Retailler market in Vietnam is very competitive in the early stage. As joining WTO, the development of domestic retail outlet systems is a matter of urgency for Vietnam as full global economic integration approaches. The young and potential consumer power of Vietnam is the reason makes this market is very competitive now. Saigon Co-op Mart, the leading Vietnamese retailer, have set up 16 supermarkets and 12 retail outlets and keep going to eventually have stores over the country. Eventhough Co-op Mart is the leading retailer in Vietnam, it is under pressure of many obstacles like time pressure, competitors, etc. This research contains findings about competitors of Co-op Mart as well as articles about the retailer industry.
Domestic Competitors Company overview
G7 Mart chains -have nearly 10,000 stores nationwide by the end of August this year and 5,000 more by 2010
- completing preparations to launch new retailing services including convenience cards, convenience payment services and catalogues.
Strengths : sub-company of Trung Nguyen Coffee chains (famous for franchising in Vietnam market). Operating policy is good for stores owners, provided with stable suppliers, franchising style so it has more benefits compared to other stores.
Weaknesses: unable to link nessessary supplier to supply important goods, stores are upgrade from local stores which still have the same management skill as old stores, unable to attract user by limited items, not daily-use product, but packed products only.
Offers nearly 1,400 foreign-made products.
Strengths : good location and facilities, operated by 1 owner “Maximark” (buy goods from suppliers and sell in supermarket itseft).
Weaknesses: high price compared to Co-op Mart, items are exclusive goods and convenient goods which are not really familiar to vietnamese.
Viet Nam National Textile and Garment Group (Vinatex) 17 supermarkets and 19 clothing stores.
Strengths: Operated by government-owned Vietnam company, good big capital investment
Weaknesses: lack of management skill, expansion ability is low, not concentrate on daily-use product, but rather to ready-made product => daily comsumming ability is low.
Intimex Co has eight supermarkets
Citimart Convenient Store
(Dong Hung Trade and Service Co) Has over 10 stores
Strengths: good location, price is fair enough.
Weaknesses: Small supermarket, variety of product is low.
Ha Noi Trade Corporation (Hapro) Concentrating its efforts in the capital city with five supermarkets and numerous convenient stores.
AN LẠC - supermarket
AN PHONG - supermarket
BÌNH DÂN - supermarket
CHỢ LỚN - supermarket
CHOLIMEX - supermarket
FAMILY - supermarket
FIVIMART - supermarket
GIA PHÚC - supermarket
GOLDMART - supermarket
HÀ NỘI - supermarket
ONLINEMART - supermarket
SAIGON SQUARE - supermarket All of these stores are small retailer with 1 stores operated. These local retailers are the upgrade of traditional vietnamese retailer market by modifying decoration, organization of display items, provided by stable supliers with percentage commission (usually 5%). These store require at least $3 million capital investment.
Strengths : familiar interface for user habit of shopping, variety range of product choice, good location.
Weaknesses : concentrated on 1 store only, no potential of expanding like Co-op Mart, lack of management skill as security is not ensured, items are displayed randomly, customer service are not good because it is operated by many sellers who rent places in the store.
Foreign Competitors Company overview
METRO CASH & CARRY VIETNAM -7 stores over Vietnam in 5 main cities (Hanoi, Hai Phong, Da Nang, Can Tho - one for each, and Ho Chi Minh City – 3 stores)
- “ Cash & Carry “ method
Strengths : Managed by global internation corporation, have strong capital investment of over $200 million for vietnam market. Provide professional enviroment for buyer with cheaper price, have good direct contact to supplier and competitive price.
Weaknesses: limited customer segment, only provided to business user. Heavy investment require long time to break even.
(former is Cora Supermarket, belong to Bourbon Corporation –French) Strengths: an entity of Casino Cor. (France) with 500 supermarket worldwide, international management, professional in retailing, former name Cora is already success in Vietnam market, have competitive advantage to domestic and foreign competitors, have support from main company in finding importers.
