SUBMISSION FOR THE INTERNATIONAL CONFERENCE:

NEW MARKETING PARADIGMS IN EMERGING ECONOMIES

January 13-14, 2005 INDIAN INSTITUTE OF MANAGEMENT AHMEDABAD

BIG C IN VIETNAM, Retail challenges at corporate and country level

Dr. BUI Thi Lan Huong, CFVG, Hochiminh city, Vietnam Prof. Jean-Paul LEMAIRE, ESCP-EAP, European School of Management, Paris, London, Berlin, Madrid, Torino

Abstract : This case story deals with retail distribution evolution in Vietnam, on a comparative basis, with other neighbouring countries, like Indonesia, Malaysia and Thailand. This example focuses on the choices to be made by a foreign retailer established there as a pioneer after the Asian crisis. The issues are manifold, encompassing environmental changes impact, both in a sectors and in a countrys perspective. It tends to identify the converging as well as the diverging features of the retailing sector in diverse emerging Asian countries which are positioned at diverse stages of maturity but in the same geographic area. It, also, emphasizes on the sectors dynamics and on the impact of the regional crisis during the late 90s. At last, it opens the debate on anticipation for the involved actors and groups of actors: corporations, customers as local authorities. The theoretical background of this case lies in the relationship to establish between company incentives to develop operations abroad (here, in retailing) and countries policies to attract, more or less selectively, foreign investment in specific sectors. It leads to joint together international sector analysis and internationalisation decision processing, both for companies and for local authorities.

Key words: retailing, international sectors analysis, international corporate development, international corporate strategies, country attractiveness, FDI policies, Asiatic crisis.

INTRODUCTION:

Retailing represents certainly a key sector for an emerging country, especially in a context of the accelerating declustering process, which has been taking place during the past decades, accelerating, even, during the last one. Which means, for them, to envisage and to implement a quick or progressive removal, not only of administrative and taxation barriers, but, also, of a large set of other obstacles, ranking from infrastructure lacks to culture gaps. This process concerns, first, a large span of regions, especially those which were largely living in a state of complete or limited autarky, due to the cold war and/or to major post-colonial external or internal conflicts, which is the case of Vietnam of course, for these two reasons, but also, of China, Cambodia, and, to a lesser extent, in Asia, India. These specific conditions apply, also, more or less, to Russia as to former Eastern European communist states. If all evolve in the same direction, with the same target, an harmonious insertion into the international trade and investment flows, they dont stick to the same integration agenda, due to their economic, social, cultural and political diversity. WTO adhesion provides a good indicator of the respective countries progression in terms of declustering: as an example, if China, a major actor, or Cambodia, a minor one, having, both, applied to this organisation later than Vietnam, they have, both, become already members, the latest remains at the door of this inescapable institution, which symbolises belonging to the international commercial community and provides to each member country a basic waver to expand trade and attract more FDI. Unfortunately for Vietnam, it has neither the economic weight of China, the present propeller of the world growth, nor the harmless image of Cambodia. It has, then, with its 80 million populations and its important textile and agricultural exports, to pay the price of its integration, not only in terms of negotiations with its major import and export partners, but, all the same, in terms of legal and structural adjustments. In such a perspective, associating short term (as adhesion had be initially forecasted for January the 1st, 2005) as long term perspectives, retailing offers an adequate example in order to illustrate them. All ingredients of declustering challenges are, in fact, gathered, in order to confront the differentiated interests of a large set of stakeholders, all directly or indirectly involved t in the process: - at first, the foreign corporate entrants, which want to create or enlarge as to secure a significant market share and a good profitability in a promising market, - then, the local players, among which, the modern retailer which have already conquered a dominating market share in urban areas, and the traditional ones, still present in the cities and dominant in the country side, - of course, the local authorities, which deliver licences to all types of actors and define the policies and regulation applying to the retail activity, - and, at last, the customers which demands tend to evolve permanently, balancing between attractiveness for Western distribution models and attachment to cultural buying habits and patterns.

Such a case may, also, permit, from a more methodological point of view, - to analyse the more specific consequences of declustering for the large set of local as foreign actors, above mentioned, encompassing local customers, modern as traditional retailers and local authorities; - to identify the major drivers of the retail sectors evolution in an emerging country, as its capacity to adjust to both, external and internal constraints, applying an environment analysis approach; - to include comparative elements allowing benchmarking between comparable countries and various level of economic and social maturity, in order to stem from this approach possible transferable lessons; - to extend the analysis approach to the decision making stage, at the corporate level of the foreign retailer chosen to illustrate the internationalisation problems raised in such a context, - but, also, possibly, to consider this decisions to take at an institutional level, as far as local authorities may think to adjust their own policy for the sector, in relation with the general declustering issues to which the country is confronted. This case will, then, be organized from a brief presentation of companys general features and of its Vietnamese venture, which will lead to a short review of the Vietnamese political and economic context, emphasizing on the facts which can be of some consequences for the sectors evolution and for its various stakeholders. Then, a focus on the Vietnamese sector retail itself will give additional elements in order to give the necessary insights on its recent evolution, the existing formats, the consumers expectations, the competition arena, the strategies of major players.. some conclusive remarks, which will not be presented, just as this introduction, in the pedagogical version of the case, will provide some additional commentaries, in order to enlarge the questions raised for discussion1.

I. COMPANYS VIETNAMESE ESTABLISHMENT: Founded half a century ago in La Runion, the foreign French Dpartement, island, North of Madagascar, and, incorporated, more recently, in Marseille, the Groupe des Socits de Bourbon is a French group, operating in distribution, through Vindmia and in maritime services through Bourbon Maritimes. Retailing activity plays the key role, with 50% of the total turnover of the group: sectors leader in La Runion Island where it has developed various formats; supermarkets, hypermarkets as well as cash-and-carry outlets. Its cross border expansion relies on the internationalisation of the concept of mass distribution in emerging markets, such as Madagascar, Mayotte, Mauritus, just like in Vietnam. In 2002, Groupe Bourbon became the leading retailer in Mauritius. In Vietnam, Vindmia has been operating in various activities, such as food (Bourbon Ben Luc), sugar refining (Bourbon Tay Ninh, Bourbon Gia Lai) and maritime services (Bourbon Duharco).

In the original case presentation, a specific flavour of retailing problematic, perceived from the chosen foreign banner s Big C- point of view, is given through an introductory story. As a complement, also, the annexes dedicate to additional data on Vietnam as on Thalands and Indonesias retailing sectors.

