Vietnam is currently in an enviable position for international investors. It is similar to India five years ago.
According to AT Kearney’s 2006 Global Retail Development Index (GRDI, an annual ranking of retail investment attractiveness among 30 emerging markets), Vietnam is now a major contender. It has jumped five spots to No. 3 behind leaders India and Russia, while China slipped one spot to No. 5 on the list.
Vietnam now sits between Russia and China at number 3. The top 10 international markets are:
- India
- Russia
- Vietnam
- Ukraine
- Porcelain
- Chili
- latvia
- Slovenia
- Croatia
- Turkey
Total retail sales of goods and services for 2006 were valued at $20 billion. There is huge potential as the total contribution of supermarkets and shopping malls accounted for about 10% only, considering that supermarkets have only existed in Vietnam for a decade. Traditional commerce, while facing challenges, will continue to be a major contributor.
Modern retail outlets are concentrated in major cities. An obvious choice, since the median income in these two cities is also twice the national median income of $400. Both Ho Chi Minh City and Hanoi, two of the country’s main cities, have a total of 105 supermarkets, representing 75% of the national total.
The two largest local supermarket chains are state owned. Intimex Hanoi and Saigon Coopmart only have a presence in the two cities, but plans are underway to expand to other major cities.
Intimex, which currently has 2 malls in Hanoi, is owned by the Ministry of Commerce (MoT) and has plans to open another five. Its annual sales for 2006 were $3.6 million.
Saigon Coopmart, currently considered the largest local chain, has 13 supermarkets. Plans have been announced to increase the number of retail outlets to around 25, both within Ho Chi Minh City and in the surrounding provinces.
Foreign players in Vietnam are Metro (Germany), Espace Bourbon (France) and Seiyu (Japan). They are already locked in a race to expand the retail network with each other. Parkson (Malaysia) and Dairy Farm (Hong Kong) will be added to the retail landscape in the near future.
Despite high import taxes, counterfeit products, and inadequate laws, Vietnam remains a top priority for international players. Vietnam is both an opportunity and a challenge. The market is set to grow uninterrupted for the foreseeable future and its attractiveness to international investors will only increase to dizzying levels.