Japan companies and investors migrate to Vietnam


Nowadays, Thu Huong no longer shops at the traditional stores and wet market near her home, choosing instead to grab a cab and head to a newly opened air-conditioned Aeon Co. mall across town in Hanoi.

It’s very convenient to shop there, said 30-year-old Huong, where she can buy all the various items that her family of five needs for an entire week at one store. She also enjoys the modern comfortable atmosphere with free Wi-Fi.

With a young population, a burgeoning middle class and an economy that is growing at a faster clip than most in Southeast Asia, Vietnam is an appealing market for Japanese home-based companies Aeon, Takashimaya Co. and Seven & I Holdings Co.

Economic growth in China and Japan has slowed to a snail’s pace, said Nagahisa Oyama of Aeon, who oversees Vietnam operations as the company’s chief. However, the retail market in Vietnam is solid and showing increasing strength, most particularly among the younger generation.

Almost 60% of the 93 million strong population of Vietnam population is under the age of 35 and they are becoming better educated on how open markets work, says market research company Nielsen Vietnam.

Four days after an Aeon Mall opened in Ho Chi Minh City last July, it recorded sales that were already 18% higher than had originally been projected by the company’s accounting department.

Aeon, the largest retailer of Japan in terms of sales, operates four malls and 54 supermarkets in Vietnam. That number of supermarkets is more than double the grocery stores the company operates in China and comprises a full one-third of supermarkets it has opened outside of Japan.

Notably, they are not the only Japanese company looking to turn a profit in the Vietnamese marketplace.

About 20 retail companies from Japan – from a chocolate maker to noodle company to a green tea manufacturer – met with potential Vietnamese associates earlier this year at a business forum in Hanoi organized by Mitsubishi UFJ Financial Group Inc. and Vietnam JSC Bank for Industry and Trade.

We think competition in the Vietnamese retail market will increase with Japanese convenience stores as well as Korean and Thai companies making their footprint there, said Oyama.

Oyama added that he believes Aeon’s tie-ups with local grocery chains Citimart and Fivimart will further help augment its business operations in the Southeast Asian country.

Vietnamese consumers have seen their average incomes rise to US$2,111 in 2015 from just US$433 in 2000, says Nielsen Vietnam. Concurrently, they are turning away from the retail model dominated by neighbourhood wet markets and are now looking for better quality shopping experiences,

The country has nearly 9,000 wet markets, 800 supermarkets and more than a million-small mom-and-pop stores run by household proprietors, says a Vietnam government report released last June.

Spending at formal retail shopping centres, as opposed to traditional local markets and shops, is expected to jump 15% to 40% of consumer spending by 2020, the report showed.

Shoppers in the country are also becoming more demanding. While six in 10 Vietnamese expect stores to be within reach, nearly as many also want them to enrich their in-store shopping experience, says Nielsen, which surveyed 30,000 people in 61 countries.

Department store operator Takashimaya opened a 15,000-sq.-meter department store at the Saigon Centre in Ho Chi Minh City earlier this year, its first in the country, hoping to tap faster-growing markets abroad especially in Southeast Asia, said Tokyo-based spokesman Hironobu Hanai.

The young population of Vietnam and the economies strong growth rate is attractive, said Hanai, noting Takashimaya has invested about US$738 million into the nation since 2012, including in the new store and other real estate.

Japanese convenience store giant 7-Eleven last year signed a franchise agreement with Seven System Vietnam as part of its expansion plan in Pacific Rim countries.

And the interest is not limited to Japan, as Korean retail conglomerate Lotte Group is planning to open 60 supermarkets in Vietnam by 2020, while TCC Holding Co. based out of Thailand acquired Metro AG’s Cash & Carry wholesale business in Vietnam.

Hanoi-based Vingroup is pushing back and targets opening as many as 500 supermarkets and 8,000 convenience stores under its VinMart and VinMart+ brands over the next five years, the property developer said in an email.

Mobile World Investment Corp., the top mobile phone retailer in Vietnam, is another that isn’t sitting by idle, announcing plans to jump headfirst into the market and launch grocery stores next year.

This new segment is expected to grow much faster than its mobile phone and consumer electronics retail business, said Chair Nguyen Duc Tai in an interview.

The market is huge here, said Tai, noting that people in general change mobile phones only once every two years or so on average, while they must purchase fresh food and meat every day.

Ten years ago, one would see women carrying plastic bags to the wet markets to buy food every morning, but that image is changing, and may become a relic of the past— as Vietnam goes through what is called a generation change.

Source: Vietnam.net

Photo: CBR Investment AG