Foreign retailers keen to enter Vietnam

Although A.T. Kearney Consultancy Group downgraded Vietnam nine places in retail market attraction rankings this year from 14th to 23rd place, foreign investors are still keen to enter the local market which topped the list in 2008.

Despite the gloomy news of macro uncertainties like high inflation and Vietnamese shoppers choosing to cut back on spending and altered their buying behavior, foreign retailers still want to enter and expand the local market.

E-Mart, South Korea’s top discount store chain, has made inroads in the local market in a joint venture with the Binh Duong-based U&I Group to set up a supermarket chain with total investment of US$1 billion.

According to Mai Huu Tin, chairman of U&I Group, the E-Mart Vietnam supermarket chain has an initial investment of US$80 million with 80% coming from E-Mart. The joint venture will kick off its first project in 2012 and its chain of 52 supermarkets and shops in large urban areas is expected to be completed before 2020, providing fresh food and agro-seafood products for the Vietnamese market.

Tin said that there were still numerous development opportunities for Vietnam’s retail market despite the difficult economic times.

E-Mart owns 136 outlets in South Korea and 27 in China. Vietnam will become E-Mart’s second foreign market after mainland China. The two companies are looking for store locations in major cities, Tin said, and depending on each area, the joint venture will consider setting up a convenience store, supermarket or distribution outlet.

E-Mart is the second retailer from South Korea to enter the local market after Lotte Mart which currently operates two complexes in HCMC, one in District 11 and the other in District 7. It plans to pour some US$5 billion into 30 department stores nationwide in HCMC, Hanoi, Danang, Can Tho and Haiphong and is currently on the lookout for locations

Meanwhile, AEON Co Ltd (Japan) retail group and its Jusco supermarket chain plans to enter the Vietnamese market by 2013. With annual gross revenue of around US$15 billion, AEON expects to become one of the three leading retailers in Asia in 10 years’ time. It plans to make Vietnam its fourth largest foreign market after China, Thailand and Malaysia.

Leaders of the Japanese retailer over two years ago met HCMC authorities to promote a huge retail complex in the city.

Nagahisa Oyama, a representative of the company, then said: “If we find a suitable location soon, the project could be commenced at the end of next year for completion in 2013.”

Late last year, Japanese convenience store operator Ministop, a member of AEON Group, also signed a strategic cooperation agreement with G7 Service and Trading Joint Stock Company (G7Mart), a member of Vietnam’s Trung Nguyen Group, to open hundreds of stores in Vietnam.

G7Mart said it would set up a 75:25 joint venture with Ministop. The first store is expected to be up and running by the end of the year, and the joint venture is looking to open 100 stores within the first year of its operation, and at least 500 in the five years following that.

Steven HL Goh, director of Retail Asia Publishing, said that compared to other retail markets in the region, which were already saturated, there were still numerous development opportunities in Vietnam.

Although foreign retailers said the cost for renting a new location accounts for 60% of total investment capital, Casino Group, the French retailer with Big C chain in Vietnam, is continuing to expand its hypermarket chain.

Big C, which already has 14 outlets in Vietnam, plans to open 15 more by 2013. From 2011 to 2013, the retailer plans to recruit 1,300 managers to professionalize its current management system and prepare for the future.

Parkson, a well-known shopping brand for high-end fashion which has seven stores nationwide, said that Vietnam boasts rapid economic development, especially in the retail sector, and Parkson sees the country as its most important market.

The leading retailer from Malaysia said its business in Vietnam had recorded the highest growth among markets worldwide where it is present, so it plans to further expand its investment in the country.

Tham Tuck Choy, general director of Parkson Vietnam, said its growth rate in Vietnam last year was 30%, while it was 10% in China and 10-15% in Malaysia. This year, it will develop more stores and renovate existing ones to meet the growing demand of the market.

“Our strategy is to open 2-3 new stores every year in key cities of Vietnam in the near future.” Tham said, adding the next store would open in Hanoi.

The company has invested nearly US$80 million in Vietnam. Last year, its sales revenue was US$200 million.

Many retailers said that the high real estate prices in Vietnam have increased the investment cost in the distribution area. However, they still plan to open more stores, as Vietnam’s distribution market has been among the top growth markets in the world, attracting keen interest from international distributors.

Vietnam’s retail sales and service revenue is set to increase to more than US$85 billion in 2012. According to the General Statistics Office, Vietnam’s retail sales increased 22.6% in the first six months of 2011. But if inflation is factored out, retail sales only rose 5.7% in the first half of this year, versus the corresponding increase of 16.4% last year. - Source: SGT

Tags: vietnam retail industry, Vietnam retail market, Vietnam supermarkets