Big retail chains keen to enter Vietnam market

A series of big names in retail sector such as Tesco (UK), FairPrice (Singapore) have constantly been eyeing Vietnam and opening the possibility of investment in retail market in the shortest time. This is the first step to break the silence of Vietnam’s retail market after two years fully open under WTO commitment.

Explaining the market’s quietness in the recent time, many experts believe that although Vietnam has officially opened retail market for businesses with 100 percent foreign capital since early 2009, it was the time the global economic crisis happened, many multinational enterprises faced difficulties and had to adjust policies and resources and consider carefully when deciding to invest in other countries. In addition, when deciding to invest in a country, multinational distributors often survey the market very carefully, look for cooperation and take time to negotiate. Therefore, if the economic crisis ended in 2010, until at least 2011 to 2012, the retail market would be exciting as earlier forecasted.

Research of US market research company RNCOS showed that there are basic factors for strong growth of Vietnam’s retail market in 2008-2012 period, with retail sales increased from $23.7 billion in 2005 to nearly $39 billion in 2008, although Vietnam’s retail market is much smaller in scale compared to other Asian developing economies. The report also mentioned that the permission of Vietnamese government for foreign companies to participate in Vietnam’s retail market would make sales of this market to exceed $85 billion, and modern retail channels would play a key role in the future growth. According to rating of global consulting firm AT Kearney, the attractiveness of Vietnam’s retail market ranks 14th in the world, higher than Indonesia and Malaysia.

Steven HL Goh, director of Retail Asia Publishing said that compared to other retail markets in the region, which already are saturated, there are still numerous development opportunities for Vietnam’s retail market. Along with big names such as Dairy Farm (Hong Kong), Lotte (Korea), and Guoco Group (Netherlands), which have formed large-scale shopping centres in Vietnam, from late 2010 to date, many world-leading retailers have also carried out investment cooperation programmes or conducted surveys and opened the possibility to invest in Vietnam’s retail market.

In late 2010, Japanese company Ministop, which manages a convenience store chain, has officially decided to participate in Vietnam’s market by cooperating with Trung Nguyen Company to open about 500 retail stores in the next five years.

Singaporean brand NTUC FairPrice has signed cooperation agreement with Saigon Co.op to build a chain of hypermarkets.
Ng Ser Miang, FairPrice Chair said that FairPrice wants to share its experiences in Vietnam’s retail market and contributes its expertise in hypermarket retail sector to build and develop a chain of hypermarkets throughout Vietnam.
Hypermarkets would sell a wide variety of local products and appropriate imported products, as well as FairPrice branded products. The first hypermarket of the joint venture is expected to be in operation in 2012.

Tesco Plc (UK), the group which has the second largest chain of supermarkets in the world, has been investing dozens of billions of dollars into Asian retail markets, among which Vietnam is an attractive destination. Tesco is currently maintaining its leading position in retail markets of Thailand and Malaysia. If including Vietnam, Tesco would be present in 15 countries. In Vietnam, Tesco has chosen New World Fashion (the leading group founded in 1990, headquartered in London, specialised in manufacturing female high fashion products for export) to be the long-term strategic partner in late December of 2010. This is considered the first business development step of Tesco in the retail market of Vietnam.

Vietnam’s retail sector in 2011 is expected to grow well, although factors, which are considered barriers such as poor infrastructure and high priced, retail space, still exist. Dinh Thi My Loan, vice President, Secretary general of Association of Vietnam Retailers (AVR) said that difficulties still exist in 2011-2012 period, but 2011 is expected to witness major changes. Functional agencies have been paying special attention to strengthen and develop distribution system and retail sector. Domestic companies have made great efforts to strengthen competitiveness, find links with partners in order to exploit the potential development of the retail market. – VEN

Tags: vietnam retail industry, Vietnam retail market

Posted by VBN on Feb 25 2011. Filed under Retail. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry