Retailers advised to learn “Parkson lesson” before entering Vietnam

18:08 | 17/06/2015 Society

The Vietnamese retail market, analysts say, is still being over-estimated by investors.

Retailers advised to learn “Parkson lesson” before entering Vietnam

Ho Chi Minh City residents in the southern part of the city in late April witnessed the establishment of one more shopping mall – SC Vivo City. 

The project is managed by Singaporean Mapletree and Vietnamese Saigon Co-op. Covering an area of 62,000 square meters, SC Vivo sells the strongest international brands.

Japanese Aeon last year officially joined the Vietnamese market with the opening of two large shopping malls in Ho Chi Minh City and Binh Duong province after it gave optimistic predictions about the potential of the market with 90 million consumers and the strong recovery of Vietnam’s economy.

The vast market of consumers who have increasingly high incomes is the major reason prompting foreign retailers to flock to Vietnam. However, this might also be the factor that causes them to wrongly assess the Vietnamese market.

Parkson Retail, which has been present in Vietnam since 2005 and has opened a lot of shopping malls located in the busiest commercial hubs in Hanoi and HCM City, admitted that the business performance in Vietnam has been below expectations.

Parkson reported 5.5% revenue decrease for the first quarter of the 2015 fiscal year, despite the recovery of the national economy. This has forced Parkson to shut down the shopping mall at Keangnam Landmark in Hanoi. 

Troy Griffiths, deputy managing director of Savills Vietnam, noted that the Vietnamese modern retail market is growing and needs time to stabilize. Shopping malls have to compete with many other retail models such as supermarkets and restaurants.

However, he emphasized that the brands of retail groups and their ways of operation alone will not determine if they can succeed in Vietnam. 

He noted that Vietnamese consumers attach importance to the prices of products, and that it would be interesting to wait and see what retail models will succeed in Vietnam.

A branding expert noted that Vietnam is attractive in the eyes of foreign investors because Vietnam is still not fully exploited.

A 2013 report of CBRE Vietnam, a real estate service provider, showed that the average shopping mall area per capita in Hanoi and Ho Chi Minh City remained modest, at 0.07 square meters. The figure was much lower than that of Kuala Lumpur (0.53), Jakarta (0,52), Bangkok (0.59) and Manila (0.43).

However, Vietnam has an annual income per capita at approximately US$2,000 per annum with the majority of population living in rural areas. Therefore, Vietnamese consumers tend to choose products and retail services that fit their pockets./.

Source Vietnamnet