Investors strongly expand in Vietnam retail sector

Vietnam’s retail industry has witnessed aggressive expansions from investors, developers, and retailers in a market of almost 100,000 million people.

Brands are in continuous competition and adaptation in terms of pricing, marketing, and sales approach toluring new customers as well as retain current clients, according to Trang Do, retail services manager at professional services firm Colliers Vietnam.

The market depends on short-term and long-term factors, including rising costs, changing needs, retailer reputation and popularity, and different shopping preferences between generations, according to the global firm. It is of the view that Vietnam is one of the most dynamic retail markets in Asia based on business expansions in 2022.

Franchising and merger and acquisition (M&A) deals are two popular strategies this year. Whether competing or collaborating, the goal is to maximize partner advantages to diversify product portfolios and increase market coverage, Colliers said Monday in a release.

Franchising is considered a surefire way for business expansion, with both GS25 of South Korea and WinMart of Vietnam’s Masan going down this path to expand their number of convenience stores. The two advantages of this model are its high flexibility and moderate investment cost, the firm said.

This year, GS25 has garnered attention as the brand marked an important milestone of 200 stores in early November. Portfolio diversification and retail ecosystem optimization are other critical strategies for businesses to shake on new deals and increase brand exposure.

An example is Nova Consumer’s acquisition of Sunrise Foods in June 2022 to link up to 450,000 retail points and develop their farming category. After that, they resold 10.66% of $24.5 million to VinaCapital.

Another example is the Phuc Long tea and coffee chain’s $280 million transfer, equivalent to 85% of Phuc Long’s stakes to Vietnamese conglomerate Masan Group’s The Sherpa.

Previously, The Sherpa had been well-known for many acquisitions, including buying into consumer goods maker Cholimex, coffee producer Vinacafe Bien Hoa, and mineral water company Vinh Hao.

Vietnamese conglomerate Thaco is expanding strongly in retail. Its subsidiary Thiso Retail opened its second Emart hypermarket in Vietnam early this November, while the third is set to open this December.

Thaco expects to have 20 Emart supermarkets in five years, with total revenue of up to $1 billion by 2026. The multi-business group finished its M&A deal with Korean retail giant Emart via a franchise form in late 2021. The Korean firm opened the unique Emart store in Vietnam in late 2015, and could not launch the second.

Lotte, another Korean heavyweight, this November opened its first downtown duty-free store in Vietnam, located in the central coastal city of Danang. Lotte plans to add a duty-free store in downtown Hanoi next year as part of what the retailer calls the Lotte Duty Free Belt, which encompasses the Asia Pacific region.

“There is an emerging trend when big retailers go on a hunt for land funds in greater urban areas as well as Tier-2 and Tier-3 cities, although they themselves proceed with caution,” said Trang from Colliers Vietnam.

Cities with growing urban middle classes, especially Can Tho in the south, Danang, and Hai Phong in the north, are on the list of targeted locations, the firm said.

In terms of expansion in the retail race, Thailand’s Central Retail has opened its new Go! commercial centers in Lao Cai and Thai Binh (northern region) and Quy Nhon (central region) this year, aiming for Dong Thap and Bac Lieu in the south next year.

To double the number of supermarkets to more than 70 within five years, the Thai giant had earlier revealed that it would spend 30 billion baht (more than $800 million) to expand in Vietnam, looking to local sales by 2026 at 100 billion baht (more than $2.8 billion) per annum.

Meanwhile, with the advantage of existing residents, Vincom Retail of Vietnam’s largest conglomerate Vingroup has opened three Vincom commercial centers this year in Tien Giang, Bac Lieu (the south), and Hanoi under its new brand Vincom Mega Mall Smart City).

Viet Capital Securities JSC forecasted Vincom would open six new commercial centers next year, increasing its gross leasable area to 1.94 million square meters by the end of next year.

The market slices become more attractive as a number of retail brands from the U.S. and Europe are eager to be present in Vietnam, with financial capability as strong as that of current players.

Trang said, “We’ve had the opportunity to talk with representatives of these brands and they are very interested in the Vietnamese retail market post-pandemic.

The biggest obstacle for foreign investors in the retail sector is finding space with a suitable location and scale, and following investment and licensing procedures.”

Vietnam’s retail industry is entering a new chapter of development with drastic changes in the digital economy, urbanization, and consumer behavior, according to Colliers.

Therefore, the retail real estate market will continue to be vibrant for the intermediate and long term. In spite of different expansion strategies, each move of the retailers in Vietnam indicates exciting growth prospects and contributes to luring new brands and foreign investors to the country, the global firm said.