The retail market in Ho Chi Minh City is believed to have great potential but that potential doesn't always translate to success.
When it was opened last December, the Kumho Asiana Plaza in District 1 had some 30 stores selling luxury products. But after months of slow sales, many tenants decided to quit because they could no longer afford the rent.
Now there are only a few stores left in the mall one of the biggest shopping centers in the city. The tenants continue to pay rent and management fees in the face of flagging sales.
The Kumho Asiana Plaza, operated by Colliers International Vietnam, is located in downtown Ho Chi Minh City. But store owners said even this location doesn't translate to more customers.
Another shopping mall, Saigon Paragon in District 7, was temporarily shut down early this month.
Le Hoai Anh, general director of Kim Cuong Company, the operator of the shopping mall, admitted that the closure was caused by a failure to effectively run the mall. "We never managed a shopping mall before and that's why there were mistakes leading to an unexpected business situation," she told Thanh Nien.
Anh said her company has hired a management firm to run the mall, which is expected to re-open at the end of this year. Saigon Paragon cost US$30 million to build. It was opened April last year.
Analysts said while Ho Chi Minh City is considered a great potential retail market, not all of its shopping centers are successful, especially those far from the city center.
Meanwhile, high rents (from $70 to $180 per square meter) make it hard to ensure profits.
More to come
More retail centers will continue to come online in the city.
According to the Industry and Trade Department, there are 102 supermarkets and 28 shopping malls in the city. The department expected the retail area in the city to reach 740,000 square meters in 2013 - double the current figure.
UK real estate services firm Savills issued a report last week that indicated three more centers would appear before the end of the year: the Crescent Retail, Bitexco Financial Tower and Thien Son Plaza. The trio will add a total of 50,000 square meters of retail space to the market.
The firm said the city's retail market has "strong potential" in the mid-term.
But right now, some industry insiders aren't happy.
Tham Tuck Choy, general director of Parkson Vietnam was quoted by Tuoi Tre as saying his company posted an average growth rate of 30 percent a year, but this is lower than expected.
He said, of the customers shopping at Parkson's outlets, 15 percent are tourists and foreigners working in Vietnam while the rest are local consumers. The purchasing power of this local customer group is rising, but not steadily, Choy said.
A toy retailer who wished to remain anonymous said the retail market depends on the growth of the middle and upper class and their demand for expensive products.
But right now there are more window-shoppers than real buyers.