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Foreign retailers use franchises for early foot in VN door
The retail rush is on as foreign supermarket chains scramble for early entry in the Vietnamese market by opening many franchises.
They are popping up all over the place – Lotteria, KFC, Gloria Jean’s Coffees, Medicare…
In a mad rush to gain an early foothold in the Vietnamese market, many of the big names mentioned above have taken the franchise route over the last ten years.
The retail market is set to be opened up to 100 percent foreign owned companies next year as part of Vietnam’s WTO commitments.
“In this fierce battle, the fastest is the winner,” says chief executive of Japanese electronic supermarket chain Best Denki’s franchise, Best Carings, Le Hong Xuan.
Best Carings was the first franchise opened by a foreign supermarket chain in Vietnam. It was set up two years ago by Best Denki, one of five leading electronics retailers in Japan and HCMC-based Ben Thanh Company’s Carings electronics and home appliances supermarket.
Another Japanese supermarket chain, Daiso, started a franchise in the southern province of Tay Ninh early this year.
7-Eleven, a well-known Japanese retail brand, is in talks with a Vietnamese partner to open the 24/7 outlets here, a source from the Vietnam Franchise Club said.
Thai technology and trading company Loxley has also said it plans to open a chain of 24-hour convenience shops in Vietnam by the end of this year or early next year through franchisees.
“Many more will come,” Dinh Thi My Loan, general secretary of the Vietnam Retail Association recently told local media.
This year, Vietnam has become the world’s top retail market, according to the Global Retail Development Index report by A.T. Kearney released in June.
In the first half of this year, total retail revenue in Vietnam reached VND447.3 trillion (US$27 billion), a 30 percent year-on-year increase, according to the General Statistics Office.
Vietnam’s annual retail sales are set to increase by 13.6 percent on average between 2008 and 2012, according to multinational market research firm RNCOS.
Vietnamese franchisees say franchising, while helping foreign retailers strengthen their presence, is a good way for local companies to develop by learning from their foreign partners.
Xuan says Best Denki has helped improve Carings’ management, technology, marketing, and customer services in two Best Caring outlets in Can Tho City and Hanoi.
Best Carings recorded a 63 percent year-on-year increase in total turnover last year, and in the first eight months of this year, saw a 38 percent growth compared to the same period last year.
To build on this success, it plans to add eight to ten more outlets nationwide by 2010.
Nguyen Van Hung, chief executive of Daiso’s franchising partner, Tri Phuc Company, says Tri Phuc’s customers are now offering as many as 90,000 different kinds of products from Daiso.
They will also open two new outlets in HCMC and Hanoi this year and plans to have 100 franchising outlets throughout Vietnam within the next five years.
After the honeymoon
But Xuan says local franchisees should also be wary of a “broken marriage” that might result from unfair terms and conditions with their foreign partners.
According to local brand building and developing consultant company Lantabrand, franchisees should have their own business strategy if they don’t want to be taken over eventually by franchisors.
Hung says local companies should be careful in choosing a foreign franchisor as there’s no guarantee that the franchise would succeed.
“Wal-Mart has failed in Germany and the Republic of Korea,” he says. “It’s a lesson for Vietnam.”
Thanhnien
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