Dec 25, 2012

Vietnam - Convenience stores: the 1-against-30 competition

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VietNamNet Bridge – Some years ago, economists predicted the strong development of convenience stores and mini supermarkets which fit the current development conditions in Vietnam and the living standards of Vietnamese people. However, this has not come true yet.

Convenience stores and mini supermarkets have been struggling to survive over the last 10 years. Contrary to all predictions, they could not grow up because traditional markets remained the preferable choice by consumers. Meanwhile, the market conditions are not good enough for convenience stores to develop: the retail premises have become too expensive, while the logistics service fees have been increasing rapidly.

1000 fight against 300,000

There are some 1000 convenience stores and mini supermarkets nationwide, a modest amount if noting that there are 300,000 groceries and 2000 traditional markets.

There are some 30 retail chains, including the well-known brands like Circle K, Shop&Go, Ministop, FamilyMart, B&B, Day&Night, Co.opfood, Satrafoods, New Chợ, CExpress, Hapromart.

Over the last many years, many retailers still have been looking for their ways in the market, some others failed to implement their plans, and others keep cautious in their plans to expand their business scale.

Convenience stores can be classified into some groups. These include food chains like Vissan with 100 sales points, Foocomart 44, Co-op Food 45, Hapro 130. Satrafoods plans to open 20 shops this year.

The number of 24/7 convenience stores has also increased rapidly. Shop&Go with 83 shops is now considering marching towards the north.

FamilyMart has had 27 shops out of the 300 shops it plans to have by 2015 and 1000 by 2020. Ministor has opened the first 12 shops in HCM City, fulfilling a part of the plan to open 500 shops in the next five years, Circle K 33 out of 550 shops by 2018.

According to Nguyen Anh Hoa, the owner of B&B chain, the most outstanding feature of the convenience stores in Vietnam is the high availability of essential goods for family daily use. Of this, food products account for 60-70 percent.

Meanwhile, according to Nguyen Thi Tuyet Hoa, Director of Co-op Food chain fried food products make up 70-90 percent of total revenue of the chain. Small shops have the daily sales of 30 million dong, while bigger 50-70 million dong.

Paying money for… convenience

While big retailers now focus on developing hypermarkets, smaller investors think of opening convenience stores. The existence of convenience stores has helped bring goods closer to consumers, because small stores can be opened everywhere, including the corners of apartment blocks.

A report showed that the network of 300,000 groceries now handle the distribution of 90 percent of the volume of goods in the market. However, experts say the business model applied by the chain has become out of date.

But they said everything can be improved only when business households which run the convenience stores feel the pressure to renovate from the market. When modern consumption channels develop, they would have to change themselves and utilize the advantages of the modern distribution channel.

Investors say one would incur losses for the first five years of operation. However, a convenience store on advantageous position would allow taking back the investment capital within two or three years.


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