Lotte Mart claims headstart will stand it in good stead

Hong Won Sik, general director of Lotte Mart Vietnam

Lotte is already renowned for stocking local goods, and the company has plans to source 90 per cent of its goods from within the Vietnamese market. However, next year, once the ASEAN Economic Community becomes operational, zero tariffs will mean a free flow of goods from other countries. So, will Lotte change its sourcing policy?

The Vietnamese government has not yet fixed what percentage of foreign products supermarkets can sell against the total on offer. Therefore, foreign retail companies have the right to decide the rate of goods to sell in the Vietnamese market. Meanwhile, Lotte Mart chains sell goods which are 90 per cent Vietnamese, while many other supermarkets are selling imported goods including those from neighbouring countries such as Thailand, Indonesia, Laos, Malaysia and China with prices not significantly higher than Vietnamese products. However, we do not care too much about such behaviour because the Vietnamese government is currently making an effort to stimulate the consumption of local goods. Furthermore, just because an item is imported does not mean it is safer, more hygienic or better standard quality. Therefore, we will try to help local suppliers improve their products in terms of all these aspects to better compete against the imported items. We will keep our commitment to not restructure our  stocks.

Lotte currently runs seven shopping centres throughout Vietnam. In addition to the major cities, why does Lotte choose provincial cities as locations for Lotte Mart’s outlets?

The company currently operates seven shopping centres – two in Ho Chi Minh City, one in Dong Nai, one in Danang, one in Binh Duong, one in Binh Thuan and one in Hanoi. Last week, Lotte Mart opened its eighth shopping centre at the Lotte Centre Hanoi. In the remaining months of this year, Lotte will launch two more trade centres, one in Ho Chi Minh City and another in Ba Ria-Vung Tau province. By 2020, Lotte Mart aims to have expanded its chain here to 60 supermarkets.

By entering the market early, the company believes that it will be able to select the best strategic locations in Vietnam. We have several things to consider before opening a new store. For example, it is local incomes. Logistics are also a very important factor. It’s necessary to have easy access to customers as well as suppliers. In the near future, after Vietnam’s GDP increases, we will expand our presence in many provinces throughout the country.

Vietnam is viewed as a lucrative potential retail market by many leading foreign retail players. What have you done to compete with other players?

We know that apart from the leading foreign retail companies already operating in Vietnam, many other foreign retailers are trying to move into Vietnam with know-how accumulated in the developed world. However, Lotte Mart believes it has a competitive edge based on our vast experience in Korea, China, Indonesia and Vietnam. In Vietnam, we changed the format and made continuous improvements based on our successful experience in other countries. Our competitiveness within any sector is wholly dependant on the quality of our products and our attractive prices.

Under Vietnam’s WTO commitments, from January 11, 2015, Vietnam will permit the establishment of 100 per cent foreign-invested retail outlets. As such, the market will see a massive influx of foreign retailers. What is your opinion of this upcoming change?

When the barriers are removed, it’s certain that the game will get harder. Vietnam’s retail market share over the past few years has fluctuated between 17 to 20 per cent, while modern retail outlets have only held an 11 per cent market share. This figure shows that there is still vast potential within the market. However, in the foreseeable future more and more foreign retailers will move in to capitalise on the development potential here. As a result, competition in the retail industry will get fiercer among players currently operating in Vietnam and new incoming companies.

Can you share Lotte Mart’s business results so far this year?

In the first six months of the year, Lotte had the turnover of VND1.7 trillion (almost $81 million), up 50 per cent year-on-year due to the opening of several new supermarkets. However, its profits fell by 25 per cent because of the tough economic climate and decreased purchasing power.