Foreign franchisers are eyeing the Vietnamese convenient store market, expecting significantly from the new profitable business model.
According to Yun Ju Young, managing director of GS25 Vietnam, the country has yet to have any retail franchise brands. Besides South Korea, other convenience store chain franchises from Japan, Taiwan and other countries also want to enter the Vietnamese market. Following the trend, Vietnamese retailers have also stepped up their franchising efforts.
Saigon Co.op for instance is franchising its Co.op Food convenience store in HCM City and other cities and provinces, and targets the opening of 100 new stores this year.
Meanwhile, Nielsen Vietnam’s statistics show that the number of convenience stores nationwide has increased four-fold since 2012. Thousands of these are operating nationwide, with the largest density recorded in the two major cities of Hanoi and Ho Chi Minh City.
South Korean convenience store chain GS25, which has around 14,000 stores in South Korean market with 80 percent of them being franchised, has to look for business opportunities in new markets like Vietnam as there is already a high convenience store density in Korea.
Vietnam, with a population of nearly 100 million, has around 2,000 stores, meaning there is still great potential for growth, Yun said, adding the country is among the fastest growing retail markets in Asia, with convenience stores recording strong growth in recent years.
GS25 estimated the opportunity in the Vietnamese market to be 50 times higher than in South Korea, Yun said.
Vietnam also has policies facilitating foreign investment, he said, adding that in Korea, convenience stores are not allowed to open within 15 meters of another, but in Vietnam there is no such restriction.
Vietnam has yet to have any retail franchise brands, but analysts forecast that convenience store franchises will be a new profitable business model in the coming time because costs are lower than in other sectors while management is easier.
According to Suttisak Wilanan, deputy managing director of Reed Tradex, Vietnam has all the potential elements for franchise development, such as a large consumer base, rapidly rising incomes and a generation of educated, young and increasingly growing population of professionals, bringing an optimistic prospective for national and international brands to double its retail and franchising industry in the next few years.
Sharing the same view, Sean Ngo, CEO of VF Franchise Consulting, expects to see growth in the franchise sector as a whole, noting that more international franchises want to penetrate the market to capitalize on the fast-growing demand in food and beverage, education, retail, and various other services.
Nguyen Phi Van, chairwoman of Retail & Franchise Asia, said that Vietnam ranked eighth of the top 12 markets identified by the International Franchise Association as the most valuable markets for international expansion.
However, she said 90 percent of franchisers in Vietnam follow the traditional model without applying digital technology, which is likely to result in losses and withdrawal from the market.
Figures from the Ministry of Industry and Trade show that more than 200 brands registered as foreign franchises to Vietnam by the end of last year. The majority of franchisers were from the US, the UK, France, Australia, South Korea, Singapore, Thailand, Japan, Hong Kong, Taiwan, Canada and the Philippines.
The sectors with the most franchising potential are food and beverage, education, health and nutrition, business services, hospitality, fashion, beauty and skincare, entertainment, children’s services, and convenience stores.
Van forecast the trend of brands entering Vietnam will continue in the next three years. Among which, regional brands, including those from Malaysia, Singapore, Thailand and the Philippines will come along with international brands.
Vietnam will continue to be a destination for international brands, especially regional brands, Van said, adding that local brands businesses are now exploring new business opportunities available via franchising and have started to develop platforms to promote their brands in the world market.
According to expert Le Dang Doanh, the business development towards franchising helps businesses utilize funding as well as human resources from partners to expand business while increasing sales and profits from franchise fee revenue to enhance brand value, and more importantly, to upgrade the business. This is a very smart way of foreign investors to mobilize capital and human resources.
