Great faith in Hanoi retail profits

Hanoi has more than 118,000 square metres of retail space and 157,000sqm of extra space will come online this year, according to CBRE Vietnam.

Michael Vong, centre manager of PICO Mall - the capital’s latest retail centre to open on September 1, said Vietnam’s retail industry hit $52 billion of revenue in the first seven months of 2011, a 22.3 per cent increase over the corresponding period last year.

“This is an ideal figure for retail development and moreover it is forecasted to reach $113 billion by 2012. This is despite news of high inflation and cut-backs in consumer spending. The market is still expanding, driven by foreign investment, and the country is still an attractive destination for global retailers,” Vong said.

Meanwhile Dane Moodie, marketing director of Colliers International - the marketing and leasing agent for the Habico retail centre, said Vietnam’s retail market was considered one of the world’s most attractive.

“A young and expanding population and fast income growth have been the most important reasons behind the tremendous growth of retail sales and retail space in Vietnam,” Moodie said.

By the end of this year, at least four big retail centres will come online in Hanoi. They are the Savico Mega Mall located in Long Bien district, PICO Mall on the backbone road linking Hanoi and Ha Dong district, Parkson in the Keangnam building and the Habico retail centre located along Pham Van Dong road heading to Thang Long bridge.

However, Moodie also expressed concern that Vietnam’s ranking in the Global Retail Development Index by AT Kearney had fallen from 11th in 2008 to the 23rd in 2011, reflecting a number of difficulties the country is facing.

“Also, in the coming years, huge supply is in the pipeline. In 2013, new supply will be five times greater than now. Therefore, despite the good market performance, pressure will rise,” Moodie said.

Especially, he added, large-space developers would have to fine-tune their marketing and sales strategy to fill up vacant space.

“New incentives will be more common, but it is essential that the developer adopts a modern development model. Failure has arisen from mistakes in positioning, design and layout. Therefore, we can expect to see more modern retail centres and also better designed ones,” he added.

Vong agreed, adding that modern retail channels continued to grow despite the dominance of the traditional channels, consumers have become more accustomed to shopping at modern grocery channels such as supermarkets, hypermarkets and convenience stores thanks.

“These modern grocery channels work hard to offer consumers fresh food at lower prices.

“Consumers also prefer modern non-grocery stores such as clothing and beauty specialists, rather than traditional stores located in the wet markets,” Vong said.

The share of modern retailing in 2009 in Vietnam was 26 per cent, versus 23 per cent in 2008, and is forecasted to reach 61 per cent by end 2017, Vong said.

 In Hanoi, the centre business district (CBD) had average rents of $45.58 per square metre, per month. Average rents in the non-CBD areas varied at more than $36.6 per square metre, per month.