Weaknesses: already famous with Cora brandname, changing brandname to BigC may cause unsuccess even BigC is already famous in Thailand. Negative feedback about local employees and management can effects the image of supermarket,
III. Industry and market
According to International Council of Shopping Centers (ICSC), Vietnam has a significant increase GDP of 8,2% and currently be the second place country having high speed of development. With the $37 billion per year retailer market, Vietnam is current come in fouth place of atractive market after India, Russia and China. With the 20% of development per year, average consummer age between 22-55 (70,29% total population), Vietnam retailing market expected $53 billion in 2010 (http://www.vneconomy.vn). The market is very potential that many competitors want to jump in. Until 1/1/2009, foreign company can set up 100% foreign capital company to join the retail market in Vietnam, this makes a big pressure to local retailers. As the results, local 4 big retailers (Co-op Mart, Hanoi Trading Co. (HAPRO), Saigon Trading Co., and Phu Thai Corp.) recently together formed a “Vietnam Development Agency (VDA)” to increase Co-op Mart competitive advantage to compete with coming foreign retailers.
IV. Information articles
Searching information about retailing market in Vietnam came up with many valuable results.
In vietnamnet.vn it has an article “Vietnam: steps taken to tap retail market potential” which showing directly what troubles and step need to be taken for the market (http://english.vietnamnet.vn/biz/2006/08/599229/) - see appendix for full article.
Local retailers have many disadvantage such as limitation in capital investment, lack of management skill, etc. compared to foreign competitors who already have been operating for over 20 years in retailing industry with capability of mangement as well as capital enforcement. Government policy is also very important to local retailers. Investing in supermarket requires strong capital and long term turnover, but the government doesn’t have any policy to support local industry in building supermarket, such as no tax reduction on imported facilities, or finding land to operate supermarket. Time for foreign investor join vietnam market is coming, and it makes a lot pressure on local retailer such as Co-op Mart to make itseft a competitive advantage. (http://www.vietnamnet.vn/kinhte/2007/05/690668/)
According to vneconomy.vn, after WTO, imported goods are decrease in price due to reduction of tax. But not all items are attractive if without careful consideration, local retailer may encounter loss because there are more competitive local supplier (http://www.vneconomy.vn/?home=detail&page=category&cat_name=19&id=efefc104802932 )
Mangement system is important for local retailer. It’s important that local company use legal software in management to avoid copyright aspect when joing WTO global market. G7 Mart is the prioneer to use legal Retailing Manager System (RMS) by Microsoft - Microsoft Dynamics (RMS). This system helps retailer to manage tightly the in-out goods flows as well as supporting local stores in easy managing. (http://www.vneconomy.vn/?home=detail&page=category&cat_name=16&id=c1e4d9d7c4e400 )
Vietnam has decrease its range in top retail market due to "country risk," measuring political risk, debt and credit ratings; "market attractiveness," encompassing retail sales per capita, population, infrastructure and regulations; "market saturation;" and "time pressure." (http://vibforum.vcci.com.vn/news_detail.asp?news_id=10341 ) This article shows figures of Vietnam compared to other countries in lucrative retail market.
“Vietnamese retailers believe that they can compete with international groups in the distribution market if the State provides good policies.” This issue is reflected on vietnamnet.vn (http://english.vietnamnet.vn/reports/2006/03/548533/ ). It is true that Vietnam market is rather new with spontaneously and unsustainably development. This needs a good policy to operate. With culture experience, local retailers are definitely have strong competitive advantage to compete with foreign retailers.
Vietnam retail market is a new market with a strong potential big customer base (over 80 millions of population, average consumer is young between 22-55, etc.) It’s compulsary for the government to have good policy to enhance competitive advantage of local retails to against upcoming big international retailing corporation in 2009. It is a strong pressure on local retailer like Co-op Mart with timing and policy as well as capital limitation. It is a big step for local retailer Co-op Mart to increase its strengths by linking other company to form a big VDA organization specifying in retailing. The future is ahead for wise company.
1. VietNamNet 17:50' 08/03/2006 (GMT+7)
2. VnEconomy online News http://www.vneconomy.vn/?home=detail&page=category&cat_name=19&id=efefc104802932
3. Vietnam Chamber of Commerce and Industry online News
4. Metro Cash & Carry Vietnam Ltd.
5. Vietnam Yellow Page
1) “Vietnam: steps taken to tap retail market”
The development of domestic retail outlet systems is a matter of urgency for Vietnam as full global economic integration approaches.
