A number of foreign investors, seeing bright opportunities springingfrom the free trade agreements expected to be signed in the near future,have jumped into the Vietnamese retail market to develop conveniencestores, according to the English language news website VietNamNetBridge.
A Nielsen report indicates that, of the 500 conveniencestores operational in Ho Chi Minh City, 60 percent are foreigninvested. Most of the stores are located at advantageous positions inthe city. Each store covers an area of at least 60 square meters,typically rent out the retail premises at a rate of thousands of dollarsper month.
Circle K on Nguyen Du street in District 1 is afavorite destination for HCM City dwellers. The food there isserved at very reasonable prices, just 11,000-13,000 VND per serving.
Competitiveprices and an advantageous location both have helped Circle K developrapidly. The company boasts more than 50 shops nationwide after a fiveyear presence in Vietnam, with 70 percent of total turnover comingfrom the shops in HCM City. The chain plans to have 550convenience stores by 2018.
The Japanese FamilyMart, which leftVietnam some years ago, unexpectedly made a reappearance last yearwith 20 shops opening. Explaining this, a senior executive of Gia DinhVietnam Convenience Store Company Ltd, said there is no reason to deserta market with Vietnam ’s potential.
Van Duc Muoi, GeneralDirector of Vissan, a food supplier, noted that HCM City iswitnessing a growing shift from traditional markets to supermarkets andconvenience stores, which is the norm for urban areas. He also said thatthe city of 10 million deserves these investments.
Observersonce thought that convenience stores, with their lower requiredinvestment rates, would be the market segment specifically reserved fordomestic investors. It turns out, however, that the market segment hasproved very attractive to foreign investors, many with powerfulfinancial capabilities.
Muoi noted that foreign investors enjoygreat advantages over domestic ones. They not only have good corporategovernance skill and hefty financial resources, but also experience indeveloping markets.
Vietnamese, by contrast, have only twoadvantages: a good understanding of local consumers’ tastes, and anational consciousness prompting “Vietnamese to buy Vietnamese goods.”
“Thetwo advantages are just enough to help domestic retailers stabilize themarket for a short time. But they will be dislodged from the homemarket if they cannot improve themselves,” he said.
Vu Kim Hanh, aconsultant, urges that Vietnamese retailers avoid direct confrontationwith their foreign counterparts. When it comes to management skills andaccess to capital, they are clearly outgunned.
Instead ofbattling with foreign operations on the same playing field, Vietnameseshould focus on developing niche markets, while applying business modelssuitable to Vietnamese consumer culture.
That said, thesolution would only be effective for the immediate future, according toHanh. In the long term, domestic-invested stores must reach out toresidential quarters, industrial zones and export processing zones. Ifdone properly, store networks would achieve large enough scales to helpinvestors cut production costs and remain competitive.-VNA
A Nielsen report indicates that, of the 500 conveniencestores operational in Ho Chi Minh City, 60 percent are foreigninvested. Most of the stores are located at advantageous positions inthe city. Each store covers an area of at least 60 square meters,typically rent out the retail premises at a rate of thousands of dollarsper month.
Circle K on Nguyen Du street in District 1 is afavorite destination for HCM City dwellers. The food there isserved at very reasonable prices, just 11,000-13,000 VND per serving.
Competitiveprices and an advantageous location both have helped Circle K developrapidly. The company boasts more than 50 shops nationwide after a fiveyear presence in Vietnam, with 70 percent of total turnover comingfrom the shops in HCM City. The chain plans to have 550convenience stores by 2018.
The Japanese FamilyMart, which leftVietnam some years ago, unexpectedly made a reappearance last yearwith 20 shops opening. Explaining this, a senior executive of Gia DinhVietnam Convenience Store Company Ltd, said there is no reason to deserta market with Vietnam ’s potential.
Van Duc Muoi, GeneralDirector of Vissan, a food supplier, noted that HCM City iswitnessing a growing shift from traditional markets to supermarkets andconvenience stores, which is the norm for urban areas. He also said thatthe city of 10 million deserves these investments.
Observersonce thought that convenience stores, with their lower requiredinvestment rates, would be the market segment specifically reserved fordomestic investors. It turns out, however, that the market segment hasproved very attractive to foreign investors, many with powerfulfinancial capabilities.
Muoi noted that foreign investors enjoygreat advantages over domestic ones. They not only have good corporategovernance skill and hefty financial resources, but also experience indeveloping markets.
Vietnamese, by contrast, have only twoadvantages: a good understanding of local consumers’ tastes, and anational consciousness prompting “Vietnamese to buy Vietnamese goods.”
“Thetwo advantages are just enough to help domestic retailers stabilize themarket for a short time. But they will be dislodged from the homemarket if they cannot improve themselves,” he said.
Vu Kim Hanh, aconsultant, urges that Vietnamese retailers avoid direct confrontationwith their foreign counterparts. When it comes to management skills andaccess to capital, they are clearly outgunned.
Instead ofbattling with foreign operations on the same playing field, Vietnameseshould focus on developing niche markets, while applying business modelssuitable to Vietnamese consumer culture.
That said, thesolution would only be effective for the immediate future, according toHanh. In the long term, domestic-invested stores must reach out toresidential quarters, industrial zones and export processing zones. Ifdone properly, store networks would achieve large enough scales to helpinvestors cut production costs and remain competitive.-VNA
