About 15 years ago, the Korean retail market belonged to 7-Eleven and FamilyMart. At that time, GS25 retail chain announced that it wants to lead the retail market of this country is an unbelievable story. Unexpectedly, after 5 years, they gradually increased sales and quickly took up 30% market share in Korea.
Why is Son Kim?
The first step out of the Korean border, they came to Vietnam with the hope of recreating the breakthrough as they did in Korea. After the first store opened, GS25 hopes to have a profit after 3 years of investment. If successful in Vietnam, Koreans will continue to bring GS25 to other countries in the region. What has made GS25 so much hope in Vietnam?
Vietnam is one of the countries with the highest young population in the world, but retail channels have not attracted young people, the GS25 representative said. According to information provided by Nielsen, on average, each store in Korea will attract 1,000 participants, while in Vietnam the rate is 69,000 people / store. According to the GS25 representative, sharing the fact in Japan, Korea and China, convenience stores are the fastest growing retail channel when the economy develops and the income level increases.
According to Mr. Yun Ju Young, CEO of GS25 Vietnam Company, convenience stores account for 15% of the total retail market in Korea, and Vietnam is only 2% more, so it will be a potential segment. The success in the retail sector of Lotte Group in Vietnam is also the motivation for GS25 to be confident in choosing the Vietnamese market.
In Vietnam, the convenience store chain GS25 has a joint venture with Son Kim Group. In which, GS Retail, which operates GS25 (under GS Group), will hold 30% of the shares, Son Kim holds 70%. GS Retail will provide the joint venture with the rights to use the trademark, experience in managing and operating convenience store chains. In return, the GS – Son Kim joint venture will pay royalties and retail profits corresponding to a 30% stake in GS Retail.
The reason GS25 chose Son Kim is because the group operates in the fields of real estate, media and retail. This company owns a large chain of lingerie stores and many fashion stores. The company is also cooperating with GS Home Shopping in the home shopping segment since 2012. GS Home Shopping and GS Retail both belong to the GS Group system.
As announced by GS25 Vietnam, in 2018, GS25 plans to open about 50 stores, concentrated in Ho Chi Minh City. By early 2020, will begin to move to Hanoi market. The goal is that after 10 years entering the Vietnamese market, GS25 will have a system of 2,500 stores nationwide. GS25 has invested in a food production factory located in Long An. This will be the place to supply fresh and delicious food to the chain.
GS25 is also calling on Korean investors to invest in Vietnam to complete the supply chain. The next step, GS Retail plans to export products from Vietnam to Korea and vice versa. Not only that, but also in the Vietnamese market, GS25 also carries the responsibility of leading the market for other Korean businesses to enter Vietnam.
GS25 representative shared that GS25 currently carries a very heavy responsibility as the fastest growing business as well as dominating many markets in Korea. “This means that our exploration of foreign markets is not simply because of GS25 Company. We will provide market exploration opportunities for many other businesses involved. Therefore, in the coming time, the exploration of foreign markets must be done continuously ”.
Attractive to Koreans
This move abroad of GS25 is considered very appropriate in the current situation. The convenience store market in Korea is now saturated with so many choices for customers. In addition, the Korean government has just increased the minimum wage to 16.4%, forcing many chain stores to cut staff and reform many aspects to maintain profits.
Another disadvantage about the new Korean policy is making it difficult for domestic retailers. According to Ms. Vu Kim Hanh, Director of the Center for Business Research and Business Support (BSA), with the new Korean policy, Korean businesses that want to open more retail stores must have the fastest growth rate. Vietnam’s retail sales in 2017 were US $ 129.5 billion, up 10.9% year on year. According to the General Statistics Office, by 2020, the growth rate of Vietnam’s retail trade will reach 11.9% / year, the market size is about 179 billion USD.
According to information released by AT Kearney consulting company in the US in the press, Vietnam ranked 6th worldwide in retail and convenience store development index and mini supermarket. thrive. GS25 also wants to bring the biggest difference of Korea, which is the Hallyu “Korean wave” culture into Vietnam. Also from the Hallyu wave has helped a Korean industry flourish not only in Vietnam but also spread throughout the world.
It is Hallyu who has contributed to helping Korea from one of Asia’s poorest countries become one of the world’s great economic powers. The Korean people’s “culture first, economy follow” strategy has been a great success in Vietnam with many businesses operating in many fields.
From large corporations in the world such as Samsung, Lotte, CJ, Daewoo, Hyundai, LG, Tae Kwang … and many small Korean companies have been very successful in the Vietnamese market. Entering Vietnam since 2007 with several small projects, Hyosung Group plans to increase its investment to 6 billion USD in the fields of chemical industry, heavy industry, power projects …
Currently, Korea ranks first in foreign investment capital into Vietnam. At the meeting between Vietnam and South Korea late last year, Mr. Nguyen Van Toan, Vice Chairman of the Association of Foreign Investment Enterprises in Vietnam, said that in addition to the accumulated investment of 57 billion USD from 1992 up to now, In the past 4 years, Korea has invested 8 billion USD in Vietnam each year.
According to the GS25 representative, next time, there will be a number of other Korean enterprises entering Vietnam. But in the short term, 2018 will be an investment race, increasing the coverage of many competitors such as 7-Eleven, Circle K, Vinmart +, FamilyMart, GS25 … in this market of more than 90 million people.
* Source: Investment bridge