Sticking to its pioneering tradition, Vindmia has been the first foreign group to open, in 1998, a French style hypermarket under the Cora banner, in Vietnam, a country, then, unfamiliar with this retailing concept. It still operates there, by now, but using the group Casinos banner Big C, already very popular in Thailand, one of the Vietnamese closest neighbor; its positive image having reached the Vietnamese consumers.. The French group Bourbon, owner of the Cora hypermarket chain, was the first foreign entity licensed to operate supermarkets in Vietnam in the context of economic recovery after the Asian financial crisis. It is worth noted, although general living standards were still low, that Vietnam would appear, then, as very promising to foreign investors in the modern retail sector, dominated by traditional distributors. In fact, the acceleration of annual economic growth rate during the 1990s, combined with the increase of average annual revenue of urban population2 boosted quickly the growing private consumption. Hypermarkets deployment Cora Dong Nai hypermarket was established in these propitious conditions. Moreover, the competition was not fierce at that time, as its main local competitors such as Co-op mart, Citimart, and Maximark were, then, quite small, both in number and size. In 1998, Coop-mart had only 3 stores operating in Ho Chi Minh City with selling areas covering, more or less, 1000 square meters per store. At that time, there were about 30 supermarkets and mini-marts established in the country; the number growing up to 100 by the end of 2003. Meanwhile, since its first installation, Bourbon has developed three additional stores, in Hochiminh city, and, at the end of 2004, another one in Hanoi, the capital of Vietnam.
CORA Dong Nai Opened in the late of 1998, this first French style hypermarket in Vietnam is located 30km East of Hochiminh city, at the T-junction of National High way 1, near one of the most quickly expanding industrial parks of Southern Vietnam, in a trading zone of 2 to 3 million of inhabitants. The CORA Dong Nai project cost reached about USD 54 million. It has been incorporated as a 65%/35% Joint Venture between Groupe Bourbon and Donimex, a state-owned import-export enterprise based in Dong Nai province. The shopping complex encompasses within 20 000 square meters, a 6000 square meters selling area, completed by 30 smaller outlets and a set of large warehouses. CORA Dong Nai has also a huge parking with 550 slots for cars and 2200 for motorbikes. It hires 391 employees. It hires 391 employees. During its early opening period, it is reported that CORA Dong Nai had attracted just for a look thousands of local shoppers who were used to visit smaller supermarkets (Maximark with 2667 square meters, Coopmart with only 760 square meters). The hypermarket receives from 3000 to 9 000 customers per day. In the first three month of its opening -in a blaze of publicit-, up to 50 000 farmers and factory workers surge through its doors each Sunday and 15 000 on other days [attracted] by anything from washing machines to shoes 3.

CORA An Lac
Two years later, with a similar approach, another hypermarket, CORA An Lac, required an investment of 35 millions USD, through a new JV: 80% of the capital hold by Group Bourbon and 20% by Binh Chanh Construction and Investment Shareholding Company (itself a Joint Venture between Espace Bourbon An Lac, the owner of Cora An Lac and Cora Mien Dong). It started operations in Hochiminh citys outskirts, in Binh Chanh district, by March 2000.

2 3

The average annual revenue of urban population has doubled in four years (1994-1998). Vietnam consumer boom ignites advertising, The Vietnam news website:http://perso.wanadoo.fr/patrick.guenin/

Like CORA Dong Nai, CORA An Lac covers an area of 20 000 square meters shared between the store itself (6000 square meters) and a 50 shops corridor. It hires 400 employees. It targets not only the shoppers from the South of Hochiminh city, but also those from North Long An provinces and the Mekong delta. The hypermarket tend to attract both people traveling in and out Hochiminh city. Gilles Blin, director general of Espace Bourbon An Lac said, at the opening of his second store: We expect the project to be profitable from the third year, but it will depend on actual performance.
CORA Mien Dong In 2001, CORA Mien Dong, on To Hien Thanh Street, was opened in district 10, just in the heart of Hochiminh city. Although it is not as large as the two others (3000 square meters), it attracts nearly the same number of shoppers per day.

Big C Hanoi
By October 2003, Vindmia started the construction of its fourth superstore in Vietnam. This store, with a surface of 14 500 square meters, due to open at the end of 2004, will be located near Hanoi, under the new banner Big C. It will be run by Espace Bourbon Thang Long, a Joint Venture between Group Bourbon and Thang Long tourism and trading company. The capital invested in this project is about 30 USD million. It plans to create 700 local jobs. This is the 7 th project of Bourbon in Vietnam with a total capital registered of USD million 250.

Selling concept presentation and layout Cora operates under the motto Vietnam popular discount and goods are all under one roof and it is the first major retailer aiming to mainly distribute Vietnamese products. Previously, nearly half of the goods sold in other big supermarkets, in Hochiminh city, like Maximark, Coopmart and Citimart were imported items. Henceforth 30,000 items 4 are available, of which 95% are provided by nearly 1,000 local producers. The store layout has adopted the French hypermarket style, with large aisles, about 2 meters large. To shoppers mind, it combines convenience, store layout, aisle placement, width, parking facilities. While Cora would like to be a hard discounter, it pays much attention to the French style in the presentation of its stores. The assortment is both large and wide and has also contributed to create the personality of the store. The staff is well-trained and the store management very professional. The shelves are higher than those of Vietnamese supermarkets. The central aisle is displayed with promotional items. The ads tend to promote the espace men, as for women, children, with items used for men, including shoes, ties, underwear, clothing, CD with service. And you will leave the store by buying French baguettes .., a French style presentation. As a matter of fact, the store is very bright, with high ceilings and decorated walls. The hypermarket respects strictly safety and security conditions. The fresh food section is typical of French style modern retailers, offering bread, ham, and, especially, different kinds of cheese.
Product and assortment To lower prices and ensure goods quality, the company has established an integrated supply system, selecting goods with its own very demanding evaluation procedures. Food quality must be in accordance with the food safety and sanitation regulations: Big C cooperates with Health centers to have periodical and accidental tests, in order to check foods quality. Moreover, Big C develops its own production units of
4

Compared with 24,000 references in Maximark, 10 000 references in Coopmart and Citimart in 1997.

butchery, bakery, fishery.. It bakes its own bread and cakes, and achieves the final processing of its own fresh seafood, fruit and vegetables sourced directly from the growers. Amazingly, fresh French style baguettes are the hottest sellers in the hypermarket. Besides, in order to better satisfy customers needs, it imports various European and Asian goods. Goods sold at Cora are definitive purchases, not under consignation, like in many other supermarkets. In Big C hypermarkets, customers can buy food, especially fresh products and in-house bakery, fabrics, cosmetics, garments, footwear, school supplies and cultural products The company has developed relations with prestigious suppliers, including state-owned enterprises, MNC and private businesses, in order to secure the quality of the products supplied.. In fact, the figures indicate a higher proportion (95%) of Vietnamese products than in other supermarkets like Coopmart (85%), Citimart (70%) and Maximark (over 75%) 5. And the turnover coming from the local items accounts In addition, Big C plans to promote Vietnamese products in European countries, in its retail international network. For instance, in 2003, Big C chain exported around USD million 5. Price and Promotion Goods sold at Cora hypermarkets are of high quality and affordable. Discount sales programs are often held. One of Big Cs most ambitious targets is to offer prices that are equal or even lower than those of traditional markets and small stores. Cora outlets were the first to cut retail prices through a general sales campaign. And the owner expects to become a discounter with the pricing strategy as low price every day. I dont understand how Cora can offer such amazing prices, one mini-mart manager says. People go crazy for its special offers 6. As, at present, 95% of the goods at Big C hypermarkets are locally sourced and 5% imported from Asian countries, it has contracts with 400 local producers to provide products at factory prices and not through intermediates. Cora is the cheapest because we eliminate extra-costs said Frank Moreau, Coras managing director 7. As far as promotion is concerned, with a stock of 20 000 lines, Big C can offer about 100 heavily discounted products in a week, some as low as 50% off8. Big C also does run theme promotions, where they focus on birthdays, national days. They tend to use handouts to advertise. A recent study carried out by Saigon Co-op found, though, that Big C offered the highest prices. On the contrary, promotion programs were the most popular to shoppers (Table 1). Table 1: Satisfaction level of customers compared with Big C main competitors Factor Big C Co-op Mart Maximark Quality 4.3 4.4 4.1 Assortmen 4.3 3.8 4.3 t Price 3.1 3.7 3.5 Service 3.4 3.8 3.2 Promotion 3.3 3.2 3.2 Source: Data of R&D department of Saigon Co-op, 2003, cited by CFVG-HCM students9 Note: The evaluation mark is from 0 to 5 as the level of satisfaction from minimal to maximal .

