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2015 Vietnam Retail with Forecasts Up to 2018 Market, Structure, S.W.O.T., Investment, Entry Strategies, Operations, and Key Players with Their Common Trading Terms

May 2015 | 75 pages | ID: 225FF417093EN
NNMT Advisor

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EXECUTIVE SUMMARY

Despite the fact that the Vietnam’s economy has a slow growth within the past three years, the retail market keeps attracting global and regional players. In addition to Big C and Metro C&C who have been years in Vietnam, there are several others who have tried to strengthen their presence or attempted to penetrate the modern trade sector which is only account for 25% of the whole market at this point in time. Different operators from various segments: shopping malls, grocery retailers and supermarkets, and convenient stores have been working hard to gain new market share. Existing operators such as Parkson, Lotte Mart, Family Mart, and Circle K are competing with newcomers such as Aeon, E-Mart, NTUC Fairprice, and Giant. Major domestic investment groups which have access to properties in good locations or have deep pockets have also penetrated into the retail sector via M&A. Take, for an example, Ocean Retail of Ocean Group was ambitious taking retail market shares but then was acquired by VinMart, a subsidiary of VinGroup, a Vietnamese real estate giant. VinGroup also became a strategic shareholder of Vinatex Group which holds 100% of Vinatex Mart.

2015 is also both challenging and promising milestone for the Vietnamese retail sector. Particularly, according to her WTO’s joining commitments, Vietnam has been fully opened for 100%-foreign-owned retailers since January 2015. Also, the ASEAN Economic Community will be established in 2015 and shall “transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital.” Needless to say, the Trans-Pacific Partnership Agreement (TPP), a strategic one with 12-country members has been regarded as a means for securing Vietnam’s economic interests vis-à-vis China as Vietnam may be able to compensate for its trade deficit with China through a surplus in trade with TPP members, especially the U.S. It could also have a spill-over effect in the form of deeper cooperation in areas such as intellectual property, services and investments. One effect from TPP, if it is going to be real from this year or next, would be approximately 10, 000 goods will be tax-exempted from and among country members. We bet that together with other free trade agreements, TPP itself will provide a short-term challenge but a long-run profound for under-developed countries like Vietnam to address. Such economic integration will challenge Vietnam’s domestic goods and services but, on the other hand, pressure Vietnamese manufacturers and services firms to work harder and smarter in order to enhance their competitiveness.

We are going to examine many aspects of Vietnam’s Retail Industry. Normally, a retail sector would go through several phases of development: small grocery stores, wet and flea markets, supermarkets, hypermarkets, shopping malls, department stores, convenient stores, E-Commerce, and m-commerce. This would be the case of retail sectors in many economies. However, for Vietnam, one can find most, if not all, physical presents of retail sector at a time, growing together and surviving the competition. In Ho Chi Minh City, one can go to buy a cigarette box at a small grocery store in Tran Hung Dao Street and drives his wife to pick up a perfume at a Vincom mall when she just needs to cross out one or two blocks to meet her friends busy shopping for clothing at a department store in Dong Khoi Street. His maid might go to a nearby supermarket Co.op for some foods while his son steps into a convenient store Family Mart for an ice cream or snack. He could eventually order some stuffs via local E-commerce website chodientu.vn and purchase something else using his mobile phone to pay via an application MobiVi. Vietnam does not move step by step in retail development path. Instead, one could see Vietnam’s retail’s progress impressive and chaotic.

Vietnam was ranked as one of the top emerging markets for retail in 2008-2009 but since then its rankings have continued to fall as the Vietnamese economy has not performed as well and stably as others. There are several reasons for that pull-back but it cannot be denied that the potential is great and is still there. Increasing demand of consumer goods and rising disposable incomes will be driving potential growth in a 90-million-population economy. Also, rising urbanization and expanding rural retail area promoted by improved infrastructure will be facilitating such growth. Within the past few years, market players have been increasing their presence in Vietnam. The number of modern stores, supermarkets, and shopping malls has increased tremendously. So has the number of foreign brands been penetrating into the market. Market volume is estimated at US$ 123.8 billion by end of 2013 and we would see an amazing annual increase of about 12% compared with last year.

