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Fierce competition in Vietnam retail market
Ngoc Thuy 07:31, 2017/10/24
Each retailer need to find an appropriate strategy and direction, at the same time to avoid competing directly and target markets which are still unknown to foreign competitors.
Vietnam retail market is considered to have high potential for development. As such, the market shares between 02 segments of tradition with familiar market and groceries stores and modern with shopping malls, super markets are transforming drastically. Along with this, Vietnamese enterprises are facing challenges when foreign companies looking to joint the Vietnam retail market. According to Savills Vietnam, with the 6th rank in the world in the retail development Index 2017 conducted by AT Kearney, Vietnam has high potential to become an attractive destination for retailing enterprises, such as: customers’ confidence, the rapid growth of e-commerce, free trade and modern infrastructure. 


Moreover, Vietnam retail market still have high potential for development, thanks to the current low retail density in Hanoi and Ho Chi Minh, which remains at modest level of 0.26 and 0.12 m2 of retailer/ per person respectively, and is significant lower than other cities in region such as Bangkok, Singapore and Kuala Lumpur. Statistics from Savills also showed that, tradition markets still dominant due to customers’ habit of going to tradition market, instead of super markets or convenient store. While the modern markets currently hold 25% market shares, but are showing positive results and gaining more shares. According to Vietnam Institute for Trade (VIT under Ministry of Industry & Trade), in the period 2016 – 2020, the growth rate of retail in Vietnam is estimated at 11.9% per year, with the market scale of 179 billion USD by 2020. Despite this number is only equivalent to that of Thailand in 2016, but investors still regard Vietnam market highly due to some important factors, such as the golden population, rapid urbanization rate, which are the foundation for citizens’ living standard improvement.  

The retail market in Vietnam has been heated up since 2014, when big brands such as Aeon, Central Group, TCC and Auchan came to Vietnam. Recently, the market also witnessed major mergers & acquisition (M&A) deals in various fields such as deal to acquire Metro, BigC and Nguyen Kim. 

Experts said, this is a smart move from big brands. As if they start from nothing, foreign retailers will have to invest time and money to build network and customer’s trust, not to mention administrative procedures. With this being said, one of the most important factors in retail market is time for market to identify and accept a new brand. This is also a learned lesson from many retailers, so that M&A deal is considered an easy and quick way to infiltrate a market. This is also considered as a marketing strategy in which foreign companies try to understand and infiltrate consumer culture at a local level, by identifying and engaging thought leaders and trend setters within the community and targeting their communications. As such, they can use various ways to try to make a strong emotional connection between consumers and the brand. Infiltration marketing also utilizes high-impact, exciting brand sampling events at local venues. 

In addition to big brands mentioned above, the Vietnam retail market also expect the appearance of major brands such as Walmart, Tesco or Carefour. Despite being one of the best brand in the world, but these retailers do not have the best experience in Asian market, due to different to the culture and the current crisis right at their home soil, so it may take time for them to come to the Vietnam market.  
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