A street vendor pushes his bicycle in front of an outlet of US convenience chain Circle K on Bui Vien Street in downtown Ho Chi Minh City. Seven other foreign convenience stores line up on the street. PHOTO COURTESY OF TUOI TRE
Foreign retailers are eating losses as they flood into Vietnam's centers in an effort to position themselves to dominate the market and eliminate local competition.
Ho Chi Minh City currently has 475 convenience stores, 350 of which are foreign-owned; several occupy the same downtown streets.
Bui Vien Street in District 1 has eight alone.
Singaporean Shop & Go, which arrived in 2005, became the leading convenience store chain in Vietnam after opening its 103rd outlet last month.
A source from the retailer said it plans to open at least 30 more by the end of the year.
US chain Circle K has opened 73 outlets since 2008, including ten in Ho Chi Minh City since the beginning of the year.
Japanese franchise FamilyMart has opened 34 stores in the city since its return to Vietnam last July and is expecting to add 50 more by the end of the year.
The firm sold its stake in 41 outlets (shared with Vietnamese retail group Phu Thai) to Thai retailer Berli Jucker, which relabeled them “B’s mart.”
Yamashita Junichi, general director of FamilyMart in Vietnam, told Tuoi Tre that its 475 stores are a modest number compared to the minimum of 5,000 such stores needed to satisfy consumer demand.
The stores cater to busy working people who like to grab quick food and necessary home products at the end of the working day.
A representative from the chain said it has plans to reach out to nearby industrial provinces Dong Nai and Binh Duong, as well as Hanoi.
The stores stress their commitment to providing whatever customers need.
A Circle K outlet on Bui Vien Street began boiling broth after late-night instant noodle buyers suggested they do so. The broth and additives (e.g. sausauges and eggs) cost an extra VND15,000 (around US75 cents) per serving.
A FamilyMart on Dang Van Ngu Street near a primary school has set up a 20 square meter rest area on its second floor stocked with plenty of tables, chairs and free water.
A nearby B’s Mart store designed a similar space for students to study in.
The foreign investors say they're determined to expand, although their stores are making losses.
Junichi of FamilyMart said its goal at the present is to open as many outlets as possible, increasing its market share as consumers grow accustomed to new shopping habits.
He expected the system will start paying off after five years.
Nguyen Ngoc Hoa, board chairman of the local chain Saigon Co.op, has opened 72 convenience stores.
He believes the small-scale retail model seems like a promising opportunity. Hoa said most investors are suffering losses, “but the goal is to stretch influence by any means.”
Another local investor said every chain is making losses, so it’s not a quite a problem.
“It’s not time yet to make profit; it's time to grab marketshare.”
Losses may prove a problem, however, when local firms short on capital attempt to compete with foreign chains with deep pockets. At the moment, foreign firms are expanding their supermarket presence as well, and eating up prime real estate.
Insiders say foreign investors are driving Vietnamese brands off local shelves, with the help of foreign-coddling authorities.
Hoa of Saigon Co.op told Tuoi Tre that foreign investors have the upper hand thanks to their financial strength, management experience and cheap global supply chains, while current government policies afford no privileges to local retailers.
Japanese retailer Aeon is about to open a second $95 million outlet in Binh Duong Province, after making a $100 million debut in Ho Chi Minh City in January.
Aeon said it plans to have 20 shopping malls in Vietnam by 2020.
Thailand’s Central Group opened a Robinson's mall in Hanoi in March and plans to open the second in Ho Chi Minh City this year.
Bangkok-based hypermarket chain Big C and Korean Lotte have also opened new outlets. Big C now runs 27 supermarkets in Vietnam and Lotte seven; the Korean firm is scheduled to add three more this year and a total of 60 by 2020.
Foreign stores tend to put more of their products on the shelves and local consumers say they have to make a lot of effort to find products made in Vietnam.
Hoai, a regular customer at Aeon, said she can hardly find Vietnamese instant noodles, soy sauce or coffee. “I thought those were Vietnam's strengths… They get stuck in obscure places, if any.”
The general director of a Vietnamese confectionary retailer, who wished to remain unnamed, said Lotte Mart has removed seven of his product categories from its shelves as the company failed to offer regular promotions.
Businesses say that's a standard requirements for a brand to be displayed at foreign supermarkets, besides having to provide to them discounts of 15-20 percent.
Vu Kim Hanh, chairwoman of the Association of Vietnamese High Quality Businesses, said local producers need to make their products more competitive by ensuring better quality control, more catchy designs and lower prices.
Hanh said that if Vietnamese products continue to lose position in retail venues, “[local producers] will shrink and die.”
But she said the government needs to support them by being fair at the very least. She said many local businesses face even more red tape than foreign investors.
Dinh My Loan, chairwoman of the Association of Retailers agreed, saying that local authorities tend to favor foreign investors and thus give them more help and fewer troubles than they do Vietnamese investors, particularly regarding access to land use and information on consumer trends.
“Governments in many places prefer big supermarkets like Big C or (German) Metro as they not only rent more land, but also boost Vietnam's reputation for being able to attract foreign investment.
“Large supermarkets like Metro are supposed to occupy the urban outskirts, but many places give them downtown real estate and affect smaller supermarkets,” Loan said.
She said some foreign businesses have a wholesale license but sell at a retail level without any consequences.
She blamed the government for opening doors to foreign retailers before the 2007 deadline set by Vietnam’s WTO commitment, exposing local businesses to stiff competition before they were ready.
“All the good policies and regulations will be for nothing if they are not strictly and effectively enforced,” Loan said.
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