Local retailers are quickly pushing their chains across the country, making full use of their relative monopoly before foreign giants like Wal-Mart can step in next year.

Vietnam’s top four retail and distribution companies – Saigon Co.op (Co.opMart), Saigon Trading Group (Satra), Phu Thai Group, and Hanoi Commerce General Company (Hapro) – have announced plans to build more outlets this year.

They are worried, however, that the lack of retail space and human resources will combine with high rents to stymie their plans.

The expansion race is heating up as Vietnam will open up its retail market to foreign businesses next year following its membership commitment to the World Trade Organization (WTO).

The retail market is considered one of the most attractive markets to foreign investors with a young population and growing disposable income.

The country ranks fourth after India, Russia and China on AT Kearney’s 2007 Global Retail Development Index (GRDI).

Famous retail groups like Central from Thailand, Carrefour from France, Takashimiya from Japan, and Wal-Mart from the US have been reviewing the market.

Meanwhile, Lotte from South Korea and Parkson from Malaysia are taking action now with multiple developments throughout Vietnam, Hanoi, Ho Chi Minh City and even Hai Phong.

Foreign retailers are currently allowed to hold 49 percent in joint ventures with Vietnamese companies, but next year they’ll be able to enter the market on their own.

Phu Thai Group CEO Pham DinhDoan said he was confident that local major retailers could compete with foreign investors thanks to their long-term experience and patron base as well as effective expansion strategy.

Securing footholds

Saigon Co.op, the largest retail chain in southern Vietnam, has spent up to VND500 billion (US$31.5 million) on nine new supermarkets in a number of provinces and cities since last year.

It plans to open 10 more outlets this year.

Its northern counterpart Hapro has launched nearly 20 supermarkets and convenience stores in Hanoi and other northern provinces last year.

The company said it would open five more commercial centers and over 200 convenience stores in 10 northern cities and provinces this year.

Vinatexmart, a chain run by Vietnam Textile Group, opened four outlets in Ho Chi Minh City, Can Tho and Kontum since December last year.

It also plans to open 25 new supermarkets in 17 cities and provinces nationwide this year.

An Phong Company, which owns the Maximark chain, has also announced an investment of almost VND300 billion ($19 million) in three supermarkets this year.

Hapro’s PR and Marketing chief Le Thien Nga, however, said local retailers would not be able to compete directly with such global giants as Wal-Mart in terms of large indoor shopping complexes.

Hapro therefore would focus on developing medium and small convenience stores at easily accessible locations.

Vinatexmart Director Nguyen Thi Hong Huong said the chain this year would speed up its plan to have up to 85 supermarkets nationwide by 2010.

The four heavy hitters also launched last May the country’s largest distribution group, the Vietnam Distribution Associate Network (VDA).

Crowded locations, understaffed The local retailers’ expansion plan, however, is undermined by limited resources of retail space and trained staff.

According to a CB Richard Ellis report, HCMC has over 140,000 square meters and Hanoi, 130,000 square meters, almost all of which have been leased out.

The pressure on retail locations is causing rental prices to increase.

CB Richard Ellis forecasts average monthly rental rates in 2008 for purpose-built retail on the ground floors will reach $200 per square meter.

Sky-rocketing land prices have also threatened plans to develop new shopping centers.

While housing project investors can sell houses to recover their investments soon, “investments in retail infrastructure can only be recovered gradually through amortization,” Saigon Co.op Vice CEO Nguyen Thi Tranh said.

“We’re all scared [of such big investments],” she said.

Each new supermarket would also need about 100 staff, most of whom must be trained and experienced, Tranh said.

She disclosed Saigon Co.op’s plan to open a professional training center this year to strengthen its staff.

Phu Thai Group, meanwhile, has aimed to have 3,000 employees, including foreigners, by 2010, CEO Doan said.

Source: Tuoi Tre