Vietnam’s retail market is forecast to be the fastest-growing in Southeast Asia in 2017 led by Japanese and Korean retail giants.
Foreign retail conglomerates are beating a path to Vietnam which is seen as a potential shopping mecca with rising demand due to its favourable demographics. American consulting firm Boston Consulting Group predicts that the middle and upper classes will double in size by 2020. Additionally, credit cards are being more widely used and more people are drawing monthly incomes of over USD714 which are the main target of retailers. Better infrastructure and an increasing number of foreign tourists also play a part in attracting big name foreign retailers into Vietnam.
Estimates from The Economist Intelligence Unit show that Vietnam’s retail market has witnessed healthy growth of approximately 10% annually in recent years, with sales growing by about 90% from 2009 to 2015. The market is expected to be the fastest growing in Southeast Asia this year.
2020: YEAR OF THE MALLS
Currently, malls, supermarkets or commercial centres which are often located in major city centres make up only 25% of total retail sales. This is predicted to rise to 45% by 2020 by which time it is projected that there would be about 1,200- 1,300 supermarkets and more than 300 large malls, and thousands or even tens of thousands of convenience stores.
“The market is becoming more attractive recently on the back of a rise in purchasing power, growth in consumer retail spending, and an expansion in urban population and young demographics,” says Stephen Wyatt, Country Head of JLL Vietnam. It has continually been among the world’s Top 30 most attractive emerging retail markets since 2008 in the Global Retail Development Index (GRDI) published annually by AT Kearney from the US.
Last year, the General Statistics Office has estimated Vietnam’s retail revenue at US$118 billion, a 10.2% rise over the previous year, and relatively higher than other markets in the region. 2016 also saw the retail network continuing to expand, business models diversified, and mergers and acquisitions of retailers increased, especially with foreign involvement.
For example, Thailand’s Central Group acquired Big C supermarket chain from French retail group Casino in Vietnam, with plans to double the number of stores from the current 34 in the next five years. It also plans to upgrade existing Big C stores into commercial complexes.
Not to be outdone, other foreign big retail groups like Japan’s Aeon, France’s Auchan and South Korea’s Lotte have been going on an expansion spree in Vietnam to increase market share.