Battle hots up in retail sector

According to the latest statistics released by the Ministry of Industry and Trade (MoIT), total retail sale and service revenue in Vietnam increased by 26.6 per cent year-on-year to VND1,560 trillion ($80 billion) in 2010, equivalent to 75 per cent of the country’s GDP.

Deputy head of MoIT’s planning department, Hoang Thi Tuyet Hoa, said the domestic market showed great potential with an expected GDP growth rate at around 7 per cent this year and with consumption demand continuing to grow.

“Since Vietnam officially joined the World Trade Organization four years ago we have seen strong activity among foreign-invested and local distributors. That, however, was only a warm-up period,” Hoa said.

“Existing foreign and domestic distributors in Vietnam are predicted to make much bigger investments and expand their distribution activities here in the time to come,” she noted.

Early January 2011, Nam Dinh province saw the inauguration of the 14th Big C retail outlet, managed under the umbrella of the Casino Group.

Big C has so far set up its presence in nine cities and provinces across Vietnam, namely Hanoi, Vinh Phuc, Haiphong, Nam Dinh, Vinh, Hue, Danang, Dong Nai and Ho Chi Minh City.

“Recently, the super outlet model like Big C and South Korea’s Lotte has developed quite strongly in Vietnam,” Hoa said.

“Under this mode, foreign invested enterprises have been a bit behind Vietnamese peers both in terms of speed and number. However, the former’s outlets are invested on a much bigger scale which will surely create huge pressure and competition for the latter’s,” she added.

According to Professor Pham Thi Tue from the Vietnam Commercial University, the threat for domestic distributors this year was not the intrusion of new international distributors but the strong growth of the two existing foreign invested distributors including Big C and Metro Cash & Carry, which were viewed as becoming the two dominant forces of the Vietnamese distribution market in the future.

“Although the advantage now lies with some local firms such as Saigon Coop-mart - currently number one in Vietnam as they have also expanded very quickly and grasped a large market share - they will lose their place in the near future if they fail to continue to strengthen, particularly in terms of capital and technology,” Tue said.

Metro Cash & Carry, which entered Vietnam in 2002, has built 13 stores in 11 cities and provinces across the country so far.

In 2010 alone, the company opened a total of four new wholesale stores in central Binh Dinh province and southern Binh Duong, Vung Tau and An Giang provinces.

“One of the advantages of Metro and Big C is that they can create connections with lots of local farmers and industrial manufacturers, enabling them to gather many kinds of products from all regions. This has brought them advantages in both the quality and price of their goods,” Hoa said.

South Korea’s Lotte is also building a third shopping centre in Hanoi after the first two were set up in Ho Chi Minh City. The firm is also exploring investment opportunities in southern Binh Duong province, which is seen a potential market for strong economic development by the Korean firm.

Hoa, however, highlighted the efforts of those Vietnamese distributors who are trying to expand and strengthen their foothold in the domestic market, with a view to being able to compete with foreign players in the long-run.

The Saigon Coop-mart currently has 50 stores across the country, including 16 stores built in 2010. In late December 2010, Saigon Coop-mart entered into a joint venture with Singapore’s NTUC FairPrice Co-operative to establish a chain of hypermarkets in Vietnam. The first store is expected to open by 2012.

This joint venture will bring Singapore’s homegrown brand overseas and grow FairPrice in Vietnam, one of the top emerging markets in Asia.

The Hanoi Trade Corporation (Hapro) in the north has also set its sights on becoming a leading retailer in Vietnam in 2015 with two supermarkets, five trading centres, 60 markets, 30 convenient stores and a base depot.

Vietnam’s retail sale and service revenue is predicted to increase to more than $85 billion in 2012. According to MoIT data, there have been more than 5,000 representative offices and 50 branches of foreign distribution, logistics and consultant enterprises set up in Vietnam to date.