Supermarkets and convenience stores race for market share

The local distribution market recently has witnessed two trends: foreign distributors are expanding to new provinces to cash in on new opportunities, while domestic distributors are cooperating with foreign investors to grow their businesses.

Foreign distributors go out of town

Foreign distributors have their eyes on provincial markets and small towns. Casino Group, the owner of Big C store chain in Vietnam, last week opened one more hypermarket in the northern province of Nam Dinh, bringing the Big C outlets nationwide to 14.

The US$4-million Big C has a total area of 6,500 square meters, stocks some 40,000 food and non-food items. Last month, the French distributor opened two hypermarkets in Vinh Phuc and Nghe An provinces. After 12 years of operation in Vietnam, the group now has outlets in most big cities and provinces, such as HCMC, Hanoi, Danang, Haiphong, Dong Nai and Thua Thien-Hue.

The interest in smaller markets is due to the dearth of retail space in big cities like HCMC and Hanoi. The South Korean supermarket group Lotte has also turned their eyes to provinces. The Korean retailer, Lotte Mart under the Lotte Group, last month inked a deal with Charm Engineering (Korea) to open a trade center in the southern province of Binh Duong.

Jeon Yong Ho, marketing director of Charm Engineering Co., said the two companies signed a business cooperation contract (BCC) to develop a shopping center at the Charm Plaza project under progress in Di An Town in Binh Duong. Lotte Mart will open business at the first five floors of Charm Plaza project which will officially go into operation in early 2013. The shopping center will have a total area of 12,500 square meters.

This will be the third Lotte Mart shopping center in Vietnam after the first two in HCMC. Jeon told the Daily that the shopping center project in cooperation with Lotte Mart was not related to a project which Lotte Mart intends to develop in the province’s Thu Dau Mot Town.

In November last year, leaders of Lotte Vietnam Shopping Co. went to the province to look for a location in Thu Dau Mot Town for the firm’s project. At a meeting with the provincial authorities, Lotte said it highly appreciated the position of Binh Duong, and that the company would prioritize Binh Duong in its strategy of developing a network of 30 department stores in Vietnam. After the working session, Lotte said it would quickly select a site for building Lotte Mart Binh Duong in Thu Dau Mot.

The company expects to put the project into operation next year. Lotte Vietnam Shopping Co., a unit of Lotte Mart, currently operates two Lotte Marts in HCMC, with one in District 11 and the other in District 7. It plans to pour some US$5 billion into 30 department stores countrywide, including in HCMC, Hanoi, Danang, Can Tho and Haiphong.

In the meantime, German-invested wholesale chain operator Metro Cash & Carry has just opened its 13th wholesale store on National Road 51B, Vung Tau City, Ba Ria-Vung Tau Province. Metro Vung Tau is the fifth provincial center Metro Cash & Carry has set up after Dong Nai, Binh Dinh, An Giang and Binh Duong. The company’s first eight centers are all located in major cities like HCMC, Hanoi, Danang, Haiphong and Can Tho. The expansion of the distributors gives a strong boost to the businesses of local producers.

According to the producers, the move helps them penetrate the market in provinces where they have been reluctant to access due to the small market size and high costs for transport, personnel and premises. However, the markets in provinces have proved attractive to distributors.

Distributors said that local consumers are now familiar with shopping at supermarkets. They have begun to pay attention to the quality, safety and hygiene of products and are ready to pay for such products at modern shopping facilities. Previously, local consumers were not familiar with shopping without bargaining and always thought that products at supermarkets were more expensive than those outside.

Domestic distributors join hands with foreign firms

With the strong increase of foreign distributors in the local market, domestic firms look to join hands with other international distributors to expand operations and competition. The local distribution Phu Thai Group has cooperated with the Japanese convenience store chain Family Mart to open the group’s first stores in the country. The Family Mart retail system opened under franchise with Phu Thai Group. The two companies plan to open 300 outlets around the country over the next five years.

As the country’s leading retail store chain operator, Saigon Co.op with 50 Co.opMart supermarkets nationwide and more than 10 Co.op Food stores in HCMC, also has plans to cooperate with foreign distributors.

Saigon Co.op will cooperate with Singapore retail giant NTUC FairPrice Co-operative (FairPrice) to set up a new hypermarket chain in Vietnam. The two partners signed a joint venture agreement in Singapore last month to set up a chain of hypermarkets in the country, with the first store expected to open in 2012, said Nguyen Ngoc Hoa, chairman of Saigon Co.op.

The new chain of hypermarkets will leverage Saigon Co.op’s network of supermarkets’ existing loyalty programs and large customer base. The cooperation is aimed at diversifying the retail business in Vietnam, Hoa said, adding it would not affect the current operation of Co.opMart.

Hoa said the agreement had been built on the cooperation between the two partners over the years in exchange and training. In Vietnam, Saigon Co.op will be able to better meet the growing needs of its customers by offering a wider range of food products, more competitive prices and greater accessibility. FairPrice and Saigon Co-op will also hold exchange programs for their employees to facilitate knowledge transfers. FairPrice is the largest supermarket operator in Singapore. The group has some 100 supermarkets across the island, including over 50 outlets of Cheers convenience stores.

Meanwhile, G7 Service and Trading Joint Stock Company, a member of Trung Nguyen Group, last month signed a strategic cooperation agreement with Japanese convenience store operator Ministop Co. Ltd., a member of AEON Group, which has retail and financial services companies in China and Japan, to open hundreds of stores in Vietnam. G7Mart said G7 and Ministop would set up a 75:25 joint venture, which will have initial total capital of US$10 million. The first store is expected to be up and running in May 2011, and the forthcoming joint venture is looking to open 100 stores within the first year of its operation and at least 500 in the following five years.

Vietnam is the fourth country Ministop has selected for expansion outside Japan. There are currently 2,032 Ministop convenience stores in Japan, 1,381 in South Korea, together with 320 and 12 stores in the Philippines and China respectively.

Despite the global economic slowdown and high domestic inflation, the distribution market in Vietnam has continued to grow and offered much room for expansion.- SGT

Tags: vietnam retail industry, Vietnam retail market