Vietnam’s retail market: global giants unexpectedly fall short

Vietnamese have turned the tables to become dominant in the retail market, while many foreign giants have had to leave.

Lotte decided to shut down Lotte Mart Dong Da on July 1 in a move which is part of an adjusted development strategy on expanding its network nationwide.

Inaugurated in March 2014, Lotte Mart Dong Da was the largest center with more than 20,000 square meters of retail premises floor, which was seven times larger than the other two centers in Cau Giay and Ba Dinh districts.

The center in late 2018 upgraded the cashier area interior, and the electricity, water supply and lighting systems.

Lotte Mart belongs to Korean Lotte Group. In 2008, Lotte Mart opened its first supermarket in in Vietnam. In 2015, Lotte Mart announced a plan to open 60 shopping malls nationwide by 2020. However, the figure had reached 14 only as of July 2021, after Lotte Mart Dong Da shut down.

Meanwhile, E-Mart, another Korean retailer, has left Vietnam. According to Korea Time, E-Mart’s board of directors decided to sell 100% of E-Mart Vietnam’s shares to Thaco, a 100% Vietnamese owned automobile manufacturer after many years of facing obstacles in expanding its operation in Vietnam.

With the deal, E-Mart Vietnam will be run under the mode of franchising, i.e. it will be managed by Thaco which pays franchising fee to E-Mart.

Prior to that, Auchan officially announced the shutdown of its 15 supermarkets in Vietnam. The French retailer opened first Auchan supermarket in 2015 and once planned to invest $500 million in Vietnam to develop its chain of 300 supermarkets and stores in the country. However, only 18 supermarkets opened in Hanoi, HCMC and Tay Ninh.

Auchan’s business performance in Vietnam was unsatisfactory despite big investments. It had revenue of 45 million euros in 2018 and incurred losses.

The biggest affair was the sale of Metro Cash & Carry chain with 19 Metro supermarkets to TCC Group from Thailand after many consecutive years of losses.

In 2016, Casino also transferred Big C chain to Central Group from Thailand.

Parkson, the Malaysian retail group, which came to Vietnam in 2005 and developed a large shopping chain in HCM City, Hanoi and Hai Phong, has closed many stores since 2015.

In the online retail market segment, the year 2019 witnessed the departure of Robins.vn (Central Group) and Lotte.vn (Lotte). In April 2016, Central Group took over Zalora Vietnam through Nguyen Kim home appliance distribution chain, and Zalora Thailand as well. The stiff competition among online sale websites in Vietnam forced Robins to give up the game within one year.

Vietnam’s retail market has been compared to a multi-billion dollar cake that attracted foreign retailers. The reports of market analysis firms all listed Vietnam among the most potential markets in Asia with an estimated growth rate of 37% per annum and the value of US$180 billion by 2020.

However, not all giants have succeeded in Vietnam. Walmart had to leave the Republic of Korea, while Family Mart, the Japanese style convenience store chain, had to leave Thailand.

Success

Matthew Powell from Savills Hanoi said foreign investors are having certain challenges when investing in Vietnam’s retail market. In Vietnam, traditional retail prevails.

Nielsen reported that traditional retail, including groceries and traditional markets, still hold 74% of the market share and have a growth rate of 1% per annum, while modern retail has 26% of market share and 12% per annum.

Though big retail players in the world have been present in Vietnam, the market is still dominated by domestic brands such as Vingroup, Masan and MWG.

Because of weak competitiveness, some foreign retailers have left the market. Meanwhile, some Vietnamese retailers successfully took full advantage of the departure to expand their chains by taking over the foreign retailers.

Bod Hayward from KPMG commented that Vietnam is in the good period of the retail industry and will continue to develop and prosper. However, enterprises need to compete well. New players will appear and Chinese enterprises won’t miss the Vietnamese market. In order to win rivals, enterprises need to master technology and online shopping channels.

Commenting about the solutions for international retailers, Powell said strictly managing resources and maintaining profit margins will help retail businesses achieve more success in the Vietnamese market.

The factors that can help businesses make the most of opportunities in the retail market include relationships and scale, commitments on attractive value, solid business models, branding, understanding of the retail market, unceasing innovation, and development on omni-channel platforms.

Many retailers have left and others will come as Vietnam remains an attractive market. The GDP per capita is at nearly US$3,000 and Vietnam’s middle class now accounts for 13% of total population, according to the World Bank, (the figure is expected to reach 26% by 2026). This will create optimistic changes in total domestic consumer spending. 

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