Thanks to deals with foreign partners, the retail market in Vietnam is waiting for a strong transformation. This is a positive signal showing the dynamism and understanding of the market from businesses.

CrownX works with Alibaba and Baring Private Equity Asia. Photo: ST

Welcoming foreign capital flows

Recently, FujiMart Vietnam Retail Co., Ltd - a joint venture between BRG Group (Vietnam) and Sumitomo Corporation (Japan), opened the third FujiMart supermarket in Hanoi. According to representatives of both businesses, this cooperation is expected to exploit the great resources and many years of experience in the operation of supermarket chains of the two businesses. Following the Japanese model, FujiMart will sell products from Vietnam, Japan and many other countries to meet the diverse needs of Vietnamese consumers.

Notably, Masan Group announced Alibaba Group and Baring Private Equity Asia (BPEA) signed an agreement to buy new issued shares of The CrownX (TCX) with a total cash value of US$400 million, equivalent to 5.5% ownership rate after the issuance. The CrownX is a retail consumer platform that merges Masan's interests in Masan Consumer Holdings and VinCommerce. As well as Alibaba and BPEA investment groups, Masan is also in the process of negotiating another strategic investment transaction worth between $300 - 400 million in The CrownX. The transaction is expected to be completed in 2021. In these transactions, Masan still holds the controlling stake.

Masan's said that these transactions help strengthen shareholders' vision of the potential to build Vietnam's first technology-applied consumer-retail ecosystem and expand the scope of customer service nationwide.

More than a month ago, South Korean conglomerate SK Group invested $410 million to hold a 16.26% stake in retailer VinCommerce under Masan. Woncheol Park, Representative Director of SK South East Asia Investment (a member company of SK Group), said this strategy was implemented because he believed in the great potential of the integrated retail segment from online to offline, also known as O2O, in Vietnam.

In Vietnam, many retail chains have had the shadow of foreign capital such as Aeon Mall (Japan), BigC (Thailand, changed to Tops Market and GO!), Lotte Mart, and recently VinMart.

Trading in a new way

According to Dr Le Anh Tu, Senior Advisor of PwC Vietnam, Vice Chairman of the Economists' Club (VEC), the participation of large and foreign investors in the market will create competition and greater pressure on firms in Vietnam. However, mergers and acquisitions (M&A) between domestic retailers or combined with foreign investors and foreign retailers help create larger and stronger businesses. Therefore, the problem of retail businesses is how to get ahead using internal resources or in combination with companion units.

According to a report by Securities Company Bank for Investment and Development of Vietnam (BSC), in 2021, when people's income gradually stabilises, households will increase spending on necessities and high supplies. Household spending growth will rebound strongly to 9.69% this year. BSC expects that in 2021, the retail industry's growth will exceed 10%. In the long-term view, the population size of Vietnam increases by 2% per year, forecast to reach 106 million people by 2050, which will be a good sign for retailers when the market is expanded.

With such potential, the retail market in Vietnam is still a "promising land" for FDI projects and investment strategies. According to the Ministry of Industry and Trade, Vietnam is the sixth-largest market among 30 countries with potential and attractiveness for investment in the global retail sector in recent years.

However, not all cooperation will receive significant achievements. The Vietnamese market has also recorded the disappearance of many foreign retail brands or foreign investors. Experts say that with the rapid change of shopping and consumption needs, retailers need abundant resources, must understand the market and quickly update and adjust business strategies in accordance with the situation.

The retail method that integrates O2O is considered by foreign investors to be quite suitable for deployment in Vietnam when two-thirds of the population is using internet services. With the $400 million - deal with the Alibaba group, VinCommerce can serve consumers with essential products on an online platform, thereby better meeting the needs of customers from offline to online, especially in the context of Covid-19.

According to Nielsen Vietnam, in 2021, supermarkets need to go in the direction of shopping with entertainment and private label products. In addition, retail firms need to quickly adapt to the differentiation and changing habits of consumers, focusing on enhancing the shopping, payment and purchase experience; technology application, digitisation, online and offline cooperation. In addition, Vietnamese retailers who want to move to the O2O model need to invest in improved customer interaction as well as flexible and more convenient payment methods.