Vietnam’s retail pie sweet but hard to get: JLL

As one of the most dynamic economies in the region, Vietnam’s young retail market has great potential as it is increasingly more competitive and attractive to foreign investors.

vietnam’s retail pie sweet but hard to get: jll hinh 0

Trang Le, head of Research and Consulting Services at JLL Vietnam said that the real estate consulting firm said that with its population of more than 90 million, 70% of whom are between the ages of 15 and 64, potentially a key driver of strong market growth, Vietnam is attracting more retailers.

Meanwhile, other factors, such as the growth of tourism, help create more demand for retail. Infrastructure development also provides investors with more opportunities to develop retail projects outside central areas.

The potential of the Vietnamese retail market has attracted the attention of many regional mall and retail investors. The market has witnessed a surge in mergers and acquisitions (M&As) since 2014.

One example is the Bangkok-based Berli Jucker’s acquisition of Metro Cash & Carry Vietnam, the country’s largest M&A deal, in 2016.

Another Thai giant, Central Group, acquired Nguyen Kim Trading JSC, Vietnam’s leading electronics retailer, and Big C Vietnam, the second-largest supermarket chain based on the number of stores in the country.

South Korea’s leading retailer E-mart also joined the playground in 2015 with a US$60 million shopping mall in northern HCMC. Lotte Mart, which is also from the Northeast Asian nation, has been quite successful, with a series of supermarkets and shopping centers across the country.

AEON, one of the world’s leading retail groups from Japan, is gradually expanding its network, with a fifth center in Ha Dong District of Hanoi going into operation last November. Its Japanese compatriot Takashimaya has been in Vietnam since 2016 in a prime location in the heart of HCMC.

Strong rental demand has made prospects brighter for shopping centers, especially for projects in the central business districts (CBD). In the third quarter of 2019, occupied space remained stable at about 90% of compound annual growth rates in both the CBD and non-CBD areas.

The market is currently seeing tenants looking for properties larger than 1,000 square meters, making it difficult to find a suitable location at the existing retail centers.

Therefore, most tenants are waiting for future supplies or retail centers that are currently undergoing renovations and upgrades. Rents at these centers remain stable. A prime location in the CBD is still the preferred choice of retailers, recording the highest prices and strong growth.

 

“However, retail is still no walk in the park and players are being knocked out left and right by the fierce competition,” stated JLL Vietnam.

This is evident in the withdrawal of major brands, such as Auchan; the shrinking domestic network of Parkson; and the series of foreign convenience store brands struggling to gain market share or having to transfer ownership to domestic rivals, with Shop&Go being a prime example.

“The ups and downs of popular brands in the market speak to the potential of the local retail market but also show that the apples are not for just anyone to pick,” according to the firm.

In addition to the prerequisite of choosing a location that boasts a high population density with strong purchasing power, changes in consumer habits and competition from ecommerce has led to the development of new retail models. Retailing aligned with the target market is the decisive factor in a brand’s success.

AEON’s success with its “slow and steady” market entry strategy shows that it is crucial to understand consumer behaviors and select the right retail model. Working from a representative office in Vietnam since 2008, it was not until 2014 that AEON officially opened its first center, Aeon Mall Tan Phu Celadon, in HCMC.

“Choosing the right model that offers a prime spot for families to shop and play in based on market trends has brought this brand a great deal of success in its five years of operation,” said the market consultant.

However, for every success, there are multiple instances of failure, such as Parkson’s less diversified tenant structure, which focuses too much on fashion and cosmetics, while paying little attention to dining and entertainment.

The market has a significant supply of retail space from commercial podiums in apartment buildings. This type of retail real estate is struggling to find a suitable direction and model due to its limitations in scope and concept, inexperienced developers and fierce competition.

According to JLL, these investors should focus on providing utilities for residents first. Other models, such as shared office space, education systems or even smart lockers, should also be considered.

For the sake of success, retail operators need to conduct careful studies to better understand the trends that will shape the retail market. VIR

 
 

Other News

.
Vietnam factory activity dips in July as Covid-19 impacts grow
Vietnam factory activity dips in July as Covid-19 impacts grow
BUSINESSicon  03/08/2020 

Despite a drop in output in July, firms remained confident in the 12-month outlook for production.

Vietnam economic outlook remains positive despite Covid-19 resurgence: HSBC
Vietnam economic outlook remains positive despite Covid-19 resurgence: HSBC
BUSINESSicon  03/08/2020 

HSBC economists forecast GDP expansion of 3% in 2020 for Vietnam, the only ASEAN country they expect to have positive growth this year.

Vietnamese startups bag millions of US dollars despite COVID-19 pandemic
Vietnamese startups bag millions of US dollars despite COVID-19 pandemic
BUSINESSicon  03/08/2020 

A slew of Vietnamese startups managed to secure millions of US dollars even in the midst of the rapidly escalating COVID-19 pandemic.

