VietNamNet Bridge – Big fortunes can be made through small investments, and this is  especially true in the distribution sector.

Nearly 200 kiosks on the ground floor of Saigon Square 3 shopping mall, for example, are fully occupied.

A merchant there told reporters that there are three kinds of fees merchants will have to pay: fixed rent (VND 110 million a month for a 2x2 kiosk), deposit of VND45 million and monthly rent of VND15.39 million. The retail premises’ leasing contracts will be renewed every two years.

Hung Vuong Square in District 5 in HCM City, developed by Mai Huong Trade and Service Company, has also reportedly stopped looking for tenants for the 350 kiosks available there.

TM, a merchant who leases several stalls at Hung Vuong Square, said that one would have to pay from VND600 million to VND1 billion for the transfer of one stall.

He would also have to pay a deposit of VND170 million, monthly rent of VND1.5 million per square meter and VND400,000 in service fees, like other merchants.

According to TM, at Saigon Square 1, a stall can be transferred for $25,000, while it is only $5,000 in 2013.

The merchant noted that the so-called Bazaar (combination of modern/traditional market) model, which has been developing strongly in Asia, including Hong Kong and India, is a growing trend in Vietnam.

Phan Thanh Company, which developed the Saigon Square chain, is believed to be the pioneer in developing the Bazaar model in Vietnam.

NY, a merchant who once had a kiosk at Saigon Square 1, and now has some stalls at Taka Plaza, said that the shopping centers can attract many merchants because their investor offers reasonable rents.

“The rent is the key which helps retain merchants,” she said. “Meanwhile, many merchants who have stalls at Taka Plaza 1 now want to have stalls at Taka Plaza 2 as well.”

Low investment, high profits

An analyst, who is an expert on the Bazaar business model, said that investors usually lease land for three years (with an extension of 12-18 years) and pay a land lease fee annually.

The short-term lease allows investors to minimize the investment cost, which allows them to take back investment capital after a short period and offer reasonable retail premises to merchants.

“It takes them (investors) two years or more to recover the investment capital,” he noted.

Meanwhile, merchants also find the business model attractive. However, a merchant at Hung Vuong Plaza said it would not be suitable for “amateurs”.

“If you have VND1 billion and you want to make money by leasing a kiosk at a shopping mall and then transfer to another for profit, you’d better give up the idea and deposit your VND1 billion in banks,” he noted.

DNSG