Domestic retail market at risk of losing Vietnamese brands

The Vietnamese retail market has recently witnessed mergers and acquisitions between leading domestic retail enterprises and foreign enterprises.

Many economic experts believe that this is an inevitable development of the retail market in the context of Vietnam's deep economic integration. However, this reality also shows that domestic retail businesses are facing the risk of being pushed out of the traditional market and losing their Vietnamese brand.

Foreign retailers enter the Vietnamese market

In the retail sector in Vietnam, for the past 10 years, people have known about large retail systems such as Metro (Germany), Big C (France), Lotte (Korea), Parson (Malaysia), Aeon (Japan), with two main forms: supermarkets and shopping malls. The fact that Thai investors are targeting the Vietnamese market, aiming to expand the retail system in the Southeast Asian region, taking advantage of the incentives brought by the ASEAN Economic Community is considered quite perceptive.

Consumers shop for goods at Co.opMart Vinh Long. Photo: VNA

In 2014, Berli Jucker Company, a member of ThaiBev Group of Thailand's third billionaire Sirivadhanakdi, announced the acquisition of the entire retail system (19 supermarkets) of Metro Cash & Carry Vietnam for 880 million USD. This is considered the largest merger and acquisition deal ever in the retail industry in Vietnam. It is known that Metro's revenue in 2013 was more than 690 million USD/year.

When the leading Thai retail group announced the purchase of Metro's entire retail system, many domestic retail businesses were also worried about losing their domestic retail market share. Businesses were concerned that goods from Thailand would penetrate the Vietnamese market, causing difficulties for domestic manufacturers, because our competitiveness and brand are still weak.

By the end of 2014, Central Group, another large corporation owned by the family of Mr. Chirathivat, the richest man in Thailand, also announced that the group's Power Buy Company had purchased 49% of the shares of NKT New Technology and Solution Development Investment Company - the unit that owns 100% of Nguyen Kim Trading Company. Currently, Nguyen Kim has 21 electronics retail supermarkets nationwide, and is one of the leading retailers in Vietnam.

Nguyen Kim representative said that selling 49% of shares will help the company have more capital to invest in expanding domestic retail market share. Meanwhile, Power Buy wants to expand and penetrate deeply into Vietnam's retail market.

In April 2014, Central Group entered Vietnam by opening a Robins supermarket in Hanoi. A few months later, the group continued to spend another 4 million USD to open a second supermarket in Ho Chi Minh City. Both supermarkets sell high-end products, world-famous brands from European countries and Thailand.

Thus, through both direct and indirect investment, Thai enterprises are building, acquiring or holding significant shares in many large enterprises such as CP Group Vietnam, Red Bull, Prime Group, Tien Phong Plastics, Binh Minh Plastics, Metro Vietnam or Nguyen Kim electronics system.

According to some economic experts, Thai retail businesses are making efforts to penetrate the potential Vietnamese market, seizing the opportunity brought by the ASEAN Economic Community, when Thai goods enter Vietnam with a 0% tax rate.

Ms. Le Ngoc Dao, Deputy Director of the Department of Industry and Trade of Ho Chi Minh City, said: The cooperation between FDI enterprises in the retail sector and Vietnamese enterprises is developing in line with the city's orientation. Currently, the number of Vietnamese branded goods sold in the distribution systems of FDI enterprises in Ho Chi Minh City still accounts for 60-70% of the goods.

Domestic retailers still have a lot of room to grow

The Ho Chi Minh City market is considered by investors to have great potential, with a population of more than 7.8 million people and strong consumption, making it a lucrative piece of cake that retail businesses want to capture. Domestic businesses such as the Ho Chi Minh City Union of Commercial Cooperatives (Saigon Co.op), Saigon Trading Group (Satra), Maximark supermarket chain under An Phong Investment Joint Stock Company... dominate the majority of the market. Currently, the above businesses are expanding their distribution channels to rural areas, with a network of dozens of supermarkets and hundreds of stores nationwide.

According to the survey results on the Vietnamese rural market by Kantar Worldpanel (a multinational company specializing in consulting and market research in the world) published in November 2014, rural areas currently account for 68% of the population and contribute 60% of the total national income, with the level of education being increasingly improved. In the long term, rural income and living standards continue to be raised. Thanks to that, basic equipment has also been available in the majority of households.

According to Ms. Dinh Thi My Loan, Chairwoman of the Vietnam Retailers Association, rural areas are a market with much untapped potential. Very few domestic retailers are able to exploit this area. The potential for the retail industry in rural areas is clear, but can businesses in the industry fully take advantage of this great opportunity? In recent times, the trend of expanding retail chains to rural areas has been implemented, but mainly by domestic businesses.

Ms. Loan said that in reality, FDI enterprises currently mainly invest in modern retail (supermarkets/hypermarkets, shopping centers). Up to now, modern retail channels only account for 25% of the market share, meaning that foreign and domestic enterprises mainly compete with each other in this 25% of the retail market share. Of which, 10% of the market share is held by foreign retailers. In addition to the competition between foreign and domestic enterprises, the penetration of foreign enterprises into the Vietnamese retail market also brings many opportunities for cooperation and development.

Saigon Co.op is one of the leading retailers in Vietnam with a fairly high growth rate in sales. According to the Vietnam Retailers Association, Saigon Co.op was the enterprise with the highest revenue in 2014, with total sales of about 24,000 billion VND. Co.op is currently implementing a strategy of bringing goods to rural areas quite effectively with a network of Co.opmart supermarkets, Co.opFood stores, Co.op department stores... covering almost all provinces and cities nationwide. Currently, Saigon Co.op has 70 supermarkets including 28 supermarkets in Ho Chi Minh City and 42 supermarkets in provinces and cities nationwide, not to mention Co.op's convenience stores and department stores that are popular with people.

Following the success of the distribution systems Co.opmart and Co.op Food, in 2013, Saigon Co.op announced the launch of a new business model - hypermarkets. Together with partner NTUC FairPrice (a cooperative in Singapore, a retailer that holds more than 60% of the market share in the Lion Island with 250 points of sale in many business models), the joint venture Saigon Co.op and NTUC Fair Price will jointly invest in a hypermarket chain business model. The first store named Co.opXtra Plus, which both retails and distributes in large quantities, was born in Thu Duc district, Ho Chi Minh City. This is the first hypermarket in Ho Chi Minh City, marking an important milestone in the development process of Saigon Co.op's retail market. It is expected that in 2015, there will be 5 more Co.opXtra and Co.opXtra Plus supermarkets opened and by 2020, this number will increase to 15 supermarkets nationwide.

Mr. Nguyen Ngoc Hoa, Chairman of the Board of Directors of Saigon Co.op, said: The development and diversification of business types is not beyond the purpose of bringing convenience and richness in choices for consumers, contributing to stabilizing market prices and further developing the modern retail market in the country. This is also the strategic direction of development throughout Saigon Co.op in the future.

According to the General Statistics Office, in 2014, total retail sales of goods and consumer service revenue were estimated at VND2,945.2 trillion, up 10.6% compared to 2013, if excluding price factors, the increase was 6.3%, higher than the 5.5% increase in 2013. By industry, retail sales of goods for the whole year reached VND2,216 trillion, up 11.3% compared to 2013.

According to Baotintuc.vn