Thai, Korean, and Japanese tycoons: A fierce race on Vietnamese soil.

A host of well-known retailers from Japan, Thailand, South Korea, and France have flocked to Vietnam, hoping to quickly seize a large share of the lucrative market. This influx of foreign retail giants has intensified competition in the Vietnamese retail market.

Massive influx into Vietnam

In late 2014, Berli Jucker Plc (BJC)'s acquisition of Metro Cash & Carry Vietnam for €655 million – the largest merger and acquisition deal at the time – signaled Thailand's entry into the Vietnamese retail market. Shortly after, another Thai giant, Central Group, acquired Nguyen Kim – one of Vietnam's largest electronics retailers – followed by Big C.

In October 2015, leading South Korean retailer Emart officially entered the North Saigon area with the launch of its $60 million shopping center. Its "compatriot," Lotte Mart, has been quite successful here with 11 supermarkets and expects to increase its market share to 60 stores by 2020.

Retailers are racing to expand their sales networks.

Most Japanese investors view Aeon's success in Vietnam as a positive sign. Aeon has opened four shopping malls in Vietnam and aims to increase that number to 20 by 2020. Also from Japan, the Saigon Centre shopping mall in Ho Chi Minh City welcomed its key tenant, Takashimaya, this past July.

With the launch of three more Simply Mart stores in Ho Chi Minh City, AuchanSuper – a retail brand from France – also plans to open 17 more supermarket chains in Ho Chi Minh City by the end of next year and 20 stores by 2020 in northern provinces.

Major fashion brands like Gap, Mango, and Topshop have become top choices for young Vietnamese people. In early September this year, Zara opened its first flagship store in Ho Chi Minh City. H&M is also finalizing procedures to enter the Vietnamese market early next year.

The Vietnamese retail market is a lucrative opportunity. Ms. Trang Le, Head of Market Research and Development Consulting at JLL Vietnam, noted that rising disposable income, rapid urbanization, and increasing living standards have made Vietnam one of the most dynamic emerging economies in Southeast Asia.

According to Boston Consulting Group, the middle and upper classes in Vietnam are growing fastest in the region, doubling from 12 million (2014) to 33 million (2020), with incomes exceeding VND 15 million per month. These are potential customers for retailers.

Furthermore, e-commerce has boomed thanks to the increasing number of consumers using the internet. According to a Nielsen report, 9 out of 10 consumers in Vietnam (91%) own a smartphone, compared to 82% in 2014, and the rapid rise of connected devices, especially smartphones and tablets, is particularly important in the trend of shifting consumer demand for goods online.

However, not all modern shopping malls or retail stores are equally successful. Metro and Big C have changed ownership despite their long history of operation in Vietnam. Similarly, Parkson unexpectedly closed its upscale shopping mall in Keangnam and, more recently, another mall in Ho Chi Minh City.

Domestic and international showdown

Domestic retailers, notably Vingroup and Coop.Mart, are also actively expanding their operations to maintain their market share in the domestic retail sector. In this race for market share, many are concerned about the "weakness" of domestic investors in the face of the increasingly rapid penetration of foreign giants.

Parkson had to close down due to years of losses.

Mr. Vo Hoang Anh, Marketing Director of Saigon Co.op, believes that domestic businesses need to be more proactive and serious in building and adjusting their strategies to adapt. This company is strengthening its brand network and retail stores, and has close relationships with customers, manufacturers, and service providers.

Economist Nguyen Minh Phong believes that the Vietnamese retail market is no longer the exclusive domain of domestic businesses but has become an attractive "territory" for foreign retail giants, especially multinational corporations. To succeed, not only price and quality but also excellent customer service and after-sales support are essential.

According to Ms. Nguyen Ngoc Tram of JLL Vietnam, the concern is inevitable because modern consumers have smart shopping habits, and quality and diverse designs will be the priority criteria for selection. These two criteria are entirely an advantage for foreign retailers, while they are limitations for many domestic retailers.

Ms. Tram believes that retailers still have many opportunities to enhance their competitiveness, but they need to critically assess their strengths and weaknesses in order to develop the most appropriate business strategies.

Domestic retailers have the advantage of understanding the regional culture and consumer habits of Vietnamese people better than foreign retailers, so they should focus on leveraging this advantage.

According to the Ministry of Industry and Trade's plan for the development of supermarket and shopping mall networks until 2020 and with a vision to 2030, the proportion of retail goods sold through supermarket and shopping mall networks will only account for 30% by 2015 and reach 45% by 2020.

"Opportunities for growth still exist for all domestic retailers; it's just a matter of their ability to seize and capitalize on those opportunities," Ms. Tram remarked.

According to Vietnamnet