Intensified competition and strategic calculations shape VN's retail landscape
According to a report by Q&Me, a market research company, updated in April 2024, the retail market in Việt Nam has experienced remarkable transformation.
The retail landscape in Việt Nam is undergoing significant and dynamic changes, requiring local retailers to carefully strategise and adapt their business models to thrive in an increasingly competitive environment.
According to a report by Q&Me, a market research company, updated in April 2024, the retail market in Việt Nam has experienced remarkable transformation.
Based on the latest statistics on the number of stores of major retail brands, there has been a sharp increase in the number of pharmacy chains, surpassing 3,200 in 2024. This growth can be attributed to the expansion of the Long Châu pharmacy chain under the FPT Digital Retail Joint Stock Company (FPT Retail), while Pharmacity chain has reduced its store count in the past year.
According to Q&Me, coffee shops and fast-food chains have witnessed a growth rate of over 10 per cent. The expansion of these establishments has been particularly strong in smaller cities. Convenience stores and mini-supermarkets have also reinvested in Việt Nam, leading to an increase in the number of stores. Brands such as GS25, MiniStop, Seven Eleven and Co.op Food have all experienced expansion in their store networks.
Regarding the retail chain owned by Mobile World Investment Corporation (MWG), Q&Me's report indicates an increase in the number of pharmacy chains, while the count of electronic/IT stores and fresh food chains has decreased.
In addition to the aforementioned report, recent developments among prominent domestic retailers also reflect a shifting landscape. For instance, in April 2024, Chinese investment fund CDH Investments announced the completion of a minority stake acquisition (5 per cent) in the grocery store chain Bách Hoá Xanh (BHX), a leading retailer in Việt Nam under MWG.
By selling stake of BHX, MWG's initial objective was to secure new investors to provide capital for BHX, supporting its working capital, expansion plans, as well as logistics and warehouse upgrades.
As anticipated by the Analytical Department of SSI Securities Company, the BHX chain is expected to reach breakeven in the first half of 2024, creating opportunities for new store openings in the latter half of the year. BHX's revenue is projected to grow by 20 per cent compared to 2023.
Regarding the inflow of foreign investment into BHX, lawyer Đào Tiên Phong from InvestPush Consulting Company revealed in an interview with VnBusiness.vn that Chinese and other foreign investors are expressing interest in various merger and acquisition (M&A) deals within Việt Nam's vibrant retail market.
Phong highlighted that during the process of selling a partial stake, some Vietnamese retailers may set high valuations. However, this also prompts foreign investors to demand thorough financial reports and balance sheets from the retailers.
Fierce competition
It is crucial to develop appropriate strategic calculations. In addition to the ongoing trend of mergers and acquisitions (M&A), the retail sector in Việt Nam is experiencing an even fiercer level of competition.
This is evident in the recent actions taken by FPT Shop in April. After a two-year trial period, they have officially entered the market for distributing home appliances. Currently, they are aggressively selling TVs, refrigerators, washing machines and other products, directly competing with MWG's retail chain, Điện Máy Xanh.
Despite facing direct competition, analysts anticipate a 5 per cent recovery in revenue for electronics and mobile phone retailers in 2024, following a significant decline of around 20-25 per cent in 2023.
Regarding essential product chains like groceries and pharmaceuticals, industry experts believe that profitable chains will focus on expanding their operations to capture more market share. Meanwhile, competitors are making adjustments to their business models.
In the case of Long Châu, analysts predict that the pharmacy chain will utilise the low borrowing costs in 2024 to extend its network into rural areas. Although the revenue from these stores may not match that of urban locations, their profitability will improve. This will create favourable conditions for efficient sourcing, as well as the utilisation of warehouses and logistics facilities.
Furthermore, it's important to consider the luxury retail market in Việt Nam. In the jewellery retail segment, analysts expect a slight double-digit increase in jewellery consumption in 2024, following a 10 per cent decline in 2023.
Daniel Borer, an expert from RMIT University, suggests that although Việt Nam is still classified as a developing economy, it has become one of the prime target markets in Southeast Asia for luxury cosmetics, jewellery and fashion brands such as Dior, Chanel, Louis Vuitton and Cartier.
He said that despite not being as affluent as some other Asian countries, Việt Nam possesses unique advantages that contribute to its rise in the luxury goods industry. As long as there is significant demand, these luxury brands will undoubtedly maintain their presence. — VNS
