Vietnam Retail Market under the perspective of International Retailers before G hour

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Hanoi and Ho Chi Minh are 2 biggest cities in terms of significant retail markets. At the moment, Hanoi retail supply is a little bit higher than the other city thanks to the additional regional retail center developed by Vingroup. There is a trend of the big retail center with the area over 40.000 sqm which provide all-under-one-roof retail definition when shoppers can spend all day with offering of grocery, fashion, lunch dishes to fine dining, leisure, spa and entertainment.

Besides, Danang is becoming an attractive location for retailers to explore, especially in the aspect of F&B and entertainment. Exhibited a good quality infrastructure and the natural tourism resource, there is predicted a developing wave of retail here. In the coming years, Danang shall be an undeniable destination to develop a retail hub in Vietnam.

Retail sales has grown at an average rate of 21.2% over the last five years to USD$124 billion in 2013. Vietnam is roughly the size of the Beijing or the Shanghai retail market, but growing much more rapidly. It cannot be denied that the rent and occupancy rate of retail market is decreasing but in the long term, a significant growth will be developed with the help of demographic and economic elements. The professional development of the market also illustrates through the acquisitions with the presence of the foreign players like Lotte, AEON, Vivo City, etc. Undoubtedly, Vietnamese consumers will be the most benefited from the quality of service and management expertise that these international companies provide.

Vietnamese modern retail market just consist of around 22% which partly shows a relatively low supply and prohibited quality of shopping centers. When participating in retail summits in Shanghai, Singapore or Hong Kong, Cushman & Wakefield has noticed an increasing interest in Vietnam retail market from international retailers. The hot debate topics include young population and rising number of middle class, discussion of legal framework, retail platform of Vietnam and local competition.

How to attract international retailers to Vietnam? Obviously one of the most important factors is location. Retailers in different industry segments will have different preferences to choose their store location. For example, one of the biggest fast fashion brands soon to open its very first flagship store in Ho Chi Minh demanded the prime location and large scale floor plate which is more than 2.000 sqm in total. They have the strong bargaining power because the brands can attracts big numbers of shoppers that increase sales for the whole center in general. This lead to a more flexible rent and commercial terms demanded and must be accepted by the property owners. Another important factor is the whether the fashion brands of that shopping center is in the same or higher segment . A shopping center that has brands in the same segment will create an exciting and memorable experience for customers when shopping in the center

While the fast fashion brands likely to take the advantage of the centered location, the department store retailers consider the accessibility, exposure to the main traffic infrastructure as well as the typical technical facilities. As a result, projects that are more carefully designed in accordance with market demand and categories mix in advance will have the advantage when both developers and retailers do not need to change the property facilities, which save a huge refurbishment cost. These projects will likely attract more retailers.

It will be a mistake if the luxury segment is not mentioned. In next coming months, Prada -one of the most powerful luxury brand in the World -their store with more than 300 sqm displaying high end leathers goods and cloths will be opened in Hanoi CBD. It somehow shows the trends of this segment, when more and more brands opening flagship stores instead of multiple brands store lasting for a long time like the case of Brooks Brothers, Versace’s stores at Union Square and other luxury brands in upcoming future. However, the luxury market brands are also aware of the tendency for the rich to travel to Hong Kong and Singapore for a better range of cheap luxury goods, so each of their strategy to expand to new market is always planned carefully.

Moreover, while providing service for clients, Cushman & Wakefield has noticed a tendency of new – to - market retailer to not only bring the products and professional international standard service but also a fresh retail format, which is “bricks and clicks” concept. Online shopping in Vietnam can be said to become more popular with the presence of Zalora, Lazada, Meta, etc…which target the young and middle class, bringing the convenience to the shoppers with the post service is highly ranking. Significantly, this concept is increasingly preferred by F&B industry, with the cooperation between restaurant franchisers and group-shopping websites like hotdeal, nhommua & muachung.

It can be said that the market is challenging but in long terms, the foreign retailers highly estimate the potential of the market. They show the commitment through intensive market research activities, which is done with the cooperation of experienced real estate agents like Cushman & Wakefield and other market research firms. The year 2015 with supportive legal procedure and WTO no doubt enhance the retail market to be brightened.