Boom in convenience store model

08:36 | 11/06/2018 Trade

(VEN) - The number of convenience stores is growing rapidly in Vietnam.

boom in convenience store model

Increased number

According to the Ho Chi Minh City Department of Industry and Trade, at the end of 2014, the city had 326 convenience stores. By March 2018, that figure had surged by 3.5 times to 1,144 stores, biting into the business of traditional markets and supermarkets. While traditional markets are gradually degraded, convenience stores continue to increase its number. Leading convenience store names such as 7-Eleven and Circle K have flocked to Vietnam, drawn to one of the world’s most attractive retail markets.

Vietnamese retail businesses have also been expanding the convenience store model. By March 2018, Saigon Co.op had 181 Co.op Food stores and 71 Co.op Smile, while VinMart+ had more than 800 stores.

Vietnamese consumers have grown increasingly accustomed to shopping in these convenient stores, often preferring them to supermarkets and hypermarkets.

Support policies

Vu Vinh Phu, a retail expert, says convenience stores also sell fast food at affordable prices, attractive to young consumers. In addition, Vietnam is particularly attractive because of its abundant agricultural products. Moreover, the policy of allowing foreign-invested companies to establish outlets covering an area of less than 500sq.m without having to comply with the Economic Needs Test (ENT) also contributes to the expansion of this shopping model.

Despite the incentives and potential market draw, convenience stores require abundant financial resources. On average, a chain of convenience stores suffers losses for the first five years of operation before it turns a profit. In this sense, foreign companies have an advantage over Vietnamese ones. Therefore, domestic businesses need to build their own high-quality brands, with clear origin and competitive prices. In addition, the rural market segment has potential for convenience stores that has yet to be tapped.

The state needs to adopt support policies in terms of tax incentives and space for domestic businesses in order to help them increase their competitiveness in this retail segment.

In the first quarter of the year, total retail sales of goods and services reached VND1,048 trillion, an increase of 9.9

percent compared to the same period last year.

Phuong Lan