Sales boom to push retailers to new frontier

January 03, 2006 | 17:40
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With consumer spending in Vietnam growing in leaps and bounds, a new momentum has been created for retailers to penetrate and expand their business into an untapped domestic market.

In the bag: retailers are ready to cash in on growing consumerism

The General Statistics Office revealed last week that retail turnover for goods and services last year reached $29.8 billion, a 20.5 per cent increase against the previous year.
This is the highest ever growth rate in five years with the tallies recorded in 2001 and 2004 being 11.3 and 18.5 per cent, respectively.
If the consumer price increase of 8.4 per cent is taken into account, then the net growth rate for 2005 retail turnover was 12 per cent.
“As production grew, the price of agro-products rose in favour of farmers, while the salary of state employees were adjusted upwards, resulting in higher incomes and demand,” said Le Manh Hung, Director of the General Statistics Office.
Consumer spending was driven by the high 8.4 per cent economic growth rate last year, contributing to the annual average increase of 7.5 per cent over the last five years.
The expanding economy signals
that Vietnam, where per capita income was estimated at $640 last year, is evolving from a low-cost

production base into one of the fastest-growing consumer markets in the Southeast Asia region.
Vietnam aims to achieve an annual per capita income of some $1,000 by 2010, still well below the current rates of Hanoi and Ho Chi Minh City which exceed $1,500.
Chicago-based research company AT Kearney ranked Vietnam in eighth position in terms of the top 30 emerging markets for global retailers.
Vietnam was previously listed by US firm Retail Forward as a top 10 global opportunity based on measured market risks and retail sales forecasts till 2008.
Terry Ghani, director of Malaysian consulting company Terry Ghani & Associates, said foreign retailers were already setting their sights on Vietnam.
“Vietnam is considered a marketing paradise,” said Ghani.
Ghani told a recent franchising seminar that Vietnam had grabbed the attention of foreign retailers due to its untapped market, stable politics, growing disposal income, large and young population, increasing tourism levels and its position as a gateway into China, Cambodia and Laos.
Vu Kim Hanh, director of the Ho Chi Minh City Investment and Trade Promotion Centre, said those consumers spending over $31 a month are aged between 22 and 55 years, with the segment accounting for 70 per cent of the population.
Hanh said although traditional distribution channels such as markets and shop houses currently prevailed, urban residents are beginning to shop in modern supermarkets with an increase of income.
Supermarkets were no longer concentrated in Hanoi and Ho Chi Minh City, but chose to instead expand to provinces showing potential.
Coop Mart, Vietnam’s largest supermarket operator, has already opened supermarkets in Quy Nhon and Can Tho provinces and has expressed plans for more expansions.
Metro Cash & Carry, which has four wholesale centres in Hanoi and Ho Chi Minh City, is also expanding to Haiphong, Danang and Can Tho.
“These retailers are focusing on developing outlets in suburban areas and provinces, locations where new towns are under construction,” said Hanh.
Hanh said Coop Mart, Maximart, Cora and Metro Cash & Carry were following a trail of increasing consumer spending in the outskirts of Ho Chi Minh City.
Consultants say Vietnam remains an untapped markets, with limited retailers such as Metro, Big C, Coop Mart and Parkson already taking advantage of the situation.
However, other retailers including Singapore’s Giant South Investment and Thailand’s Central Marketing Group are planning to enter the market.



No. 742/January 2-8, 2006

By Ngoc Son

vir.com.vn

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