Retail boom
/We have talked a bit about the foreign retail players coming into the Vietnamese market. The market is attractive, and Vietnamese consumers haven’t really had exposure to a lot of this retail yet. Plus, online ordering has not yet destroyed physical retail in Vietnam yet. So both the Vietnamese and the retailers get something out of it.
Looking a bit closer at the retail “boom”
To give a sense of what is happening in the market, I wanted to look at how big the retail “boom” is.
There is also a shift from Mom and Pop stores to more organized retail, in malls and grocery stores. McKinsey says that only 8% of grocery share is in modern groceries.
Companies from all over are trying to take a share of the growing market:
Locals: We have talked about the massive growth in VinGroup stores (which are now being sold to Masan). There are also Mobile world stores with 2,800+ locations in the country.
Korean stores: Lotte now has 14 Lotte Mart supermarkets and 1 department store in Vietnam. E-Mart has a hypermarket in HCMC. GS Retail partnered with Vietnam’s Son Kim Group to open 54 convenience stores.
European stores: Zara was the first big European brand to come into the market, and it now has multiple starts. H&M is now in Vietnam, and Ikea is opening a store in Hanoi.
Japanese stores: Uniqlo opened its first store this month. Aeon and Takashimaya are department stores in the country. Plus there are Japanese-owned 7-11 stores all over.
US stores: There aren’t that many US stores in Vietnam. Circle K is the biggest player that I could see.
The Deloitte report has a good list of domestic and foreign retailers.
Source: JLL
This has meant a pretty buoyant retail real estate market.
Occupancy rates are around 90% and have been trending around this.
This is despite about 150,000 in new supply in HCMC (more than 10% in additions), and about 60,000 in Hanoi (6%).
Rents have been trending steadily, also despite the additions.
Basically, lots of supply is being added, but it hasn’t affected rents or occupancies.
Logistics firms benefit too
The knock-on effect is that logistics firms are also benefiting. We’ve talked a bit about investments in logistics companies and warehouses. Now there’s more support for the boom in logistics. FM Logistic said that it doubled its revenue this year with just 10 customers. It is opening a new $30m, 52,000 sqm warehouse near Hanoi in March 2020. Interestingly, the company said it hopes to “provide both B2B and B2C deliveries from the same distribution centre.”
It will have a lot of competition there, but for its current customers, it should be attractive.
Bonus: Not all retail investments in South Asia works out. See this story on Tesco selling its Thailand and Malaysian subsidiaries. In Thailand, it had 1,967 stores, but just 74 in Malaysia. It would be funny if Masan bought those as well. Probably they should learn to run stores in Vietnam first!