From CORA to BIG C By October 2003, Group Bourbon also announced that all Vindmias outlets in Vietnam would be re branded under the Big C banner of Casino, which is due to take control of Vindmia by 2007. Casino acquired a 33,33% stake in the company in 2001 and will be able to exercise two options during 2004-2005 and 2007-2009 periods, in order to reach a 100%
5
6

Bich Nga, Vinh Phuong, Hang Viet Nam vao Sieu thi p. 7, SGTT 29/4 - 6/5/2004 Hanh Dung (1999), Hyper reality, Vietnam economic Times, January, 1999, pp. 20-21 7 ibid. 8 ibid. 9 Fresh food at Co-op mart supermarket chain, group assignment, reported by Le Ngo Luan, Ngo Thi Xuan Binh, and Nguyen Ngoc Chau Bau, July, 2004.

control level; this participation into Vindmia leading to an end the franchise with Cora. The reason to choose the banner Big C, according to Guy Lacombe, the director general of the Big C chain in Vietnam has been that this banner is already very popular in Thailand 10. However, according to economists, when Cora has already built up its brand name for several years, the changing of Cora to Big C banner could undermine its competitiveness compared with its main competitors like Co-op Mart, Maximark of Citimart 11 Meanwhile, discussions with several people working in the industry and shoppers have indicated that this cause no big problems for Big C because, even under this new banner, these superstores are still perceived as French style big modern retailing outlets in the shoppers mind, as for the time being, it is the unique French brand name in the Vietnamese retail market.
Big C performance: The total turnover for Big C hypermarket chain is estimated roughly 500 million VND per day. The number of shoppers is around 2000 per day for each store. The average purchase goes up from 60 000 VND in 1998 to 80 000 VND in 2004. Its annual sales growth rate is 10%. Owners of Big C expected profit after the third year. Gilles Blin, director of Cora Dong Nai, affirmed that Cora Dong Nai, after 4 years of operation, had reached the break-even point while the two others are not yet profitable 12. In general, operating profit in supermarkets in Vietnam use to fluctuate around 10% to 15%, and the net profit is estimated around 3.5 to 4% and in average, profits are expected after 5 years. Concerning Big C brand awareness building, it becomes the second strongest one after Co-op mart. During the period 2002-2003, the store equitized index published by AC Nielson has indicated that Big C had improved this index from 0,9 in 2002 to 2,1 in 2003 13 compared to a 2,2 to 2,9 progression, for of Coop mart, and to a 1,1 to 1,8, for Maximark In 2004, in order to seize new opportunities to create supermarkets, Groupe Bourbon plans to open more stores throughout the country in the coming years, in particular in Can Tho and North Vietnam: as to stick to the increase of the number of supermarket shoppers pushed by the threat of food poisoning and bird flu, combined with steady annual growing sales,. According to Guy Lacombe, about USD 12 million will be invested in each superstore. Increasing competion: Despite its good performance and new expansion plan, Big C has to overcome many difficulties to survive in the rapid changing context where local distributors like Co-op mart and other global new comers like Metro Cash& Carry have pushed considerably the mass distribution market share. In fact, the biggest threat to Big C is, mainly, from domestic competition. In fact, in a few years, the local state-owned chain Co-op Mart appears to be the citys most popular supermarket chain, with its low price strategy. Since 2002, Big C had competed toughly with the leader Co-op marts 11 major stores, located in high concentrated population areas and its two others in Quy Nhon (in the Centre of Vietnam) and Can Tho (the biggest city located in Mekong Delta), that hold actually half of the supermarket business market share. Meanwhile, Big C Dong Nai and Big C An Lac, in Hochiminh citys outskirts, aim to attract both customers living in and out the city, including travelers to the Center and the South. These two superstores do not attract more shoppers than Big C Mien Dong, as the purchasing power of city-dwellers is higher than in the outskirts. Until mass transportation is still poor, there is no convenience for shoppers based in the city to have access to the outskirts. Moreover, in this fierce competition, not only Co-op mart, but also other big local competitors, such as Maximark, Citimart and Mien Dong Supermarket, have started new
10

Big means respectable size and enormous space and C means Customers. Therefore, the store must be a modern retail outlet with spacious facilities to meet customer needs. Big C started business in 1993 under the registered name of Central Superstore and had 20 stores in 1998. In 1999, Big C Super Centre Ltd decided to form a business alliance with the French group Casino, the owner of 500 supermarkets in the world. Now it operates 37 Big C stores all over Thailand, represents 26% of the market share of hypermarkets in this country after Makro and Tesco Lotus, with more than 11 500 employees, and the total turnover amounted to 42 342 million Baht. 11 He thong sieu thi Cora doi ten thanh Big C, 28/10/2003, Kim Tinh, Theo Saigon Times, website : http://vnexpress.net 12 March prometteur, le Vietnam attire les grandes surfaces europennes, Eric Albert, la Tribune, 24 avril, 2001 13 AC Nielson (2003), Shoppers trend survey of AC Nielson, cited by CFVG students.

sales initiatives, and improved their store management, by focusing more on extending selling areas, on improving store layout and product display, developing fresh food and prepared food sections and providing more added-value services as well. As a consequence, gross profit in supermarket business has gone down under 10% in 2002. On the other hand, the average shopping basket in Big C stores seems to grow slowly despite the price decrease.

This shows clearly that it becomes extremely hard for Big C to increase sales and, hence, to make profit as projected its owners in previous years. In addition, it has to compete not only with other supermarket businesses, but also with many traditional retail formats that are upgrading their infrastructure and tend to be very efficient and flexible in terms of customers credit. II. THE RAPID EVOLUTION OF VIETNAM Country background Vietnam is located in the South East Asian region. Hanoi is the capital of the country, based in the North. Hochiminh city, located in the South of Vietnam, is the biggest urban and commercial centre of the country. Vietnam is the second most populous country after Indonesia in the south-east Asia. Its population counts more than 80 million with 60% under the age of 30. Urban population represents only 25% of the total population. Year 1986 is the turning point for the Vietnamese economy, as Vietnam began launching the Doi Moi reform policies, introducing market-oriented economic principles into its socialist system. Since this date, economic growth rate has been raising quickly, about 9% per year, from 1993 until the Asian economic crisis of 1997. It is worth noting that during this period, Vietnam has experienced quite a modest inflation. As its key determinants, economic growth has been driven by the high domestic consumption, steady investments and a strong export performance within a stable political and social environment. Vietnam has not only made significant progress in achieving rapid economic expansion, but also through poverty reduction in the recent years and has performed well on social issues. Statistical data indicate that about 20 million people have been lifted out of poverty in less than a decade. The broad improvement in living standards was explained mainly by job creation in the private sector and the increase of transactions with the agriculture sector. Despite its rapid economic expansion and its success in reducing poverty, general living standards remain modest compared with its more advanced ASEAN members. Per capita GDP is estimated around 400 USD significantly less than in Indonesia and in Thailand. Openness to international trade and foreign investment Trade regime has been liberalized gradually, while its trade openness has increased sharply. During the 1990s, most export quotas have been removed and exports taxes have been reduced to a generally low level. In addition, export activities by the private sector (both domestic and foreign) have been increasingly encouraged, thus breaking the monopoly of a small number of state-owned enterprises. Change in trade policies have led to a rapid export and import growth rate. Total exports and imports of goods, both, increased on an average of 20% per year during the period 1990-2002, substantially faster than GDP. If, in the 1970s and 1980s, exports covered only one-third of imports and trade deficit reached 10% of GDP, the countrys international trade has largely improved: exports were covering two-third of imports

