Middle class look for quality
HCM CITY — There’s a retail revolution coming to Viet Nam. The
growing middle class of Vietnamese comsumers are becoming savvier and more
discerning about their product quality and shopping ambiance. At the same time,
the prices of mid-range goods are coming down. Together, these pressures will
modernise trade in the country, according to delegates at a conference in HCM
"Rising incomes over the last 10 years have dramatically changed
the buying habits of Vietnamese consumers," said Pabrice Carrasco, general
manager of Kantar Worldpanel Viet Nam and Philippines, TNS Viet Nam. "With 56
per cent of the population under 30 years old, Viet Nam has a large consumer
market with young, demanding and newly sophisticated consumers."
Retail sales in the country grew by 18 to 22 each year between
2003 and 2007. Despite the global financial crisis, total revenue from the
retail sector in the first eight months of this year rose by 18 per cent against
the same period last year.
"As purchasing power has exploded, many consumers have begun to
prefer shopping in safe, clean and convenient, and sometimes indulgent places,"
Viet Nam currently houses around 230 supermarkets and
hypermarkets, 23 trade centres, 165 wholesale markets and nearly1 million square
metres of floor area under construction for retail business, according to Tran
Tinh Minh Triet, consultant at Retail Chain.
One key indicator of the changing retail landscape is the food
industry, in which consumers are increasingly patronising brick-and-mortar
stores instead of traditional markets.
Supermarkets, led by the Sai Gon Co-op Mart, "are rapidly
developing in Viet Nam and enjoying healthy growth, and will continue to play a
key role in modern trade for the next 10 years," Triet said.
Hypermarkets like Metro Cash and Carry enjoy relatively low
market-share right now, but their presence is expected to increase in the near
future due to improved infrastructure and changing lifestyles.
Mini markets, convenience stores, speciality stores and online
retailers had also rapidly developed in recent years, he said.
The nascent online shopping market was expected to take a
foothold soon, but only in major urban areas with reliable Internet access.
"With the opening of Vietnamese retail market under the World
Trade Organisation commitments, foreign investors can wholly own companies here,
add trading or distribution rights to the existing scope of their businesses and
acquire a local company currently doing trade and distribution," said Indochine
Counsel partner Bui Ngoc Hong.
"Opportunities are even more abundant for international
distributors since the country has committed to reduce import tariffs to help
foreign goods better compete," Hong said.
Many foreign investors would join Viet Nam’s retail market in
the future, he said, noting that his company had helped at least seven investors
prepare the necessary documents to enter Viet Nam.
But the market here is not totally open to foreign firms, and
the local labour market and infrastructure do not meet standards. These facts
impede the growth and modernisation of the retail industry.
"The doors to trading and distribution rights for foreign
investors have been opened to the largest extent ever, however, implementation
of these rights faces difficulties due to ambiguous legal provisions," Hong
For instance, under the WTO commitment, a foreign retailer can
open only one outlet. Its expansion plans are subject to the Economic Needs Test
(ENT), an instrument the WTO allows to be used to limit foreign access to
Under the ENT, the foreign-invested company would apply for a
separate licence for each subsequent outlet, with approvals made on a
case-by-case basis based on four criteria: the number of existing outlets,
market stability, population density and the conformity of the project with the
province’s planning. — VNS