E-mart will sell its Vietnamese business to THACO

South Korea's largest supermarket chain E-mart is selling its retail store business in Vietnam to THACO Group after hitting road bumps to expand in the market. Accordingly, the local business will be converted to a franchise model managed by THACO, which will pay royalty fees to E-mart.

Since its debut in Vietnam in 2015, E-mart planned to open 10 hypermarkets within five years. At present, the retailer has only one hypermarket in Go Vap district of Ho Chi Minh City. The retailer failed to realise its expansion plans due to challenges in securing liscenses and development sites.

Last year, E-mart was rumoured to pull out of Vietnam, its second major Asian market after China. However, general director of the Vietnamese arm Chun Byung Ki refuted the news.

However, the deal marks the withdrawal of the South Korean retailer from the Vietnamese market. At the same time, THACO Group makes deeper venture into the retail scene. THACO Group is one of the leading car manufacturers in Vietnam and the fourth-largest firm in the country. The group also owns a number of business sites and shopping malls.

E-mart expects that through the alliance, THACO can open over 10 discount stores in Vietnam by 2025. 

"Our strategic alliance with THACO will not only pay us royalties for using the E-mart brand in Vietnam, but also give us the opportunity to export our private brand of products," an E-mart employee said.

In the past two months, Vietnamese conglomerate Masan Group has attracted over $800 million funding for its retail businesses just in the past two months. Alibaba Group Holding Ltd. announced that it is leading a $400 million investment in the retail unit of Masan Group Corp. A consortium led by Alibaba and Baring Private Equity Asia, is taking over a 5.5 per cent stake in The CrownX, which combines VinCommerce and Masan Consumer Holding.

In April, SK Group, South Korea's third-largest conglomerate, also spent $410 million to scoop up a 16.3 per cent stake in VinCommerce in April.

The foreign investors are pinning their hope on Masan’s retail businesses, which controls over half of Vietnam’s retail market. Specifically, VinCommerce operates 2,300 convenience stores and supermarkets – and that’s just offline. It has a vision to become an omni-channel operator, serving customers through both traditional bricks-and-mortar stores and emerging online channels to deliver new value to the market.

Meanwhile, Becamex IDC joined forces with Central Retail Vietnam to develop the GO! shopping mall in Ben Cat town of Binh Duong province.

Langlet Olivier Bernard, general director of Central Retail Vietnam said, "GO! shopping mall construction project at Ben Cat town has a scale of three floors with a planning area of three hectares, and total investment of $35 million. The malll will feature fashion business stores, dining areas, supermarket, and entertainment zones, thereby transforming the facade of the local retail sector and contributing to the economic and social development of Ben Cat Town in particular and Binh Duong province in general."

"With the aim of delivering the best shopping experience to people with high-quality services, Becamex IDC will enable Central Group to continue their research and investment in diverse retail models in other localities outside of Binh Duong as well, where Becamex IDC is operating. We hope that Becamex IDC and Central Group can fully capitalise on each other's potential,” said Pham Ngoc Thuan, general director of Becamex IDC.

Commenting on this trend, Matthieu Francois, associate partner of McKinsey & Company, said that local players are typically taking the lion’s share of the market in most retail categories and might, at some point, face increased need for funding. However, foreign retail concepts do not easily resonate with Vietnamese buyers who are generally loyal to local brands, except for convenience stores.

“This might urge foreign players to consider investments in local ventures that could be more attractive to some than a greenfield venture, while also holds appeal for local players that are looking to lift their profitability,” he added.

Indeed, Vietnam has witnessed the growing partnership of local and foreign partners to bet on the potential of the local retail market. Most recently, Japan’s Sumitomo Corporation has joined forces with Vietnamese firm BRG Group to launch its third FujiMart supermarket in Hanoi. With extensive experience and strong financial capabilities, the Japanese group expects to contribute the growth of Vietnam’s retail market.

According to a report by Euromonitor International, Vietnamese retailing was active in terms of M&As in 2019-2020. For example, at the end of December 2019, VinGroup sold its retailing business to Masan Consumer. In 2021, overall retailing in Vietnam is expected to return to the dynamic value sales growth rates that were being registered pre-pandemic.

VIR

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