during the 1990s. Trade deficit, averagely around USD one billion, is explained by high demand from industry for capital goods and intermediate goods such as fertiliser, iron and steel, textile fibers. Import policies focus on protecting strategic sectors like construction steel, cement, sugar, paper, glass and petroleum. Since the Doi moi, Vietnam has become more and more opened. At the beginning of the transition period, during the late 80s, exports counted only USD 854 millions, a figure far from those of other Asian developing countries like Bangladesh (USD 1.29 billion) or Sri Lanka (USD 1,48 billion). Its export efforts have been remarkable, as its export progression index (30% in 1999) caught up that of Thailand and Indonesia in 1990. It has overcome many other Asian in transition economies, like China, Laos, and Cambodia. As far as the merchant structure of international trade is concerned, Vietnam appears typically at the takeoff stage, characterized by exportation of primary products (crude oil, rice, rubber, coffee, tea, pepper,) and importations of equipments and intermediate goods. However, it has become increasingly diversified. Like other more advanced ASEAN countries, its exports structure has swiftly evolved from primary to manufactured goods. Within ten years (from 1992 to 2002), crude oil, rice and other primary products dropped from 80% to 45% of the total exports. In contrast, the percentage of manufactured goods rose from 6% to 32% during the same period. Particularly, top exported manufactured items including textiles, garments, electronics and handicrafts occupied one third of total exports in value in 2003. Along with the gradually modified structure of exports, there has been a significant geographic diversification of Vietnams export markets as well. Asian countries like Japan, Singapore, Korea and China are, form now on, the major trading partners of Vietnam. The EU and the US have become also crucial for Vietnams exports of manufactured products such as textiles, apparels and footwear. The rapid growth of Vietnam during the 1990s has attracted as it has been facilitated- by FDI inflows. FDI accounts for about 15% of GDP. Strong inflows of FDI drove the economy in the mid-1990s. Especially, Vietnam has attracted USD 8.5 billion of FDI in 1996. But they have dropped drastically after the Asian economic crisis occurred in 1997 14. Up to December 2003, Vietnam has attracted and licensed more than 4324 FDI projects with a total registered capital of over VND billion 40. The total capital operated is about VND billion 24. FDI concentrates mainly in industry and construction, representing 66.3% of the projects and 64.5% of the invested capital and over 70% of the new labour force required, while services, only 20% of the projects and 30% of the invested capital. North East Asian countries like Japan, Korea, Taiwan and Hong Kong are the major investors in Vietnam. The most attracting areas are Hochiminh city, Hanoi, Dong Nai, Binh Duong and Ba ria-Vung tau, which are all, except Hano, located in the South of Vietnam. International economic integration Increasing integration into the international economy has been an important component of Vietnams economic reform. At this aim, Vietnam adopted active diplomatic policy, allowing not only the insertion in its region but also the re-establishment of relations with the rest of the world. Vietnam joined ASEAN in 1995, APEC in 1998 and heads to its target of WTO accession by 2005. Commercial relations with European Union have been retied since 1990
14

Table 5, Appendix 1.

and diplomatic relations with the US were normalized in August 1995. Since joining ASEAN, Vietnams exports to ASEAN countries have grown by an average 25% per year. In July 2003, Vietnam started to implement the tariff reduction scheme under the Common Effective Preferential Tariff for the AFTA by reducing import tariffs of 774 product items from 30-50% to fewer than 20%. Under the CEPT, during the period 2003-2006, Vietnam has committed to cut tariffs by, at least, 73.6% for 10 160 product items, to the level of 0-5% by 2006. According to the 9th Congress in November, 1996, new laws on trade have been approved, such as rules on the competition, laws encouraging the creation of new channels of distribution and on the modernisation of Vietnamese trade. Recently, the Ministry of Trade has confirmed its incentives to modern distributors to open stores targeting middle-income class. However, in the distribution sector, the law prohibits a foreign firm to implement its own distribution network for imported goods. Despite the protection of local operators of the retail sector, under its bilateral, regional and international agreements, Vietnam has committed to open up its service sector. Under the Vietnam - US bilateral agreement for wholesale service, Vietnam will have to allow JV with 49% foreign equity by 2004. And recently, negotiation with Japan will mention cooperation in the retailing sector as well. In the near future, more new global retailers will set up operation in Vietnam, such as Parkson and Dairy Farm. Moreover, the project of development of commerce in HCM city until 2005 encourages to build 45 new medium size shopping centres (10,000 to 15,000 square meters per centre), to enlarge 100 supermarkets in big cities, as 5 hypermarkets and a number of mini-superstores (1,000-3,000 square metres) in residential areas, to re-plan wet markets, wiping out 96 so as to keep only 250.

III. EVOLUTION OF THE MODERN RETAIL SECTOR During the 1990, after the Doi moi policy had been launched, the retail sector witnessed a profound evolution in Vietnam. Through industrialization and modernization policy, combined with rapid urbanization and general living standard rise that leads to the rising household consumption, the total retail sales is growing quickly from year to year 15. The retailing industry in Vietnam is highly fragmented, with a great number of middlemen and distributors, divided into traditional and modern distribution channels, with domination of traditional markets and grocery stores representing 83% of the total market value. In Vietnam, particularly in Hochiminh city, modern retails formats appeared as soon as the early 1990s, but developed rapidly in recent years. In the past five years, along with other South-East Asian countries, Vietnam has witnessed the expansion of the retail sector. In 2002, total wholesale and retail sales (included restaurants and hotels) contributed to 13.3% of GDP in Vietnam compared with 17.1% in Thailand and 16.2 in Indonesia16. The average annual retail sales growth is 10%, compared to 16.4% of those of Indonesia. Nowadays, the modern distribution sector represents 17% of the entire annual retail sector (it represented only 5% of the retail market value in 1999) while it reaches 26% in Indonesia and 43% in Thailand 17. The growth rate of modern retail formats in Vietnam is around 15% to 20% per year. In spite of
15 16

See Appendix 1 Website: Euromonitor.com 17 AC Nielson (2004), Asia Pacific, Retail and shopper Trends 2004

