VietNamNet Bridge - Vietnamese retailers have withdrawn from the convenience store market after a long period of incurring losses, leaving the market more open to foreign retailers, who have been expanding their chains.

 

 

Convenience stores are not a lucrative business field for Vietnamese investors, as they once thought. It is estimated that investors have to pay VND1.5-2 billion to develop a store. High rent at retail premises and high operation expenses eat into their revenue from convenience stores.

Nguyen Bao Loc, deputy general director of Intimex Vietnam, noted that retailers could only make satisfactory profits if the rent is no more than $9 per square meter a month. However, the average rent in central areas and advantageous positions is $30-50 per square meter a month.

Robert Tran, CEO of Robenny Corporation, said that investors need to develop hundreds of shops in Vietnam, double or triple than in other countries,  to be able to make profits. 

In general, a convenience store is not a lucrative business model in Vietnam because of its modest profit.

However, Tran also noted that retailers were still expanding their convenience store chains in Vietnam, citing two reasons. 

First, as for the foreign retail chains with thousands and tens of thousands of convenience stores like Circle K, Shop&Go and FamilyMart, their firm positions in a highly populated market with the annual growth rate of 15 percent will help them expand their networks rapidly.

With large networks, the retailers have great advantages in negotiating with manufacturers and suppliers on discount rates, debts and commissions.

Since the retailers are all ‘big sharks’, they can offset the loss in Vietnam with profit from other markets. 

FamilyMart, for example, reported that it took a loss of $11.5 million from the business in the US, China and Vietnam in 2012, but still could make a net profit only 50.9 percent higher than the year before in the global market.

Opening convenience stores is a part of big groups’ plans to develop their multi-field investments. 

Vingroup, for example, plans to develop 1,000 convenience stores in its strategy to become the leading Vietnamese retailer in three to five years. 

Vingroup plans to open many more shopping malls, 100 supermarkets, 300 specialized shops and hundreds of home appliance centers.

A Vietnamese analyst also noted that if investors just want to expand their business networks, they would find Vietnam a reasonable place to develop convenience stores. 

“This explains why only the ‘big guys’ join the convenience store market segment in Vietnam,” he noted.

NCDT