Vietnam’s retail market robust despite downturn

The sector generated VND452 trillion (US$25.45 billion) in sales in the January to May period, according to the Ministry of Industry and Trade.

The shopping frenzy could have been buoyed by the Vietnamese government’s six-month income tax holiday for wage and salary earners, announced in response to the global economic crisis. The consumer-spending stimulus measure expires at the end of June and consumers will resume paying personal income tax in July.

This year’s strong growth in the retail sector may also reflect changing shopping habits in Vietnam, especially among younger consumers. Modern supermarkets and shopping malls, with their cafes, restaurants, cinemas and games centers, are replacing the country’s traditional markets as social, entertainment and shopping hubs.

Duong Thi Mai Lan, deputy head of the Managing Board of the Ben Thanh Market in Ho Chi Minh City, said sales at the historic trading center the first half had fallen about 60 percent from the first half of 2008.

Foreign firms have been showing increasing interest in Vietnam since the government announced the retail sector would be opened to wholly foreign-owned retails from January 1 this year, under the country’s World Trade Organization commitments.

Domestic and foreign retail operators are competing for high profile locations from which to tap the potential of Vietnamese retail market, which has been growing at an average of 20 percent a year over the past few years.

According to real estate consulting firm Savills, Vietnam’s commercial hub, HCMC, had 25 trade centers, 57 supermarkets and three wholesales outlets covering a total area of 4,300 square kilometers at the end of the first quarter of this year. The number of shopping venues remained small in relation to the city’s 8 million residents, Savills said.

More and more shopping venues are popping up in HCMC, with the city’s downtown area the most sought-after for shop space. The monthly rent for shops in the downtown area ranges from $60 to $250 per square meter. “Having a good location doesn’t guarantee the success if you don’t have management skills,” said Tran Thanh Sang, managing director of Viet Fashion Company, owner of the popular clothing line NinoMaxx.

Nguyen Ngoc Minh, chief executive of Hung Vuong Co., owner of the Hung Vuong Plaza in HCMC, said Vietnamese firms were not as skilled at managing large-scale shopping venues, such as Diamond Plaza and Parkson, as foreign firms. However, Vietnamese business people were highly accomplished at managing small-scale retail outlets, Minh said.

Convenience stores are another relatively new phenomenon in Vietnam, attracting shoppers with their longer opening hours.

Circle K, a U.S. chain with 7,000 outlets worldwide, launched its first five convenience stores in Ho Chi Minh City last week. The company plans to open 100 franchised stores in Vietnam by 2011. However, traditional markets are not giving up their market share to shopping malls without a fight.

Operators of traditional markets are upgrading their facilities and improving customer services in a bid to reclaim their customer base.

Traditional markets remain popular with the generations who are fond of the cheap prices, the familiar booths and the opportunity to exercise their bargaining skills.