Viet Nam's retail market, which is recovering with the opening of trade centres, supermarkets and shopping malls, is attracting many large multi-national groups. — VNS Photo Thai Ha

HA NOI  (Biz Hub) — Viet Nam is a promising market for foreign retailers and will have more competition on the local retail market next year which is the deadline of opening the domestic retail market.

According to the Association of Viet Nam Retailers (AVR), Viet Nam has 130 trading centres, 700 supermarkets and over 1,000 convenient shops developed by local and foreign firms, including 21 wholly-foreign invested firms, reports Dien dan Doanh nghiep newspaper.

The number of local retailers is not small but, in reality, there are only a few large and successful local retailers. Meanwhile, the domestic retail market has great potential for retailers.

The General Statistics Office reports that Viet Nam's retail market is recovering, with the opening of many trading centres, supermarkets and shopping malls. Further, the market has attracted many large multi-national groups.

Retail experts note that it is typical to find one trading centre and one shopping mall per 100,000 people, while one supermarket often serves an average of 10,000 people and 1 to 2 convenience shops serves up to 1,000 people. But in the major cities of Ha Noi and HCM City the demand is not ensured and there are areas with vacant retail sites.

Additionally, convenience shops, supermarkets, trading centres and shopping malls have accounted for 22 per cent of the domestic retail system. This percentage, however, is higher in neighbouring countries, including 30 per cent in the Philippines, 43 per cent in Indonesia, 46 per cent in Thailand, 51 per cent in China, 60 per cent in Malaysia and 90 per cent in Singapore.

Viet Nam, then, has become a potential retail market for foreign retail firms, the experts said.

The CB Richard Ellis Viet Nam branch said in its quarterly report on property in Ha Noi, that in the first quarter this year Viet Nam was negotiating to participate in the Trans-Pacific Partnership to create fair competition among domestic and foreign retailers.

In addition, Viet Nam is expected to see an influx of retailers from Thailand, Japan and Korea. Large developers, such as Aeon Mall, Central Group, and CJ Group, have expressed interest in gradually expanding their presence and announcing long-term plans in the market.

Among other positive signals at the beginning of the year was that consumer confidence was the highest in the last two years, as of the end of 2013, according to the Nielsen market research firm. Experts note that higher confidence means consumers would be spending more money, leading to higher demand for retail businesses.

Further, Viet Nam Report, a Ha Noi survey company, reports that retail ranks 6th among top 10 highest ROA (return on asset) industries in Viet Nam, which indicates there will be further developments in the future.

Viet Nam has attracted many foreign retailers, including Lotte from South Korea, Aeon from Japan, Berli Jucket from Thailand and Auchan from France.

Lotte plans to develop 60 supermarkets and trading centres in Viet Nam, while Aeon expects to have 20 trading complexes in the nation by 2020.

Meanwhile, existing foreign retailers, such as Metro and Big C, have also expanded their businesses in Viet Nam.

Also, large domestic retailers, including Hapro, OceanMart, Eximart, Satra and Sai Gon Co.op, have expanded their system to compete with development of foreign retailers in the home market.

AVR chairwoman Dinh Thi My Loan said Vietnamese supermarket and retail shop chains had been upgraded, but they still lacked professional factors, competitiveness in pricing, diversification in products and control in quality of products.

Of note, many local retailers said they had difficulties due to state management policies. Foreign retailers had many investment incentives when developing their retail system in Viet Nam, they said. For example, foreign retailers easily found sites to develop their retail infrastructure, while domestic firms must face challenges in purchasing sites for developing businesses.

Loan expected the state would solve such problems by creating favourable conditions for domestic retailers when competing with foreign rivals.

For domestic retailers, she said, they must improve their distribution policies, including building modern distribution systems in urban and rural areas and cooperating with management offices in controlling the quality of products within their retail systems. — VNS