Vietnam sees growth opportunity in retail sector

Vietnam’s retail sector offers great potential for investors in the context of various free trade agreements and the Trans-Pacific Partnership the country has signed, which are expected to boost investment flows, heard at a recent conference.

Dang Tran Hai Dang, deputy director of VietinBank Securities Company’s research centre, told participants that retail turnover last year was worth US$102 billion, and it is expected to rise to US$179 billion by 2020.

Wet markets dominate the retail scene with a 75% share, while supermarkets, department stores and other modern retail outlets account for 25%.

But Đăng said this is expected to increase to 45% by 2020.

“The 25% rate is low compared to 33% in the Philippines, 60% in Malaysia, 34% in Thailand and 90% in Singapore.”

Meanwhile, the Vietnamese Government is opening the doors with policies to loosen foreign ownership regulations pertaining to both listed and unlisted firms and the conclusion of the TPP and other free trade deals.

vietnam sees growth opportunity in retail sector hinh 0

Foreign retailers have been buying local companies, finding it the quickest way to enter the market. In 2014 mergers and acquisitions were worth US$4.74 billion, and the figure increased to US$5.2 billion last year.

M&A deals in the retail sector accounted for US$899 million and US$254 million during the two years.

They included the purchase of 49% in electronics chain Nguyễn Kim by Thai group Power Buy for US$100 million.

Japan’s Aeon Co bought 49% of Citimart for US$9.8 million and 30% of Fivimart for US$4 million.

Huynh Phuoc Cuong, director of retail sector at market research firm GfK Vietnam, said the technology products retail marketachieved 22% growth last year.

Mobile phones saw the highest growth of over 29%, followed by electrical cooling items, which achieved 23.6%.

Cường attributed this to the economic revival, higher average incomes and the increased demand for electrical, electronic home appliances and technology devices like mobile phones and tablets.

The Ho Chi Minh City-listed Mobile World Group is the leader in mobile phone sales with a market share of 30%, followed by FPT with 10%.

Nguyen Kim has a 12% share of the electrical and electronic appliances market with Điện Máy Xanh of Mobile World Group ranking second with 8%.

The conference was organised by the Ho Chi Minh Stock Exchange and VietinBank Securities Company.

Consumer spending slows down in March

Consumer spending slowed down this month after posting a rise in February which also saw the Tet (Lunar New Year).

According to the General Statistics Office (GSO), purchasing power in March decreased by 3.4% against the previous month.

Vu Manh Ha, the GSO’s economist, said that the slowdown in spending was because consumers had tightened their belts after splurging for the traditional holiday.

Statistics revealed that purchasing power decreased across all sectors. The retail sale of goods and services, which accounted for three thirds of the total retail sale, fell by 1.9% in February while accommodation, restaurants and catering services were down by 13.1%, and travelling services were down 12%.

The weak consumer spending in March dragged the growth rate down in purchasing power in the first quarter of this year.

GSO said that the total retail sale of goods and services reached more than VND859.5 trillion (US$39.9 billion) in the first three months of this year, representing a rise of 9.1% against the same period last year.

If inflation was excluded, the growth rate was 7.9%, lower than the 9.2% growth rate registered in the first quarter of 2015.

According to Ha, consumer spending slowing down in March was partly because of a light increase in prices. The GSO’s statistics revealed last week that the consumer price index (CPI) rose by 1.25% in the first quarter of this year compared to last year’s same period.

Haiphong, Hai Duong and Ho Chi Minh City were among provinces and cities that registered double-digit growth in purchasing power.

The total retail sales of goods and services last year touched VND3.243 trillion, up 9.5% against 2014.

VNS

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