Tuesday , April 23 2019
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Investors race in opening convenient stores

Foreign investors are racing to bring convenience stores to Vietnam’s nearly untapped market and battling to modernize the chains in a move to find a firm foothold in the potential outlet.

A GS25 store in Vietname
A GS25 store in Vietnam

Mushrooming stores

Vietnam has continuously welcomed new players joining its retail market in the first half of this year. One of the newcomers heralding a major foray into the Southeast Asian nation’s retail market is the convenience store GS25, which arrived in downtown Ho Chi Minh City in the first quarter.

GS Retail, the operator of South Korea’s top convenience store chain, plans to have 50 of the stores in Vietnam by the end of this year and expand its network here to 2,500 locations within a decade. In its home market, GS25 boasts 12,000 stores.

Together with newcomers, existing retail chains, such as Lotte, B’s Mart, 7-Elevent, Aeon, Ministop, Family, Circle K and Shop & Go are also racing to open many new stores in the market.

After opening its first outlet in Ho Chi Minh City, 7-Eleven, for example, has rolled out about two locations per month in Vietnam, with plans for 100 within the next three years.

Up to now, Japan’s Family Mart has 130 stores in Vietnam, and it plans to open another 700 stores by 2020. The same move is also seen with South Korea’s Lotte Mart, which plans to open 60 stores in Vietnam by 2020.

Together with foreign players, domestic retailers have also joined in the market with ambitious plans. Among them, the country’s biggest operator of gas stations, Vietnam National Petroleum Group, plans to add mini-marts at fillings stations across the country and property developer Vingroup JSC says it will add 4,000 mini-grocery stores by 2020.

Large room to grow

According to statistics from the Association of Vietnamese Retailers (AVR), modern shopping demand of Vietnamese people currently accounts for only 20-25 per cent of their total consumer spending. The figure is very low if comparing with other regional countries, such as the Phillipinnes (33 percent), Thailand (34 per cent), China (51 percent), Malaysia (60 percent) and Singapore (90 percent).

After gaining an annual steady growth rate of 10 percent, the Vietnamese retail market is continuing an upward trend. The market last year grew by 10.9 percent against the previous year to nearly US$130 billion. The rising rate was even more impressive in the first half of this year with a year-on-year increase of 11.3 percent to US$69.45 billion, according to the General Statistics Office.

Thus, the retail market in Vietnam has still a lot of potential and its value is projected to reach US$190 billion by 2020.

Mom-and-pop retailers and small chains have long dominated Vietnam’s retail landscape, and continue to do so today. According to Euromonitor International, modern grocery retailers — supermarkets, convenience stores and the like — make up only 5.4 percent of Vietnamese food sellers this year, the lowest figure in Southeast Asia.

But as incomes rise, more Vietnamese are willing to pay higher prices for higher-quality foods at modern stores. Vietnam’s economy is growing around 7 percent annually, and per capita gross domestic product reached US$2,385 in 2017. In Ho Chi Minh City, the figure is over US$5,000.

This spells a major opportunity for foreign chains, as Vietnam only has around 1,000 supermarkets and 2,000 convenience stores at present — one-20th and one-30th of the numbers in Japan.

Vietnam is in need of several thousand modern retail stores, according to Nguyen Duc Tai, chairman and CEO of MobileWorld. “If we build the stores, we’re bound to capture a certain level of market share.”