Vietnam’s retail industry is continuing to see more merger and acquisition (M&A) deals made by both domestic and foreign investors thanks to a rising income of local consumers and free trade agreements, but the competition in the market is also becoming fierce, experts said.

South Korea’s GS 25 is completing final procedures to acquire Zakka Mart

VinCommerce, the retail arm of Vietnam’s largest listed firm Vingroup, last week took over convenience store chain Shop&Go, which was one of the earliest ones in the country by opening its first store in 2006, for a symbolic US$1.

Shop&Go now has 70 stores in Ho Chi Minh City and 17 in Hanoi, open 24/7 and selling consumer goods, fast foods and beverages among others.

According to a Shop&Go spokesperson, while the potential in the Vietnamese retail market is still great, "the competition is more intense than we imagined; that is why we’ve decided to leave. We have sold our stores to Vingroup so it can continue to develop them."

Last month, South Korea’s GS25 completed final procedures to acquire Zakka Mart, a convenience store chain of Zakka Joint Stock Company.

Though not releasing the value of the deal, a Zakka representative said all 49 Zakka Mart’s stores and its personnel will be transferred to GS25 from next month.

According to M&A expert Yee Chung Seck, partner of multinational law firm Baker & McKenzie, while the overall volume of M&A deals in Vietnam was lower last year, the broader consumer goods and retail sector was vibrant and this trend will continue in 2019.

“Convenience stores and mini-marts in Vietnam remain one of the fastest growing segments in the industry, and we expect to see continued investment in the retail sector,” he said, explaining the growing middle-class, higher disposable income and demand for quality goods and services, in particular, which are considered to be beneficial to health and wellness, means that more investments into this market will be made.

Besides, Seck said, with reforms to further facilitate foreign investment underway, and with the ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the upcoming ratification of the EU-Vietnam Free Trade Agreement (EVFTA) and other free trade agreements, Vietnam’s inbound investments in particular are expected to accelerate through 2019-2021.

High growing market

According to reports from the General Statistics Office, wholesale and retail value in Vietnam accounts for more than 14 percent of the country's GDP, making retail one of six industries attracting the most interest of foreign investors.

Vietcombank Securities Company (VCBS)’s analysts also said retail is attractive for investors as the industry has advantages after foreign wholly-owned retail firms have been allowed to set up in Vietnam and taxes imposed on most of goods imported from other ASEAN countries to Vietnam are exempted under the ASEAN Common Trade Area.

A report of the Ministry of Industry and Trade estimated total revenue generated from retail sales of goods and consumer services to grow at an average of 13 percent from now to 2020 reaching VND5.8 quadrillion (US$255.5 billion) by 2020.

Between 2021 and 2025, the growth rate is projected at 14 percent with total revenue reaching VND11 quadrillion (US$484.58 billion) by 2025.

Dinh Thi My Loan, president of the Association of Vietnam Retailers, said there is “big room for the modern retail sector to develop” since retail channels such as supermarkets, shopping centers and online shopping platforms account for less than 30 percent of the retail market.

The expansion of retail chains is also a strongly growing trend in the country, Loan noted, adding that retail chain growth of 20-30 percent is expected this year.”

Hanoitimes