VietNamNet Bridge – In recent times, Vietnam has come to be seen as an attractive destinations for retailing with increasing numbers of shopping centres opening in Hanoi. Many have been well managed and proved successful, but still more have failed.

 

 

Retail centers appear to be big business no brainers, but that’s not always the case.

One example of a successful developer is Vingroup who operates throughout the country. The group currently has six shopping malls four of which are operational, one will open this July and the last is still under construction. In each of the operational centres, Vingroup has achieved more than 80 per cent occupancy and receives thousands of visitors daily.

The success of Vingroup is down to its strategy of combining shops with entertainment services, such as food and beverage, cinemas and games. Vingroup is expected to maintain its dominant market share in Hanoi’s retail market as it has two major projects in the pipeline, Vincom Mega Mall Times City and Royal City, providing a total retail area of approximately 437,000sqm. Vincom Mega Mall – Royal City will be launched in July, 2013 when it will become the largest mega centre in Vietnam.

But in every success story there are numerous failures. Hang Da Galleria became quieter in the first days of April. Nguyen Thi Nga, shop owner in this trading centre is feeling the pinch because the centre will soon be closed for upgrading – the second time in the last four years.

“I am so upset. We had to wait for more than one year to recommence trading in this market because the market was re-built. However there was very little trade and now we have to, once again, halt our business,” Nga told VIR.

Nga is not the only one strongly impacted in Hang Da Galleria. Hundreds of other traders are in the same boat. In May 2011, Hang Da Galleria became Hanoi’s first traditional market to transform into a modern market and sell space to individual tenants.

Due to the market’s location in Hanoi’s Old Quarter area, CBRE advised the developer to build the market as a traditional bazaar selling goods for tourists. However pressured by demands to make quick recovery on the initial investment capital, the developer decided to sell booths to individuals on 49 year leases at $6,000 to $10,000 per square metre.

In reality, this long lease was a type of sale resulting in the market being shared by many separate owners. And the more owners it has, the more difficulties it faces in operations.

The situation in Hang Da Galleria is the same as at Grand Plaza Hanoi. Grand Plaza Hanoi used to be one part of the Korean Charmvit Group’s five star complex, consisting of a hotel, an office tower and retail podium. Charmvit sold the retail segment to Vietnam’s IDJ Financial in 2010. IDJ then resold booths to many owners. A representative of IDJ Financial, admitted to VIR that the company was facing a lot of difficulties because it could not gain consensus on common issues among more than 200 shop owners in the centre.

After slow beginnings, Knight Frank Vietnam was contracted to handle marketing, leasing and management of the centre in a desperate attempt to increase the occupancy which had been in as low as 30 per cent.

However, some months later, in February 2012, Knight Frank announced the termination of the contract with IDJ because the two sides could not agree on the management of the centre. Knight Frank also claimed that it could not operate effectively because of IDJ’s internal problems. Following the split, Grand Plaza decided to step down from selling luxury to mid-level commodities. However the centre’s business continued to wane and recently closed for restructuring.

Vacancies occur in many high-end trading centres, even the most successful. Mipec Mall, formerly known as the Pico Mall, is undergoing re-branding after an unexpected period of sluggish business.

The pressure of the growing rivals such as Parkson and Lotte will continue to increase the challenge that retail centers face.

Parkson recently announced plans to open three or four new centres in Hanoi. Lotte are also rushing to open a 65 floor center with a total project budget of up to $400 million, while Aeon Mall Vietnam has received an investment license for retail projects with a total investment of up to $200 million.

According to experts, to survive, developers need to have retail strategy right from the beginning alongside long-term investment. Adequate research is vital before investing in retail projects. Apart from pre-feasibility studies and market research, developers have to consider residential areas surrounding the project and the income of the people in the nearby areas.

Late arrival, but big expectation

Trang Tien Plaza, the most modern trading centre in Hanoi, officially reopened its doors in the first days of April after being closed for two-years of renovations. The restructuring was aimed to turn Trang Tien Plaza from a traditional department store into a modern retail venue deserving of its prime location in the city centre.

The newly-renovated six-storey shopping mall, invested primarily by Imex Pan-Pacific, features 112 luxury brand names in fashion, watches and perfume, including Christian Dior, Versace, Mango and many others. The shopping centre, located on a prominent corner of Hoan Kiem Lake in the heart of Hanoi, has a completely upgraded interior while its exterior architecture remains basically unchanged.

However, the success or failure of the center is far from assured in the current economic downturn.



Source: VIR