Darin Williams, Managing Director, The Nielsen Company Vietnam
In the post-recession global economy, retailers in developed markets are facing a changed landscape that features fewer stores, heavier discounting and more discriminating shoppers. In contrast, retail in most developing markets like Vietnam has remained fairly robust, and all signs point to further opportunities for expansion. Desirable real estate is still difficult to obtain, competition remains strong from both domestic and foreign players, and the middle class continues to grow.
The Retail Landscape
With these factors in mind, it is no surprise that A.T. Kearney ranked Vietnam one of the top three most attractive Asian markets in their 2010 Global Retail Development Index. The nation’s 2010 GDP growth is expected to be 5.5 percent, slightly lower than previous years, but still ahead of many markets. Yet amidst relatively high inflation, the economy remains robust, with the performance of most Fast Moving Consumer Goods (FMCG) categories fairing well.
Vietnam now has over a half million stores selling consumer packaged goods and continues to see steady growth. While the number of traditional trade stores grew 6 percent in 2009 (see Figure 1), the growth of Vietnam’s modern trade (MT) store numbers was substantial: up 45 percent. The strong growth in MT outlets is expected to continue as significant growth opportunities remain relative to the country’s Southeast Asian neighbors.
Vietnam’s population is estimated at 86.5 million, with around three quarters of the population residing in rural areas. It’s no surprise then that almost 46 percent of Vietnam’s FMCG store turnover is attributed to rural areas. What’s interesting for suppliers is that over time, rural consumers are introducing new categories to their repertoires as their level of disposable income increases and demand grows for more sophisticated products. Consumers are also moving from “must have” staple items such as rice and shampoo to discretionary items such as deodorants/skincare.
Since the opening of the retail market by the Vietnamese government, the key international players continue to be Big C, Metro Cash and Carry, while Saigon Coop continues to be the leading local chain. Over the past few years, convenience stores have also taken root, with both local and foreign players competing for customers.
Modern Trade Outlook
Sales in modern trade stores enjoyed growth of 63 percent in 2009 versus 2008, with MT sales contributing 11 percent of total FMCG sales across Vietnam by the end of 2009. There are 752 MT outlets in Vietnam, up 45 percent from last year. With the significant increase in MT outlets shoppers have only slightly increased their store repertoire (see Figure 2). Although shoppers have not increased their number of store visits in any noticeable manner, they have increased spend per visit, especially at supermarkets (see Figure 3). With the continued opportunities for expansion, 66 percent of business leaders expect MT to contribute at least 10 percent to sales revenue by this year.
Food For Thought
Growth is still on the radar for Vietnam with a number of areas to keep in mind:
- Modern trade and specific convenience management systems will need faster development.
- Maximizing portfolio efficiency in-store will be key to success in the still dominant traditional trade channel.
- Rural strategies must be part of long term planning in Vietnam.
- As modern trade development accelerates, this channel will have an increasingly more significant influence on the way people shop, which will inevitably lead to opportunities to create new categories.
Most importantly, to win in the modern trade arena, incumbent players as well as new, emerging entrants will need to consider very carefully the needs and wants of their consumers, and devise strategies to satisfy these specific consumer demands.