10

fierce competition in this sector between traditional and modern channels and, also, between local and foreign modern retailers, there is a sharp increase in new investments from both local and foreign operators. Traditional formats of distribution The retail network in Vietnam has developed along with the history of development of cities and provinces. Like other Asian countries that are well-known for their outdoor markets, both as a place to shop and a way of life, Vietnamese traditional retail formats include wet markets, moving markets on streets or floating markets (on the Mekong delta) existing in every districts or local communities. They reflect characteristics of Vietnamese life style with all of their advantages and shortcomings: daily shopping at proximity, small amount of purchasing, preference (and sometimes requirement) for fresh products consumption, habits of bargaining, absence of stock, limited range of prices, restricted lines of items, small display surface, lack of safety and cold storage, pollution, and hygienic problems as well. Payment mode, direct contact, and credits easily granted to loyal customers, popular regional specialties that varied from one region to another.., habits inherited from the past and the rural dominance created a formula that seemed to be the best adapted to Vietnamese life style. In figures, there are more than 400 markets operating nationwide. Along with this traditional format, we can find numerous informal markets developed by vendors who move from one district to another to sell fruits, vegetable and low quality items. In addition, there are a great number of street stores usually called mom and pop stores, at every corner and at every street, serving all types of customers, without segmenting or targeting them. In terms of number of traditional stores, Vietnam is ranked 7th in Asia, in 2003, with 24,241 stores in Hanoi and Hochiminh city, compared with 273,314 in Indonesia, 252,873 stores in the Philippines and 1,745,589 in Thailand, the closest neighbour country with a population similar to Vietnam18. If this number is bigger in the other more developed Asian countries, this traditional format tends to decrease there from year to year. In the reverse trend, their number has increased in Vietnam. For instance, during the 2002-2003 period, in the two biggest cities in Vietnam, Hochiminmh city and Hanoi, 240 new traditional stores were opened, while 9,695 in Thailand disappeared. The traditional distribution sector network is operated not only by retailers but also by wholesalers. In Hochiminh city, it is estimated that 346 traditional markets like Ben Thanh, Tan Dinh, An Dong, Soai Kinh Lam, Kim Bien and Binh Tay. Ben Thanh market is the most prominent, carrying many fresh products and other consumer goods. This market receives around 15 000 visitors per day. Some markets are more specialized with Chanh Hung market focused on sea products and Soai Kinh Lam, on fabrics. In Hanoi, there are around 125 traditional markets, of which some are very popular, like Cho Hom, famous for its fresh products, Hang Da, Cua Nam, and Dong Xuan. Dong Xuan is the biggest wholesale market that supplies the North of Vietnam. In addition to these fixed locations, temporary street markets are estimated 2,000 in number, adding another 6,000 small mom and pop stores. The vast majority of the traditional markets lack cold storage. Despite the actual importance of this traditional format, numerous old wet markets meet serious pollution problems as well as lack of hygiene. Industrialization and modernization of the country in conjunction with the enlargement of cities have enabled the government to plan the reorganization (or renovation)
18

AC Nielson (2004), Asia Pacific, Retail and shopper Trends 2004

11

of those which have been deteriorated and to wipe out many informal street moving markets causing traffic jams. As a consequence, the government has announced a plan to reduce the number of wet markets so as to build more department stores and shopping centers, combining specialty stores, supermarkets, hypermarkets with entertainment places (restaurants, games, etc.) that must be compatible with urban development plan. Nowadays, Diadmond Plaza, Savico-Kinh Do and Saigontourist established in Hochiminh city or Trang Tien Plaza in Hanoi become the most popular shopping complexes for Vietnamese people. Even though, traditional retail formats still dominate the distribution market with several advantages in terms of location and flexibility of payment, there is room for modern formats to develop gradually as the Vietnamese buying habit tends to change swiftly, especially in major cities, in favor of convenience and comfort provided by these new formats with the new concept of one stop shopping. With its first implementation in the early 1990s, the foreign big distribution has become a growing threat for local traditional markets. Modern retail formats newly developed in Vietnam While in industrialized countries, modern distribution has reached the maturity stage, they still stand on an early phase in developing countries like Vietnam. The newly introduced retail formats have sensitized the Vietnamese consumers to a new type of purchasing, in a nice, pleasant, air-conditioned place, self serve, clean, safe, professional good display, with fixed price. These outlets, very diverse, from mini-supermarkets at the early stage of development of modern retail formats to supermarkets, convenience stores with limited assortment, and currently superstores or hypermarkets, providing an one stop shopping, combining food and general merchandise. They encompass also cash & carry stores, that are essentially wholesale stores that require a membership card for access. Supermarkets and hypermarkets carry fresh, processed, prepared food items, including baked products, as general merchandise. In this changing context, with the possibility of investing through FDI in commerce and trade (although FDI in the commerce sector had not been initially encouraged), Vietnam had witnessed the expansion of all of these modern retail formats. In Hochiminh city and Hanoi, the two biggest cities in Vietnam, a few mini supermarkets, opened in the early 1990s, have evolved to more than 140 supermarkets and hypermarkets with a selling area covering from hundreds to thousands of square meters. Modern retailing outlets began to appear only in the 1990s in Hochiminh city area. They have evolved in two steps : mini supermarkets, as the first generation, such as Unimart, Donamart, Megamart, in the 1990s, and supermarkets and hypermarkets, as the second generation, like Coopmart, Citimart, Maximark, in Hochiminh city, Fivimart, Seyiu, Intimex, in Hanoi. Step by step, the supermarkets have penetrated into provinces, especially the Mekong delta, Vinh long, Can Tho, Dong Thap, Binh Duong19. Initially, the modern stores targeted the high-income class customers, Viet kieu and foreigners, use to sell primarily imported goods, with fixed prices, that are often viewed as about 10% higher than those offered by traditional outlets. The proportion of Vietnamese food sales proposed through modern formats where, then, less than 2.5%. Later on, the setting up of the two foreign banners Cora (renamed Big C) and Metro Cash Carry have dramatically speeded up the modern distribution diffusion in Vietnam. In 1998, Cora Dong Nai became the biggest hypermarket in Vietnam. The opening of Metro
19

For instance, CO-OP MART operated its first store in the Centre at the end of 2003, at Quy Nhon and VINATEX has opened its supermarket chain in Vinh Long, Can Tho, Dong Thap, Binh Duong.

12

Cash & Carry Vietnam in Hochiminh city and, recently, in Hanoi has introduced Vietnamese people to modern and professional wholesale distribution. However, these new formats are concentrated particularly in big cities with a significant purchasing power. They represent two-third of the national total number in Hochiminh city and Hanoi in Vietnam and in Bangkok in Thailand. Along with these supermarkets and superstores, there are other formats, like specialized supermarkets, convenience stores which are in direct competition with the formers. An Nam and Masan, the two convenience stores chains operated in Hochiminh city, opened 24h/24h, 7 days a week. Located in many central districts, near offices and residential areas for foreigners, they targeted more refined customers segments with a limited assortment. This newly introduced format was not a success in Vietnam, in terms of profitability, on the one hand, and not as well-positioned in comparison to traditional street stores or boutiques, in the other. As a matter of fact, the Masan mart cahin, with 25 stores operating in Hochiminh city, was closed in 2003. Meanwhile, convenience stores have developed rapidly and raised their market share over traditional stores in Thailand and in Indonesia for the past five years. For instance, in Thailand, there are more than 3 000 convenience stores under the franchise of 7Eleven (1,520 stores), Family Mart (100), AM/PM (130), and hundreds of these stores are deployed in Indonesia, such as AM/PM, 7-Eleven, Circle K,... In contrast, there is no franchise from foreign companies and convenience stores present in Vietnam. If convenience stores in Hochiminh city had not been successful, supermarkets specialized in cosmetics (Chua Boc, Medicare), shoes, furniture (Nha Xinh), computers (Blue Sky Ham Long), electronics (Nguyen Kim), apparel (Vinatex), wine, fresh fruit, vegetable, and real estate (ACB bank) have become more and more popular in big cities. The competitive environment of the modern retail sector in Vietnam Despite the dominance of traditional markets and outlets, there is still room for the expansion of supermarkets. There is a fierce competition between local and foreign players. They all expand operations not only in big cities, but also in the rest of the country. Almost all of existing modern retailers plan to open more new stores: Big C in Hanoi, Metro C&C in Can Tho, Seiyu in Hochiminh city, Intimex and Coop-mart nationwide. They seek to open more modern and larger stores. In the early stages, the average surface area of a supermarket store was around 500 square meters. Later on, the store size increased to 1,000 to 2,000 square meters, and now, the newly opened superstores have a selling space of 4,000 square meters. Besides enlarging the physical size of the stores, supermarkets owners have been forced to reorganize the layout and promote permanent innovation in order to attract more shoppers. They tend to focus more on building their brands. In 2004, Co-op mart has spent 1.5% to 2% of total sales on promotion and marketing activities for the Co-op mart banner. Price is the main criteria of competition. Besides, adding entertainment to the modern retail formats has been one of the most popular strategies through the recent years. Entertainment is not limited to music, fashion shows; it includes, also, other services, such as coffee shops, beauty salons, and restaurants, anything that makes shoppers have a good time. However, in this sector, there are strong entry barriers to entry for newcomers. As far as local retailers are concerned, huge investments are needed: roughly VND 30-40 billion for a

