Retail market predicted to grow at 20-25 percent

The image of supermarkets and shopping centres fully packed with consumers on Golden Promotion Day in mid November indicated people’s willingness to spend.

The General Secretary of the Vietnam Retailers’ Association, Dinh Thi My Loan said that total retail turnover and revenues from consumer services post an average growth rate of 18-20 percent/year. The increase in consumer spending has added fresh impetus to developing the retail market. However, after opening up the retail market earlier this year, few foreign investors were watching the Vietnamese retail market due to the global economic downturn. Economic experts have predicted that there will be more chance for the retail market to flourish next year when the world and domestic economies bounce back.

Modern retail channels, including major supermarkets and trade centres in big cities such as Hanoi and HCM City are growing at 16 percent, accounting for 26 percent of their sales revenue.

However, modern retail channels across the country make up only 12 percent of consumption value while the similar figure in other Asian countries such as Indonesia is 37 percent, the Philippines (44 percent), Thailand (44 percent) and Singapore (91 percent). In Hanoi and HCM City, 400 supermarkets is a drop in the ocean when compared to the consumption power of 16 million people and this opens up more business opportunities for foreign investors, said Loan.

The Head of the Consultancy and Retail Measurement of the Nielsen Market Research Company, Nguyen Huong Quynh, said that the number of customers going to supermarkets increased sharply from 66 percent in 2007 to 96 percent in late 2008 while the frequency and size of customer services at convenience shops or supermarkets rose from as much as twice in 2005-2007 to three times in 2008. But the sales performance is still too small to compare to the average monthly increase of 28 times at traditional markets.

Interaction between traditional and modern retail channel

Currently, Vietnam has nearly 400 supermarkets and trade centers as well as more than 8,000 traditional markets. But the difference between the modern and traditional way of shopping is huge. Ms Loan said that it’s no easy task to strike a balance between traditional retail channels by 2014. However, the participation of foreign retailers has breathed a new lease of life into Vietnam’s retail sector. With many new retail channels, consumers can have many more options available to choose. Subsequently, under the pressure of tough competition, traditional retail channels have to change and adapt to the situation.

The advantages of markets are the essential commodities and fresh products, which account for 62 percent of the total expenditure of Vietnamese people. Therefore, Mr Nielsen said that to compete with traditional channels, supermarkets should pay more attention to fresh products. Especially, as consumer tastes are changing a lot as they prefer promotional products rather than expensive ones. Therefore, businesses will have to take action by launching promotional programmes. Currently, a new retail model which is developing rapidly along with the development of technology and e-commerce is to sell products via the Internet, television and mobile phones. This is a great opportunity  for producers and distributors to take a bigger market share.

The strong competition amongst manufacturers and retailers will also bring more benefits to consumers as business trend will have to change in accordance with consumers’ tastes. For example, if non-alcoholic beverages sold well in 2007, instant tea now tops the list of consumer goods this year.