As more and more foreign retailers prepare to break into the Vietnamese market, it's hard to believe that the nation is mired in inflation and consumer spending is falling.
Savico, a local real estate developer, has launched an ambitious promotional campaign in advance of the opening of a new shopping mall in Hanoi, this November. The US$35 million MegaMall project is being billed as the nation's largest shopping mall.
Big C, the French retailer, will convert the mall's 14,200 square meter basement into a hypermarket a relatively new concept in a country where traditional retail channels continue to dominate.
Big C, which already has 14 outlets in Vietnam, plans to open 15 more by 2013. The retailer may recruit 1,300 managers to help prepare its expansion plan, according to a story published on Monday by Dau Tu (Investment) newspaper.
Industry insiders are not surprised.
Dinh Thi My Loan, general secretary of the Vietnam Retailers Association, said foreign players have been expanding into the local market quickly.
"Foreign retailers are investing in Vietnam in many ways," Loan told Dau Tu, adding that more European retailers will arrive once a free trade agreement is signed between Vietnam and the European Union.
One way for foreign firms to secure a foothold in the market is to partner with local firms here.
Last week, South Korea's top discount retailer E-Mart set up an $80 million joint-venture with Vietnamese firm U&I to open 52 convenient stores and supermarkers by 2020. E-Mart, the second Korean retailer to invest in Vietnam after Lotte Mart, contributed 80 percent of the project capital, which will gradually increase to more than $1 billion.
Late last year, Singapore's FairPrice inked a similar joint venture agreement with Saigon Co-op to form a new chain of hypermarkets in Vietnam, which FairPrice described as "one of the top emerging markets in Asia." The joint-venture's first hypermarket is expected to be operational by 2012.
Slow growth, for now
While foreigners have big plans for the future, the local market is losing some steam.
In June, consulting firm A.T. Kearney downgraded Vietnam from 14th to 23rd place in its emerging retail market rankings. Vietnam topped the list in 2008.
According to the General Statistics Office, Vietnam's retail sales increased 22.6 percent in the first six months of 2011. The growth represented a slight dip from the 23.2 percent growth rate recorded a year ago. But if inflation is factored out, retail sales only rose 5.7 percent in the first half of this year, versus the corresponding increase of 16.4 percent last year.
Last week, Nielsen released a consumer trend study saying that Vietnamese shoppers have cut back on spending due to soaring inflation and altered their buying behavior.
Vietnamese inflation accelerated in June to 20.82 percent, the highest level in Asia.
"Inflation and devaluations of the dong have had a very tangible effect on the average Vietnamese shopper," said Darin Williams, the managing director of Nielsen Vietnam. Shoppers are increasingly looking for promotions and are willing to change the brands they buy and where they shop, he said in a report.
But the slowdown could be just a minor hiccup.
A.T. Kearney said that the country remains an attractive retail market and is set to hit $113 billion by 2012. Last year's retail sales were recorded at nearly $76 billion.
India-based research firm RNCOS also released a new report on the nation's retail market.
The firm forecast that Vietnam will sustain its upward growth in the coming years. Although the market is dominated by traditional retail stores, the concept of modern retailing is constantly expanding in the country thanks to the entry of foreign players and changes in consumer buying patterns, the company said.
RNCOS projected that modern retail sales in Vietnam will account for nearly 61 percent of all purchases by the end of 2017.