Competition in the retail market has just begun

"Competition in the retail market has just begun" - That is the judgment of Ms. Do Thi Thu Hang, Director of Research & Consulting of Savills Hanoi, about the current situation of the retail market.

Ms. Do Thi Thu Hang, Director of Research & Consultancy of Savills Hanoi

According to research by Savills Vietnam, in Hanoi only, the total supply of retail space has now reached over 1.5 million m2 of floor, an increase of 14% compared to the same period last year. In the past two years, the number of commercial centers has been continuously increasing. Meanwhile in Ho Chi Minh City, the total supply of retail space has reached about 1.4 million m2 of floor, an increase of 13% compared to the same period in 2018.

Large population size, high urbanization rate in Hanoi and Ho Chi Minh City, increasing income leading to large consumer demand are considered advantages to promote Vietnam's retail market quickly. In addition, consumer confidence also contributes to the demand of Vietnamese entertainment and shopping.

Compared to regional markets, the percentage of retail space per capita in Hanoi and Ho Chi Minh City is currently low. This shows that there is much room for development in this area. Another advantage for investors is that local governments are very welcoming and facilitating retail businesses. However, the retail market does not have a clear master plan to introduce large retail development units, thereby creating momentum to change the face of investment, shopping habits in some localities. The planning is currently passive.

According to Ms. Hang, the high cost of land in large urban areas, which requires a lot of initial investment and a slower recovery of capital than other real estate products like housing. In addition, Vietnam's retail market has not really had the advantage of competing with markets in other countries for high-end products. The proportion of buyers of this item is small and they are willing to buy high-end products abroad.

Last time, the market witnessed fierce rejection when a series of names were forced to leave the market such as Tran Anh, Shop&Go, Fivimart, Giant and most recently Auchan. However, Ms. Hang stated that the competition of the retail market has only just begun. The fact that large enterprises such as Vingroup and Saigon co-op have expanded their business to many big cities and provinces in the past and acquired small brands is a testament to this.

The competition is expected to be even more fierce because after a long time of learning and experimenting in the market, foreign businesses have gradually grasped the tastes and habits of Vietnamese consumers, thereby giving out the suitable business strategies and expectations, ready to compete with domestic businesses.

In this race, if foreign retail chains have modern models, they are proven in the world, have financial potential and have a competitive advantage over Vietnamese enterprises in the development of trade centers. Commercial, domestic enterprises are showing strength in the field of convenience stores with a wide network.

Ms. Hang predicts the success story of a retail business will be in the business strategy, besides integrating technology to match modern consumer habits. Nor does it eliminate the direction of integrating retail ecosystems or combining domestic and foreign enterprises to diversify development, taking advantage of both sides' strengths, towards providing more experience and products, convenient, affordable prices for consumers.

According to Thanh Thinh