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Small shops, local markets loosing ground to superstores
Traditional retail channels in Vietnam find themselves struggling as consumers opt for the modern supermarkets and convenience stores invading the fast-growing retail market.
Phan Thi Kieu Thu, owner of a grocery store in Ho Chi Minh City’s District 1, told a conference earlier this month that sales at her store had dropped as much as 10 percent annually over the past three years. She said 2009 sales had fallen 20 percent year-on-year.
“It has never been so difficult for me. The number of customers keeps going down and sales continue to fall.”
She said many of her regular customers had switched to modern, self-service convenience stores nearby.
According to the Ministry of Industry and Trade, the country’s 900,000 mom-and-pop stores like Thu’s held a 40 percent share of the retail market.
But Tran Thanh Liem, Sales Manager at German supermarket Metro, said the share ratio would shrink as more modern retail models exerted pressure on smaller businesses.
Under its World Trade Organization commitments, Vietnam began allowing wholly-owned foreign firms to enter the distribution and retail markets in January.
US-based Circle K is the latest foreign retailer to enter the opening market. The owner and operator of more than 7,000 convenience stores worldwide opened its first five outlets in Ho Chi Minh City this month.
It intends to become a leading retailer in Vietnam with 550 stores in 20 provinces and cities by 2018, the company said.
With the world’s 13th-largest population, Vietnam has a large domestic market whose purchasing power is rising rapidly.
According to figures from the General Statistics Office, retail sales reached US$58 billion last year, a 31 percent year-on-year increase.
Retail sales in the country grew 20 percent year-on-year in the first six months of 2009 to VND547 trillion ($32 billion), the Ministry of Planning and Investment said last week.
The economy, on the other hand, expanded by just 3.9 percent in the first half of the year compared to 6.5 percent in the same period last year.
The larger retail pie, however, does not mean everyone in the industry can have a bigger slice.
Like mom-and-pop stores, traditional markets have been struggling with lower sales as the presence of modern retail chains expands.
Duong Thi Mai Lan, who sits on the management board at Ben Thanh Market, said sales at the most famous market in south Vietnam were down 50-60 percent in the first six months of this year compared to the same period in 2008.
Many other large markets in the city, like Tan Dinh and Ba Chieu, have reported nearly identical drops in sales, citing increased competition from supermarkets and shopping centers.
The city’s more than 200 markets used to be most local residents’ only retail channel. But the city trade department said poor service, low quality products and uncomfortable shopping environments had pushed shoppers away from local markets and into air-conditioned supermarkets.
As of the end of last year there were around 400 supermarkets, 60 shopping centers and nearly 2,000 convenience stores nationwide, with the number of supermarkets expected to increase by two-thirds by 2010.
Though the share of modern retail sales in Vietnam is less than 20 percent now, experts expect it to grow rapidly.
Nguyen Khanh Trung, a professor teaching at the Economics Department at the National University in Ho Chi Minh City, told Vietnam Economic Times traditional retail outlets still played an important role in Vietnam but their dominance was shrinking.
Trung estimated that modern retail sales in Vietnam have been growing more than 20 percent every year.
He suggested the best way for local retailers to survive the competition from foreign chains would be to cooperate with each other and with producers.
Vietnam fell to the sixth position this year after being ranked the best emerging market for retailers in 2008 by global management consulting firm A.T. Kearney.
The country lost its No. 1 position because of inflationary pressures from its own real estate boom, consumer price inflation in the last half of 2008, and a significant drop in its export-driven economy, according to A.T. Kearney’s 2009 Global Retail Development Index, a study of retail investment attractiveness among 30 emerging markets released earlier this month.
However, many global retailers are well established in Vietnam, including South Korea’s Lotte, Japan’s Seiyu, Malaysia’s Parkson, Hong Kong’s Dairy Farm and Germany’s Metro, the US-based company said in a statement on its website.
“Vietnam has some short-term challenges, but our long-term outlook for the country remains positive as it continues to open its doors to international investors,” said co-leader of the study Hana Ben-Shabat in the statement. “Its population is young and it continues to urbanize, making it easier for suppliers to fulfill the country’s demand.”
thanhnien, agencies
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