The Attractiveness of Vietnam Retail Market

With the attractiveness that has been affirmed in the international retail market, nowadays more and more foreign investors decided to set up company in Vietnam.

With the scale of 110 billion USD by 2016 and forecasted to increase to 180 billion USD by 2020, Vietnam is considered one of the 30 most attractive retail markets in the world. Therefore, in recent years, large foreign corporations such as Lotte, Central, Aeon, Auchan… have stepped up the penetration and expansion of retail market in Vietnam, showing the potential as well as the race to win market share of the Vietnam retail market.

As predicted by the Trade Research Institute (Ministry of Industry and Trade), in the period 2016 – 2020, Vietnam’s retail growth rate will reach 11.9% per year, the market size of about 179 billion USD by 2020, from 102 billion USD in 2015, in which modern retail will account for more than 45% compared with the rate of 25% of 2015. By 2020, as planned, the country will have about 1,200 – 1,500 supermarkets, 180 trade centers, 157 shopping centers.

With commitments when joining the WTO, nowadays, Vietnam has fully opened the retail market. The attractiveness of Vietnam market is shown in a market with population of over 93 million people, in which nearly 40% are urban residents with rising per capita income and have reached over 2,000 USD per person.

Market research by Nielsen also shows that the middle class in Vietnam will double by 2020, from 12 million people in 2014 to 33 million people in 2020. The increased spending, coupled with consumers are willing to pay for high quality service and product. The structure of population and family, changing shopping habits are also facilitating the development of the retail market.

With such attractive market, foreign retailers have constantly landed in Vietnam. From Metro Cash & Carry, to Big C, Lotte and now Aeon, Auchan, Robinsons, Emart… also do not miss the opportunity to massively invest in Vietnam. In addition to direct investment, foreign retailers also strengthen joint ventures such as Saigon Co.op with FairPrice (Singapore), CitiMart and Fivimart with Aeon (Japan), or through M&A deals such as Alibaba ( buy Lazada), Central Group (buy Big C, Nguyen Kim), BJC (buy MetroVietNam), Lotte (buy Diamond Plaza), Nojima Corporation (buy Tran Anh)…

With the increasing participation of large retailers in the world in Vietnam, the competitive pressure in the retail sector is increasing for Vietnamese businesses. When both Big C and Metro are belonging to the Thai people, it is clear that Vietnam retail businesses are experiencing both financial and management weaknesses. However, proficiency in local culture and proximity to Vietnamese consumers is advantageous for local retailers. Therefore, the competition of one side is the retail businesses coming from Thailand, Korea, Japan and the other is mainly Saigon Co.op with Co.opMart supermarket chains, Vingroup with Vinmart chain is predicted to be stressful and prolonged.

In addition, the organic food supply chains like Bac Tom, Sagrifood… are also effectively exploiting the demand for food of urban people. The typical characteristics of domestic retailers are high proportion of Vietnamese high-quality goods, which have many characteristics in line with Vietnamese shopping culture.

However, the choice of consumers is the decisive factor for the success or failure of retailers. The issue of quality and price of goods is the number one priority of consumers when shopping. Therefore, besides improving management and raising capital, Vietnamese businesses need to maintain good quality products and competitive selling prices in order to survive and compete with foreign retailers right in the domestic market.

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