High gowth forecast for retail sector next year

Vietnam’s retail industry is expected to grow around 15-16% next year although obstacles to the development of the sector may not be removed pretty soon, said a local industry expert.

The outlook of the industry next year is good, Dinh Thi My Loan, vice chairwoman and secretary general of the Association of Vietnam Retailers (AVR), told the Daily on Wednesday at a conference about Vietnam’s retail and consumer trends in 2011 held by the European Chamber of Commerce in Vietnam.

“The challenges faced by the industry are still out there but we believe it will make big headway,” said Loan.

“Retail companies have made big efforts to expand their operations despite the economic slowdown, such as Nguyen Kim, Tran Anh and Citimart… Consumer confidence is expected to improve next year.”

Though there are just a number of foreign retailers operating in Vietnam, they have fueled competition on the market, she said.

The Ministry of Trade has given out instructions to solve problems involving the Economic Needs Test (ENT), a requirement for the second foreign retail store in the country.

Minister of Industry and Trade Vu Huy Hoang, speaking before the National Assembly this week, underlined the importance of further developing the retail industry, Loan added.

Ralf Matthaes, managing director of TNS Vietnam, and most foreign retailers share a view that ENT is a hindrance to market entry and expansion by foreign firms on the fast growing retail market.

Rik Mekkelholt, operations director of Big C Shopping Malls, however, said ENT is not a kind of challenge that is insurmountable. “It’s not always an obstacle and it doesn’t mean we can’t overcome it,” said Mekkelholt.

He said cooperation with local enterprises could simplify the second foreign retail store licensing procedure. Big C now has 14 stores nationwide, with five in HCMC, two in Hanoi, and one in each of Haiphong, Danang, Hue, Vinh, Dong Nai, Vinh Phuc and Nam Dinh.

Despite the positive forecast, the market will continue see no big names in the global retail industry, such as Carrefour and Tesco. There are reasons for this.

Vietnam is considered a potential retail market with a population of 86 million, but most of Vietnamese consumers earn low income, at US$1,200 a year.

According to Ralf Matthaes of TNS Vietnam, two-thirds of the population is still eking out a day to day existence.

The number of middle-income people accounting for 26% of the population, or 22 million, is increasing but their incomes stay at low levels, ranging from VND3 million to VND5 million a month. The size of the market is still small compared to some other markets.

Modern retail favored, shopping habits change

At the conference, Dinh Thi My Loan of the Association of Vietnam Retailers talked about some possible market trends next year.

Modern retail will continue to grow well and to be locals’ favorite due to convenience, indulgence and health safety. Moreover, supermarket and hypermarket channels will develop while specialty stores, such as furniture, garments and books, will strongly grow as well.

Loan forecast next year might see a return of convenience stores. “As far as I know, some convenience stores are operating well in HCMC, such as FamilyMart (Japan). Two years ago, some retailers failed to conquer the market, but they will make a comeback next year.”

But she warned price competition would remain a big challenge for convenience stores. Shopping habits of local consumers are changing as Vietnamese shoppers spend less time but buy more and choose healthier products, according to TNS Vietnam. This is considered a driver for retail development.

Total retail sales and services revenue in Vietnam is estimated to soar 25% year-on-year this year, or 15% excluding price increases. – Dtinews

Tags: vietnam retail industry, Vietnam retail market