Figures from Euromonitor show that the number of convenience stores in Vietnam increased from just 565 in 2014 to 1289 by 2019 when revenues reached US$103 billion. The key players at the time were FamilyMart, Circle K, and B’s Mart, with market shares of 21.4 per cent, 20.7 per cent, and 9.6 per cent, respectively.
And then the whole market changed. Local conglomerates with access to vast amounts of capital spotted the opportunity.
First off the rank was the nation’s largest private trading company, VinGroup, whose interests then spanned residential property, shopping malls, hospitals, education, a university – and even motor vehicle manufacturing under its Vinfast subsidiary. The company’s VinCommerce unit – into which South Korea’s SK Group invested nearly US$1.5 billion in 2018-19 – gained a foothold in the sector by snapping up rival retail groups including 23 Fivimart supermarkets, 87 Shop&Go convenience stores and the smaller Queenland convenience-store chain, rationalising and rebranding the network under the VinMart banner.
In 2020, VinCommerce sold the operation as part of an organised exit of all its retail and technology businesses (it was selling appliances and making mobile phones and flatscreen TVs at the time) to long-established FMCG manufacturer and wholesaler, listed Masan Group, which rebranded the then 2000-strong network VinCommerce had built under the WinMart+ banner, shedding any obvious link to VinGroup.
WinMart+ has now grown to more than 2600 stores, predominantly across the nation’s two largest cities – the capital Hanoi and the commercial hub Ho Chi Minh City – but is now being rolled out in smaller cities to outflank its foreign rivals.
Since the beginning of this year, the chain has opened 300 Winmart+ stores, with 800 more planned by the end of this year.
According to a report from market research house Q&Me, WinMart+ now dominates Vietnam’s convenience store market. This year, Masan took a majority stake in the owner of the Phuc Long tea chain and began adding tea and coffee kiosks to its convenience stores. It reached another deal with local bank Techcombank to add not only ATMs but actual bank service counters where store footprints were large enough to accommodate them.
And in yet another move to lock down its domination of the convenience store market, Masan sealed a deal with Phano Pharmacy and Mobicast to integrate their service in some stores, further enhancing the shopping experience and convenience offer.
The VinGroup/Masan move has almost neutered the foreign interlopers, who by 2015 were already starting to question their heavy capital commitments to a market that was so unsophisticated they struggled initially to make headway.
Students proved to be early adopters, embracing the cheap, fresh food and gathering at tables or counters of Circle K or FamilyMart stores – often on mezzanine floors – chatting or working on their laptops. But those students had less money than their parents who initially proved difficult to budge from traditional markets which often doubled as a social meeting place. If they needed washing liquid, eggs, veggies or paper towels, they’d duck down the road to a market or a ma-and-pa store – whether in a large format meeting place the size of a small Western supermarket or a collection of shophouses and street vendors shoulder to shoulder down a narrow alleyway.
The challenges the foreign interlopers have faced in Vietnam’s market are best summed up by the experience of Japan’s FamilyMart. It made its debut in Vietnam in 2010 with ambitions to open 300 stores in partnership with local partner Phu Thai Group. Three years later only 42 were operating and the partnership was dissolved, the stores transferred to Thailand’s Beri Jucker Plc, and rebadged as B’s Mart. Undeterred, FamilyMart returned just a few months later, but four years on it only has 130 stores, all in Ho Chi Minh City and neighbouring areas of Vung Tau and Binh Duong.
In 2017, FamilyMart’s president Koji Takayanagi conceded the company was losing money in Vietnam (as well as in Indonesia and Thailand). He told Reuters at the time: “If we can get them to rally we will, but we cannot continue to pour in resources.”
The extent of those losses is unclear, but after five years FamilyMart remains in the game, dwarfed by WinMart+, with just 143 stores, its growth stunted, its future there surely unclear. That’s seven stores short of the size it projected five years ago. VinGroup also sustained ongoing losses as it rush to roll out its convenience stores, but again those figures are hard to confirm.
By nature, the convenience store industry is highly profitable, with fatter margins than supermarkets driven by location and being a ‘quick fix’ for daily needs. But the business model still relies on critical mass – the more stores in the network, the greater the buying power, and the higher the margin. The buying power of a chain with 143 stores cannot match that of a chain with 2600 stores.
