An influx of major Japanese retailers heats up Vietnam’s service market

Ambition of Japanese giants

According to the Ministry of Planning and Investment, Japan is the second largest investor in Vietnam with more than 3,400 validated foreign direct investment (FDI) projects and the total registered capital of nearly US$44 billion.

Those projects have been carried out in 19 sectors. They mainly focused on Japan’s strengths and ones needing overseas investment opportunities such as manufacturing and processing industry (1,541 projects worth US$33.54 billion); real estate (53 projects worth US$1.91 billion); production and distribution of electricity, gas, water (15 projects worth US$1.28 billion).

However, in 2016, the project number in the manufacturing sector steeply fell from 30% to 20% in the newly-invested project number. Meanwhile, the project number in retail, hotel and catering services has doubled.

Notably, the "giant" Aeon Mall is showing its burning ambition to spur and expand investment in Vietnam. In early 2017, Aeon Mall announced it would open a new shopping center worth US$200 million in Ha Dong (Hanoi), which is expected to operate in 2019.

Until now, about US$600 million has poured into five AEON centers. However, compared with the target of opening 20 commercial centers in Vietnam by 2020, Aeon has only reached one quarter.

Also, Aeon has promoted the cooperation and acquisition of local supermarkets to set up 100 commercial locations. Currently, Aeon owns a 49% stake in Citimart, which has been renamed to AEON Citimart, and a 30% stake in Fivimart.

Takashimaya, another major Japanese retailer, has invested US$47 million in Vietnam since 2012, including Saigon Centre.

The 7-Eleven convenience store chain also claims to have 20 more stores in 2017 and will increase to 100 stores in the next three years.

Many Japanese small enterprises are also interested in the Vietnamese market. Recently, ACA Investments Fund of Sumitomo Group held a 20% stake in Bibo Mart.

Potential market for foreign investors

Talking with TheLEADER on Japanese investment trends in Vietnam’s service sector, Akira Hizukuri, Vice Chairman of Japan Business Association in Vietnam (JBAV), said that Japanese companies are now stimulating investment in retail and consumer goods business in Vietnam, which is expected with high growth potential.

"With a growing economy and a large, young population, Vietnam is a potential market attracting the attention of foreign investors, including Japanese ones."

Sharing the same view, Hironobu Kitagawa, Chief Representative of Japan External Trade Organization (JETRO), Vietnam's economy is growing steadily with an annual GDP growth rate of over 6%, accompanied by the increasing demand for high-quality consumer goods and household goods. Therefore, Vietnam has been attracting the attention of businesses around the world.

He also stated that Japanese enterprises were beginning to focus on producing consumer goods for the Vietnamese, as high-quality household products such as kitchenware, detergents or cosmetics are the strengths of Japan. Therefore, Japanese companies are looking forward to entering Vietnam, a large market with nearly 100 million consumers.