MWG plans to expand retail market

Its employee numbers also increased, from 15,800 in 2015 to 26,200 in 2016. 

With new outlets opening at lightning speed, MWG has seen impressive growth in the retail market in terms of mobile phones and consumer electronics, but the question is how such growth can be maintained in the face of an increasingly competitive retail market.

Growth drivers 

Over the last five years, MWG’s revenue and after-tax profit have risen by an average of 43.87% and 65.7% annually. 

For many years, the mobile phone chain thegioididong.com, one of MWG’s three chains, has been a key driver of its growth, together with its online business. 

The chain accounts for approximately 70% of sales, and in 2015 grew 56% year-on-year, with revenue of VND20.7 trillion (US$928.2 million), and in 2016 by 49% to VND30.9 trillion (US$1.38 billion). 

The mobile phone retail market is forecast to continue growing and is an opportunity for MWG’s chain to increase its market share, which rose from 21% in 2013 to 30% in 2015 and 38% as at February 2017. 

The increase is based on its new outlets and growth in revenue at existing outlets. The number of new thegioidiong.com outlets was 220 in 2015 and increased to 387 in 2016.

The success of thegioididong.com is due to it entering the market earlier than its rivals, according to local industry insiders, together with its modern management methods and large-scale management system. 

Meanwhile, Dien may Xanh, MWG’s consumer electronics chain, which was launched later, is viewed as the company’s strategy to ease growth pressure following the company listing on the stock market as well as the low margins in the retail market and the mobile phone market approaching saturation point. 

According to market researchers GfK, the electronics market is estimated to reach VND97 trillion (US$4.3 billion) in value by 2020, for annual growth of 11.3% in the 2016-2020 period. MWG Chairman Nguyen Duc Tai defined the chain as being the major contributor to the company’s growth in 2016-2018. As such, the number of outlets has expanded from 69 in 2015 to 256 in 2016. 

Dien may Xanh’s revenue in 2015 was VND4.5 trillion (US$201.8 million), which increased three-fold to VND13.7 trillion (US$614.3 million) in 2016. 

In January 2017, its revenue increased 222% year-on-year and has grown 200% since being launched. MWG continues to apply strategies introduced at thegioididong.com to Dien may Xanh, such as affordable prices and professional services. 

At the same time, with such a large scale, the chain can provide diverse products to consumers. 

The success of the consumer electronics chain is due to its advantages and the experience of thegioididong.com, as well as its expansion in potential suburban areas, according to the latest research from MB Securities. 

Number of chain stores

To realize the plan, Mr. Tai and senior leaders at the company have expressed their determination to build the model into “the No.1 choice in consumers’ minds”.

It spent hundreds of billions of Vietnam dong on branding for Dien may Xanh in late 2016 and plans to double its spending this year. 

The chain how holds a market share of 16-17% in consumer electronics and expectations are for it reach 30% by the end of this year. 

Mr. Tai’s ambitions don’t stop at developing the two existing chains. 

While the market value from the two chains is about US$6 billion, the grocery market value is ten-times higher, or US$60 billion. 

To pursue its growth goal, the company will continue to exploit new fields and has recently launched a pilot project in the consumer goods market - Bach Hoa Xanh. 

Investing in the new field is a challenge for the retailer, as the chain enters a crowded consumer goods market boasting major local names such as Vinmart, Co.op Mart, and Co.op Food and foreign names such as Circle K, 7-Eleven and Family Mart.  

Bach Hoa Xanh targets Vietnamese housewives who prefer to save time on shopping by visiting chain stores. 

The chain is not convenience stores but traditional stores with professional services. “Our rival will be traditional markets,” said CEO Mr. Tran Kinh Doanh. 

Its turnover now stands at VND1 billion (US$44,700) per month at each outlet but it’s yet to contribute to MWG’s profits. 

“Business results for 2017 will prove how effective the model is,” said Mr. Tai. “If we succeed we will launch a range of outlets nationwide by 2018.”

Forty-eight outlets of the three chains were opened in Ho Chi Minh City last year and 350 in Binh Tan and Tan Phu districts will open this year. 

“The chain is expected to be a major contributor to growth by 2019-2025,” Mr. Tai said. “Bach Hoa Xanh will be among the top three players in the consumer goods market.” 

US$10 billion goal 

As at February, the company had 1,327 retail outlets in total across the country, including 970 thegioididong.com, 330 Dien may Xanh, and 54 Bach Hoa Xanh outlets. 

It targets VND63.3 trillion (US$2.83 billion) in revenue and VND2.2 trillion (US$97 million) in profit for 2017, representing increases of 38.7% and 39.5%, respectively, compared to 2016. 

Mr. Tai has also announced a revenue goal of US$10 billion by 2020, which will be a difficult target to reach according to Mr. Chris Freund, CEO of Mekong Capital, a major shareholder in MWG. 

“I don’t think the US$10 billion goal is possible, because that means the company must increase its scale ten-fold in five years,” he said. 

Any company reaching a growth peak will have find new models and opportunities if it wishes to keep growing. 

MWG has recognized this and is preparing to meet the challenge. Its number of new mobile phone outlets fell last year while the number of the new consumer electronics outlets increased sharply. 

Consumer electronics retail market share

CEO Doanh is confident about the revenue goal, saying that “with the strength of thegioididong.com and the outstanding growth of Dien May Xanh, it won’t be hard for us to gain 50% market share in the mobile phone and consumer electronics market in three to five years.” 

Bach Hoa Xanh only needs to account for 10% of the US$60-billion market, which that will help the company reach its US$10 billion goal. 

At the same time, it also focus on investing in Bach Hoa Xanh, with a goal of opening 1,000 outlets by 2025, which would constitute a major success. 

“Bach Hoa Xanh will be even more impressive than thegioididong.com,” according to a 2016 report from KIS Vietnam Securities Corporation. 

In early March it opened its first outlet in Cambodia, called BigPhone.com. Only 100 outlets will be opened this year so that the customer experience can be enhanced before focusing on expansion. 

Cambodia is expected to contribute to the growth of its mobile phone chain, as the Vietnamese market is at saturation point. 

Meanwhile, its online business accounts for 5% of total retail turnover and is to grow to 20% in the future. “vuivui.com will earn higher revenue than thegioididong.com and Dien may Xanh over the next five years,” Mr. Doanh said. 

“The company plans to become the No.1 online retailer in Ho Chi Minh City in 2017 and in Vietnam by 2020.”

As the main driver of growth is based on an increase in retail outlets at the moment and in the future, the retailer clearly doesn’t intend to cease opening new outlets and will continue to expand to reach its goals.