In 2016, the retail market in Vietnam has reached the sixth place in global retail development index (GRDI) with the total sales of more than US$118 billion, increasing by 10.2% compared to the same period of 2015.
According to a survey by A.T.Kearney on annual GRDI, in 2016, Vietnam only ranked behind the major markets namely India, China, Malaysia, Turkey and the United Arab Emirates.
That means there will be more foreign retailers eyeing the Vietnam market in the future. A.T.Kearney predicts that the convenience stores and mini-marts model will be the most developed segment of the retail market. This partly explains the reason why so many giants particularly focus on it.
With different strategies, numerous large retail brands in the world continue to set foot in Vietnam and intensify the competition for market share.
A whirlwind of new chain stores
Vietnam has completely opened its retail market since January 11th, 2015 when it officially granted the establishment of wholly foreign-owned retailers to fulfil Vietnam's WTO commitments. Nevertheless, right in 2014, a series of foreign retail giants had planned to invest in Vietnam.
It is Aeon (Japan) with the strategy of expanding market share that expects to have 20 large-scale shopping malls with the investment capital of US$1.5 billion by 2020. Lotte Mart (South Korea) has also secured its position in Vietnam with the expectation to own 60 shopping centres throughout Vietnam with the total investment capital of US$3.2 billion.
After that, in October 2015, Emart - the leading retailer in South Korea - officially entered Vietnam with a shopping centre worth US$60 million in Ho Chi Minh city. The presence of Takashimaya, one of the largest retailers in Japan, at the Saigon Center Shopping Mall in July 2016 also showed the obvious appeal of the Vietnam retail market.
The race among retailers continued to warm up. In mid-June 2017, 7-Eleven Japanese convenience store chain officially opened its first store in Vietnam. 7-Eleven is considered the world's most powerful convenience store chain as a new store is opened every two hours. According to their plan for the next three years, 100 7-Eleven stores will be opened in Vietnam, which should reach 1000 in the next ten years.
According to the latest information, South Korea's largest convenience store operator GS Retail has signed a contract with Son Kim Corporation on a joint venture to open GS25 stores. Vietnam will be its first overseas market, and the first store is expected to be opened before the end of 2017.
A whirlwind of M&A deals
However, foreign retailers are choosing a faster and more economical way to enter Vietnam – via M&A (mergers and acquisitions) deals. In 2016, M&A, whose value accounted for 38.46% of the value of all the deals, is considered to be the most exciting in Vietnamese retail sector.
In early May 2016, the Central Group of Thailand stirred up the Vietnamese retail market by spending US$1.05 billion to buy the BigC supermarket chain from the Casino Group (France). Previously, TCC Holdings, another Thai conglomerate, had also acquired the entire chain of Metro Vietnam Cash & Carry at a price of US$800 million. Not only Thai investors, South Korean ones have also signed remarkable M&A deals in the retail sector. A name to mention is CJ Group that acquired nearly 72% stake of Cau Tre Enterprise and renamed it CJ Cau Tre Foods Joint Stock Company.
Notably, apart from the M&A scheme, foreign giants continue to buy shares, stocks and invest in Vietnamese new enterprises that sell their capital for the first time. This seems to be a strategy to research the market, buy the brand and earn profits before they officially break into the Vietnam market.
Da Lan toothpaste is an example. This emerged as a strong brand in the Vietnam market in the 90s which accounted for 30% of market share. Collaborating with Colgate, the owner of Da Lan dreamed of flying high with this famous cosmetics corporation. However, this is just a scheme of Colgate to enter the Vietnam market. As a result, after only 3 years, Da Lan lost its brand to Colgate.
M&A is not bad by nature, as sellers and buyers are only chasing their own benefits. Every takeover attempt is adorned with "missions" and "win-win cooperation".
In general, the recent foreign "whirlwinds" have made the Vietnam retail market more competitive. The retail market will be an intense battle, and only who have the right strategies can gain advantages.