13

supermarket and parking space20, but the return on investment is slow, 5 years, and the profitability is low (the net profit under 5%). For foreign retailers, there will be opportunities to enter the Vietnamese market in the coming years as until Vietnam joins AFTA, local distributors have been protected. In the modern retail sector, in Hochiminh city, Coop-mart chain has become the leader since 2001, holding 55% of the market share, followed by Maximark (19%), Big C (15%) and Citimart (5%)21.
Co-opmart The local state-owned chain Co-opmart appears to be the citys most popular supermarket chain, operating through 13 outlets, located in central areas, in Ho Chi Minh city, developing a low price strategy. It targets are employees and middle-income people. They draws big crowds of 50 000 shoppers a day. Goods on sale have a high quality but the prices are really not much different from those at traditional markets. The chain has helped producers of high quality Vietnamese goods to promote their products. Since 2003, it has developed online sales. One of the community services provided by Co-op mart is the organization of trip store to sell goods at low prices to poor people, factory workers, hospitals and remote areas. This activity is in line with its motto: Co-op mart, a friend to every family.22 It holds actually the leading position, accounting around half of the supermarket share. In 1996, when the first Co-op mart has opened, its turnover was only VND 24 billion, with only 20% to 30% of Vietnamese products. In 2003, with a chain of 13 supermarkets, it reaches nearly VND 1, 05 trillion with 80%-90% of Vietnamese products. Its annual growth rate is about 25%. According to Ms Nguyen Thi Nghia, general director of Saigon Co-op, the chain tends to expand its activities to other big provinces, especially in the Mekong delta, aiming to open 20 supermarkets, by 2005, inorder to dominate the retail sector in Vietnam. While Co-op mart has good results in selling processed food for local consumption, its export results mainly from handicraft and ceramics have accounted for USD 2 million only23. Maximark This privately-owned local chain of 4 supermarkets was developed during the 1990s. the most recently opened store at Cong Hoa is based on 19 000 square meters, in which 3,000 square meter hypermarket, with amusement center, game arcade, department store. The store carries about 15,000 references. Citimart The privately-owned local chain has 4 stores across the country. It offered exclusives imported products. Metro Cash & Carry On March 2002, the German trading company Metro Cash & Carry Vietnam (with 100% foreign capital), the global modern wholesaler, opened its first store in Vietnam at Binh Phu, district 6. Metro Binh Phu is built on an area of three hectares, with more than 14,000 food items at international standards. The investment cost accounts for 20 million euro. It has a staff of 420. On December of the same year, its second store, located in An Phu - An Khanh, district 2, on an area of 36,000 square meters was opened. One year later, its third one was established with an area of 40,000 square meters in Hanoi. The company plans to open five more in big cities, like Danang, Can Tho, Hai Phong and Nha Trang, with an investment of USD million 170. The Metro stores target distributors, companies, hotels, restaurants, hospitals and retailers as well. Customers should have cards to be allowed to do transaction at these stores. The company will create 2500 jobs in Vietnam. The trading system aims to supply member customer with quality products, food with hygiene standards, but at the lowest price. Like Big C, Metro tends to become a direct distribution network for Vietnamese products. Right away in 2002, Metro Vietnam exported around 50 million of goods to Europe, mainly shoes, leather goods, textiles and ceramics 24.

20 21

Dao Loan (2004), Supermarkets on a roll, p. 14, Saigon Times, March 6, 2004. Data of R&D Department of Saigon Co-op in 2003, cited by CFVG students 22 Supermarkets on a roll (10/03/2004) 23 Bich Nga (2004), Tim co hoi xuat khau qua cac sieu thi, 24 Hai Yen (2003), Covering the country , Vietnam Economic Times, September 2003, pp. 21-21

14

Concerning its international development strategy, Vietnam is the second Asian country that Metro has entered, after China, which counts already 15 stores. After Vietnam, it plans to penetrate Japanese and Indian markets. Concerning Vietnamese modern retail market, James Scott, general director of Metro C&C, evaluated that the development of supermarkets in Vietnam is lower than that of Thailand (5% in 1995, 10% in 2005 and 30% in 2010 in Vietnam against 20%, 602% and 70% during the same period). In sum, it is not surprising that Hochiminh city has given access to modern stores much earlier than Hanoi, and the development of supermarkets is growing faster in Hochiminh city than in Hanoi, as it plays the leading role, not only in the distribution but also in the attraction of merchandises exported from other provinces in Vietnam. In comparison with Hochiminh city, the supermarket system operating in Hanoi has revealed itself several shortcomings resulting from the lack of professionalism of modern distribution. Evolution of the Vietnamese consumer behaviour towards modern retail formats The speeding up of economic growth, combined with the increase of purchasing power of a part of the total population, especially urban population, and the demographic evolution, affects the progression of household private consumption, as do the industrialization and modernisation increasing pace, the growth of female activity rate, the rapid development of the cities, the mass information development, which have changed tremendously the life style, and, therefore, the consumption and consumer behaviour. Geographically, Hochiminh city and Hanoi, the two biggest cities have a higher annual growth rates, compared with those of other parts of the country. At a result, in Hochiminh city, the average annual growth rate of supermarket purchase of households is 40%. More interesting, even, is that a powerful potential consumption is anticipated in other big cities, like My Tho, Long Xuyen, and Phan Thiet, as far as up to half of main household shoppers from these cities have already purchased in supermarkets, even though there are no supermarkets existing in these locations25. Besides, the youth element gives a flavour of supermarket shoppers future buying habit, as more than half of the population is under the age of 30 and represents a powerful consumer force. Vietnamese consumers are described as young, curious and more and more demanding in their buying decisions. They pay much attention to brand-name, price, design and marketing strategy of distributors. As far as communication strategy is concerned, they seem very responsive to advertising and promotional activities 26. Concerning shoppers attitude to try new things in supermarkets and hypermarkets, Vietnamese supermarket shoppers, along with Malaysian shoppers love to try new things much more than any other Asian customers 27. And they have modified their buying habits in supermarkets by adopting this changing behaviour. Like most people in Asia, Vietnamese customers mainly shop at the wet market, rather than in supermarket. As of June 2003, modern stores attracted 10% only of the total expenditures for
25 26

Anh Minh (2004), Tang toc, tang chat luong ??????? Sai Gon Tiep Thi, 2003. 27 AC Nielson (2004), Asia Pacific, Retail and shopper Trends 2004 Percentage of supermarkets and hypermarkets shoppers who love to try new thing in Asia: Malaysia (37%), Vietnam (36%), Japan (24%), Thailand, Indonesia (21%), Philippines (16%), Korea and China (12%), Taiwan and Sri Lanka (11%).

