Cost juggling continues for retailers

April 08, 2024 | 09:04
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Retailers in Vietnam are still determined to expand their operations, at a time when prominent groups reorganise their operations to cut costs.
Cost juggling continues for retailers
Cost juggling continues for retailers, source: VNA

Last week, AEON Vietnam inaugurated AEON Nguyen Van Linh, located in the Crescent Mall shopping centre in Ho Chi Minh City. This is the third so-called ‘super supermarket’ model from the Japanese retailer, following others launched in Hanoi in 2022 and in the southern province of Binh Duong in 2023.

According to AEON Vietnam CEO Furusawa Yasuyuki, alongside the opening of large shopping centres, AEON will continue to enhance its strategy of diversifying models and adapting them flexibly to suit the needs of the local community and the practical conditions of each region.

“We currently have six shopping centres, general merchandise stores, and supermarkets. In 2024, we will open three new general stores and supermarkets, as well as one streamlined general merchandise store and supermarket,” said Yasuyuki.

The Japanese retailer has set a plan to expand and develop additional shopping locations, not only within AEON malls but also at the commercial centres of other partners. Yasuyuki also mentioned that not only AEON Vietnam but all other remaining subsidiaries within AEON Group in Vietnam will accelerate the development of new business locations and enhance systems this year.

Masan Group, which currently owns over 130 Winmart supermarkets and 3,500 WinMart+ convenience stores, will complete the receipt of a $250 million investment from Bain Capital this month.

Notably, Masan’s consumer businesses demonstrated exceptional performance in 2023, growing its operating profit by 40 per cent on-year.

Meanwhile, FPT Retail also aims to open an additional 400 Long Chau pharmacy chains by the end of this year, bringing the total number of stores to nearly 1,900. FPT Retail currently operates in tech products and consumer electronics with its FPT Shop chain, as well as pharmaceuticals with its Long Chau chain.

Despite the market outlook for 2024 being accompanied by various risks and requiring time for recovery due to macroeconomic uncertainties, FPT Retail expects the revenue of the FPT Shop chain to maintain its stability, similar to 2023. Meanwhile, Long Chau is expected to achieve double-digit growth.

While many retailers remain optimistic about the long-term positive growth of the market, some others are making decisions that will have a significant impact on their business performance by withdrawing or narrowing their operating areas.

Vingroup last month announced its divestment from Vincom Retail, in a process that will last until the end of the third quarter. Once the transaction is completed, Vincom Retail will no longer be a member of the Vingroup ecosystem, although the conglomerate still holds an 18.8 per cent stake.

Vincom Retail currently manages over 80 Vincom shopping centres nationwide, and its contribution to the conglomerate’s business activities ranks third only to real estate and vehicle manufacturing.

Four years ago, Vingroup transferred its VinMart and VinMart+ supermarket chains as well as VinEco farms to Masan Group. Nguyen Viet Quang, vice chairman and CEO of Vingroup, explained that this is a time when the conglomerate needs to focus all its resources on developing key brands that have higher growth potential. “We will allocate all our efforts, especially financial resources, to generate breakthrough development in the upcoming pivotal phase,” said Quang.

Also last month, Unilever made a decision to spin off its ice cream business. The move comes amid the corporation facing various challenges as its growth slows down due to inflation. The company is moving towards streamlining its product portfolio and cutting costs to save nearly $870 million over the next three years. Around 7,500 employees of Unilever worldwide will face job cuts, and according to sources from Unilever Vietnam, employees working in this country will not be exempt from the impact.

“The separation of ice cream will assist management to accelerate the implementation of its growth action plan, announced in October 2023, which is focused on carrying out fewer things better, with greater impact to drive consistent and stronger topline growth,” the company said.

In 2023, the ice cream business segment generated $8.6 billion for Unilever, accounting for 13 per cent of the total company’s revenue.

According to Nguyen Anh Duc, chairman of the Vietnam Retailers Association, the long-term outlook for the retail market is promising. “Vietnam remains a prosperous land for retailers as the average incomes continue to rise, the middle class has grown by 70 per cent in the past five years, and the consumption-to-GDP ratio is over 70 per cent, which is high compared to other countries in the region,” he stated.

However, Duc also noted that retail will experience a somewhat slow recovery this year due to the decline in employment opportunities and reduced income of workers, which directly impacts this market.

“Some government policies, such as the 2 per cent VAT reduction, have only provided support to consumers and have not directly impacted or supported manufacturers and distributors. Vietnam could consider implementing direct rental price reductions to create vibrancy in the market,” Duc added.

A Kantar Worldpanel Vietnam report released in March reveals that the retail industry in Vietnam is facing volatility. More than half of brands are having trouble keeping up with competitors, and about one-third have begun to slow in growth. “Retail types in Vietnam are gradually becoming more modern and promoting convenience, but not all retail channels are achieving good growth. Hypermarkets are gradually losing market share, giving way to the strong rise of convenience channels, small supermarkets, and specialised sales chains,” the report stated.

According to the Ministry of Industry and Trade, the retail market size in Vietnam hit $142 billion in 2023 and is forecast to rise to $350 billion by 2025. It continues to be a promising sector, attracting investments from both domestic and foreign enterprises.

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