According to Director Tran Du Lich of the Ho Chi Minh City Economics Institute, many top-tier world retailers have chosen to develop outlets in Vietnam, including the German-based Cash and Carry, the US Walmart, the Carrefour of France, the Parkson of Malaysia, the Giant Asia Investment Pte of Singapore and Tesco of Britain.
It is believed that their presence in Vietnam will encourage foreign producers to establish themselves here, and will make the local retailing market more competitive and discerning. In addition, local enterprises wishing to become part of these distributing channels will have to improve their standards and meet much stricter requirements, Lich said.
The Ministry of Trade (MoT) is moving quickly to develop a domestic trade system to cope with increased global integration, said Senior Advisor Pham Chi Lan of the Prime Minister's Research Board. She called on domestic enterprises to develop a long-term vision when choosing which retailing channel to join.
Vietnam boasts a relatively large population of 84 million people, half of whom are under 30 years. However, this retail market potential has not been fully tapped as only 10 percent of the country's total amount of goods are circulated through local supermarkets and trade centres, while the remainder are sold at street markets and small outlets.
Domestic retailers have also moved to develop their own outlet systems. The leading Vietnamese retailer, Saigon Co-op Mart, have set up 16 supermarkets and 12 retail outlets and plan to eventually have stores in almost every district and commune across the country.
Domestic G7 is a formidable rival of Saigon Coop Mart. According to G7 Board of Management Chairman Dang Le Nguyen Vu, if everything goes as expected, G7 will have nearly 10,000 stores nationwide by the end of August this year and 5,000 more by 2010. It is moving rapidly to complete preparations to launch new retailing services including convenience cards, convenience payment services and catalogues.
Companies engaged in food and seafood processing, and textile and garment production, have already started to build outlets and showrooms throughout Vietnam.
A modern domestic retail network is being developed in all regions in the country. Ho Chi Minh City is taking the lead in upgrading small markets into large supermarkets and trade centres. Authorities of Ha Noi capital city recently decided to transform its wholesale markets into modern trade centres. Plans for similar retailing centres in central Da Nang and Nha Trang cities, in central provinces of Quang Ngai and Binh Dinh, and in the Central Highlands are also in progress.
2) Vietnam Drops Back on World's Top Retail Market List
Vietnam Chamber of Commerce and Industry
Vietnam, a lucrative retail market, has taken a step down on the list of the most attractive global retail destinations, according to the 2007 Global Retail Development Index (GRDI), an annual study conducted by AT Kearney of retail investment attractiveness among 30 emerging markets.
Vietnam scored 74 on the GRDI, a full 100-point scale, less than last year, losing its third place position to China. Vietnam’s score gradually increased from 76 in 2004 to 79 in 2005 and rocketed to 84 in 2006.
The study based its results on four variables: "country risk," measuring political risk, debt and credit ratings; "market attractiveness," encompassing retail sales per capita, population, infrastructure and regulations; "market saturation;" and "time pressure."
The higher the ranking is the more urgency for retailers to enter the market, according to the study.
Vietnam improved the country risk rating this year by scoring 57 points against 43 in 2006, 54 in 2005 and 52 in 2004.
China scored 75 points in the category for 2007, Russia 62, and India 67.
Vietnam made the most encouraging improvement in terms of attractiveness, but it still fell far short of its three main competitors, wining 29 points in 2004 and 2005, 24 in 2006 and 34 in 2007, much lower than India’s 42, China’s 46, and Russia’s 52.
Vietnam saw sharp declines in the other two criteria, getting 90 points for market saturation level in 2004, but 88 in 2005, 87 in 2006 and only 76 in 2007.
Time pressure has become Vietnam’s worst category with only 59 points, a huge drop of 22 points over the previous year.
Local experts expressed concerns that this revealed unstable development, which could make the retail market less stable. (Thanh Nien Daily, VnExpress)
3) Local retailers need good policies rather than capital
VietNamNet – Vietnamese retailers believe that they can compete with international groups in the distribution market if the State provides good policies.
