Debate on AT Kearney’s report on Vietnam’s retail market

In two consecutive years, Vietnam’s retail market has been downgraded in the AT Kearney report, from the position No. 1 in 2008 to No. 6 in 2009 and 14th in 2010.

“Downgrading” of Vietnam’s retail market is attracting many discussions, offering a reasonable sense whether the country’s retail market is worsening.

Every year, AT Kearney – US leading management consulting firm – selects and announces the annual report on worldwide retail development ranking index in which it ranks top 30 attractive retail markets in the world out of 185 economies.

Regarding assessment methods, AT Kearney offers four major criteria: (i) country risk and business risk, (ii) the attractiveness of the market, (iii) the saturation of the market and (iv ) time pressure. Each criterion is assessed with a score of 25 percent for synthesis of the results.

With this calculation, in 2008, Vietnam reached 88 points and led amongst others, while in 2010 it gained only 55 points and then dropped through to the 14th position.

This brought the worrying ideas for Vietnam’s retail market, has the general situation of the current market is too bad and not worth the investment? The answer is: “no.”

The downgrade is only about “the attractiveness for foreign investors” and this is completely more different than the attractiveness and potential of the market’s reality.

A retail market is really attractive or is not is lying in scale as well as growth. That if the evaluation comes to this aspect, Vietnam’s market is particularly attractive.

According to the Ministry of Industry and Commerce, retail sales of Vietnam reached $77.8 billion in 2010. And if in 2009, total retail sales of goods and services increased by only 18.6 percent due to the economic recession, in 2010, Vietnam’s total retail sales grew 24.5 percent year-on-year.

Perhaps, experts at AT Kearney themselves were probably surprised at downgrading outlook on Vietnam. Even in its own report, they emphasized that for Vietnam, although lagging behind, it is still much potential.

“Vietnam retail market is still growing well with spending expected to exceed 70 percent of income. Retail sales reached $77.8 billion in 2010 and will increase to $88 billion in 2012. High annual GDP growth and young population is the strength of this market,” the report said.

AT Kearney’s own report admits that the Saigon Coopmart announced its plan to open 100 more stores till 2015 is a testimony that “local competitors” are growing stronger and have completely enough edge competition.

AT Kearney’s report is done on the basis of investigations and surveys from other distributors, leading retailers of the world. Not saying clearly, but everyone also can understand whether Vietnam has to open the market under WTO commitments, foreign distributors are still finding it difficult to enter the market massively.

One of the biggest obstacles is the provisions on “Economic Need Test” (ENT), a prerequisite in the licensing of additional new retail outlets.

In “Vietnam Retail Forum” held recently, John Yeomans, CEO of Deloitte Consulting Co., said that the world retail sector has the high focus and consistency, which can only be built at a point and the model can be applied to the entire geography. But in Vietnam, the opening of new facilities is very difficult.

Not surprisingly, in the forums for dialogue with government agencies recently, foreign investors always emphasized the need to change regulations on ENT.

However, in the latest draft decree on retail planning and verification on issues of economic needs remain fairly detailed provisions. Once this decree is issued and applied, foreign investors entering Vietnam and establishing a series of distribution facilities as many people worried before the WTO is very unlikely to take place.

In the eyes of foreign investors, ENT is a technical barrier and dissatisfaction of this barrier has represented by the leading distribution groups in answers to the questionnaires of the survey of AT Kearney, which contributed to downgrading of Vietnam’s retail market this year.

The problem is that how domestic investors should seize this opportunity in the future, when the ENT or technical barriers can also be “effective.” WTO is not a mechanism for cooperation at the highest level and these barriers can be eliminated in the future by a different mechanism, such as TPP (Economic Partnership Agreement on Trans-Pacific Strategic.) – Vneconomy

Tags: vietnam retail industry, Vietnam retail market