Modern retail has widened its range

Several big players are seeking new revenue streams in modern retail channels, Photo: Le Toan

Huynh Bich Tran, associate director of retail measurement service at Nielsen Vietnam, said that modern trade channels now have different store formats including convenience stores, food minimarts, health and beauty stores, modern drugstores, and mother-and-child stores.

“Vietnam was home to 4,765 modern trade stores in 2016, including 4,194 minimarts and convenience stores, and 571 supermarkets. Modern trade channels achieved a store growth rate of 61 per cent year-on-year. Meanwhile, traditional retail had a store growth rate of two per cent and a total of 1.4 million stores in 2016,” she said.

Speaking at the launch of the first GS25 store in Ho Chi Minh City last Friday, Yun Ju Young, managing director of GS25 Vietnam, said that convenience store chains are commonplace in South Korea, accounting for 15 per cent of the total retail market. On the other hand, Vietnamese convenience stores currently make up a mere 2 per cent of the retail market, leaving much room for future growth.

To tap into the market potential, the company has invested in a fresh food processing plant in the Mekong Delta province of Long An to supply goods for GS25 convenience stores. The plant has a capacity of 20,000 prepared food items per day, sufficient to supply 100 convenience stores in Vietnam.

Even prior to GS Retail’s debut, the Vietnamese market was already crowded with Japan’s FamilyMart and Ministop, US chain Circle K, Singapore’s Shop & Go, and local brand Vinmart. 7-Eleven also entered the market last year with 10 stores as of November.

In addition, Medicare and Guardian are the two largest chains in health and beauty retail. Medicare has increased its outlets from 50 to 65 between January and November 2017. Meanwhile, Guardian has operated 62 outlets in the given period.

Bart Verheyen, commercial director of Medicare, said that the health and beauty modern retail channel has always been very small in Vietnam. However, the sector has seen rapid growth with several newcomers in the market. The country’s modern retail channel in make-up and well-being products will grow exponentially in the future, he noted.

“Our vision to remain the market leader in Vietnam until 2020 and beyond will be achieved by basically opening more stores in the country. By the end of this week, Medicare will operate 66 stores nationwide. The chain has also set up a presence in Myanmar in September with the opening of six stores so far,” he said.

Aside from health and beauty retail, modern retail drugstores have become popular in Vietnam. Pharmacity has opened six stores this month, bringing its total outlets to 71 and making it the largest pharmacy chain. Meanwhile, Phano Pharmacy is the second-largest chain, with a total of 60 stores.

The modern retail drugstore market also attracts some domestic players. Mobile device retail company The Gioi Di Dong (Mobile World) has acquired the Phuc An Khang pharmacy chain, changing its name simply to An Khang. Mobile World plans to open up to 500 stores across the country.

FPT Retail has also invested into Long Chau Pharmacy, Ho Chi Minh City’s biggest drugstore chain. According to FPT, the pharmaceutical market is worth $5.2 billion, and as such the company hopes to enter this sector to drive its future revenue.

According to Nielsen, modern retail channels are spurred by Vietnam’s fast-moving consumer goods (FMCG) industry, which has achieved a healthy growth rate of 6.2 per cent. This figure still trails those of India and China, with growth rates of 13.5 per cent and 6.6 per cent, respectively. However, the FMCG sector in Vietnam has grown faster than in other countries in the region, making it a market with potential for a vast range of consumer products.