Vietnam's total retail market is forecast to grow at 23 percent annually between now and 2014, offering many opportunities for both domestic and foreign retail businesses, according to a report by AT Kearney.

The modern retail channels will play a crucial role in future growth, improving their position in the market. Increasing purchasing power and changing lifestyles are some of the key growth drivers in the country's modern retail market, it says, adding that during the next few years, a short wave of consolidation will emerge as foreign retailers are trying to consolidate their position and accelerate their market penetration.

The modern retail market will be the key distribution channel in Vietnam in the near future due to its huge consumption market of nearly 90 million consumers, AT Kearney's report remarks. Vietnamese consumers' shopping habits are changing, with more spending in modern retail outlets due to convenience and health-related issues. Many consumers said that modern retail outlets give them good access to new products, more confidence in food safety, and clean facilities.

Vietnam's total retail revenue in 2011 reached nearly VND2 trillion or approximately US$90 billion, an increase of 29.3 percent in comparison with the previous year, and contributing 15-16 percent of the Gross Domestic Products (GDP), a promising figure in the context of decelerated economic growth, according to the Ministry of Industry and Trade (MoIT).

The country currently has 636 supermarkets, 120 commerce centres and over 1,000 convenience stores. Experts says these figures still do not meet the demand. As a result, Vietnam's retail market holds many opportunities for both foreign and domestic investors.

Competing with foreign retail businesses will be a big challenge for domestic companies, says MoIT. Leading international retail groups have poured large investments into their business expansions in Vietnam with the aim of gaining the lion’s share. This can be seen through the opening of more outlets and trade centres to compete with local retail businesses.

Leading brands like Metro Cash & Carry opened 10 new trade centres in 2011 while Parkson added seven new shopping centres in big cities across Vietnam. Big C invested US$14 million in a new trade centre in the central province of Thanh Hoa late last year, raising its chain in Vietnam to 17, and plans to increase the figure to 29 by 2013. Japan's Aeon retail group decided to invest US$101 million in a chain of Jusco trade centres and supermarkets across Vietnam. With initial investment capital of US$80 million, the Republic of Korea (RoK)'s E-Mart Group has signed a joint venture with U&I Group to put their first project into operation this year.

Vietnamese retail businesses are also trying their best to stand firm in the local market. Co.op Mart will open six new supermarkets this year, increasing its network to 57 across the country. The electronic retail company dienmay.com plans to open five new stores this year, bringing its total to 12.

By 2020, E-Mart Vietnam will establish a chain of 52 supermarkets and stores in big cities with total investment capital of up to US$1 billion. Phu Thai Group, Itochu Group and Japanese company Family says their store chain has reached 19 since 2009, and they have planed to open 27 new stores this year.

Since the country opened its market to 100 percent foreign retailers in early 2009, with the entry of the likes of Metro Cash&Carry and Lotte Mart, modern retail formats are growing more prominent in the country. Some foreign retailers are also expanding their distribution networks to Vietnam's rural regions. However, traditional retail channels still dominate the market.

In fact, the local retail network for common goods in general and necessity goods in particular remain poor and weak. Over the past few years, although the State and local businesses have concentrated on upgrading infrastructure and expanding the network, a lack of close co-operation and co-ordination among producers, businesses and localities has led to ineffective goods distribution.

In the face of fierce competition, Vietnamese retailers and distributors will have to come up with strategies to stand firm in the local market.

(Source: VNS/VOVOnline)