The situation of Vietnam's retail industry when Parkson leaves

Real Estate Business

Mini Magazine

Tuesday, May 2, 2023 06:00 (GMT+7)
06:00 5/2/2023

Foreign investors are constantly expanding in Vietnam in the shopping mall segment. Parkson is probably the only name showing signs of weakness compared to domestic giants.

Parkson Vietnam Co., Ltd. has recently filed for voluntary bankruptcy with the Ho Chi Minh City court. The group that owns the famous shopping mall chain will leave Vietnam after 18 years of association, due to large losses that are difficult to improve.

The poor business results of one of Asia's big names further demonstrate the fierce competition in the retail market in recent years.

What "killed" Parkson?

Parkson started in Malaysia as a department store in 1987. It was the second largest department store operator in Malaysia with a 20% market share in 2012.

The brand has also continued to expand to China, Vietnam, Laos, and Myanmar, with periods when it nearly reached 70 locations across Asia. However, to date, apart from 38 centers in Malaysia, Parkson is only present in one foreign market, Vietnam, with one final location being Parkson Saigontourist Plaza (District 1, Ho Chi Minh City).

Parkson Retail Asia founder and chairman William Cheng believes that staying in Vietnam is not commercially viable. However, looking at Parkson’s downsizing across markets, including Malaysia, it is clear that the group has been going through a difficult time not only in Vietnam.

Parkson has only one store left in Vietnam. Its fate remains uncertain after the parent company filed for bankruptcy. Photo: Quynh Danh .

In fact, the trend of department stores with high-end products that once made waves has now waned. In Vietnam alone, Ms. Le Thi Thu Cuc, Director of Consulting, Market Research and Valuation at Cushman & Wakefield Vietnam, said that this model currently only exists in small numbers.

"In recent times, the department store model with a limited number of stores and no increasing trend has shown that the market's reception is quite selective," Ms. Cuc told Zing .

Except for the first center in Vietnam - Diamond Plaza (District 1, Ho Chi Minh City), this model now only exists inside shopping malls, such as Takashimaya in Saigon Center (District 1) or Robins of Central Retail in Crescent Mall (District 7). However, Diamond Plaza is constantly upgrading and renovating to keep up with new shopping and consumption trends.

One of the main reasons for "killing" independent department stores, according to Ms. Trang Bui - General Director of Cushman & Wakefield Vietnam, is the success of large, even very large shopping malls (also known as mega malls).

In recent times, the department store model with a limited number of stores and no increasing trend has shown that the market's reception is quite selective.
Ms. Le Thi Thu Cuc, Cushman & Wakefield Vietnam

Parkson itself has acknowledged the need to innovate in all aspects to adapt to Vietnam's competitive retail market.

Not simply a shop-and-go place like before, Parkson's "transformation" in the first half of 2019 aimed to become an all-in-one destination for shopping, dining and entertainment serving a variety of customers.

But clearly, the late decision to change cannot save Parkson, because the retail market is becoming more and more crowded.

The tug of war between domestic and foreign enterprises

According to Ms. Le Thi Thu Cuc, with good access to land funds, Vietnamese enterprises are still key players in the shopping mall market in recent years, owning prime locations in big cities and urban areas.

Vincom Retail holds the largest market share, with 83 shopping malls spread across 44 provinces and cities. This is the only investor to open 3 new shopping malls in 2022, with occupancy rates of over 94%. Notably, Vincom Retail has just earned a record net profit of up to VND 1,024 billion in the first quarter of 2023, an increase of 171% over the same period last year.

Not stopping there, the recent 2023 general meeting of shareholders of this giant also agreed not to pay dividends for reinvestment. The enterprise aims to develop about 800,000 m2 of rental floor space in the 2023-2025 period, with an expected capital of more than 12,000 billion VND .

This year alone, Vincom Retail expects net revenue from business activities to reach about VND 10,350 billion , with after-tax profit of VND 4,680 billion , up 41% and 69% respectively compared to 2022.

