vinh Phuc and Nghe An, after it’s rapid growth in big cities.

Reaching out to small provinces is considered a new business strategy of foreign distributors. In the past, the distributors only targeted big cities, where the purchasing power is high. In particular, urbanites like going shopping at supermarkets, where they can use high quality services, they do not have to negotiate about the prices and they can feel safe about product quality.

However, wise retailers have found out that consumers in small provinces now also have similar shopping habits. They have realized that residents in small provinces now also like making purchases at supermarkets or shopping malls. Since consumers now pay more attention to food hygiene, they are ready to spend more money to purchase products at modern distribution centers, even though the products here are more expensive.

Nevertheless, foreign retailers have admitted that one of the reasons that has prompted them to develop their network in small provinces is that they now find it difficult to expand their networks in big cities. It is not easy to find retail premises in big cities, while it is very difficult to get permission to open more distribution centers.

Domestic retailers joining forces with foreigners

G7Mart Trade and Service Company which owns G7Mart chain belonging to Trung Nguyen Group, has signed an agreement with Japanese Ministop on developing a convenience store chain in Vietnam. The two sides plan to set up a joint venture, in which G7Mart holds 75 percent of stakes and Ministop 25 percent. The first convenience store is expected to come out in May, while at least 100 stores will be set up during the first year of operation.

Analysts have commented that this is a wise move by G7Mart, because the cooperation will be transfered the technology on running modern convenience store systems. Nobuyuki Abe, an executive of Ministop said Ministop will begin labor training immediately after the signing.

Saigon Co-op, the biggest retailer in Vietnam with 50 supermarkets and 100 Co-op Food shops is also considering cooperating with foreign investors. Saigon Co-op has signed a cooperation agreement with Singaporean NTUC Fair Price. The two partners will create a completely new hypermarket chain which will be bigger than Saigon Co-op. The first hypermarket of the chain is expected to become operational in 2012.

Meanwhile, Phu Thai Group has quickly contributed capital to build the Family Mart chain in Vietnam after signing a franchise contract with Japanese Family Mart. In developing the plan, Phu Thai has received support from Family Mart from countries and territories that have successfully developed the chain in South Korea, Taiwan or Thailand.

Phu Thai has called on investors to join forces to develop Family Mart in order to develop the benefits of the involved parties. Family Mart does not directly compete with traditional shops, because the products available at Family Mart will be 70 percent different from the ones displayed at normal shops.

Tags: vietnam retail industry, Vietnam retail market