Vietnamese retail sector to flourish in AEC era

Since the establishment of the ASEAN Economic Community (AEC), Vietnam has become a potential market for regional retailers, which promotes the development of the domestic retail sector, but also alerts domestic enterprises to watch out and continuously improve to not fall behind in this fierce competition. 
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Before 2015, the Vietnamese retail sector largely slipped under the notice of the mass media but there were only a handful of investors, such as Big C from France, Metro Cash & Carry from Germany, and some big retailers from Asia, such as Aeon Group and Lotte Group from South Korea were present.

vietnamese retail sector to flourish in aec era
The Big C chain in Vietnam was acquired by Central Group from Thailand. (Photo: Inside Retail Asia)

The situation had changed after the establishment of the AEC in 2015, after most trade barriers among different member states were eliminated and a market of more than 600 million consumers was created.

Vietnam has become a target for regional countries, such as Thailand, Indonesia, Malaysia, and Singapore. Among all these countries, Thailand can be considered the biggest and most noticeable partner in the retail sector.

ASEAN has become Vietnam’s second biggest trade partner with an annual growth rate of 14.5 per cent during the last decade.

Two-way trade turnover between Vietnam and the ASEAN increased from about $19 billion in 2006 to around $41.36 billion in 2016.

The ASEAN is the third biggest market and supplier for Vietnamese enterprises.

Within a year, the three biggest M&A deals in the retail sector were implemented by billionaires from Thailand.

Some experts explained that domestic room to develop in the Thailand retail sector has become narrow and saturated, so Thai retailers are forced to look for other potential markets. Thus, the establishment of AEC is a chance for Thai retailers to gain success outside their home turf.

According to Pham Hong Hai, general director of HSBC Bank Vietnam, in the next five years, there will be a strong wave of investment from ASEAN countries into Vietnam.

“The Vietnamese market has huge advantages in terms of stabile politics and macro-economy, low labour costs, and many preferential policies to attract investment,” Mr. Hai said.

However, great opportunities of foreign investment come along with increasing competition from foreign enterprises. But that cannot discourage Vietnam retailers.

 “We do not mind competing with foreign rivals. We want to hold a strong position in the market, and the best way is to focus on qualified services and products for more than 93 million Vietnamese nationals,” Tran Kinh Doanh, general director of Mobile World Investment Corporation, said.

The Vietnamese market is not only a playground for domestic enterprises, so if these firms fail to win significant market share and strengthen their position, they may lose right in their home.

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