Fierce race for convenience store pie in Vietnam

Famous brands like Circle K, GS25, FamilyMart, 7-Eleven and Ministop are racing for a bigger stake in Vietnam's convenience store sector, a lucrative pie of the current retail market.

'Lucrative pie'

The total retail sales of consumer goods and services in 2022 reached VND5.68 trillion ($242.2 million), up 19.8% over the previous year, according to the General Statistics Office. The Ministry of Industry and Trade estimated Vietnam's retail market at $142 billion currently and $350 billion by 2025.

In recent years, convenience stores have mushroomed in Vietnam under small and medium business models. They often offer essential items for daily life, in combination with a number of services like wifi, dining space, and air conditioning.

Data released by Q&Me, a leading Vietnamese market researcher, shows that last year, Vietnam had about 6,740 convenience stores, with Ho Chi Minh City in the south taking the lead with over 2,600 stores, followed by Hanoi in the north and Da Nang in the central region. Convenience stores are gradually becoming more popular with brands like Circle K (U.S.), Ministop (Japan), GS25 (South Korea), and 7-Eleven (Thailand).

Meanwhile, market research site Euromonitor pointed out that the revenue of foreign convenience store brands in Vietnam increased from VND3.35 trillion ($142.7 million) in 2016 to VND8.02 trillion ($341.8 million) in 2021. Of this, Circle K held the highest market share at 48%, followed by Family Mart 18.8%, Ministop 14.3%, and 7-Eleven 7.3%.

This is considered an attractive battle to win a lucrative pie of the retail market in the current context.

Vu Thi Hau, chairwoman of the Association of Vietnamese Retailers, said that despite the Covid-19 impact, retail systems in Vietnam have been still thriving. Convenience stores all have made impressive growth, meeting the consumption needs of people, especially in big cities.

Game of foreign names

However, currently this game only involves foreign businesses as domestic equivalents are not strong enough or do not participate.

Family Mart is an example. The Japanese brand officially entered the Vietnamese market in 2009 in a joint venture with Phu Thai Group. Due to continuous losses and unsuccessful restructuring efforts, in 2013, the joint venture broke down and Thai convenience store chain B's Mart acquired all Family Mart stores in Vietnam.

Previously, on December 20, 2008, Circle K became the first international convenience store brand in Vietnam. The U.S. brand is considered the most successful case in this market as it boasts more than 400 stores across the country and makes up nearly half of the market share.

One of Circle K's formidable competitors is Ministop, owned by Japan’s "big man" Aeon. Entering Vietnam in 2015, Ministop has become a true "roadside stop" for a large number of Vietnamese users and quickly expanded with 135 stores.

Another "player" is 7-Eleven, which joined the Vietnamese market in 2017 with a store right in District 1, the busiest area in the southern economic hub HCMC. At that time, 7-Eleven announced it would own 100 stores in three years and 1,000 stores in 10 years. But by 2022, it had only 66 stores across Vietnam.

In 2018, GS25, a South Korean brand operated by Son Kim Group, officially opened its first store in District 1, creating a fever among young people. Using Son Kim Group’s existing premises, GS25 has been present in prime locations in HCMC, aiming to have 2,500 stores in 10 years.

However, as of 2022, GS25 had only 133 stores. Notably, the current number is the result of three years of franchising to increase its coverage.

Changing to adapt

In fact, not many Vietnamese companies and corporations have been participating in the race for a convenience store market share, except Son Kim with GS25.

Unwilling to hand the lucrative pie to foreign giants, Vietnamese companies and corporations have also played this game, including Saigon Co.op's Co.op Smile, and Masan's Winmart+. To attract customers and increase their experience, Winmart+ included Phuc Long counters in its stores.

However, their efforts are not enough and success depends on many factors. Moreover, Co.op Smile and Winmart+ are seen as mini supermarkets rather than convenience stores.

Commenting on this issue, Bui Ngoc Son, director of Dan Thai Co., Ltd., operating in the field of consumer finance, said he was not surprised by convenience stores in Vietnam bearing the footprint of foreign names.

"This is a very specific market segment as convenience stores are a modern grocery model favored by Western and Asian countries. They serve the customer purpose of quick and convenient purchases. That means convenience must come first,” he explained.

Son added that with a distinctive shopping environment like Vietnam, where traditional consumers are familiar with small grocery stores and supermarkets, domestic brands will not be interested in running convenience stores that need a different way of management and operation. They are open around the clock and require optimal space and safety for both customers and employees.

"So, choosing to franchise GS25 like Son Kim can be considered a reasonable choice," said Son.

In addition to diversifying products, big brands like Circle K, Ministop and 7-Eleven have continuously added more services including WC, e-wallets, offering dining space and wifi to satisfy the on-site working needs of young people and office workers.

As convenience stores mainly serve modern, young customers, most are located near apartment and office buildings, train and bus stations and airports, he said.