Domestic retailers to cement dominant position in Vietnam

The increasing presence of foreign brands in Vietnam has been seen a push for domestic retailers to participate in the race for market share and keep their leading position in the market as the country remains one of the most promising markets in the world, especially its effective results in containing the Covid-19 outbreak and support policies for businesses.

VinMart and VinMart retail and agricultural chains VinEco are expected to open another 300-500 outlets by year-end. Photo: Masan Group

The global research market and consulting firm Mordor Intelligence estimated the Vietnam retail industry’s revenue to gain a compound average gross rate (CAGR) of more than 10% in the 2021-26 period.

The figure was made at the base of the country’s ongoing urbanization and evolving demand trends among young urban consumers to drive strong growth in modern retailing channels, such as convenience stores and the rapid expansion of e-commerce.

In the latest move, Thailand’s Central Retail has planned to expand its market share in Vietnam, looking to reach nearly 90% of the country’s provinces and cities through its US$1.1 billion investment capital for the next five years.

The reason for the new investment, according to the retailer, came from that Vietnam’s service industry will continue to grow strongly in 2021, making it one of the fastest and most attractive markets in the world.

Central Group conglomerate’s subsidiary, after acquiring Big C Vietnam from France’s Casino Group in 2016, has been operating 37 commercial centers and 230 stores in 39 provinces.

A statistics of property consultancy Savills Vietnam showed that among 66 newly-registered foreign-direct investment (FDI) projects conducted in the first quarter of 2021, there were five shopping malls and supermarket projects, with investment capital of nearly $13.5 million, equivalent to 27% of the total newly-registered FDI capital in the capital.

All five projects are developed by foreign investors from Japan and South Korea who are ready for long-term operation in Vietnam. 

“The retail market is attractive to foreign investors thanks to the steady population growth and rapid surge in consumer spending,” Savills said.

Rapid expansion

The retail market, recently, has witnessed strong expansion from domestic players through the opening of new stores across the country as competing with foreign rivals like Central Retail. 

Truong Hai Auto Corp. (THACO), the Vietnamese automaker, after acquiring the South Korean Emart retail system, is planning to expand the chain’s network to up to four hypermarkets by 2022 and over 10 discount stores by 2025. 

Trade and services are one of five pillars including automobiles, real estate, and agriculture, and logistics that help it realize its goal of becoming a multi-sector industrial corporation.

This year, it plans to earn more than VND1.8 trillion (US$78.2 million) in revenue from the Emart system, marking an increase of about 10% year-on-year and contributing about 2.2% of the group's total revenue, Tran Ba Duong, Chairman of THACO said.

Masan Group, owning more than 3,000 VinMart and VinMart retail and agricultural chains VinEco, is expected to open another 300-500 outlets by year-end. Earlier, Vingroup, the Vietnamese conglomerate, sold its subsidiary VinCommerce, which operated VinMart and VinMart and VinEco to Masan Group in a merger deal in 2019.

Danny Le, CEO of Masan Group said they will hit a key milestone this year with VinCommerce becoming profitable. The company is turning its focus on expansion to build the nation’s No.1 network while keeping our profit momentum intact.

Its subsidiary Masan Consumer posted double-digit top and bottom-line growth in the first half of 2021, despite the overall fast-moving-consumer goods (FMCG) market de-growing in the period.

Clean seafood products are sold in Soi Bien outlet in Hanoi. Photo: Soi Bien

The BRGMart chain managed by Hanoi-based BRG Retail has continuously opened new stores from 2020 to 2021, expanding its network to up to 75 supermarkets and minimarts, Nguyen Thai Dung, Chairman of BRG Retail told The Hanoi Times.

“We will open up to 100 supermarkets and minimarts in Hanoi, Hai Phong, Hai Duong, Hung Yen, Ba Ria-Vung Tau, and Ho Chi Minh City by the end of this year,” Dung added.

According to the Ministry of Industry and Trade, Vietnamese enterprises are now accounting for 80% of a total number of nearly 1,100 supermarkets, 240 shopping centers, and nearly 2,000 convenience stores across the country.

Over the past years, domestic players have rapidly expanded their scale to capture market share through merger & acquisition (M&A) deals. This has significantly changed the landscape of the retail industry in recent years, local insiders said.

Vu Thi Hau, Chairwoman of the Vietnam Retailers Association (VRA) underlined Vietnamese retailers are growing stronger than previously.

“They are aware how to take advantage of the home field to leverage their development, typically through M&A deals with the desire to expand their market share in the domestic ground,” she told The Hanoi Times. “It proves the Vietnamese retailers are completely capable to dominate the market.”

Local insiders commented the firms have taken advantage of understanding the local market, consumer habits as well as effectively focused on customization and localization strategies.

Adaptation and dominance

Covid-19 has created more momentum for the shift from traditional trade to e-commerce, Hoang Quang Phong, Vice President of the Vietnam Chamber of Commerce and Industry told the online conference entitled “Digital transformation-Solution to boost retail growth” last month. Impacts from the pandemic including travel restriction have aggressively boosted online shopping. 

Bach Hoa Xanh chain's shippers serve online shopping. Photo: MoMo

Local retailers have promptly turned their business strategies to developing omni-channels to adapt to the new normal situation. 

Soi Bien chain has put into use the “All-in-one” payment solution with high security. The solution helps employees both sell goods, manage orders, make payments, control the status of goods and manage revenue. “We are preparing to sell on e-commerce platforms in the coming time,” Bui Van Hau, Managing Director of Hanoi-based Soi Bien food chains told The Hanoi Times.

BRG Retail, last year, also launched its app BRG Shopping as well as enhanced cashless payment to create convenience to customers. “Training human resources, applying new technology and caring customers are a priority of the chain, in parallel with outlet expansion,” Dung said.

Dang Thanh Phong, PR Manager of MobileWorld JSC (MWG), one of the pioneering retailers applying omni-channels successfully, saw the Vietnamese retailers have improved their weakness of capital and technology application compared to the previous years. The retailer owns a huge number of outlets at thegioididong.vn (mobile devices chain), Dien may Xanh (electronic products chain), and Bach Hoa Xanh (grocery chain) across the country and in overseas markets.

“They are both actively and strongly investing in applying technology into the management of chains, invention, and customer care. It is key factors to help them accelerate their capacity as well as competitiveness in the tougher competition," he told The Hanoi Times.

Hau from the VRA commented that the Vietnamese retailers have emerged from their weaknesses which were capital shortage and backward technology application in the previous years. Enterprise’s strategy must always be associated with the development of the market. Meeting the needs of consumers helps businesses survive. “So it is not surprising that retailers have to change to adapt," she added.

Meanwhile, the $1 billion plan of Central Retail is to focus on developing the multi-sectoral platform to improve customer experience, branding for non-food categories as well as enhancing its presence in urban and rural areas to strengthen its dominance in Vietnam.

Philippe Broianigo, CEO of Central Retail in Vietnam, said they will develop the omni-channel including nguyenkim.com and supersports.com.vn, build e-commerce stores on Lazada, Shopee, and Tiki and cooperate with food apps such as Grab, Now, Beamin, and Chopp.

Local insiders predicted the population scale of Vietnam will increase by 2% per year, and reach 106 million people by 2050, which will be a good sign for retailers. Looking at the potentials of the retail market, they said Vietnam is a “promising land” for domestic firms, and also an ideal destination for foreign businesses.