STORES Magazine - March 2009 - (Page 94)

POSTSCRIPT endcap New Dawn for Retail in Vietnam BY ROBERT GREGORY Robert Gregory is a retail analyst with Planet Retail specializing in Asia and the grocery segment. Vietnam’s embryonic modern retail sector opened 2009 with a significant shift in the regulatory environment. As part of its World Trade Organization membership, the country opened its retail sector to foreign companies on January 1, allowing foreign retailers to hold more than a 49 percent stake in a local joint venture for the first time. Going forward, foreign investors will be able to establish 100 percent foreign-owned enterprises, which should lead to a significant shift in the structure of the market in the medium to long term. The first major entrant to the Vietnam market was France’s Bourbon (now Casino), which opened its first Cora hypermarket in 1998. The chain was renamed Big C in 2004 and is now one of that country’s leading retailers. Germany’s Metro Group opened its first cash & carry in 2001, and Malaysia’s Parkson opened its first store in downtown Ho Chi Minh City in 2005. Dairy Farm gained approval from the Vietnamese authorities to establish supermarket operations in 2007. Most recently, Lotte Shopping opened its first Lotte Mart hypermarket in Ho Chi Minh City in December; its Korean rival, GS Retail, has also been granted a license to open in early 2009. poor at present, Vietnam has a relatively large, literate and youthful population that is becoming increasingly urbanized. The political situation is relatively stable, and the country has one of the fastest-growing retail sectors in the world, though it remains highly fragmented (for example, Planet Retail estimates that the top five grocery players held a combined market share of 20 percent in 2008). Further deregulation and closer trade links with the rest of the world should also encourage foreign investment. The obvious contrast is with China, which joined the WTO in 2001. In that market, the lifting of restrictions happened relatively quickly: By December 2003, foreign retailers were able to own in excess of 50 percent of joint ventures, and all capital cities were opened up. Foreign companies have been able to own 100 percent of Chinese ventures since December 2004, and there have been no restrictions on where they can operate geographically or on the number and size of stores. In China, the impact has been significant: Foreign global grocers have established a strong presence among the leading retailers — it is the only market in which Wal-Mart, Carrefour and Tesco all compete — and are increasing their share of the market annually. In 2004, the combined market shares of Carrefour, Auchan, Wal-Mart, Metro and Tesco was 1.1 percent; by 2007, it had increased to 1.8 percent. Retailers on the horizon Given the recent relaxation of regulations, a host of players can be expected in the coming years. The likes of Tesco, Carrefour and Wal-Mart are all likely to be interested in such an attractive market. Tesco, with its strong operations in nearby Thailand, appears particularly well positioned to extend its operations eastward. 7-Eleven’s entry into the market also seems inevitable: CP ALL, Dairy Farm and President Chain Store are aiming to gain a license from 7-Eleven Inc. The benefits for foreign retailers are obvious. Although 94 STORES / MARCH 2009 Uncertain future As might be expected, Vietnamese retailers view the future with a mixture of optimism and fear. They are likely to face increasing competition from the new arrivals, but it seems likely that there will be room for both domestic and foreign retailers to grow in such a fragmented market, at least in the immediate future. In the medium to long term, however, consolidation is likely to occur. Large native retailers like Saigon Co-op (32 stores, with plans for 100 by 2015) that have expanded strongly in recent years now look well positioned to survive, but a number of the smaller players could be acquisition targets in the future. Vietnam is certain to be one of the most dynamic and important retail markets in the coming years. The increasing modernization and growth of the country’s retail sector, as well as the growing presence of global giants, will open some exciting opportunities for suppliers, given that this relatively untapped market will be receptive to new products and categories. WWW.STORES.ORG http://WWW.STORES.ORG

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STORES Magazine - March 2009 Contents Executive Editor's Page President's Page Movers and Spenders What Shoppers Think Take Your Laundry Online 10 Things You May Have Missed Numbers Worth Counting Full Price/Markdown Retail People Luxury for Less Q & A CONCEPT2WATCH Checkout Management Online Entrepreneurs Sustainability POS Online Strategy Online Scheduling SaaS Online Marketing Merchandise Security PCI Compliance LPinformation Supplier Directory Exception Reporting Industry Perspective Theft Research LOEB Retail Letter ARTS Update Point of View NRF News Retail Crossword Retail Industry Calendar End Cap

STORES Magazine - March 2009

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