Vietnamese retailers’ circular firing squad
Vietnamese retailers’ circular firing squad
While foreign retailers have been making big leaps to expand their businesses in Vietnam, domestic retailers have been busy playing tricks on each other to scramble for others’ clients.
Foreign players gear up
Aeon is starting the construction of Aeon Mall Him Lam, a shopping mall/exhibition complex in Long Bien District in Hanoi this April. The Japanese retail group may be thinking that now is the right time to kick off the project, in order to be ready when the Vietnamese market opens fully to foreigners in 2015.
Observers have noted that Aeon, like many other retailers, are sprinting to the Vietnamese market, where they can see great development potential.
In general, there should be one big shopping mall for every 100,000 people, one supermarket for every 10,000 people, and 1-2 convenience stores for every 1,000 people. These ratios have not yet been reached in Vietnam, which means that retailers still have a lot of opportunities in the market.
In addition to Metro Cash & Carry Vietnam, and Big C, which have been present in Vietnam for the last many years, the country has welcomed many “rookies” such as Lotte from South Korea, Aeon from Japan and Berli Jucket from Thailand.
Lotte plans to develop 60 supermarkets and shopping malls in Vietnam. Aeon, after inaugurating the first shopping mall in HCM City, capitalized at $100 million, is preparing to set up a second one in Binh Duong Province. It plans to have 20 shopping malls in Vietnam by 2020.
In April 2013, the French Auchan announced it would pour more than $500 million into Vietnam.
Domestic retailers busy playing dirty on each other
Vietnamese supermarket chains, including Saigon Co-op (owned by Saigon Co-op Mart), Hapromat (Hanoi Trade Corporation) and Fivimart (Nhat Nam JSC), have long dominated the market. However, analysts warn that the situation may well change in the future. The biggest disadvantages of domestic retailers are their lack of experience and modest financial capabilities.
While foreign retail groups take firm steps with professional marketing campaigns to attract customers, Vietnamese seem to be stuck in the old ways of doing things. Analysts point out that Vietnamese retailers, which are already at a disadvantage with respect to foreign ones, do not give enough consideration to cooperating with each other to improve their competitiveness.
In fact, four big Vietnamese retail groups – namely Hapro, Satra, Phu Thai and Saigon Co-op – once drew up a cooperation plan under which they would join forces to create a brand strong enough to compete with foreign ones. However, the plan has not yet come to fruition.
A report released recently by Quang Minh Investment and Development Consultancy JSC disclosed that an unhealthy competition exists in the Vietnamese retail market. 63 percent of businesses were found to be selling goods below cost to attract clients; 38 percent attempt to recruit away key personnel of their rivals; 25 percent collude with manufacturers/suppliers to hamper rivals.
The report also pointed out that Vietnamese supermarket chains do not ensure the quality of the products available from their distribution chains.
vietnamnet
