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21st century retail gets local

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Increased consumption and consumer demand have in recent years made Vietnam a more desirable destination for several international retailers – one which is expected to see giant retailers embracing the omnichannel approach to retail in 2018.

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A lucrative year

Thanks to new retail experience, South Korean retail giant Emart recorded a healthy performance following its local debut in Vietnam in late 2015.

Le Huu Tinh, marketing manager of Emart Vietnam, said that the retailer fared well in 2017, with business results surpassing the previous year’s figures by 30 per cent. Emart Go Vap in Ho Chi Minh City attracted 10 million visitors in 2017, up 25 per cent against 2016. 

“With the aim of becoming the number-one hypermarket, Emart is planning to open another outlet in Ho Chi Minh City in 2019. If all goes as planned, the number of new outlets will not stop at one,” he said.

In 2017, Lotte Mart Vietnam also achieved high marks, with sales growth of 20 per cent. Lotte Mart has a total of 13 stores nationwide, and the retailer plans to open 13 more locations – including smaller outlets – in 2018.

Lee Jong Kook, president of External Relations for Lotte Vietnam, told VIR, “This result has been realised after 10 years of operation since the start of our business in Vietnam. We have secured a stable profit structure, which would be an ideal structure for any other retailer.”

Japanese mega-retailers are also seeing big opportunities in the local market, and have plans to expand their footprints. AEON Mall has recently been greenlighted by the Ho Chi Minh City People’s Committee to build an addition onto its first location, AEON Mall Tan Phu Celadon. The expanded shopping centre is slated to go on stream in January 2019.

AEON Mall Tan Phu Celadon was inaugurated in January 2014, with total investment capital of more than $100 million. Following this project, AEON has opened three other stores, including AEON Mall Binh Duong Canary in Binh Duong province, AEON Mall Long Bien in Hanoi, and AEON Mall Binh Tan in Ho Chi Minh City.

In the second quarter of 2018, the shopping mall developer will commence the construction of AEON Mall Haiphong, with total investment capital of $180 million.

Convenience stores mushroom

Another notable trend in the retail market is the ongoing expansion of convenience store operators such as Japan’s FamilyMart and Ministop, US chain Circle K, Singapore’s Shop & Go, and local brand Vinmart+. The attractiveness of the market lured in two new entrants in 2017, 7-Eleven and GS Retail.

GS Retail, South Korea’s biggest convenience store franchise, inked a deal with local firm SonKim Group to establish a joint venture running the convenience store brand GS25 in Vietnam. Last Friday, GS Retail announced that it will open its first branch in Vietnam in mid-January 2018. The retailer will launch four convenience stores in Ho Chi Minh City next month, according to the Korea Herald. The move is part of its broad strategy to develop more than 2,500 GS25 outlets in the country within 10 years.

Meanwhile, 7-Eleven made a big splash when launching its first outlet in Ho Chi Minh City in mid-June, 2017. The chain aims to launch at least 100 stores in major urban cities within the next three years, and 1,000 nationwide over the next decade.

Hirohisa Yamanouchi, general manager of the Merchandise and Marketing Department at FamilyMart Vietnam, said that Vietnam is deemed a high-potential market for convenience store operators in Southeast Asia thanks to the country’s large population and young demographic.

“Vietnam has low modern retail density, so the population for a convenience store is very crowded with over 50,000 people per store. The country’s convenience store market is expected to grow by 240 per cent in 2021, compared to 2017,” he said, noting that FamilyMart Vietnam has set a goal to reach 161 stores by the end of 2017 and 220 stores through 2018.

An ominichannel approach

The year 2017 also witnessed the shift from brick-and-mortar to omnichannel retailing to serve the changing shopping habits of Vietnamese consumers.

AEON Topvalu Vietnam hopped on the Vietnamese e-commerce bandwagon through the launch of its website on January 2017. Yuichiro Shiotani, general director of AEON Topvalu Vietnam, told VIR, “Online sales have been on the rise, so we need to take action to respond to the market.”

Combining online retail with modern retail formats like supermarkets and convenience stores, AEON Topvalu Vietnam aims to deliver convenience and an enhanced experience to its customers. “We are developing a newer retail style to cater to the demand of the Vietnamese people,” Shiotani said.

Shiotani made a point of distinguishing between convenience stores and supermarkets. “Convenience stores open 24 hours a day. In case customers need something suddenly or want to buy something quickly, the [need for] convenience store arises,” he said.

Prior to AEON Topvalu Vietnam’s e-commerce move, Lotte E-Commerce Vietnam was launched in October 2016. The venture helps diversify Lotte’s Vietnamese portfolio – which now includes supermarkets, department stores, e-commerce sites, and duty-free stores.

Lotte Duty Free (LDF) in Danang International Airport expects to reach the $11 million sales mark for 2017, following its soft opening in May and grand opening in November. LDF will open a second location in Cam Ranh International Airport in April, for which the company has set a sales target of $21 million in 2018.

Moving forward to 2018

Vietnam recently reached sixth place among the 30 most attractive retail markets in the world, according to US consulting firm A.T. Kearney’s Global Retail Development Index. The prevalence of modern retail channels is expected to result in more choices for consumers, through a variety of products and services.

Shiotani said that the provision of Japanese products for the domestic market only started in force this past year. In addition to products imported from Japan, AEON also sources quality products from local manufacturers, such as socks and women’s clothes.

On the same note, Yamanouchi from FamilyMart said that Vietnamese consumers are increasingly changing to modern shopping habits – such as shopping at convenience stores. FamilyMart and other convenience store chains can thus capitalise on these trends by offering the best products and services.

“Among them, ‘Nakashoku’ products [take-out items] or daily prepared food like sandwiches and sushi play an important role. This is the category that we will invest more into, promising further development in 2018,” he said, adding that the category has been proven the determining factor for FamilyMart’s success across Asia.

Meanwhile, Lotte Mart’s modern retail business not only enriches Vietnam’s retail market with a unique retail and entertainment model, but also provides Vietnamese customers with a wide range of diversified products from South Korea and elsewhere in the world.

 

 

Source: VIR 

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