Retailers continue to expand in Vietnam

Lotte Mart, for example, has reported an accumulative loss of VND800 billion since 2008, when it began operation in Vietnam.  

A representative of Lotte Mart said revenue had reached VND5.268 trillion as of the end of 2017. In the last 10 years of operation, the retailer has spent VND9 trillion on infrastructure and retail premises for 13 shopping centers and hypermarkets, on advertisement and marketing campaigns.

Metro Cash & Carry Vietnam has reported a loss of VND600 billion since it was transferred to the Thai owner in 2015. To date, the retail activities of 19 centers belonging to the chain still cannot bring a profit.

Fivimart and Citimart, after cooperating with Aeon, also reported losses. The former incurred a loss of VND60 billion in 2015, VND96 billion in 2016 and VND23 billion in 2017. Finally, it was taken over by Vingroup.

As for Citimart, the retailer incurred a loss of VND91 billion in 2015, VND33 billion in 2016 and accumulative loss of VND157 billion by the end of 2016.

Meanwhile, e-commerce firms either have to leave the market (vuivui.com, which belonged to The Gioi Di Dong, Lingo.vn, Deca, Cucre and Beyeu), or accept losses.

Tiki, for example, had incurred a loss of VND600 billion by the end of 2017, while Lazada took a loss of VND1 trillion in 2015 and 2016, with the accumulative loss climbing to VND2.7 trillion by the end of 2016.

Pham Dinh Doan, deputy chair of the Vietnam Retailers’ Association, and chair of Phu Thai Group, confirmed that only a few retailers make profits, while most modern distribution chains take losses.

“All supermarkets report losses, and convenience stores report even bigger losses. E-commerce firms are also in the same situation: big firms take a loss of trillions of dong, smaller ones, hundreds of billion of dong a year,” Doan said.

The expert said that competition in the market is cutthroat, which forces retailers to force selling prices down despite high operation costs. 

Some e-commerce firms accept losses of up to VND2 trillion, while retailers accept VND1 trillion a year. Some businesses plan to break even after 10 years of operation, but the investment rate is huge at $2 billion.

In principle, convenience store chains need to have at least 300 shops, and supermarket chains need to have 20-30 points of sale to reach the break-even point. Therefore, incurring losses in the first phase of operation is normal. 

According to BMI, the Vietnamese consumer goods market was valued at $120 billion and had annual growth rate of 10 percent in 2012-2017.

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