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Retail sector readies for take-off
The attractiveness of the nation's retail market has dropped eight places on the 2010 AT Kearney Global Retail Development Index (GRDI), falling from the 6th position in 2009 to the 14th this year.
Foreign-invested and domestic retailers remain optimistic, however, and many are planning for expansion.
Germany's Metro Cash & Carry said it planned to open four new supermarkets in the southern cities of Vung Tau, Binh Duong, Binh Dinh and Long Xuyen, while France's Big C announced plans to open a new outlet in the city of Vinh in the central province of Nghe An.
South Korea's Lotte Group – which has opened two supermarkets in HCM City in the past two years – has also earmarked US$5 billion to develop a chain of 30 stores in Viet Nam over the next decade.
Among domestic players, market leader Sai Gon Co.op, with 46 supermarkets nationwide, plans to open seven new markets this year and projects to expand its distribution network to 100 stores by 2015.
After the success of the Vincom Shopping Centre in Ha Noi, Vincom in April launched a new mall in HCM City, Viet Nam's largest economic hub, on a site of 58,000sq.m.
Nevertheless, the AT Kearney survey for the last three years shows the Vietnamese retail market losing attractiveness to investors. Viet Nam topped the index in 2008, only to fall to 14th place this year.
The survey ranks the 30 most attractive retail markets worldwide out of 185 economies, basing its results on four criteria, including country and business risk, market attractiveness, market saturation and time pressure.
While Viet Nam performed rather well in saturation and time pressure criteria, its slump was attributed to a heavy decline in the country's market attractiveness. High country and business risks also contributed to lower ranking. Viet Nam lost points in a number of major criteria, including per-capita retail sales, business efficiency, debt indicators and credit ratings.
Leading global retailers including US-based Walmart, France's Carrefour, Singapore's Diary Farm and UK's Tesco all continue to pass on Viet Nam's market.
Viet Nam opened the doors for multinational retail investment on January 1, 2009, when its commitments to the World Trade Organisation required it to provide a level playing field for foreign retailers. However, France's Big C, Germany's Metro Cash & Carry, Malaysia's Parkson and South Korea's Lotte remain the only major foreign-invested players.
Viet Nam Retailers Association general secretary Dinh Thi My Loan said the world financial crisis had driven the big foreign retailers to be more thoughtful about their entry strategy.
"Viet Nam frequently remains among the top 10 most attractive retail destinations, but the market is still all unmet potential," Loan said, noting that consumer habits and infrastructure still remained underdeveloped.
Two additional foreign retailers had demonstrated interest in Viet Nam but had to postpone their entry plans due to the financial crisis, confirmed the director of Deloitte Consulting Southeast Asia, John Yeomans.
The post-recession outlook remains bright, with the AT Kearney survey reflecting that Vietnam's market was far from saturated. It is 50.2 points out of the highest 100, compared to China's more heavily-saturated 32.9 points.
Big C general director Pascal Billaud said only 20 per cent of Vietnamese goods were sold through modern major retailers like supermarkets and malls, leaving enormous room for growth. In developed markets like South Korea, Hong Kong and Japan, these larger retailers accounted for 80-90 per cent of the market, he said.
Viet Nam's consumer confidence, meanwhile, was the second-highest in the world, according to a second-quarter report by global market researcher Nielsen. Consumer spending was expected to rise above 70 per cent of income, while retail sales, expected to reach US$77.8 billion this year, have been forecast to climb to $85 billion by 2012.
Competition among domestic retailers continues to be fierce. Domestic retailers Hapromart and Citimart are developing chains of convenient stores or mini-marts in new urban areas.
"Taking demand and convenience into consideration, we believe we are heading into right direction," said Citimart deputy sales director Ngo Van Hai.
Saigon Co.op is also diversifying its retail distribution channels by setting up Co.op Food Store chains near densely-populated areas, targeting female shoppers.
"We have to look for distinction to compete with foreign retailers," said Saigon Co.op general director Nguyen Thi Hanh.
Major foreign retailers and franchises from Tesco to 7-Eleven continue to avoid the Vietnamese market due to restrictive laws on distribution, which won't be lifted under WTO commitments until 2012. Foreign retail chains with integrated distribution systems are not allowed under Vietnamese law to import and distribute goods as well as operate a chain of retail outlets
Until 2012, foreign retailers would have to establish economic necessity to open more than one outlet, noted Viet Nam Chamber of Commerce and Industry legal counsel Tran Huu Huynh.
Mai Huong
vietnamnews
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