Vietnam will be opening its retail market in 2015 in line with its commitments to the World Trade Organisation.
|Customers at a Lotte Mart Supermarket in HCMC (Photo: SGGP)|
This is expected to create challenges for the domestic retail market, as well as opportunities for the domestic retail property market. Ngo Thi Huong Giang, Savills Vietnam senior manager for research and consultancy, discusses the issues with Vietnam News.
*What is your comment regarding the present state of the domestic retail market?
The purchasing power of the people is highly dependent on the stable development of the economy. The domestic economy has experienced development difficulties in past years but recently, there have been numerous positive factors, including growth in the revenues of retail goods and services, consumer price index (CPI) and gross domestic products (GDP).
Therefore, the domestic economy will be better in the coming years, but Vietnam will not experience a boom in economic development in the future like it did many years ago. For instance, in 2007, the economy had a large volume of money supply, especially the stock market, which attracted much money, and the people did not think too much when deciding on payment for goods and services. The people were ready to spend money.
But now, money-spending habits have changed. For instance, customers think a lot before spending on a product or service.
If the economy improves in the future, the people's purchasing power will increase further. If the people have confidence in future economic development, they will spend money not only on essential goods and services but also on other products and services.
*Vietnam will be opening its retail market in 2015 in line with its commitments to the World Trade Organisation. What is your comment regarding competition in the domestic retail market between foreign-invested retail firms and their domestic rivals after the opening of the retail market?
Under its commitments with the WTO, Vietnam will open its retail market. In line with the opening of the market, companies that are entirely foreign-invested will open retail systems. The domestic retail market will witness competition that is tougher and more fierce in the future.
Because of this, domestic retail companies have expanded their retail systems and invested in the intensive development of a number of new retail products to meet domestic market demand and improve their levels of competitiveness.
For instance, Coop Mart, a popular domestic retail system, has expanded and developed new retail products catering to the needs of medium- to high-end customers.
So, it will not be easy for foreign retail companies to crush domestic rivals because foreign and domestic retailers have different strong points. Domestic retailers have the advantage in market knowledge and development because of their long experience in the market. Meanwhile, foreign companies have the advantage in experience, skills, volume and kinds of goods, sales strategy, workforce and other business strategies.
In the future, mergers and acquisitions (M&A) will surely increase in the domestic retail market. In fact, M&A activities have always happened and have never stopped, but not all business transactions have been announced because the announcement would have to include losses, profits, public images of buyers and sellers and the quality of trading products.
The competition in the domestic retail market will become more fierce in the coming years, so the government should make and enforce policies to control the retail market, leading to a partial and not total opening of the market next year.
*How will the opening of the domestic retail market affect the domestic retail property market in the coming years?
According to the Euromonitor study, Vietnam is one of the retail markets with the highest growth rates in the Asia-Pacific region, and it has attracted leading Asian retail groups. The opening of the market to companies that are entirely foreign-invested in Vietnam will contribute to the growth of the modern retail system in Vietnam and has the potential to create demand for the leasing of retail store space.
Also, the opening will create conditions for famous foreign retail trademarks to enter the domestic market in Vietnam. They will bring in more new retail models to the market, and that will improve trading activities at trading centres and the marketing of retail store space for lease in the future.