NUMBER OF COMMERCIAL SHOPPING CENTERS OF ENTERPRISES
As of early May 2023.
Label		Vincom	Central Retail (Go!, Robins)	LotteMart	Aeon Mall	Crescent Mall	Diamond	Parkson	Takashimaya	VivoCity
Number of shopping malls	Shopping mall	83	41	15	6	1	1	1	1	1

This ambitious business plan is set in the context of international businesses also growing strongly. Ms. Le Thi Thu Cuc said that since 2015 when Vietnam allowed the establishment of 100% foreign-owned retail units, a series of foreign investors have joined, typically Central Retail, Aeon, Lotte...

Except for Parkson, foreign retailers are still continuously developing with their own strategies. With existing shopping malls in Ho Chi Minh City, Hanoi , Hai Phong and Binh Duong, Aeon plans to nearly triple its size to 16 shopping malls nationwide by 2025, focusing on attracting the middle-class customer group that is growing rapidly.

In particular, the Japanese group's later shopping malls all have large areas, typically Aeon The Nine (Hanoi) is 1,200 m2 wide, 4 times larger than regular supermarkets in Vietnam. Or Aeon Mall Hue, which has just started construction, has a total area of 8.62 hectares, of which the total floor area is 138,000 m2, with 51,000 m2 of rental area and 2,500 m2 of parking area.

Meanwhile, Lotte is about to open Lotte Mart Tay Ho shopping mall located on a 7.3-hectare plot of land in Hanoi. With a total investment of more than 600 million USD , this is considered one of the most expensive shopping mall projects in the capital. In addition, the Korean giant also owns 15 supermarkets and Lotte Mart shopping malls with areas ranging from thousands to tens of thousands of square meters.

Foreign enterprises, in addition to the advantage of having strong capital, also have experience in successful retail business in other countries.
Ms. Le Thi Thu Cuc, Cushman & Wakefield Vietnam

But the foreign investor with the largest market share in Vietnam's retail industry is still Central Retail.

In the shopping mall segment alone, this Thai enterprise has opened 39 locations under the Go! brand, providing 213,000 square meters of floor space to more than 900 tenants nationwide. In parallel, the Robins department store brand currently has 2 locations in Ho Chi Minh City and Hanoi.

The group also announced in mid-February that it would invest 50 billion baht (about 1.45 billion USD ) in Vietnam in the 2023-2027 period to accelerate its presence in the market, after pouring in more than 10 billion baht in the previous 10 years.

Thailand's largest retailer operates supermarket brands and other retail stores, with total sales soaring from 300 million baht ( $8.7 million ) in 2014 to 38.6 billion baht ( $1.1 billion ) in 2021. The group's leadership expects to capture 13% of the market share in Vietnam by 2027, up from 8% in 2016.

In recent weeks, the market has also been flooded with information about Central Group’s intention to acquire a chain of shopping malls across the country. Ms. Cuc emphasized that this is one of the signs of strong foreign development in this segment.

"Foreign enterprises, in addition to the advantage of having strong capital, also have experience in successful retail business in other countries to bring new experiences and more diverse goods to consumers," Ms. Cuc said.

This shows that Parkson's failure is just a business story. The retail market situation is still not completely settled.

Investors are continuously upgrading and renovating existing shopping malls and expanding new ones. Photo: Quynh Danh .

The only certainty is that Vietnam, with a population of nearly 100 million, is still considered a large market with strong purchasing power. "Looking at the current number of small individual stores and purchasing power in supermarkets and shopping malls, we can estimate that the potential for the retail market is still very large," said Ms. Cuc.

Therefore, in parallel with meeting increasingly strict standards from the Government to protect consumer rights, the expert believes that transforming to meet high requirements for management experience is a vital condition for shopping malls in the new conditions.

Factors affecting the success of a shopping mall are quite diverse, including determining a prime location with a large population, choosing a suitable business model, and operational capacity. In addition, input cost management is also an important factor helping shopping malls survive in a gloomy economic context and people tightening their consumption of high-end goods.

In 2023, the world economy is forecast to continue to fluctuate and cannot recover quickly. Many major economies still face risks such as slow GDP growth, inflation, unemployment, bad debt, etc. Zing readers are invited to read the 2023 Economic Bookshelf to grasp new economic knowledge and information in 2023.

Lan Anh

parkson retail shopping mall department store vincom aeon lotte central retail