15

food and non food purchases for all retail formats in the four big cities in Vietnam, Hanoi, Hochiminh city, Danang and Can Tho. In contrast, wet markets represented 15% while the traditional street stores still reach 60% of total spending. These are women who decide the purchase. This reflects a family-oriented life style with the important role of women in Vietnamese consumption pattern, in comparison with South-East Asian household shoppers. Recent results of AC Nielson illustrated clearly this decision patterns, as 97% of shoppers and 95% of key influencer are Vietnamese women, against 84% and 65% in Thailand and 91% and 47% in Indonesia 28. The shopping hours are between 8AM to 9AM. The duration is about one hour and the amount purchased is around 50 000 VND. They come to wet markets every day to procure fresh food. They love to shop in traditional markets mainly because they prefer fresh items, large assortment, bargaining, price, and proximity. However, the buying behaviour towards traditional markets versus modern retail formats had significantly changed. In big cities, like Hochiminh city and Hanoi, the shopping at supermarkets is more and more frequent. A survey of Taylor Nelson Sofres on the shopping frequency by channels, on a month to month basis, has indicated that almost all shoppers visit their local street-front store on a monthly basi. Interestingly, almost half of Vietnamese households still visit the wet markets with the same frequency, while a record 40% of all shoppers visit Metro, Superbowl and other modern outlets in urban centres. According to the studies conducted by CFVG29 students, the amount of purchase is growing from 30,000 VND per shopper in the 1990s to 100,000 VND to 200,000 VND nowadays. The shopping frequency in supermarkets is twice per month. Their reasons to visit is quite similar: for entertainment (30%) as for shopping (70%). The hygiene conditions, the guaranty of quality and the source of products, the broad assortment, the novelty, and the price are the key incentives for purchasing in supermarkets. Freshness and quality are of growing importance, while the basic needs of ease of parking and low prices have become relatively less important. The majority of the consumers see price and quality as important factors to shop. In 2004, around 60% supermarkets shoppers are fond of quality, 44% of price, 41%, of infrastructure and 23%, of promotion30. The same behaviour can be found among Indonesian people, who seem also extremely price sensitive. Compared to the previous years, when shoppers come to supermarkets mainly for visiting, relaxing and discovering prices, the numbers of shoppers and the shopping frequency have increased significantly. There is a common growing preference of Vietnamese and Indonesian consumers for shopping in modern outlets rather than at traditional markets due to more comfortable trading places, more broad assortment, attracting good display, guaranteed quality and source of products, especially food safety, cleanliness, and pleasant shopping atmosphere. Their favourite stores are Nhat Nam, Maximark and Co-opmart in Hochiminh city and Fivimart, Makro in Hanoi. Nowadays, Vietnamese consumers spend more on food and beverage than ever before. In fact, in June 2002, the average urban household was spending VND 223,000 per month at street shops, against VND 322,000 in June 2003. Wet market consumption rose from VND 116,000 to VND 148 000, while modern outlets spending increased from VND 98,000 to 108,000
28 29

AC Nielson (2004), Asia Pacific, Retail and shopper Trends 2004 Centre Franco-Vietnamien de formation la Gestion, established in Hochiminh city and in Hano, offering both MBA programs. 30 Nguyen Loan (2004), Hang Vietnam ban chay qua sieu thi, http://www.dddn.com.vn

16

during the same period (June 2002-June 2003). Food consumption made up two thirds of all FMCG and 70% of all street-front store purchases on food against 52% of modern outlets. Concerning types of products bought at supermarkets in Hochiminh city, a survey conducted by SGTT31 in April 2004 found that 50.8% of shoppers have bought processed food, 50% bought cosmetics, detergents and 30% bought beverage while only 24.2% bought fresh food. Despite the low actual consumption of fresh food in these outlets, the consumer tends to change especially in Hochiminh city, due to a growing food safety and hygiene concern 32. If processed food has room in modern outlets, personal care items, in particular cosmetics and beauty products are bought mainly in traditional markets. This buying habit differs a lot from those of Asian consumers, who preferred to buy personal care items in modern stores (cosmetic and drugstores, supermarkets and hypermarkets). This purchasing decision is explained mainly by the low income level of Vietnamese consumers. Street shops and traditional markets attracted around 72% of all cosmetic buyers in 200333. While brands, products and tastes are still national and most fresh food is purchased outside supermarkets, growing food poisoning from year to year in conjunction with bird flu outbreak in the Asian region has drawn more Vietnamese shoppers to supermarkets. Moreover, convenience, location and selection of products in each channel are driving consumer habits in Vietnam34. Like Indonesian people, in spite of the growth in the modern retail sector, the majority of Vietnamese continue to shop at traditional store conveniently located to their homes, familiar to the majority of consumers (as indicated, still about 72% of purchase are made in traditional markets). Even though, urban consumers welcome these new retail formats, but they are not ready to change abruptly their habits that are largely associated with the Vietnamese economic, social and cultural context. Which is the case, especially, of elderly people who like direct communication and negotiation in traditional markets. Besides, the consumption habit in fresh food has made obstacles to the development of these items in supermarkets. A decade of rapid economic growth has changed Vietnamese consumer culture. Vietnamese shoppers, nowadays, consider supermarkets as a place combining purchase and leisure. Even though, the traditional markets still dominate the retail sector, with a growing concern for quality and hygiene conditions which makes room for supermarkets. And this change in consumer behavior of urban household might affect the elaboration of foreign and local distributors strategy in a fierce competition in this sector. Economic impact of the modern retail formats 1. Slow rate of penetration of supermarkets Despite the growing popularity of modern retail formats, the traditional market still plays a key role in the Vietnamese retail sector, like in several other Asian countries, like Indonesia,
31

SGTT: Saigon Marketing In Hochiminh city, there were 11 cases with 1158 people poisoned in 2003 against 5 cases with 577 people in 1997. And this city accounts for 25% of the total cases in Vietnam. 33 Taylor Nelson Sofres Vietnam (2003), Personal touch more popular, p. 44, Vietnam Economic Times, June 2004. 34 Taylor Nelson Sofres Vietnam (2003), Eat, drink and be merry, p. 38, Vietnam Economic Times, January, 2004.
32

