Building a Việt Nam-owned retail system remains a challenge

Building a Việt Nam-owned retail system remains a challenge

Foreign players have developed and expanded rapidly through new investments and mergers and acquisitions

Shoppers at a supermarket in Thanh Xuân District, Hà Nội. VNA/VNS Photo

Building a robust, wholly Vietnamese distribution system to compete with global players present in Việt Nam—and to serve as a platform for Vietnamese goods on the world market remains a challenge, according to researchers and industry insiders.

According to data from the Ministry of Industry and Trade (MoIT) by 2022, Việt Nam had 1,241 supermarkets and 258 shopping centres. As the economy develops and incomes improve, on top of a young population drawn to new consumption trends, modern retail infrastructure, such as supermarkets and shopping centres, has expanded rapidly, particularly in major cities and urban centres across the country.

Between 2010 and 2022, the number of supermarkets and shopping centres increased sharply – from 567 supermarkets and 95 shopping centres in 2010 to 1,241 supermarkets and 258 shopping centres in 2022.

Tens of thousands of commercial centres have also emerged, with a growth rate far outpacing that of traditional markets. On average, supermarkets increased by over 10 per cent and shopping centres by approximately 16.3 per cent during this period, while the number of traditional markets barely rose by just 0.02 per cent over the same period.

In addition, consumer goods companies in sectors such as textile and apparel, footwear, food, and household appliances have heavily invested in their own retail chains. During the period, large domestic distribution groups and enterprises—with modern distribution networks—began to emerge, taking steps to lead the market and shape production and consumption trends.

By the end of 2024, domestic distribution systems owned by Vietnamese enterprises had shown substantial growth. Notable examples include large players including Saigon Co.op, WinCommerce, Bách Hóa Xanh and Vincom Retail.

Meanwhile, reputable international retail groups have entered the market. Foreign players have developed and expanded rapidly through new investments and mergers and acquisitions. According to the Ministry of Planning and Investment, as of June 2024 there were 7,522 active foreign direct investment (FDI) projects in the wholesale and retail sector—accounting for 18.55 per cent of total FDI projects—with a total investment exceeding US$11.4 billion, ranking fifth among 19 sectors with FDI in the Southeast Asian country.

According to Professor Lê Việt Nga, Deputy Secretary-General of the Vietnam Association for the Development of Consumer Goods (VACOD), modern retail infrastructure still accounts for a low and uneven proportion of the market, concentrated mainly in large cities and urban centres. In contrast, over 8,000 wholesale markets and traditional markets remain the primary channels for distributing goods in both urban and rural areas, yet these channels have not attracted significant investments.

Vietnamese consumers in the middle income group continue to chase bargains, with little regard to quality and origin. In addition, poor transport and logistics infrastructure in many regions increases business costs and reduces product quality—especially for agricultural and food items—thus diminishing the appeal of modern distribution systems.

Nga said there were several shortcomings in managing competition among various distribution channels. In particular, domestic enterprises faced "the unique challenge of borrowing at much higher interest rates than their FDI counterparts", who could secure financing at lower rates directly from the state.

To make matters worse, domestic enterprises often lacked human resources to effectively manage finance, product quality, digital transformation, green transition and logistics optimisation.

According to research published in 2024 by the Institute of Strategy and Public Policy, FDI enterprises outperformed Vietnamese competitors in efficiency in retail distribution.

Specifically, from 2007 to 2022, retail revenue of FDI enterprises increased 40.65 times, while that of domestic sectors increased only 6.72 times. The average annual retail revenue growth for FDI enterprises was 26.29 per cent, compared to just 13.49 per cent for domestic sectors.

Domestic companies' share of the market declined from 88.14 per cent in 2007 to 74.19 per cent in 2015 and further to 70.23 per cent in 2022. 

Bizhub