Vietnam, a lucrative market for retailers
Many international retail groups are eyeing the potential market of Vietnam. The country has a high proportion of consumption compared to GDP in the region. During 2001-2005, the consumption growth rate was reportedly much higher than the population growth rate, which means a considerable improvement in the living standard of Vietnamese people.
In a recent announcement, AT Kearney, one of the management consultancy service providers, ranked Vietnam the 8th among the world’s 30 fastest developing markets. Meanwhile, according to Pricewaterhouse Coopers, Vietnam is listed among the seven most attractive nations in the world in terms of trade investment.
That explains why many international retail groups are attempting to penetrate Vietnam’s market. The three world’s biggest retailers Wal-Mart (US), Carrefour (France) and Tesco (UK) are among the names.
Metro, Big C, the agile investors have been successful with their business in Vietnam. The groups continue to expand supermarkets and trade centre chains quicker than initially planned. Vietnam is proving to be a lucrative retail market, 50% of the population of which are aged under 30 and have high income levels.
Hard pressure not only from foreign groups
Most of the Vietnamese retailers are small scale. According to the Ministry of Trade, in 2004, an enterprise employed 72 labourers on average and had VND24bil ($1.6mil) of capital. Industrial enterprises are the biggest ones with 154 labourers and VND24bil capital ($1.6mil), while a trade company only has 18 labourers and VND6bil ($400,000) on average.
According to the Ministry of Trade, Vietnam’s retail system has been developing spontaneously and unsustainably, most of the retailers are small scaled and lack advanced management methods.
A recent survey made by the Ministry of Trade showed that most traditional shops are small in area, 11.8 sq m for each, with rudimentary equipment. Modern supermarkets have appeared in only 30 out of 64 provinces, and the management technology does not meet international standards.
Meanwhile, the logistics base for retail activities is not developed enough to serve retail activities. While the 10-14 tonne-trucks and 32 tonne-trucks are popularly used in the world, Vietnam only uses 7-tonne trucks. The biggest transport company owns 200 vehicles, while a medium company worldwide has 2,000 units.
Nguyen Ngoc Hoa, Director General of Saigon Coop, the biggest retailer in Vietnam said that Vietnamese enterprises have been developing slowly over the last few years. Saigon Coop, for example, opens one or two trade centres more each year, and with such development, Vietnam’s retail activities will lag behind not only in the world but in the domestic market as well.
Hoang Tho Xuan, Head of the Domestic Policy Department under the Ministry of Trade shared this view, warning that hard pressure will come not only from international groups. It is the local consumers who will boycott local retailers if the companies cannot improve themselves.
Policy, not capital is the biggest concern
Pham Dinh Doan, Director of the Phu Thai Retail Group said that the biggest concern for the enterprises is the lack of suitable policies. He added that the enterprises now seriously need capital, but they need good policies more.
According to Mr Doan, Phu Thai Group plans to build 10 base depots to serve retail activities, at an estimated cost hundreds of billions VND. “The banks are ready to provide loans, but the State has to have clear policies,” he said. For example, Phu Thai will need large areas of land for the depots, however, with the current land policies, the enterprise will have to wait for land allocation for 3-4 years at least.
“The problem lies in suitable policies,” said Mr Doan, “which can help local companies grow even if they have to compete with strong rivals”.
Under the commitments made under the integration process, Vietnam will have to open its markets to international retailers; however, how wide the market will be opened will depend on Vietnam. Mr Doan has called on state bodies to thoroughly reflect before making decisions on issues relating to retail markets.
India, for example, accepted the opening of its markets, but it does not allow the development of supermarket chains, only allowing the opening of separate supermarkets. In other countries, big supermarkets are allowed to be set up in suburban areas only, not in the centres of cities.
According to Mr Doan, Vietnam should learn from Thailand, which is reconsidering retail market opening. International groups hold 80% of the retail market in the country, and in the future, other big world names will not be allowed to build big supermarket chains.
Mr Hoa from Saigon Coop called for suitable solutions to support retail companies. In China, a fund for domestic market development has been set up, and the model could be a suitable one for Vietnam, he said.