Sky-high livestock prices may breach competition law
Sky-high livestock prices may breach competition law
BUSINESSicon  03/08/2020 

Although many livestock companies could face an inspection to ensure they follow through on commitments to cut their prices, the market outlook still looks dreary in spite of the government’s call to stabilise the selling cost of live pigs.

Aligning with trade remedy principles
Aligning with trade remedy principles
BUSINESSicon  03/08/2020 

The EU-Vietnam Free Agreement (EVFTA) is a giant leap for Vietnam in international integration.

Electricity of Vietnam suggests not to extend deadline for wind farm FiT
Electricity of Vietnam suggests not to extend deadline for wind farm FiT
BUSINESSicon  03/08/2020 

In order to ensure transparency and stability in the selling price of wind power, EVN opposes the Ministry of Industry and Trade's proposal to extend the deadline on the current feed-in tariff (FiT) scheme for wind power projects

Ministry seeks to further open petroleum retail market
Ministry seeks to further open petroleum retail market
BUSINESSicon  03/08/2020 

The Ministry of Industry and Trade has called for allowing all foreign investors to further participate in the petroleum retail market.

Shares to correct on worries of virus surge
Shares to correct on worries of virus surge
BUSINESSicon  03/08/2020 

 Vietnamese shares may continue to fall this week as a spike in fresh coronavirus cases fuelled concerns that the path to economic recovery could be hindered.

Vietnam fulfills international commitments as EVFTA takes effect
Vietnam fulfills international commitments as EVFTA takes effect
BUSINESSicon  03/08/2020 

Vietnam will continue to fulfill its international commitments so that it can take full advantage of the EU-Vietnam Free Trade Agreement (EVFTA) and recover its economy amid a resurgence of COVID-19 pandemic.

Vietjet reports loss of over VND2.1 trillion for H1
Vietjet reports loss of over VND2.1 trillion for H1
BUSINESSicon  03/08/2020 

Vietjet Aviation Joint Stock Company has reported a loss of over VND2.11 trillion (approx. US$90.5 million) in air transportation business in the first half of this year.

F&B firms prepare for possible second round of social distancing
F&B firms prepare for possible second round of social distancing
BUSINESSicon  03/08/2020 

Though local F&B businesses don't want social distancing to return in August, the experiences they had in April are helping them prepare.

Vietnam Airlines, ACV suffer heavy losses due to COVID-19
Vietnam Airlines, ACV suffer heavy losses due to COVID-19
BUSINESSicon  03/08/2020 

The COVID-19 pandemic has severely dragged down revenues of the Vietnam Airlines Corporation (Vietnam Airlines) and the Airports Corporation of Vietnam (ACV) in the second quarter of this year.

Economic growth projected to reach about 7 percent in 2021
Economic growth projected to reach about 7 percent in 2021
BUSINESSicon  03/08/2020 

Prime Minister Nguyen Xuan Phuc has issued a directive on the building of plans for socio-economic development and State budget estimate for 2021, with a target of about 7 percent of economic growth for the year.

Enterprises in industrial parks urged to use hi-tech equipment
Enterprises in industrial parks urged to use hi-tech equipment
BUSINESSicon  03/08/2020 

 Enterprises in export processing zones (EPZs) and industrial parks (IPs) should use high technologies to better manage manufacturing processes and improve product quality.

Vietnam emerges as popular industrial property destination: CBRE
Vietnam emerges as popular industrial property destination: CBRE
BUSINESSicon  03/08/2020 

Vietnam has emerged as a popular destination for industrial property projects as increased labour costs, trade disputes and COVID-19 prompt global manufacturers to vary their supply chains throughout Asia, according to CBRE.

Condotel market faces gloomy prospects
Condotel market faces gloomy prospects
BUSINESSicon  02/08/2020 

 The condotel market has faced a gloomy period due to low absorption rate while inventory has been on the rise, experts said.

Ministry of Construction eyes building low-cost housing
Ministry of Construction eyes building low-cost housing
BUSINESSicon  03/08/2020 

 The Ministry of Construction (MoC) is completing a draft resolution to encourage the development of low-cost commercial apartments to submit to the Government in the third quarter of this year.

Businesses in Hanoi’s Old Quarter shutdown amid COVID-19 fears
Businesses in Hanoi’s Old Quarter shutdown amid COVID-19 fears
BUSINESSicon  02/08/2020 

The Hanoi People's Committee has moved to require all shops throughout Hanoi’s Old Quarter to close as of midnight on August 1 due to fears regarding recent developments relating to COVID-19 epidemic.

Reality and vision for industrial zones
Reality and vision for industrial zones
BUSINESSicon  02/08/2020 

The media have recently featured industrial properties, especially industrial land, as a potential area to attract investment.

Vietnam to develop night-time economy
Vietnam to develop night-time economy
BUSINESSicon  02/08/2020 

Prime Minister Nguyen Xuan Phuc has approved a project to develop the night-time economy in Viet Nam to allow some activities to run overnight until 6am of the next day in some major tourism cities and zones.

 
 
 
Leave your comment on an article

OR QUICK LOGIN