Saigon is now home to 1,800 convenience stores and small-scale supermarkets.
Over the last six years, the number of corporate-run corner stores has quadrupled, according to a report released last week by Nielsen, far outpacing the growth of traditional shops and trade centers. Vietnam’s convenience store market is expected to hit a growth rate of 37.4% by 2021, making it the fastest-growing in Asia, according to IGD, an international grocery research organization. The numbers back up what anyone who has spent any period of time in the city has witnessed – the rapid proliferation of convenience stores shouldering into the urban landscape.
With the recent arrival of Japanese chain 7-Eleven joining other franchises such as Korean GS25, American Circle K, and Singaporean Shop & Go, it’s apparent that foreign investment is fueling growth. About 70% of convenience stores are owned by overseas companies and the establishment of these foreign brands is also introducing a variety of unique food and beauty brands into the local market.
The success of convenience stores can be attributed to local populations with increased purchasing power and changing shopping preferences. Convenience, reliability, range of products and comfort are all cited as reasons for why people are choosing them over local mom-and-pop options.
Nick Miles, the head of international grocery research organization IGD further explained their popularity: “Convenience stores in Vietnam have become popular destinations for young consumers to shop and hang out, as the stores provide them with an air-conditioned environment, well-organized shelves and seating areas, high quality products and, in some stores, free Wi-Fi. It is also easier to get licenses for stores under 500 square meters, which is why retailers have been expanding to gain market share.”
But as new chains open, many are also closing or downsizing ambitious growth projections. FamilyMart, a Japanese chain, for example, has had to abandon plans to open 1,000 locations in Vietnam by 2020 and stop investment because of losses. Stiff competition and increased property rents are the most common causes of profit losses.
Despite the failures, the future is unmistakably bright for convenience stores. Vu Vinh Phu, former chair of the Hanoi Supermarket Association explained that “big retailers will reap fruits in the future if they can survive difficulties and accept losses for the first several years.”
[Photo via Tuoi Tre]
