Vietnam continued to lose its appeal to retail investors this year, even though prospects for modern retail formats remain positive, according to a report by global management consulting firm A.T. Kearney.
The country moved down nine spots to 23rd place in A.T. Kearney's index of top ranked developing countries that retailers should enter. Vietnam topped the list in 2008, ending India's three-year reign, only to dip to 6th place a year later. It fell to 14th last year.
A.T. Kearney said that the country remains attractive, with its growing population. The firm anticipates that Vietnam's market size will hit US$113 billion by 2012.
Vietnam officially opened its retail market to international businesses in early 2009.
"While consumer confidence is high, poor distribution infrastructure and expensive retail space remain barriers to entry by foreign retailers," the company noted.
Traditional retail channels continue to dominate the Vietnamese market, but modern retail formats are growing more prominent, the firm found.
"Consolidation is expected among foreign retailers trying to deepen their market penetration," A.T. Kearney said. UK retailer Tesco and Singapore-based FairPrice plan to enter the market in 2011, it added.
The company's Global Retail Development Index ranks 30 emerging markets based on factors like economic risk, market saturation and time pressure.
South America dominated the list this year, with Brazil, Uruguay and Chile occupying top three positions. Two major Asian markets lost out: 2010 champion China slipped to 6th place while India dropped one spot to 4th.
Michael Moriarty, A.T. Kearney partner and study co-leader said, "Brazil is an attractive target expansion market given its expected GDP growth of 5 percent per year over the next five years, a large and highly urban population, and surging retail sales."