Numbers never tell lies. We are confident that with processed data collected from reliable trade sources, interviews with decision makers in the field, and our own observations and analyzed insights, readers can use our findings in several ways such as the followings:
  • A strategic industry review and analysis that covers historical development and relevant foundation, industry structure, overall industry strategies, and major considerations for investments and businesses;
  • A helpful reference manual of the Vietnamese retail sector that indentifies challenges and strategies for entering the market, that points out areas for continuous improvement, that forecasts development and market trends, and that reports where market opportunities exist.
  • A deep report of metrics and more importantly, common key trading terms of several major retailers, both local and international brands such as Saigon Coop, VinMart, Big C, and Metro Cash & Carry;
  • A management case study for any stakeholders in the retail sector;
This comprehensive dataset includes a full suite of up to more than 70 figures and tables containing about 600 key metrics and indicators that feature our deep interaction with more than 60 companies in the Vietnamese retail industry. We are confident that our endless efforts and selective study methods have made the research and report reliable and helpful. At such, policy makers, local and foreign retailers, suppliers, and any stakeholders of the retail industry could find great implications for their future directions and actions.

For readers’ convenience, the report is structured into the following components: Market, Structure, S.W.O.T., Investment Considerations, Entry Strategies, Operations, Industry Forward Looking, and Key Players’ Profiles plus their common trading terms which were confidential and challenging to most, if not all, potential vendors.

Our patial list of clienteles for the previous version of this report is as follows:
  • An established and leading Vietnamese retailer which has presence in most, if not all, segments of the modern retail sector – The firm is seeking ways to defend its market share;
  • A new entrant to the sector but having deep pocket and large land bank and being quite aggressive in the high-end segments – The firm is seeking ways to gain new market share;
  • A Thai association of retail enterprises seeking reliable market insights and analysis to make better informed decisions to improve their sales volumes for Vietnam; and,
  • Tokyo’s branch office of a top-four global management consulting firm seeking reliable market understandings and knowledges to advise their Japanese clients which have tried to expand to Vietnam.
Needless to say, readers who are dealing with strategies such as senior executives at retail firms and management consultants will find this publication especially helpful as we have generated a similar approach addressing strategic issues using typical management concepts and terms. Such readers definitely can find the values lying at business environment analysis, industry analysis (S.W.O.T.), and other considerations for both market entry and growth strategies.

Investors, both institutional and individual ones, can find this report extremely helpful as we provided not only the historical numbers (with insights and interpretations) but also interesting forecasts up to 2018 (with concrete supporting evidence). Investment opportunities can also be realized and compared as we did include details of major M&A transactions in the field. A complete and comprehensive picture of investment environment is presented including issues such as legal framework and profitability ratio which can be easily computed using our tables of figures and proper investment models or vehicles.

Operational issues and the nature of suppliers-retailers relationship are also addressed; and, for those who are operating a retail business, this research serves as a power manual. It goes straight to address some, and hopefully most, if not all, issues you can find on your desk on a daily basis. You can also know what you competitors plan to do. You know where you are and in what marketplace.

Suppliers and/or exporters will find this report valuable as it does provide significant commercial tips to work with retailers, not only to build a last-long beneficial relationship thanks to comprehensive understanding about their practice but also to have quick wins on ongoing transactions.

