Foreign players raise competition in Vietnam's retail market

Customers shop at a supermarket in Hanoi - Photo by Reuters

Vietnam's retail market is listed in the top five in Southeast Asia and ranked 11th globally in terms of growth rate, based on the A.T. Kearny 2016 Global Retail Development Index.

The retail market is forecast to hit $179 billion by 2020, the Ho Chi Minh City’s Law newspaper cited an Industry and Trade Ministry's projection as saying, a jump of 52 percent from last year.

Foreign-invested companies are rushing to grab a share of a market of nearly 93 million people, 60 percent of whom are young people.

Foreign convenience store operators already held a 70-percent market share in the Southeast Asian country in 2016, the newspaper cited the trade ministry as saying.

7-Eleven, one of the largest Japanese operators of convenience stores, has started hiring staff for its debut in Vietnam, Seven System Vietnam Company, the franchise owner in the country, has said.

The advent of global retail giants like 7-Eleven, which have advanced inventory management and technology, financial strength, as well as advantages in shop design and product line-up, will help develop Vietnam’s retail sector, Nguyen Huy Hoang, an executive from market research firm Kantar Worldpanel Vietnam, told the newspaper.

Hoang said mergers and acquisitions among chains of convenience stores would emerge in near future.

Some industry experts say the arrival of foreign retailers in the Vietnamese market poses a threat to local retail companies.

“It is obvious that Vietnamese retailers can’t gain a foothold in this segment," said Dao Xuan Khuong, an expert in retail and distribution. "Foreign companies will be the dominant players in the convenience store industry.”

Government statistics shows Vietnam now has about 9,000 traditional outdoor markets, 800 supermarkets, 160 shopping malls and 1.3 million small-sized family shops nationwide.

Vietnamese people are gradually shifting away from traditional retail channels to modern retail stores and centers. Spending at supermarkets, convenience stores, and shopping malls, as opposed to traditional local shops, is expected to rise to 40 percent of consumer spending by 2020, from 25 percent currently, government data show.

Vingroup, a Vietnamese leading real estate group, has said it planned to open 500 supermarkets and 8,000 convenience stores under its VinMart and VinMart+ brands by 2020.

In the past two years, Vietnam has seen mergers and acquisitions jumping in the retail sector as foreign investors, mainly from Thailand, Japan and South Korea, want to tap into the country’s sizeable fast-growing consumer population.