Convenience store segment welcomes newcomer from South Korea

BGF Retail Co. signed a master franchise agreement with CUVN. Source: BGF Retail Co.

The company said that it has signed a master franchise contract with CUVN, a Vietnam-based convenience store operator backed by local companies including retailer SnB Distribution Co., Ltd., according to newswire Pulsenews.co.kr.

Under the master franchise deal, BGF Retail – the franchiser – will share its brand and business knowhow in convenience store operation with its Vietnamese partner who will be responsible for investment and operations.

The two parties expect to open their first Vietnamese outlet by next June.

A master franchise contract is preferred because it can reduce the risk and investment costs for the franchiser in a new market while guaranteeing a steady loyalty income. BGF Retail also entered Mongolia last year under a master franchise deal with a local company.

Previously, in January 2018, GS Retail Co., a major convenience store chain operator, opened the first outlet of convenience store brand GS25 Vietnam, a joint venture between South Korea’s GS Retail and Vietnam’s SonKim Land in Ho Chi Minh City’s District 1.

The launch of the stores came about six months after GS Retail signed an agreement with local company Son Kim Group to tap into the Southeast Asian country.

GS25 Vietnam aims to open 50 stores in 2018, in major cities such as Hanoi, Haiphong, Danang, and Can Tho. Within ten years, it plans to expand to 2,500 outlets nationwide. However, the stores of the brand currently number 32.

Vietnam is considered a potential market with the average economic growth of 6.8 per cent and the population of 100 people, half of whom are under 30 years old.

However, according to experts, the convenience store segment is nearing its saturation point. According to British market research firm Euromonitor International, during the review period, convenience stores recorded booming expansion in terms of the number of outlets, as the format was still relatively new to Vietnam.

However, in 2018, outlet growth slowed down significantly. Many urban areas have become overcrowded with convenience stores while rural areas do not generate enough demand for industry players to invest there. In suburban and rural areas, convenience stores compete with many traditional grocery retailers, street stalls, and cafes that sell almost identical items at a cheaper price.