Shopping centers expanding but business is not guaranteed

It is estimated that by 2013, HCMC will have about 740,000 square meters of retail space at shopping centers, double the current space, due to property developers going full steam ahead with new shopping center projects.

Experts said that even though shopping centers have been mushrooming in Vietnam, recent events prove that some malls don’t produce the goods.

Location, location, location not enough

Distributors said that the success of a modern shopping mall depends on its strategic location and professional management. Investors will find it very difficult to succeed if they lack even one of the two the major factors.

Many retailers who operate a wide range of local and world-famous brands of clothes, shoes, and jewelry items had big problems at the premium shopping mall Kumho Asiana Saigon in District 1, on the corner of Le Duan Boulevard and Hai Ba Trung Street.

Some stopped trading there and today, the shopping mall only has a few retailers doing business.

Since its inception the shopping mall has always been quiet with very few customers. Even in peak season, it failed to attract the numbers. Debenhams and Hard Rock Café used to stand out at the Kumho Asiana but they didn’t rub off on other companies.

Debenhams was the first of its kind in Vietnam but due to the lack of high-quality neighbors Viet Thai International Joint Stock Company (VTI), the local franchise which also owns a chain of Highlands Coffee shops, moved Debenhams to Vincom Saigon Center and closer to the English and European designer brands.

Some sources, who asked not to be named, said Viet Thai was losing heavily at the Kumho Asiana and had no choice but to move.

Other famous fashion brands including Aldo, Tissot, Elle, Paris Hilton, Aubade, Carita, Converse and Levi’s at the nearly 7,000-sqm shopping mall have also relocated.

Similarly, Saigon Paragon shopping mall was said to be poorly performing in Phu My Hung Town and closed in October.

Professional management needed

Why did two shopping malls with modern décor and great locations fail so miserably? Regarding location, the Kumho Asiana Plaza shopping mall on the corner of Le Duan Boulevard and Hai Ba Trung Street, District 1, near Diamond plaza is an ideal position downtown.

Saigon Paragon in Phu My Hung is close to some 10,000 households most of whom are affluent professionals from Vietnam and all over the world.

However, a number of businesses renting spots at the two shopping malls said poor management was the main reason why two commercial centers located in the very favorable areas couldn’t bring in the money.

The closure of Saigon Paragon was also due to management failure.

Le Hoai Anh, director general of Kim Cuong Corporation, the management agency who ran Saigon Paragon, admitted it had no experience in managing a commercial centre and the business suffered accordingly.

Anh explained the temporary closure was due to the poor business performance of the shopping section, which was partly due to ineffective management.

It has now signed up professional management firm Parkson to improve the building’s performance.

Anh is confident that Parkson can turn its fortunes around as it has six years of operation experience in Vietnam.

Parkson, a well-known shopping brand for high-end fashion, initially managed the Saigon Paragon department store, and then took over it to rename it Parkson Paragon.

It now has a total area of some 15,000 square meters over five floors, includes a Megastar Cinema Complex, a food court and supermarket, said Tham Tuck Choy, general director of Parkson.

A year after shutting its doors to the public, MegaStar Media Ltd. Co. this month reopened its Cineplex at Parkson Paragon.

Experts said that, to do good business at a shopping mall, a trilateral relationship between investors, management agency, and retailers is necessary.

The management agency is vital. Besides being an intermediary to sign deals with retailers, it also supplies solutions for brands’ strategies in the commercial center.

However, in Vietnam the management agency doesn’t focus on building brands for the center. That is one of the reasons why some shopping malls struggle to survive.

Several years ago similar hard-luck stories applied to Saigontourist Plaza on Le Thanh Ton Street, District 1 and Thuan Kieu Plaza in District 5.

With more and more international fashion brands to arrive in Vietnam in the future and more shopping malls opening, competition for business will be stronger than ever, so the right management teams have to be in place to deliver success.

The 68-story Bitexco Financial Tower-BFT is scheduled to become operational this year with six floors reserved for a shopping mall of 8,000 square meters. HCMC will also have a new shopping mall on Dong Khoi street – the Eden Trading Center.

Meanwhile, C.T Group is developing some department stores in Le Van Sy and Nguyen and Dinh Chieu Street, among others. Commercial centers are considered the trend of modern retail and have developed rapidly in Vietnam.

Although the number of commercial centers have increased sharply, according to many companies, doing business in the retail sector is not easy.

The development of the retail market depends heavily on the development of the middle and upper classes, and the demand for luxury goods. Many shopping centers have fallen into difficulties because they sell only luxury commodities. People often come there to relax and go for a weekend stroll rather than buy anything, say retailers – Saigon Times

Tags: Vietnam shopping centers