We also find this report generally a good reference for regulators, researchers, and students. Though its nature is a research-based document, but it addresses all practical issues that a textbook or a governmental report might not be able to cover and update. More or less, researches were carried out and main schools of thoughts are by and from businesspersons and consultants who have experienced working on the field.
1 EXECUTIVE SUMMARY

2 METHODOLOGY

3 PROFILES OF POTENTIAL SUBSCRIBERS

4 NEW SECTIONS AND UPDATES

5 OVERVIEW ABOUT RETAIL DEVELOPMENT IN VIETNAM

6 INDUSTRY STRUCTURE OF VIETNAM’S RETAIL

6.1 TRADITIONAL VS. MODERN TRADE
6.2 FOREIGN PARTICIPATION VS. DOMESTIC EXPANSION

7 SWOT ANALYSIS FOR VIETNAM’S RETAIL

7.1 STRENGTHS
7.2 WEAKNESSES
7.3 OPPORTUNITIES
7.4 THREATS

8 INVESTMENT CONSIDERATIONS

8.1 LEGAL FRAMEWORK
  8.1.1 ECONOMIC NEEDS TEST (ENT)
  8.1.2 WTO MEMBERSHIP
  8.1.3 TRANS-PACIFIC PARTNERSHIP (TPP)
  8.1.4 OTHER REGIONAL FREE TRADE AGREEMENTS (FTAS)
8.2 KEY SUCCESS FACTORS
8.3 MAJOR CHALLENGES FOR INVESTORS
8.4 DIFFERENCES AMONG CATEGORIES OF PLAYERS
8.5 REAL-LIFE EXAMPLE OF AN INVESTMENT PROJECT

9 MARKET ENTRY STRATEGIES

9.1 STRUCTURE OF MODERN RETAIL
9.2 COMMON ENTRY STRATEGIES
9.3 ENTRY BARRIERS
9.4 M&A AND PARTNERSHIPS IN THE SECTOR

10 OPERATIONAL ISSUES

10.1 COSTS AND COST STRUCTURE
10.2 SOPHISTICATED AND DYNAMIC CONSUMER BEHAVIORS
10.3 SUPPLY CHAIN AND DISTRIBUTION NETWORK
  10.3.1 PHYSICAL DISTRIBUTION NETWORK
  10.3.2 DIGITAL DISTRIBUTION CHANNEL
10.4 SUPPLY OF HUMAN RESOURCES
10.5 TECHNICAL SOLUTIONS

11 INDUSTRY FORWARD LOOKING

12 PROFILES OF KEY RETAILERS

12.1 SAIGON CO.OP (SGC)
12.2 VINMART AND ITS ACQUISITIONS (OCEAN MART AND VINATEX MART)
12.3 HAPRO MART
12.4 BIG C
12.5 LOTTE
12.6 BERLI JUCKER AND METRO CASH & CARRY

