Parkson eyes retail coup

Parkson’s application for an investment licence is now awaiting approval from the Ministry of Planning and Investment.
A government notice issued last week asked that the licence require Parkson to support the export of domestic products and seriously invest in the local fashion design industry. The retailer applied for a licence to set up a 100 per cent foreign-owned enterprise with initial investment capital of $15 million.
The company aims to design, produce and distribute garment products throughout Vietnam, with its first centre to be located in Ho Chi Minh City.
Parkson stated the centre would sell locally-made garments and only import products that were not produced in Vietnam. In addition, foreign products will not exceed 5 per cent of the total value of commodities in the centre.
Chief executive officer of Parkson, Toh Peng Koon, was quoted by Star newspaper as saying the company expected to obtain an operating retail licence and open its first outlet by the end of the year. Toh said the company hopes to operate up to 10 outlets in five cities in Vietnam by 2009. He said Vietnam, with a population of 80 million and a vibrant youth market, is set to be the next high-growth country in the Asia-Pacific region given the progress it has made in socio-economic development during the past three years.
“Economic restructuring and the regularisation control of business development policies have primed the country for more viable labour-intensive economic activities, including retail,” he said.
Vietnam’s retail industry is mostly out of bounds for foreign distributors, with only some of them, such as Bourbon and Metro Cash & Carry, receiving investment licences on a case-by-case basis.
A Ministry of Trade official, who wished to remain anonymous, said Vietnam would only gradually open the retail market to foreign distributors, according to bilateral trade agreements reached with specific foreign countries.
He said that Metro and Bourbon were allowed to operate in Vietnam because they had invested in infrastructure according to regulations in the Foreign Investment Law. He added that normally this is the only way that foreign companies can enter the retail market.
Foreign retailers have been trying to crack the local market for years.
Only 10 per cent of food and non-food purchases are made at modern retail outlets in Vietnam and analysts claim the potential for growth in the retail industry is huge.
Surveys in a number of southern localities conducted by Saigon CoopMart, a leading local retailer, indicated 80 per cent of interviewees were interested in shopping at supermarkets if they were available in their area.
CoopMart’s general director Nguyen Ngoc Hoa said the changing tastes of urban populations had created favourable conditions for developing and expanding retail networks such as supermarkets, shopping malls and convenience stores.
Dairy Farm, another leading Asian retailer that operates 2,680 outlets and achieved total sales of $4.5 billion last year, has expressed interest in entering the Vietnamese market.
Distributors with existing footholds in Vietnam are racing to expand operations to tap the growing market.
Metro has opened three centres and recently began construction on another wholesale centre in Can Tho City. The company plans to open more outlets in Haiphong, Hanoi and Danang.
The Bourbon group currently has three Big C supermarkets and is building a $30 million facility in Hanoi, which is due to open early next year.
Bourbon’s general director Guy Lacombe said his company is pursuing an expansion policy across Vietnam and expects to have eight hypermarkets by 2008.
Vietnamese retailers are expanding as well. Saigon CoopMart hopes to double its number of outlets to around 25 in the next few years from the current 13 located in the southern part of the country.