About 10 years ago, the Masan Investment Company was a pioneer, blazing a trail into the domestic retail chain market.
The planners for MasanMart were humble enough to open a chain-store that imitated the existing Seven-Eleven convenience store chain, which has proven successful throughout the region. However, just a few months down the track, MasanMart’s were shutting up shop one after another.
A series of newspaper articles that followed the fate of Masan Investment pinpointed their mistakes. While Masan Investment was a highly successful enterprise and experienced in trade, its first mistake was the common mis-determination of customer potential.
MasanMart outlets were aimed at the middle class.
However, Masan did not dare to invest in shops in exact imitation of the Seven-Eleven shops which are equipped with air-conditioning, rich and diversified products. Here all Masan shops were without air-conditioning and both the lay-out and products were not eye-catching.
The second mistake was in their choice of location. Masan outlets were not convenient for consumers, as they were not conveniently located in places with heavy traffic and inaccessible. So consumers rarely came to those so-called convenience shops.
Last year, the appearance of a number of Day&Night convenience stores, backed by the Phu An Thinh Company, reminded people of the fate of MasanMart. However, Phu An Thinh has made better location choices for its Day&Night stores, setting up near Petrolimex petrol stations.
The plan is to open 13 stores near Petrolimex petrol stations, with priority in-store positioning given to high-quality local products. The investor’s ambition is to expand Day&Night stores further afield and eventually to other areas of business activity.
However, Day&Night stores have not proven successful. A marketing specialist said the cause of this failure lays in the wrong choice of location. While Phu An Thinh had probably examined Masan’s mistakes, and chosen petrol stations because they are frequented by many people, in practice, petrol stations are not appropriate places for shopping, especially in downtown areas. Phu An Thinh failed to be aware that Vietnamese people do not have a habit to dropping in petrol station areas for shopping. They do so just for filling their tanks. Moreover, goods on display at these shops were not eye-catching at all.
G7 Mart, founded by the owners of uber-successful Trung Nguyen Coffee, has recently made a breakthrough in the retail market by ‘upgrading’ existing grocery stores. The brainwave for G7 Marts was to make use of existing grocery stores, which already have existing customer bases. For this reason, G7 Mart can be more aggressive in its branding.
Dang Le Nguyen Vu, G7 Mart director general, is confident in the future of G7 Mart since the brand will be placed in firmly rooted stores. The G7 system is expected to have 9,500 member outlets, 100 distribution centres and six G7 trade centres across the country.
Existing shops, customer bases and solid trademarks are factors that G7 Mart is banking on. Through this latest push, G7 Mart is the largest-scale domestic retail project, with investment capital for each store reaching VND50-200 million ($3,100-$12,500).
Saigon Co-op, the current leader in retail, is also upgrading stores into Co-op shops.
Nguyen Thi Nghia, chairwoman of the Saigon Co-op board of directors, said that this move, besides the obvious purpose of doing business, is meant to upgrade, strengthen and develop the commercial cooperative system, as Saigon Co-op itself is a member of the Cooperative Alliance.
Nghia said there are 22 Co-op shops in operation, and by the end of 2006, a further 50 shops will be opened, with plans to expand to 100 next year. Capital for the upgrades has been sourced from the Cooperative Movement Promotion Fund.
Nguyen Ngoc Hoa, general director of Saigon Co-op, said that the lessons to be learned from predecessors is not too old to be valid. Saigon Co-op therefore will not develop shops in large numbers, but rather plans to use existing co-operatives, been though they are not in tip top shape.
Many of these shops have been in operation for a long time, and therefore have extensive customer bases, and are in good locations.
Besides the use of existing outlets by both G7 Mart and Saigon Co-op, a number of other private companies are preparing to open convenience stores. These include Small Mart 24/7, a 10 store Pham Trang Company initiative opening this year, and the CitiMart B&B (Best&Buy), with target of 11 outlets in 2006, and 60 points of sale in 2007.
Citimart retail stores are like small supermarkets that are prudently located inside high-rise buildings that contain offices and apartments.
Guy Lacombe, general director of Big C supermarket, cited figures as evidence of the attractiveness of Vietnam’s retail business. With Vietnam’s population estimated to extend beyond 100 million in 2020, consumption compared to GDP will be high (around 70 per cent), while 57 per cent of the population will be under 30 years of age, and Vietnam’s retail trade is now on the increase. The recent explosion of chain-stores and the distribution system is evidence that there is money to be made.
According Ministry of Trade statistics, with just 200 supermarkets, 30 trade centres, and around 1,000 convenience stores, the market is wide open when compared with the 55,000 trading enterprises, 1.16 million households involved in trade activities. It is these figures that have spurred enterprise confidence.
But, as Nguyen Ngoc Hoa put it, each enterprise needs to be cautious, because competition will become stiff as the market fills.

Source: Vietnam Investment Review