13 COMMON TRADING TERMS BETWEEN SUPPLIERS AND RETAILERS

TABLE OF FIGURES

Figure 1: GDP vs. Retail Sales in Vietnam
Figure 2: Key Indicators of Economy and Retail Development in Vietnam (1995-2007)
Figure 3: Key Indicators of Economy and Retail Development in Vietnam (2008-2013)
Figure 4: Key Indicators of Economy and Retail Development in Vietnam (2014-2018)
Figure 5: A Floating Market in Mekong Delta
Figure 6: An Old Grocery Store in Hoi An
Figure 7: Vietnam's Retail Structure (Traditional Trade vs. Modern Trade)
Figure 8: Vietnam's Retail Components (Shopping Malls, Supermarkets, Convenient Stores, and Wet Markets)
Figure 9: Major retailers operating in Vietnam, domestic players and foreign counterparts
Figure 10: SWOT Analysis for Vietnam's Retail
Figure 11: Vietnam as an Urbanizing Society
Figure 12: Geographical Concentration & Urbanization
Figure 13: Vietnam’s Golden Population Structure
Figure 14: Wealth Distribution among Vietnamese Households
Figure 15: Assessment of Disposable Incomes vs. Expenditures in Hanoi and Ho Chi Minh City
Figure 16: Review of Personal Income Tax Indicators
Figure 17: Vietnam Literacy
Figure 18: Vietnam's PMI in an upward trend
Figure 19: Vietnam Tourism
Figure 20: Vietnam’s Infrastructure Development
Figure 21: Key Information and Telecommunications Indicators
Figure 22: Renting Fee in Shopping Malls and Department Stores (early 2013 vs. end 2014)
Figure 23: Employment in the Retail Industry in Vietnam (2009-2013)
Figure 24: Inflation
Figure 25: A Comparison between ROI and Lending Rate in Vietnam
Figure 26: Demand-side Contribution to Growth
Figure 27: Ho Chi Minh City's Retail Stocks vs. Those of Comparable Cities in the Region
Figure 28: Reported Retail Sales of Hanoi and Ho Chi Minh City
Figure 29: Licensed Foreign Investment Projects in Ho Chi Minh City
Figure 30: Key Success Factors for Chosen Retail Business Strategies
Figure 31: Challenges Facing Retailers in Vietnam
Figure 32: Evaluation of Key Business Factors among Different Kinds of Retailers in Vietnam
Figure 33: An Investment Case: A Shopping Mall Project Proposed in Binh Duong Province
Figure 34: Structure of Retail Sales of Vietnam in Grocery vs. Non-Grocery
Figure 35: Structure of Non-Grocery Retail Sales in Vietnam
Figure 36: Current Market Structure of Fast Food Sector in Vietnam
Figure 37: An Example of Leading Retail Product in Vietnam: Smart Phones
Figure 38: Another Example of Leading Product: Sales of Automobiles in Hanoi
Figure 39: Favorable Market Entry Strategies for Retailers in Vietnam
Figure 40: Aggressive market entries and expansions plans for retailers
Figure 41: Typical Entry Barriers against Foreign Retailers
Figure 42: Relevant M&A Deals in the Retail Industry in Vietnam
Figure 43: Cost Considerations for Retailers in Vietnam
Figure 44: Allocation of Operating Expenses for One Retail Shop in Ho Chi Minh City
Figure 45: Vietnamese Consumer Behaviors Regarding Payment Instruments
Figure 46: Major Retailers in Vietnam and Their Key Network Indicators
Figure 47: Typical Terms Applied to Suppliers of Supermarkets
Figure 48: The Role of E-Commerce in the Retail Industry in Vietnam
Figure 49: Supply of Human Resources in the Retail Industry in Vietnam
Figure 50: List of Common Retail Solutions Providers
Figure 51: Structure of Modern Trade Retail
Figure 52: Development of Saigon Coop's Network of Supermarkets
Figure 53: Saigon Coop's Key Financials and Operations Performance Indicators
Figure 54: SGC Revenues
Figure 55: Market Share of Supermarkets in Ho Chi Minh City
Figure 56: Saigon Coop's Supermarket Network Indicators
Figure 57: Vingroup Structure Overview
Figure 58: List of projects in which Vingroup has controlling interests
Figure 59: Vinmart's Supermarket Network Indicators
Figure 60: Vinmart's Convenient Stores Network Indicators
Figure 61: Vinatex Mart’s Key Financial and Performance Indicators
Figure 62: Vinatex Mart's Network as of March 2015
Figure 63: Hapro's Key Performance Indicators
Figure 64: Hapro's Network Indicators
Figure 65: Big C’s Key Financial and Performance Indicators
Figure 66: Big C Vietnam’s Hypermarket Network Indicators
Figure 67: Lotte Mart Vietnam’s Supermarket Network Indicators
Figure 68: Metro Cash & Carry’s Key Financial and Performance Indicators
Figure 69: Metro C&C Vietnam’s Network Indicators
Figure 70: KEY TRADING TERMS BETWEEN SUPPLIERS AND RETAILERS
Figure 71: COMMISSION STRUCTURE PAYABLE TO RETAILERS - A REAL-LIFE EXAMPLE


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