By October 2019, South Korean companies were described by Korea Bizwire as “engaged in a fierce battle with Japanese rivals” in Vietnam, which it likened to a “post-China” market. Between between 2013 and 2018, the country’s retail market was growing at about 11 per cent each year – massive cumulative growth for any retail market in the world. Convenience stores and the e-commerce sector were growing much faster than the overall market. IGD Research projected Vietnam’s convenience store market would be the fastest growing in Asia by 2021.
But the local operators simply bulldozed their way through them, aided by an acute understanding of local consumer behaviour, stocking FMCG brands familiar to locals and offering a broader range of fresh vegetables, leaving some stores with an uncanny resemblance to the old-style shophouses or street vendors.
Step back for a moment and reflect on those figures: In 2019, FamilyMart had a 21.4 per cent share of the convenience-store market with around 140 stores. In 2022, WinMart+ has 2600 stores and a share already estimated at 39 per cent, with rival Bach Hoa Xanh an additional 32 per cent. The latter is a new chain – more of a mini supermarket concept than a convenience store as such – launched by local mobile phone retailer Mobile World (The Gioi Di Dong). In August of this year, the parent said it had hired an adviser to explore the sale of 20 per cent of its business which would value it at more than US$1.5 billion. Funds would be deployed on expansion, although the company has this year shuttered several hundred stores it said were underperforming, suggesting the offer has not yet met the market.
Since Covid arrived, another local player has joined the fray. Residential property group Novaland started to look at opportunities to diversify, identifying food and beverage and retailing as market sectors with growth potential. Covid provided a quick win: the company snapped up numerous restaurants and franchises including Australia’s Gloria Jeans, Baskin Robbins, Crystal Jade, Mango Tree, and Don Chicken.
Separately, and with multiple residential apartment towers as ready landlords, Novaland launched a mini-market retail concept dubbed ‘Nova Market’, which serves as a crossover of a convenience store and a traditional market. The company is already sharing plans to expand from 12 stores now to 450 (although it is not clear by when). Nova Market is positioning itself to compete directly with WinMart+ and Circle K.
Boomtimes, but not yet oversaturated
Despite being swamped by the might of Vietnamese Johnny-come-latelies, the foreign legion remains optimistic. Another South Korean brand GS25 has been making steady headway since it launched shortly before the pandemic. Its compatriot rival CU announced plans to enter Vietnam in 2019, but in the wake of Covid-19, its first store has yet to open.
“Although convenience stores are not a conventional retail channel in Vietnam, we believe that they will experience significant growth in the future as the country’s economy matures and income levels rise,” executive director of GS25 Vietnam, Yun Ju Young, said in 2018 when the chain launched in Vietnam.
GS25 now has more than 130 stores in the country under a partnership with Son Kim Group and aims to increase the store number to 260 by year-end. FamilyMart is hoping to reach 150 by the same date.
Despite the rapid expansion of modern trade outlets across the country, traditional markets and mom-and-pop shops still account for the majority of local grocery purchases. As of last year, the country was home to 1.4 million mom-and-pop shops and more than 9000 traditional markets, which serve 85 per cent of the consumption demand of local people.
Given that Vietnamese people were used to shopping at traditional markets and mom-and-pop stores, how have convenience stores gradually changed local customer purchasing behaviour in this market?
Convenience stores set themselves apart from traditional trade retailers by projecting a more ‘trendy’ image by providing cutting-edge amenities, a wide selection of ready-to-eat meals, and electronic payment options like e-wallets that appeal to young urban consumers. That also explains why a majority of their customers are younger generations – primarily students and office workers.
According to Euromonitor, these consumer groups see convenience stores not only as a place to shop, but also as important social hubs due to their air-conditioned environments and the fact that they offer opportunities to socialise without spending as much money as in a restaurant or cafe.
While local players are currently dominating Vietnam’s convenience store market – after a slow start – it’s important to recognise that even with current strong growth rates, the market remains in relative infancy. Vietnam has a population of around 99 million people. According to Statista, the country (as of May) has 6735 convenience stores. Nearby Thailand, with a population of 67 million people, had – according to the same research house – 17,340 in 2020, of which more than 10,000 were trading under the 7-Eleven brand.
Even accounting for its heavily weighted rural population – around 65 per cent of Vietnamese people live in rural areas rather than major cities – there is clearly enormous growth potential for the convenience retail market there.
The battle may have taken a sharp turn, but the war is far from over.