Retail sector in Vietnam: lack of knowledge about consumers'​ culture leads to failure

With a population close to 100 million people, the fastest-growing middle class in Southeast Asia, robust spending behaviours, and being one of the world's best performers in terms of economic growth, Vietnam is naturally perceived as a land of big potential for the retail sector. And of course this kind of retail landscape combined with the rapid growth of e-commerce is naturally creating very tough competition among all the players in this sector.

It is obvious that in an environment with tough competition some players must abandon the race for the best shares of the market, but the surprise came at the beginning of June 2019 when the French retail giant Auchan withdrawal from the Vietnamese retail market. Auchan's abandonment just confirmed a tendency that does not bode well for the foreign retail giants in Vietnam: they are progressively leaving Vietnam.

Indeed the French Casino Group sold its Big C Vietnam to the Thai Central Group in 2016, the German giant Metro Cash & Carry sold its wholesale business in Vietnam to the Thai TCC Group in 2016 as well, the Malaysian Parkson malls finally closed in 2018 after a progressive downfall and Shop & Go, the Singaporean convenience store chain transferred its 87 shops to Vingroup for a symbolic 1 USD in the first half of 2019.

The common point between all those withdrawals from the Vietnamese market is that all those big retail names suffered consecutive losses throughout their operations in Vietnam. Only Casino Group can be perceived as an exception as its reason for leaving the Vietnamese market was part of its global business strategy.

If we look deeper at each individual case, we can see that the common point between those loss-making retailers, that left the Vietnamese market is that their business approach was not appropriate to the psychology and culture of Vietnamese people. For example the Auchan’s supermarkets were located essentially in residential areas, and because of that the company could not develop its brand identity within the perception of its Vietnamese customers. Auchan organised its supermarket system in such a way that it was only made to serve customers living in close vicinity of its supermarkets, and it was not adapted to customers living in more remote areas and to their needs such as shopping, playing, eating, cinema etc. In the case of Parkson, it quickly started to suffer losses after it started to operate in Vietnam as the group focused only on high-income customers, who are not numerous, and established its malls in prestigious and expensive buildings such as Paragon, Keangnam Landmark, Cantavil An Phu. We can draw a conclusion that the reason for the failure of each of those foreign retail companies lacked knowledge about the local market in a different way.

Even if the Vietnamese retail market is characterised by a very fierce competition, it is still a very attractive market due to its characteristics that prove that the retail sector in Vietnam is still accessible and can still develop. Nonetheless foreign retailers needs to remember that the Vietnamese market has some aspects that need to be identified and properly assessed before the establishment of a retail system, as for example choosing a fitting consumer segment in Parkson's case. The Vietnamese retail sector is accessible and is not hostile towards foreign businesses, nonetheless foreign businesses must perform deeper cultural and market analysis before they start their activities in Vietnam if they want to succeed.

Viet Australia
Công ty Kiểm Toán Việt Úc là tổ chức Kiểm toán độc lập được cấp giấy phép và thành lập năm 2007 tại nước Cộng Hòa Xã Hội Chủ Nghĩa Việt Nam.