Vietnam’s retail market attractiveness drops: report

Ho Chi Minh City has decided to start its two-month Impressive Vietnam Grand Sale 2010 campaign in November since its own month-long promotional program was kicked off early this month

Vietnam’s retail market has been ranked at No.23 in the latest A.T Kearney's market retail ranking, continuing its downward trend since it topped A.T Kearney's market retail ranking in 2008, according to Dau Tu Chung Khoan newspaper.

Currently, major barriers include costly space rental, about $94 per square meter in central business areas and $48 per square meter in suburbs, together with unfavorable infrastructure and underdeveloped distribution systems.

However, young population along with rapid urbanization and increased personal income would attract plenty of domestic and foreign retailers, said A.T. Kearney Consultancy Group’s report.

According to the General Statistical Office of Vietnam, there are around 4.3 million people in the age range of 15-65 years old.

The number of households of annual average income of above $5,000 is also on the rise, which makes Vietnam an attractive destination, said the report.

Colliers' recent survey that was conducted in Hanoi indicated female of between 17-45 years old accounted for 70% of consumers. Major products that are popular among this group include shoes, perfume, clothing and entertainment.

What is noteworthy is customers of between 26-35 years old with stable jobs and high income tend to shop at commercial centers.

In the meantime, customers of above 46 years old appear to afford costly luxurious items.

In recent years, retail market supply has continuously hiked thanks to the potential domestic market.

Yet, given the gloomy local and global economic weather, consumers tend to tighten their belts.

Retailers would now be keen on improve their current business rather than expand further making competition even tougher.

Despite macro uncertainties such as high inflation and lower consumer spending, foreign retailers still want to enter the Vietnamese retail market.

E-Mart, South Korea’s top discount store chain, last July made inroads in the local market in a joint venture with Binh Duong-based U&I Group to set up a supermarket chain with a total investment of US$1 billion.

Meanwhile, AEON Co Ltd (Japan) retail group and its Jusco supermarket chain plans to enter the Vietnamese market by 2013. It plans to make Vietnam its fourth largest foreign market after China, Thailand and Malaysia.

Japanese convenience store operator Ministop, a member of AEON Group, last year also signed a strategic cooperation agreement with G7 Service and Trading Joint Stock Company (G7Mart), a member of Vietnam’s Trung Nguyen Group, to open hundreds of stores in Vietnam.