09:32 | 13/06/2017 Society
Vietnam has jumped five positions from last year to number 6 on the global retail development index (GRDI) compiled by the American consulting firm A.T. Kearney.
The country has a score of 56.1 out of 100 and is currently behind India, China, Malaysia, Turkey and the United Arab Emirates.
According to A.T. Kearney, foreign retailers have reasons to be positive about Vietnam thanks to favourable government policies, urbanisation, a growing middle class and a relatively young population.
The Vietnamese government has permitted 100% ownership by foreign retailers since 2015 and favourable policy continues to usher them in, as seen in the 12.5% growth in foreign investment in 2016.
A recently concluded free trade agreement with the European Union is expected to further boost investment in Vietnam.
Convenience stores and mini-marts are the fastest-growing segment with Circle K and FamilyMart expanding aggressively since entering the market in 2009. FamilyMart plans to have more than 800 franchise stores in Vietnam by 2020.
7-Eleven plans to open its first store in Vietnam in 2018 and raise the number of stores to 1,000 over the next ten years.
Other retailers from Japan and the Republic of Korea also have plans to open stores and expand their presence in Vietnam.
A.T. Kearney added that e-commerce is growing fast in Vietnam with sales expected to increase by 22% to account for 1.2% of total retail by the end of 2020.
Huge online discounts and promotions are driving sales but also forcing firms to shut down.
Nevertheless, new entrants and investors are making their bets on the fast-growing market with VNG Corporation reportedly investing approximately US$17 million for a 38% stake in e-commerce platform Tiki.
According to the General Statistics Office, Vietnam’s retail and consumer services in 2016 rose by 10.2% from the previous year to an estimated US$118 billion.
The GDRI ranks the top 30 developing countries for retail investment based on all relevant macroeconomic and retail-specific variables.