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Industry forecast: inevitable trends of Vietnam's retail industry

Saturday 16, 11 2019
Localization and personalization are being applied by domestic retailers in Vietnam market
Industry forecast: inevitable trends of Vietnam's retail industry
Several foreign retailers entering the Vietnamese market are eager to build a wide network. However, many of them have failed and left the market. The cause does not come from the financial shortage, but from the fact that they did not apply localization and personalization in the development process.

Leave due to insufficient understanding of the market

In the past 10 months, the Vietnamese retail market has witnessed many M&A deals between major retail businesses, of which the acquisition of the entire supermarket chain Auchan Reatil (France) of Saigon Co.op in June 2019, or the acquisition of Z-Mart (April 2019), Shop & Go (April 2019) and Queenland Mart (September 2019) of Vincommerce are the major ones.

Along with that it is the continuous failure of foreign giants including Metro, Auchan, Casino Group (France), Parkson ..., which could do nothing but announce their departure from the Vietnamese retail market. Some other retail businesses such as 7-Eleven, GS25 of Korea ... are almost temporarily maintained.
These examples show that it was not coincidental that retail experts have said Vietnam is a potential market but not "easy to swallow". The cause of the failure of foreign and world-class retail businesses in Vietnam comes from not understanding the market.

"Many domestic and foreign investors entering Vietnam’s retail market are expected to build a large network and coverage. But not every business can do that. This is due to limitations not only in terms of finance but also in history, people, relationship as well as investors’ level of penetration into Vietnam market", said Ms. Dinh Thi My Loan, President of Association Vietnamese retailers.

According to Ms. Loan, each market has its own characteristics and the retail market of Vietnam is divided into many other regional and small ones. For example, the North and the South retail market are totally different while urban and rural areas are not the same either.
Therefore, in order to have the coverage over 63 provinces and cities, retail businesses must have a certain understanding of regions and localities, as well as a comprehensive development strategy to be able to serve all types of customers. "Many retail businesses fail because they do not understand the market and the habits of Vietnamese consumers," Loan said.

Localization

Learning from the retail businesses that suffered from failure, recently the terms localization and personalization have been mentioned a lot in the retail market. Ms. Loan said that these are two prominent trends being absorbed by domestic retail enterprises from the advanced retail market in the world to apply in Vietnam.
Accordingly, localization is to gather preferences and shopping needs of local consumers to build a suitable supply of goods to meet that demand, while personalization is the understanding of shopping culture and the requirements on experience in the procurement process in order to offer new and creative shopping methods to attract customers. Only when understanding the market and shopping habits of local people can retail businesses become popular.

"Currently, some retail businesses including Saigon Co.op, Satra, Hapro, or Vinmart have begun to research and apply these two trends in the development process. However, the extent and the specific strategy differs from business to business" Loan said.
Take Saigon Co.op for example. This business has now had a network of 125 supermarkets from the North to the South. In order to achieve such coverage, this enterprise has made research and studies on each locality and region, but mainly concentrated in the Southeast and a few small provinces in the North.

In a conference with a supplier of Vincommerce (the company that owns the brand of Vinmart, Vinmart +) which has just been held, Ms. Thai Thi Thanh Hai, General Director of Vincommerce revealed that in the next 5 years, this business will focus on product strategy and differentiation through localization and personalization.

"To develop widely, businesses must capture the habits of customers. In other words, by thoroughly applying the localization and personalization trend, enterprises can approach success. The failure of many foreign enterprises does not come from inexperience or lack of finance but from the lack of understanding of the local market" said Ms. Dinh Thi My Loan.
Source: Vneconomy
 
 

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