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Acquisition of foreign giants, domestic retail reverse the situation?


The expansion of coverage through mergers and acquisitions shows that domestic retailers have been very active to reverse the situation.

In the first half of 2019, Vietnam’s retail market saw a change in market share as domestic retail businesses continuously expanded their coverage through a series of mergers and acquisitions.

On April 2, 2019, VinCommerce General Trading Service Joint Stock Company, the unit managing the retail system of VinMart and VinMart +, announced that it would receive the transfer of 87 stores of Shop & Go for $ 1 USD.

Most recently, Saigon Co.op acquired Auchan supermarket system in Vietnam. Under the agreement, Saigon Co.op will transfer 18 stores and Auchan’s online e-commerce activities in Vietnam. With this deal, for the first time a Vietnamese retailer has received a world-class retail brand.

According to Dinh Thi My Loan, president of the Vietnam Retail Association, after the above deals, domestic enterprises have made great efforts to increase their market share. “Previously, when the M&A activity in the retail sector was dominated by foreign businesses, now Vietnamese businesses have been very active to reverse the situation.”

Sharing the same view, economist Pham Chi Lan said that Vietnamese enterprises are increasingly active in deals on both sides of buying and selling. This is a very encouraging sign. This proves the strength as well as the striving of local retailers.

In fact, in recent years, the market share of the retail industry has changed significantly. If in 2016, 50% of Vietnam’s retail market share went to foreign enterprises, after 3 years the latest figures showed that domestic retailers had a better share of the market.

In supermarket segment, Vietnamese retailers account for 70% of selling points, in which VinCommerce’s system accounts for over 60% of selling points.

Domestic retailers are actively rising in the race to gain market share

Business results show that, while foreign retailers such as Lotte and Aeon have modest revenue, domestic retailers have better results. In 2017, Lotte Vietnam’s revenue was VND 5,268 billion. Although the revenue increased, Lotte Mart reported an accumulated loss of nearly 800 billion dong. Although increasing compared to 2016, in 2017, Aeon’s revenue was only modest at VND 5,136 billion.

Saigon Co.op achieved nearly VND 30,000 billion in revenue, an increase of 7% compared to 2016

Meanwhile, Saigon Co.op achieved revenue of nearly VND 30,000 billion, up 7% compared to 2016, while profit reached 100% of the plan. Along with that, the total revenue that the supermarket segment brought to Vingroup also reached over VND 13,000 billion, a sharp increase compared to 2016.

According to Tuan Pham, Asia Plus market research director, domestic retailers are having certain advantages compared to foreign retail chains. Firstly, because they have the ability to spread throughout the country. Secondly, they understand the consumption behavior of Vietnamese people. Therefore, businesses need to take advantage of this to regain market share, break out in the near future.

According to Loan, although owning less coverage, foreign businesses excel in the ability to apply new and modern retail methods to attract Vietnamese consumers. Meanwhile, domestic enterprises are mostly small and medium enterprises.

As a result, these businesses are facing difficulties in business as well as the ability to access capital, high taxes and fees, administrative procedures and other expenses to access land when opening supermarket chains, The cost of applying for a construction permit, a license for building a billboard, and renting a business premises are high due to the high real estate prices.

Meanwhile, Ms. Lan said, Vietnam has a large consumer market with increasing purchasing power. Large distribution corporations such as Aeon, Lotte and other chains all target Vietnam.

Therefore, they all have strategies to open more stores next to their big stores. So they go on both feet, both making a big supermarket and opening small convenience stores. This has created a great challenge that requires Vietnam’s retail system to come up with good strategies to compete.

Hà Linh
* Source: Investment bridge

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