Foreign retailers vie for the lion’s share in Vietnam

(VOV) - Retail giants from Japan, Thailand and the RoK find the Vietnamese marketplace highly lucrative and are stepping up efforts to grow their establishments and put the squeeze on domestic companies.

The RoK: concerning the market

Retail giant Lotte is opening its impressive Lotte Centre Hanoi – with its five star hotel, a six floor department store, serviced residences, Evian Spa, Lotte Mart, restaurants and observation deck in early September.

The beautiful, domineering skyscraper in many ways reflects the company’s business strategy of becoming the commanding retailer in Vietnam. Recently, Lotte announced it has embarked on an ambitious expansion plan to open 60 supermarkets throughout the country by 2020.

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In a recent high profile purchase the retailer has acquired a 20,000sq.m commercial centre at Pico Plaza in Dong Da precinct in Hanoi to add to its real estate portfolio.

Hong Won Sik, Lotte Mart Vietnam Director General said that the company is bullish on the Vietnamese market with its 90 million strong consumer market with its increasing per capita income.

“Our company sees tremendous opportunity for growth in Vietnam and we expect to have tremendous growth in the coming time,” Sik said.

Since first coming to Vietnam in 2008, Lotte Mart has opened two supermarkets in Ho Chi Minh City, and one each in Dong Nai, Danang, Binh Duong, Phan Thiet and Hanoi.

Japan: penetrating the market silently

Japan’s leading retail group Aeon is currently constructing a commercial complex in Sai Dong, Long Bien district, Hanoi on an area spanning 1.1 million sq.m. The centre comprises fashionably designed hotels, restaurants, entertainment sites, offices and a sports centre.

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Earlier, in January 2014, Aeon inaugurated the company’s first shopping mall in Vietnam – Aeon Tan Phu Celadon – in Ho Chi Minh City. The mall is the third of Aeon in the world, following the launch of similar ones in Malaysia and China.

In 2008, Aeon Credit Service was the first Japanese company to provide hire-purchase services, which allow the consumer to pay on an installment basis. Since opening its first Ministop in 2011, the company has opened 17 similar shops in Vietnam.

Aeon Japan’s plans are afoot to build around 20 large-scale shopping centres across in Vietnam by 2020.

Fierce competition

The leading retailers are transforming the domestic market, making it more robust, energetic and fiercely competitive. Competition for market turf and talk of hostile takeovers of smaller retailers is becoming increasingly commonplace.

The competition places a lot of pressure on domestic smaller retailers, who are at a competitive disadvantage compared to their more experienced and larger rivals with plenty of capital to heavily invest in new facilities, machinery and equipment, and human resources.

Dinh Thi My Loan, Chairwoman of the Vietnam Retailers’ Association, says retail sales skills are an inherent weakness of Vietnamese companies, not to mention weak management capacity and shortage of logistics, warehouses and shopping sites.

“In addition, some shop assistants do not share the ‘serve your customer’ view in the same vein as foreign businesses, which puts them at a distinct disadvantage,” Loan says.

Nguyen Tien Dung, Director of Coop-Mart in central and northern regions, points to the fact that coordination among Vietnamese businesses is also unsound and a severe problem that needs to be adequately addressed in order for domestic retailers to effectively compete.

“There are no special business models for Vietnamese businesses to emulate and it will be difficult for them to develop sustainably until businesses can align themselves together in some coordinated fashion,” he says.

A representative from Fivimart Vu Thi Hau says poor human resources are one of the competitive disadvantages for domestic retailers, and inadequately skilled management resulted in Fivimart in Ho Chi Minh City having to temporally close.

Last but not least, domestic supermarkets are spending too much time seeking ways to compete with each other, when they should be forming alliances among themselves and pooling investment capital to more effectively compete with foreign rivals.