Trend of retail mergers growing

Experts told Vietnamnews commenting on this emerging trend.

The M&A trend is gaining popularity because foreign retailers provide the benefit of experience in management, operations, expansion and development of a distribution system, thus reducing the pressure of competition, these experts said.

Japanese retailer Aeon has bought 49% of Citimart’s shares and 30% of Fivimart’s shares to expand its share in the local retail market. Meanwhile, Thai businesses hold two large retail chains, BigC and Metro, in Vietnam.

Vietnam is an attractive potential market for large global retailers, said Tran Quoc Khanh, deputy minister of industry and trade, noting that opportunities always entail challenges, especially for domestic enterprises that must reform themselves to survive in the market, reported vietnamplus.vn.

They must accept M&As since price competition is not the optimal solution, he said. They should focus on improving the quality of their product, their governance and their reputation, he added.

A representative of Aeon Vietnam said Vietnam’s enterprises must reform themselves, focus on their target customer groups and change the design of their goods accordingly and offer better customer care to improve their competitiveness.

Aeon requires its Vietnamese suppliers to deliver products that meet Vietnamese quality standards and ensure the safety of customers, the representative said.

To develop local retailers and promote local production, Dinh Thi My Loan, chairwoman of the Association of Vietnam’s Retailers, said local retailers should adopt comprehensive reforms and should especially assemble into groups to create strong business practices to compete with foreign retailers.

However, local retailers expect the State to provide more specific and efficient support policies, she said.

Now, the Ministry of Industry and Trade is developing a national strategy for the local retail industry.

“Growth opportunities are still available for all retailers in the country. What matters is their ability to capture and capitalise on these opportunities,” said Nguyen Ngoc Tram, Head of Research, JLL Vietnam, a foreign property service provider.

According to the Ministry of Industry and Trade’s development plan for the supermarket and shopping centre network leading into 2020 with a vision towards 2030, the proportion of retail sales handled by the network accounted for only 30% of all retail sales in 2015, and this will increase to 45% by 2020, she said.

“Currently, traditional retail channels still account for a large proportion of the market share on a country level, especially in areas other than Hanoi and HCM City. Therefore, I believe that retailers still have many opportunities to improve their competitiveness,” Tram said.

Nevertheless, domestic retailers should recognise their strengths and weaknesses to design business strategies that are best suited to the consumer market in Vietnam, she said. The key advantage of domestic retailers is their knowledge of regional culture and consumption habits of the Vietnamese and it should be fully utilised in order to provide the most suitable products.