Vietnam’s leading mobile retailer The Gioi Di Dong (MWG) shutters six stores in month

The company announced its first-ever store discontinuation in January, before shutting down six other outlets in April alone, according to Jan-Apr business results published on its official website.

The report shows that The Gioi Di Dong’s revenue in the first four months of 2018 reached VND29,700 billion (US$1.31 billion), up 43 percent year on year and fulfilling 34 percent of the full-year target.

In the same period, the mobile retailer posted a total profit of VND1,044 billion ($45.94 million), up 44 percent from a year earlier, making up 40 percent of its target.

Following the store closing spree, The Gioi Di Dong’s revenue in April dropped five percent from a year earlier to VND2,883 billion ($126.85 million), according to the report.

Founded in 2004, The Gioi Di Dong started as a small company with three mobile phone and electronics stores, now holding a network of 1,100 outlets across Vietnam as of the end of 2017, according to the company’s website.

Throughout 2017, the number of The Gioi Di Dong mobile stores was on the rise every month, with some months even witnessing two stores opened every day.

In 2010, the firm separated its electronics business into a new entity, called dienmay.com, and renamed it Dien May Xanh (Blue Electronics) in May 2015. The chain now has nearly 700 outlets countrywide.

April sales of the Dien May Xanh topped VND3,776 billion ($166.14 million), up 62 percent over the same period. Dien May Xanh is currently the main source of the corporation’s revenue.

Despite that, The Gioi Di Dong revealed at the latest shareholder meeting on March 16 that the company would not continue to expand the network of its mobile and electronics stores, but to increase sales of the existing shops.

“The goal is to increase sales of both sectors by five to ten percent each,” one company leader said.

Analysis reports by two of the world's leading market research institutes AC Nielsen and GFK also indicate that the market for these two sectors in Vietnam has reached the point of saturation.

Grocery store chain to blame

In late December 2017, The Gioi Di Dong dipped its toe into the pharmaceuticals retail sector by acquiring the Phuc An Khang pharmacy chain and rebuilding the brand under the new name of An Khang.

Before this expansion, the company also threw its hat into yet another ring, grocery retailing, through the opening of the Bach Hoa Xanh (Green Department Store) fresh food chain in early 2017.

The blame has been put on Bach Hoa Xanh for the recent business results of The Gioi Di Dong.

A search on the company’s website at the time of writing showed that the company had opened 372 Bach Hoa Xanh venues in 16 districts out of 24 districts in Ho Chi Minh City.

Despite the rapid outlet expansion, Bach Hoa Xanh modestly contributed only three percent to the corporation’s total revenue in the first four months of 2018, with its leaders admitting that the chain is still struggling in the "trial and error" phase.

The Gioi Di Dong said that its grocery chain incurred an EBITDA (earnings before interest, taxes, depreciation and amortization) deficit of about VND60 billion ($2.64 million), prompting the company to close three Bach Hoa Xanh outlets and cancel the opening of seven others.

In the wake of consecutive losses, The Gioi Di Dong now looks to open only 500 new locations by this year-end, instead of the previous goal of 1,000 stores, according to chairman Nguyen Duc Tai.

This loss-making food chain is the main reason that sent The Gioi Di Dong stock prices (HOSE: MWG) down by more than 20 percent since the beginning of the year.

An expert in the retail industry assessed that The Gioi Di Dong can only compete with other grocery stores in management software technology, while having no experience in other important factors such as supply chain and customer management.

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