Can ‘underwear giant’ squeeze into the retail market?

Many investors are entering the retail market, including Son Kim, an underwear manufacturer, to open convenience store chains, competing against big chains like 7-Eleven, Vinmart and Circle K.

Yonhap has reported that the republic of Korean GS Retail has signed a contract with Vietnamese Son Kim Group to set up a joint venture to develop the GS25 chain in Vietnam, expected to include 2,500 shops in the next 10 years. The first shop will open this year in HCM City.

The press release of the Korean retail giant said it received invitations from many countries, including China and South East Asia, for franchise contracts. However, it came to a conclusion that Vietnam has the greatest potential.

Business Korea quoted a source from GS Retail as saying that GS Retail chose Vietnam for its first GS25 shop overseas because the economy is developing rapidly and 57% of population are aged 35 and below.

A.T. Kearney has put Vietnam in the sixth position in the world in terms of the retail market development index, a five notch upgrade compared with last year’s ranking. 

The US consultancy firm’s report also pointed out that convenience stores and mini supermarkets are two very hot segments in Vietnam.

Under the agreement, GS Retail will provide the joint venture with the right to use the trademark and the experience to manage and operate a convenience store chain. 

In return, GS-Son Kim, the joint venture, will pay royalties and the profit suitable to a 30% stake ownership.

Many RoK retailers have come to Vietnam to seek opportunities, including Lotte and E-mart. However, GS25 is the first convenience store chain from the Republic of Korea (ROK).

RoK press have commented that more convenience store chains were looking for new opportunities as the domestic market has become saturated.

Son Kim, the Vietnamese partner, has been in the retail market for a long time, but opening convenience stores is a new step for the group.

However, analysts say it has advantages in retail and financial capability. GS Retail is leading the distribution sector in the RoK, while Son Kim is a large conglomerate in retail, real estate development and media.