Groceries still dominate the retail market in Vietnam despite stiff competition from the modern distribution channels such as supermarkets and convenience stores, according to Nielsen.

According to Nielsen’s Connie Cheng, nearly 50 percent of retail turnover in Asia is from small grocery shops. In Vietnam, 80 percent of FMCG sales is from shops. 

In large cities, the areas which witness the strong rise of convenience stores and supermarket chains in recent years, 60 percent of small shops’ sales are from groceries, according to Kantar Worldpanel.

It is clear that though the modern retail channel has been expanding unceasingly with the number of convenience stores increasing by twofold, and mini supermarkets by 70 percent just in 2013-2014, they still cannot defeat the 1.3 million existing groceries in Vietnam.

Groceries are not as large and well equipped as supermarkets and convenience stores, and the service is not as good, but they have a big advantage in that they are available everywhere and at every corner of the market.

Meanwhile, supermarkets’ capability of approaching customers is more limited: there is one convenience store for every 69,000 people, according to Nielsen. 

Supermarkets and convenience stores are mostly located in large cities and urban areas. Meanwhile, 70 percent of Vietnamese consumers live in rural areas where groceries are dominant.

A branding expert commented that Vietnamese habits and culture determine the development of groceries. Most Vietnamese use motorbikes, and therefore, they want to do shopping without having to park their motorbikes. 

Busy people do not want to spend money on selecting goods and waiting for their turns to make payment.

If consumers only want to buy consumer goods and products for daily use, they won’t go to large supermarkets and shopping malls because it will take time to do this. 

However, the branding expert noted that there are many problems. 

Most groceries are small, covering an area of 19 square meters on average, according to Nielsen. Therefore, the area for displaying goods at groceries is limited, while manufacturers have to compete fiercely to display their products at advantageous positions.

Nearly 10 years ago, Trung Nguyen, a coffee chain, could see the problems of groceries when it decided to jump into the retail market. 

Therefore, it planned to join hands with groceries’ owners to develop a new retail mode – modern groceries. 

Under franchise contracts, Trung Nguyen quickly set up 500 standard G7 Marts and about 10,000 member shops. However, they went bankrupt due to conflicts between retailers and manufacturers, as well as financial problems.

NCDT