The second coming of Vietnam's retail market

By Ha Phuong   June 8, 2017 | 10:10 am GMT+7

Nearly a decade since A.T. Kearney first declared it the most attractive market, Vietnam is making its way back to the top.

Vietnam's retail market seems ready for a comeback after losing some of its momentum in the last few years.

The latest A.T. Kearney's Global Retail Development Index, released this week, has put the maket back in the top 10.

The country made headlines worldwide when it topped this list in 2008. While the market has been growing steadily over the years since, its attractiveness has somehow waned, at least according to the A.T. Kearney rankings.

Last year Vietnam was at number 11. The five-spot jump this year is without a doubt a redemption that it needs, which has been attributed to the recent easing of investment restrictions.

Vietnam ranked 6th in the Global Retail Development Index 2017 by A.T. Kearney

Vietnam ranks sixth in the Global Retail Development Index 2017 by A.T. Kearney

When compared to the top markets, particularly India and China, Vietnam pales in terms of size. The market value remains small, only around $90 billion. 

Disposable income is not very high as the economy has just escaped the "low income" status. The average income was around $2,200 a year in 2016.

And yet the country is emerging as an important market for retail expansion, said the A.T. Kearney's report.

“Vietnam’s moment seems to have finally arrived.”

With Vietnam reaching “peak” stage, according to the index, now is the time for investor to enter the market, Soon Ghee Chua, partner and head of Southeast Asia at A.T. Kearney, told VnExpress International via email. In the longer term, he expected that mobile penetration will play an increasing part in retail.

Convenience stores continued to be a phenomenon in Vietnam this year with the "aggressive expansion" of some foreign brands, namely U.S.’s Circle K and Japan’s Family Mart, according to the report.

The foreigners seem to be the dominant players, holding 70 percent market share, estimated by trade ministry.

A combination of rapidly growing per capita income of Vietnamese consumers and the relaxing of regulations sets the perfect time for foreign retailers to get involved.

Some global heavyweights are expected to also enter the scene in the near future with the closest debut of Japan’s giant 7-Eleven this June.

The key challenge that faces Vietnamese retailers is the sheer size and sophistication of global commerce giants as they have the scale and ability to open many new stores relatively quickly, bringing global brands, more variety and a better shopping experience to customers, Chua said.

"However, Vietnamese retailers with local know-how will have a significant advantage in the competition against global retailers who are completely new to the market," he said. "Those local companies that are increasing quality, tightening up supply chains and harnessing technology will see sustainable growth."

Vietnam’s trade ministry has projected the market to hit $179 billion by 2020, a jump of 52 percent from last year.

The sector has a lot room to grow in Vietnam, where more than half of a population of nearly 92 million are young and the annual average income is expected to increase rapidly, the ministry said.