With investment in the domestic retail market forecasted to increase to US$180 billion by 2020, Vietnam is an attractive destination for foreign investors. However, in the past year, the market also witnessed the departure of several foreign retail brands, such as Shop & Go (Singapore) or Auchan (France). This shows the fierce completion in the market but, and also opens up new opportunities for domestic enterprises if they take advantage of opportunities to conquer the market.
Reverse the situation
In the first half of 2019, Vietnam’s retail marker witnessed a change in market share as domestic retailers continued to expand their coverage through a series of mergers and acquisitions (M&A). On April 2, VinCommerce, the unit managing the retail system of VinMart and VinMart+ under the conglomerate Vingroup, announced the receipt of transfer of a chain of 87 Shop & Go stores. Most recently, Saigon Co.op has transferred a system of 18 supermarkets and e-commerce platform and activities of Auchan in Vietnam. With this deal, for the first time ever there is a Vietnamese retailer that has acquired a world-class retail brand.
The departure of the "big names" in the market shows their struggle to acquire market share in Vietnam. Even existing businesses like Big C or Lotte Mart cannot avoid these difficulties. Since falling into to the hands of a Thai boss, Big C has recorded poor business results. The latest financial statements of the three Big C supermarkets of Thang Long, An Lac and Dong Nai show that the profits of some Big C supermarkets have dropped by 10% compared to the pre-transfer period in 2016. Besides, the Korean retail giant Lotte Mart is also reporting accumulated losses of up to VND800 billion.
In recent years, the market share of the retail industry has changed significantly. In 2016, the public was startled by the statistics that more than 50% of Vietnam's retail market share went to foreign enterprises, with a forecast for a grey future of the country's retail industry. However, after more than three years, the new statistics showed that domestic retailers have recorded superior in coverage compared to foreign ones and are gradually prevailing in the market.
According to the statistics from the market research company Asia Plus, in Vietnam’s retail market, for the supermarket and hypermarket segments, Vietnamese retail businesses account for nearly 70% of selling points out of a total of 479 points, of which VinMart accounting for 120 venues and Co.op Mart having 116 ones. For shopping malls, Vincom accounts for more than 60% with 67 out of 96 selling points. While in the growing model of convenience store and mini-supermarkets, this number is also overwhelming with more than 80% of the selling points are domestic enterprises out of over 3,000 venues. In particular, VinMart+ alone accounts for more than 1,800 points, The gioi di dong (Mobile World) more than 500 points and Santra Food over 200 venues.
The expansion of coverage through M&A shows that domestic retailers do not give up and they have still silently expanded their scale to actively reverse the situation and conquer their own "home ground" with their own capacity. Domestic retailers have shown their ingenuity when both strengthening market share in major provinces and cities and targeting niche markets. In several localities and regions, there are local small and medium-sized retail models appear, such as Lan Chi, Bach Hoa Xanh, Thanh Hao or Me Linh. The development of convenient stores and supermarket there is a smart choice to meet the quick, convenient purchase demand of consumers.
Taking advantage, capturing new technologies
Vietnam’s retail market has so far attracted the participation of various large domestic and foreign retailers. However, it is still in the first stage of development and there are many opportunities for latecomers, especially branded retail businesses with difference and application of sales management technologies. Businesses have seized upon the trend in the retailing market and established virtual supermarket models in order to promote the application of e-commerce in retailing as the model of Vingroup.
Accordingly, instead of going directly to supermarkets for shopping and waiting for payment, now, with just a phone with the VinID application and a smart shopping guide from the supermarket system VinMart, customers can choose the products they want to buy and pay instantly with e-wallets. About two to four hours later, VinMart staff will deliver the product to the customers’ addresses. They can also scan QR codes of the products they want to buy printed on large-sized posters of the virtual supermarket "VinMart 4.0" located in residential areas, office buildings, schools or bus stops to "go shopping" at any time. Or as Saigon Co.op has cooperated with the Ho Chi Minh City Television to open HTV Co.op sales channel to bring consumers an enjoyable and convenient shopping experience, making shopping more easily through online business models.
According to the assessment of the president of the Vietnam Association of Retailers (AVR), Dinh Thi My Loan, domestic retailers have certain advantages compared to foreign enterprises when they are able to cover retail points throughout the country, not just focusing only on two big cities of Hanoi and Ho Chi Minh City. Domestic enterprises always have the home-field advantage as they understand the Vietnamese consumer behaviours. However, many of them are still weak in terms of capital, with limited scale and a lack of professional management ability, making their competitiveness even weaker.
Therefore, they should know how to cooperate and seize the opportunities right now to accelerate and dominate the market in many ways. Vietnamese retailers should master the new retail trends and create experiences as well as bring added value to customers. At the same time, they should also integrate multi-channel sales in both direct and online manners to meet the diverse needs of consumers. In addition, it is necessary to take advantage of technological development to be able to successfully compete with foreign retail corporations.
