Vietnam has been named among the Top 6 most-attractive retail markets in the world this year by A.T. Kearney in its Global Retail Development Index (GRDI), following India, China, Malaysia, Turkey, and the United Arab Emirates (UAE).
It outstripped populous markets such as Indonesia (8th) and countries with good retail markets in recent years, such as Thailand (30th), Philippines (18th), Kazakhstan (16th), and Saudi Arabia (11th).
This is evidence that Vietnam’s retail market is again attracting foreign investors, as it was outside of the Top 30 in 2002, then 6th in 2009, 14th in 2010, and 23rd in 2011, according to A.T. Kearney.
The reason why Vietnam is in the Top 6 is that its investment laws are open and promote its attraction among foreign retailers.
The government has permitted foreign retailers to own 100 per cent of capital in the country’s retail sector and has adopted priority policies to attract them.
This is reflected in a 12.5 per cent increase in foreign investment in 2016. The recent free trade agreement (FTA) signed with the EU is expected to push investment even higher.
Retail sales have also increased significantly in recent times, reaching $118 billion in 2016, up 10.2 per cent against 2015.
“It’s a suitable time for Vietnam to boost up its economy, which is shifting towards private enterprise and high-value export items, and this is expected to increase incomes and consumption in the long term," said Mr. Soon Ghee Chua, AT Kearney’s Southeast Asia chief.
He also believes that government incentives, urban and middle-class population growth, a young population, and GDP growth expected at 6.6 per cent this year gives foreigners plenty of reason to be optimistic about Vietnam.
E-commerce also contributes significantly to retail revenue in the country, which is expected to increase 22 per cent this year, and online discounts and promotions are boosting sales. AT Kearney notes, however, that businesses will have to be careful and have a long-term strategy to sustain this growth.
Foreign retailers are expanding their business systems in the domestic market. According to A.T. Kearney, convenience stores and mini-marts are the fastest growing segments. Circle K and FamilyMart entered the market in 2009 and are expanding rapidly. FamilyMart expects to have more than 800 stores by 2020 and 7-Eleven will open its first store in Vietnam this month under a franchise agreement with Seven System Vietnam, and aims to open 1,000 stores over the next ten years.
According to forecasts to 2020, modern retail channels will increase up to 45 per cent, the country will have about 1,200-1,300 supermarkets, the number of trade centers will also increase to over 300, and convenience stores will number in the thousands.
The GRDI was first published in 2002, ranking 30 developing countries on their attractiveness for retail investment.
It analyzes 25 factors related to macroeconomics and retail, to help retailers identify global strategies and identify emerging market investment opportunities. The study not only indicates the most attractive markets today but also potential markets in the future.