English
Foreign investors hurry to dominate Vietnam’s retail market
The Hanoitimes – After a long time making merger and acquisition (M&A) deals to set foothold in Vietnamese market, foreign retailers are ramping up their expansion plans to gain more market share here.
Central Group, Thailand’s largest retail conglomerate, has recently planned to spend as much as US$500 million to expand its retail network in Vietnam over the next five years.
“Central Group has already invested US$1.5 billion in Vietnam since 2012 and plan to invest another US$500 million in the next five years, from 2018 to 2022. Store penetration year to date in total is 250 stores nationwide and we plan to reach 720 stores in the next five years, or by 2022,” Philippe Broianigo, chief executive officer of Central Group Vietnam and Big C Vietnam, told the media.
With 250 stores covering more than 700,000 square feet in more than 37 provinces and cities, Central Group is the largest foreign retailer in Vietnam, owning five core business units: Big C Shopping Mall, Food Store, Fashion Store, Hardline Store, and Online Platform providing omnichannel and e-commerce services.
The move was made after Central Group reported that its sales in Vietnam grew by double digits in the first six months of this year compared with the same period of last year. The firm expects to achieve an even greater performance in the second half of this year.
Many other foreign retailers have so far also sped up plans to increase their outlets in Vietnam, which has been one of the world’s most attractive markets for retail investment, ranking sixth in the Global Retail Development Index (GRDI) of A.T. Kearney.
Among them, Japan’s AEON Group is building two malls in northeastern cities of Hanoi and Hai Phong while Lotte Mart also expects to increase its stores in Vietnam from the current 13 to 87 at the end of 2020.
Besides the expansion of outlets, foreign retailers have been also racing to spend a significant amount of money to hunt for personnel, who are mainly Vietnamese people with competence of the Vietnamese retail market.
With the move, analysts forecast that foreign retailers will soon dominate the local fertile retail market. United Kingdom’s market research firm Euromonitor forecast that foreign retailers will hold 68.3 percent of Vietnam’s modern retail market share by 2020.
Ineffective protection policy
Experts attributed the dominance prospect of foreign retailers in the local market to several reasons, including the ineffective implementation of domestic protection strategies and policies.
Vietnam has allowed 100 percent foreign ownership of retail businesses under certain conditions since 2009, two years after accessing the World Trade Organization. In 2016, the country lowered barriers to opening stores under 500 square meters, and foreign convenience store chains flourished.
Though the country also set up barriers to protect its retailers, including the imposition of ENT (economic needs test) permitted by the World Trade Organization before allowing foreign supermarket chains to open their second outlet in Vietnam, but the restrictions are not effective when foreign investors conduct M&A deals or make joint ventures with Vietnamese companies.
Specifically, when making M&A, foreign retailers aren’t imposed ENT and they automatically have more new distribution outlets. Taking Central Group as an example, after M&A deals with Big C and Metro, it has 51 stores, including 32 of Big C and 19 of Metro.
Under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, signed in March, these companies will eventually be able to expand without any further government screening.
With 250 stores covering more than 700,000 square feet in more than 37 provinces and cities, Central Group is the largest foreign retailer in Vietnam, owning five core business units: Big C Shopping Mall, Food Store, Fashion Store, Hardline Store, and Online Platform providing omnichannel and e-commerce services.
The move was made after Central Group reported that its sales in Vietnam grew by double digits in the first six months of this year compared with the same period of last year. The firm expects to achieve an even greater performance in the second half of this year.
Many other foreign retailers have so far also sped up plans to increase their outlets in Vietnam, which has been one of the world’s most attractive markets for retail investment, ranking sixth in the Global Retail Development Index (GRDI) of A.T. Kearney.
Among them, Japan’s AEON Group is building two malls in northeastern cities of Hanoi and Hai Phong while Lotte Mart also expects to increase its stores in Vietnam from the current 13 to 87 at the end of 2020.
Besides the expansion of outlets, foreign retailers have been also racing to spend a significant amount of money to hunt for personnel, who are mainly Vietnamese people with competence of the Vietnamese retail market.
With the move, analysts forecast that foreign retailers will soon dominate the local fertile retail market. United Kingdom’s market research firm Euromonitor forecast that foreign retailers will hold 68.3 percent of Vietnam’s modern retail market share by 2020.
Ineffective protection policy
Experts attributed the dominance prospect of foreign retailers in the local market to several reasons, including the ineffective implementation of domestic protection strategies and policies.
Vietnam has allowed 100 percent foreign ownership of retail businesses under certain conditions since 2009, two years after accessing the World Trade Organization. In 2016, the country lowered barriers to opening stores under 500 square meters, and foreign convenience store chains flourished.
Though the country also set up barriers to protect its retailers, including the imposition of ENT (economic needs test) permitted by the World Trade Organization before allowing foreign supermarket chains to open their second outlet in Vietnam, but the restrictions are not effective when foreign investors conduct M&A deals or make joint ventures with Vietnamese companies.
Specifically, when making M&A, foreign retailers aren’t imposed ENT and they automatically have more new distribution outlets. Taking Central Group as an example, after M&A deals with Big C and Metro, it has 51 stores, including 32 of Big C and 19 of Metro.
Under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, signed in March, these companies will eventually be able to expand without any further government screening.
Source: http://www.hanoitimes.vn/investment/news/2018/09/81E0CD31/foreign-investors-hurry-to-dominate-vietnam-s-retail-market/