Digitizing traditional markets – $10 billion potential

Traditional markets and groceries still hold the largest share of the consumer retail market, but new business models are scrambling for a piece of the pie.

As early as five years ago, The Gioi Di Dong (Mobile World), a success story in Vietnam and the region, decided to jump into the consumer goods retail market. Vegetables and fresh meat were the first items it sold after joining the market, following achievements in mobile phone and home appliance distribution.

Digitizing traditional markets – $10 billion potential

Five years ago, fashion products, cosmetics and restaurants were the promising land for retailers, because there was no retail chain big enough at that time to lead the market.

Meanwhile, department stores were places where Big C and Co-op Mart dominated. However, The Gioi Di Dong still jumped on the bandwagon though it had no experience.

Even after taking over An Khang drugstore chain amid a busy drug market, Nguyen Duc Tai, the co-founder and president of The Gioi Di Dong, still focused on Bach Hoa Xanh, one of its retail brands, and not on drugstores.

After five years of operation, Bach Hoa Xanh now brings 20 percent of total revenue to the group, helping save The Gioi Di Dong from the Covid-19 pandemic.

While the mobile phone retail witnessed minus growth rate and home appliance distribution did not grow much, consumer food retail has been growing by over 100 percent, serving as the driving force for the group.

Nielsen says there are 1.4 million groceries in Vietnam and 9,000 traditional markets, which have revenue of $10 billion a year, or 75 percent of market share.

Kantar Worldpanel Vietnam said traditional retail channels satisfy 85 percent of people’s consumer demand.

At present, Bach Hoa Xanh, Vinmart+, Co-op Food and SatraFoods are scrambling for land. As such, traditional markets and groceries now feel pressure from these retailers.

Petty merchants and grocery owners have no other choice than improve their service quality and digitize their business, especially during Covid-19 when people want contactless transactions.

As early as five years ago, The Gioi Di Dong (Mobile World), a success story in Vietnam and the region, decided to jump into the consumer goods retail market. Vegetables and fresh meat were the first items it sold after joining the market, following achievements in mobile phone and home appliance distribution.

 

Nguyen Thuy Anh from the Vietnam E-commerce and Digital Economy Agency in June 2020 commented that Covid-19 has accelerated the development of e-commerce.

Some wholesale markets want to sell products on e-commerce websites, which shows that traditional markets are aware of the risk of being replaced by supermarkets and online retail channels.

Many owners of small businesses and petty merchants have begun selling goods on social networks, on their own websites and cooperating with e-commerce sites. Marketplaces like Lazada, Tiki and Shopee all run programs to support merchants to sell goods on their platforms.

However, for many petty merchants at traditional markets, who are weak at accessing new technologies, becoming digitized is difficult work.

Nguyen Thai Hai Van, CEO of Grab Vietnam, noted that in the digital transformation era, tiny business households lacking resources have been left behind and will be in danger if they do not receive support from professional associations.

Meanwhile, Grab is trying to bring traditional markets to its app to offer more choices to customers. The merchants who are ready to apply digital technology and have business licenses and certificates on food hygiene will be eligible to sell their products via the app.

About 100 petty merchants at traditional markets in Da Nang, Hanoi and HCM City sell goods on Grab’s app.

Petty merchants, at first, hesitated to make transactions via bank accounts as 75 percent of payments on GrabMart are not in cash. And many merchants are using modern payment technologies for the first time.

“We have successfully persuaded taxi motorbike drivers to use technology, and it is not too difficult to persuade petty merchants to do this,” Van of Grab said.

Of the three countries where Grab runs the program, Vietnamese merchants have shown high readiness, Van said. 

Ha Anh

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