Retail market attracts foreign investors

10:37 | 26/04/2017 Economy

(VEN) - The Global Retail Development Index (GRDI) announced annually by the American global management consulting firm AT Kearney shows that Vietnam remains among the 30 most attractive retail markets worldwide.  

The VinMart chain has been expanding continuously

Convenience stores

In late February, 7-Eleven, an international chain of convenience stores, recruited staff to work in Ho Chi Minh City. Although it had yet to announce its official presence in Vietnam, this retail giant is likely to be welcomed and to increase competition in the Vietnamese retail market.

Data compiled by the Ministry of Industry and Trade (MoIT) show that businesses with foreign direct investment (FDI) currently account for about 17 percent of retail sales through shopping centers and supermarkets, and 70 percent of sales through convenience stores. The FDI sector also accounts for 15 percent of sales through minimarts and about 50 percent of online sales via the internet, television, and mobile phone.

At a recent meeting of the Domestic Market Management Team, Vietnam Retailers Association President Dinh Thi My Loan said that Vietnam’s participation in free trade agreements (FTAs) has made the domestic retail market more attractive to foreign investors.

The Japanese Aeon supermarket chain has opened four shopping centers in Vietnam and expects to increase this number to 20 by 2020. Other retailers, such as Korean Lotte and Thai Central Group also intend to double or even triple the number of their shops in Vietnam in the next several years.

Targeting rural markets

Growing competition pressure requires domestic retailers to strive to increase their market share to enhance competitiveness. One promising target is increased distribution and presence in rural areas.

According to Vo Van Quyen, Director of the MoIT’s Domestic Market Department, Vietnam is in a golden population structure period and the incomes of Vietnamese people are growing. The consumer purchasing power in rural areas has grown 15 percent annually, triple that in urban areas. If they have good knowledge of the shopping habits of rural consumers and sell suitable products at reasonable prices, domestic retailers will dominate rural markets, he said.

Many domestic retailers have concentrated on promoting sales in rural areas. Lan Chi Mart has expanded its distribution network into suburban areas and opened its 18th shop in late 2016. Vingroup is pursuing a target of an additional 70-80 Vinmarts and 1,500 Vinmart+ stores in remote areas. Saigon Co.op is also expediting its penetration into rural markets by opening supermarkets and convenience stores to sell essential consumer goods.

Vu Kim Hanh, Director of the Center of Business Studies and Assistance:

Rural areas are a potential market segment for retailers. Domestic distributors should strengthen their presence in rural

markets, otherwise foreign retailers will dominate them.

Phuong Lan