The “fantastic four” Japanese retailers in Vietnam

Japanese retailers are on the offensive.

 Sumitomo's FujiMart - a breath of fresh air

Vietnamese people are “mad” for supermarkets. Supermarkets are popping up everywhere, fed by the changing buying habits of Vietnamese consumers. Instead of buying everything one by one at traditional markets or grocery stores, lots of consumers take to the supermarket where they can find their needs at a single place.

Q&Me Vietnam Market Research surveyed about 400 people aged 18-39 over the country, showing that about 37 per cent of people visit the supermarket once or twice a week, while about 28 per cent only go once or twice a month. Consumers often pick quality over price and other considerations.

Understanding consumer habits in Vietnam, with 100 years of experience in the field of investment and trade and 50 years of experience in retail, Sumitomo followed the footsteps of its “countrymen,” all the way to the Vietnamese retail market.

According to Keisuke Hitotsumatsu, general director of FujiMart Vietnam, FujiMart is rich in seasonal commodities and impresses the customers with its selection of goods, display, storage, and service.

“No matter how life changes, most consumers still enjoy shopping when they can see, touch, or even taste and immerse in the bustling atmosphere of shopping places” said Keisuke Hitotsumatsu.

Sumitomo assumes that with nearly 95 million people, the Vietnamese consumer market will increase rapidly.

The traditional retail market in Vietnam is still largely made up by small independent stores, but modern retail markets such as supermarkets and convenience stores are capturing a growing piece of the pie in big cities like Hanoi, Ho Chi Minh City, and Danang.

BRG Group, holding the Hapro chain, is not the partner Sumitomo wants to co-operate with.

In June 2017, through ACA Investments, Japan’s leading fund management company, Sumitomo completed the purchase of a 20 per cent stake in Bibo Mart JSC. Hiroyuki Ono, director of ACA Investments, together with the owner of Bibo Mart, plans to raise this chain to 500 stores, earning at least $300 million in 2019 and increasing enterprise value to $500 million.

In addition, ACA Investments has invested in four firms in Vietnam, namely Viet Thanh Technology Corporation (March 2014), Cat Dong Trading and Service JSC (March 2015), BBM Investment JSC (August 2016), and Son Kim Land Corporation (January 2017).

Recently, Sumitomo spent $41.1 million on buying 22 per cent stake of Simple Mart Retail Co. (Taiwan). This investment will help Simple Mart increase from more than 600 stores to 1,200 stores by 2023.

Previously, Sumitomo also shook hands with Thailand’s top consumer goods manufacturer Saha Group of Boonsithi Chokwatana to establish a teleshopping firm under the name Shop Global.

After this deal, Saha Group and Sumitomo entered the Vietnamese real estate market together by the US$4 billion smart city project in Dong Anh, Hanoi, in league with BRG.

Saha Group and Sumitomo want to increase their competitive position in Asia, capitalising its connection to the rest of the world through the ASEAN Economic Community (AEC) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that will take effect in January 2019.

Japanese style

Many Japanese brands are present in the Vietnamese retail market, such as AEON, Takashimaya, 7-Eleven, and now Sumitomo with FujiMart.

AEON was the first to enter. Recently, this retailer had to abandon the Fivimart supermarket chain to Vietnamese retailer Vingroup and also broke up with Trung Nguyen with whom they jointly bought the franchising rights to Ministop. However, in the commercial centre segment, AEON Mall has turned a profit only after three years of operation, while many competitors are suffering big losses.

Along with the expansion of the shopping centre system, AEON Vietnam’s business results have also improved year by year.

In 2016, AEON Vietnam’s revenue surged by VND3.88 trillion ($168.8 million), tripling over 2014.

In 2017, AEON Vietnam continued on this momentum, with revenue increasing to VND5.13 trillion ($223.3 million) up 32 per cent, pre-tax profit hit VND234 billion ($10.17 million).

Besides the four AEON Malls in operation, the Japanese corporation will open two more in Haiphong and Hadong (Hanoi). According to its plan, AEON will open 20 hypermarkets in Vietnam by 2025.

Meanwhile, Japanese retailer Takashimaya decided to conquer the Vietnamese market by setting up its first shopping mall in Ho Chi Minh City with the capital of over $25 million.

However, the mall’s prices are considered too expensive by consumers. The firm is planning to increase sales by expanding daily family services and expects to turn a profit by 2022.

Shigeru Kimoto, Takashimaya’s chairman, affirmed that retail is still a potential business line and the corporation will still expand in Southeast Asia in spite of challenges.

Latecomer 7-Eleven set foot into the Vietnamese market nearly two years ago and still mainly operates in Ho Chi Minh City, focusing on districts 1, 3, and Binh Thanh. In particular, 7-Eleven does not expand through the franchise form, but will open and operate stores by itself.

7-Eleven aims to open 100 stores in three years and 1,000 stores in the next 10 years. Vu Thanh Tu, director of Seven System Vietnam (7-Eleven franchise’s partner), acknowledged that it is difficult to find satisfactory locations. 7-Eleven wants to find a place that is large and crowded enough.

Thereby, the Vietnamese retail scene has four large-scale Japanese contenders, with each one operating with their own strategy, but sharing one trait: they are all very quick to catch up with shifting consumer habits.

Most Vietnamese consumers do not like to eat frozen food and always flock to supermarkets and commercial centres for discounts.

“Price is an important factor for Southeast Asian consumers, who like the feeling of hunting down discounted products. Supermarkets here distribute flyers and coupons every day and people even have the habit of shopping in many different locations to take advantage of these discounts,” said an expert from Nielsen Vietnam.

In addition, traditional markets and retail stores in Vietnam have a terrific market coverage and their products are no different from those offered by commercial centres, supermarket chains, and large utility stores.