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Thailand, Cambodia, and Laos. Nevertheless, the pace of expansion of modern self-service outlets in big cities of the region, is more significant: in major urban areas; like Bangkok and Jakarta, for instance, where it represents, respectively, 69% and 46%, the modern trade continues to grow. At the country level, the modern distribution in Vietnam still covers a minor part of the local sales turnover, compared with the level of East Asian or South-East Asian regions. It reaches only 17% (in Hanoi and Hochiminh city) of the total retail sales, against 70% in Hong Kong, 86 % in Singapore, 71% in Korea, 49% in Malaysia, 40% in Philippines, 43% in Thailand, and 26% in Indonesia in 200335. In figures, Vietnam has up to 100 supermarkets nationwide for a total population of 80 million of inhabitants; a number that could not be comparable to its neighboring comparable countries -with more than 2600 in Thailand and 940 in Indonesia-. Moreover, the presence of foreign retailers remained modest with only three banners such as Big C, Metro and Seiyu while a large set of the world distribution leaders are operating in Asia, such as Makro, Tesco, Carrefour, Continent, Casino, Wal-mart, Isetan, Sogo, Parkson,In Indonesia and in Thailand, for instance, more than 10 foreign retailers have set up operations over the past five years such as Tesco Lotus, Big C, Tops, Carrefour, Continent, Makro, Alfa, Indo Grosir and Goro. The expansion of modern retail formats, especially in Indonesia, is explained by the positive attitude towards foreign investors, adopted as early as 1998: those have been granted by the Indonesian government, through a new regulation giving them the same rights as local investors in retail business. As a result, in comparison with other Asian countries, the penetration of supermarkets in Vietnam is rather slow. 2. Introduction and building up of Vietnamese products After a decade of creation and development of supermarkets in Vietnam, the percentage of imported items sold in supermarkets, at its first stage, was close to 100%, decreasing from year to year, to 30%-40%, in 1997-1998, and to 10%-20%, in 2004. Interestingly, modern retail formats, initially considered by Vietnamese shoppers as targeting high income segments and expatriates, have become new channels for retailing companies to launch and promote Vietnamese products domestically and abroad. Besides, supermarkets contribute to stabilize prices. 3. Opening up the retail sector and its consequences However, new comers, such as Dairy Farm and Parkson will open their first stores in the near future, along with the opening up of the retail sector in Vietnam. The country is following its neighboring countries, which have opened up the retail sector with a time table reflecting their level of economic development: foreign investors were allowed to entry business in Thailand in the early 1990s; in Indonesia in 1998. Since then, modern retail foreign players have not only developed their business, but also have been competing aggressively with both local players and traditional ones. Actually, with the expansion of foreign big retailers on a national scale, some lessons should be learned from other Asian countries, like Indonesia and Thailand: after a decade of continuous development of the modern distribution sector in these countries, local players have been left behind by global retailers with strong capital and experiences in the high
35

AC Nielson (2004), Asia Pacific, Retail and shopper Trends 2004

18

competitive environment in their own country and worldwide. In fact, the rapid growth of the economy, especially previous to the Asian financial crisis, led to the supermarket boom. Food retailing in Thaland, fo rinstaance, was dominated, at that time, by the two local groups, CRC (Central Retail Corporation) and CP (Charoen Pokphand Group). They are now held by foreign owned companies36. The recovering of the retail sector, after the financial crisis, occurred simultaneously to its explosive development. Foreign competitors, soundly financed, competed aggressively for new market shares and got rid of traditional small players, offering very low prices, 2% to 10% below those proposed by traditional distribution channels, through a tight control of costs. Then, the presence of foreign major distributors, like Carrefour, Casino, Tesco, and Makro, provoked a drop of 80% of traditional wholesalers turnover. Local small traditional retailers suffered also from the convenience stores established near-by. The same situation could be observed in Indonesia: since 1998, Carrefour, Continent, Makro Asia, Dairy Farm have shared the market among them, while other big global retailers, like Tesco and Giant, tried to penetrate the market. Hero and 300 other local retailers (of which the biggest are Matahari, Ramayana, Pasaraya, and Sarinah)had also to cope with a serious profit shortage. Consequently, foreign retailers have largely contributed to the wiping out of many traditional retailers, especially those located within five miles from those, with a drop of their sales, up to 80%.

In order to protect traditional and local retailers, Thailand restricted the market access to foreign retailers, holding already 80% of the countrys modern retail market. As in Malaysia where the government has stopped delivering licences to foreign operators in big cities. It only allows them to open outlets in less developed and rural areas. CONCLUSION The retailing industry in Vietnam is still highly fragmented, with a domination of traditional channels. Within 10 years, the modern distribution has been progressing slowly in the country, speeding up during the past two years. However, as far as modern retail sector is concerned, there remains a big gap between big cities and provinces. The biggest operators, already established in Hochiminh city and Hano, are planning to extend their operations to the other provinces. Compared with Thailand or Indonesia, the number of supermarkets is still small and, with the growing consumption demand, the potential Vietnamese retail market is huge. Will it be, then, an opportunity for foreign modern retailers to enter this market (or to stay there, if they are already present, like big C), along with the countrys commitment of opening up this sector to foreign players in the near future? Answering such question requires, then, to analyze the Vietnamese distribution sectors environment, to measure - how progressively the authorities release restrictions to entry, not only to satisfy international requirements, but, also, in order to attract new foreign actors. - and, to what extent they keep a grip on a sector whose potential is more and more appreciated by major players from abroad.
36

Appendix 3.

19

This leads to anticipate the possible future evolution of the Vietnamese distribution sector, its pace of growth in relation with the countrys GDP progression, using as a benchmark Indonesian and Tha examples. Such approach covers the identification of sectors existing and coming challenges, i.e.: - the impact of all type of external pressures -either political regulatory, economic and social, as technological37- , - to convey in terms of adaptation requirements of the offer, geographic (national) and activities (formats range) deployment and, above all, competitions nature and intensity changes. From such analysis stem some conclusions which may clarify the decision making process, both for foreign and local corporate actors as for the local authorities. These will have to consider their respective resources and handicaps; which will lead them to define or to reconsider their respective policies: - as for the authorities, which will have to conciliate all the countrys international commitments and their respective constraints, in order to define and select the most appropriate policy orientation and the consecutive measures to be implemented ; - as for the corporate players, local -like Co-op mart-, and foreign -like big C-, taking into account their respective strengths and weaknesses, their level of control of KFS, and the consecutive strategic orientations offered to each one, with their respective pros and cons and, once the most appropriate selected, the implementation process to adopt. Another output to expect from this approach could be to identify, - in Vietnam, comparable (service) activity sectors, which could take advantage of the retail activities experiences, and benchmark for the account of their public/private, local/foreign stake holders, as of their consumers/users, - in other selected emerging countries, comparable to these of the South East Asia region, lessons and good practices to be shared, all the same, by local authorities as by local and foreign actors.

37

Lemaire, J.P., Measuring the International Environment Impact on Corporate Marketing and Strategy: the P.R.E.S.T. model, 16th annual IMP conference Univeritiy of Bath, Sept. 2000.

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APPENDIX 1: DATA COMPLEMENTS ON VIETNAM

Table 1: Economic Indicators Year 1985 1990 1995 1998 Population 59.87 66.02 72.00 75.46 (million) Urban population 19.5 20.7 23.1 (% of the total population) Growth of GDP, 5,1 9.5 5.8 annual change, % Per capita GDP, 214 332 converted to USD, 1USD=15000VND (constant) * Exports, FOB 699 2404 544+ 9360 (USD million) Imports, CIF 1857 2752 8155 11500 (USD million) Trade balance -1159 -348 -2706 -2140 (USD million) Exchange rate 6482.80 11015.0 13268.0 (VND per USD) 0 0 Consumer price 7.8 index, annual change (%) Inflation rate (%) 12.7 9.2 Source: World Bank, 2004 *: http://www.vvg-vietnam,com/economics 1999 76.60 23.6 4.8 362 2000 77.64 24.3 6.8 387 2001 78.68 24.8 6.9 400 7.0 420 2002 79.73

11541 11742 -201 13943.2 0 4.2 0.7

14483 15637 -1154 14167.7 0 -1.6 -0,5

15027 16162 -1135 14725.2 0 -0.4 -0.3

16706 19733 -3027 15279.50

2.9

Table 2: Structure of output (% of GDP at current price) Year 1985 Agriculture 40.2 Industry 27.4 Service 32.5 Source: World Bank, 2004 1990 38.7 22.7 38.6 1995 27. 28.8 44.1 1998 25.8 32.5 41.7 1999 25.4 34.5 40.1 2000 24. 36.7 38.7 2001 23.2 38.1 38.6 2002 23.0 38.5 38.5

Table 3: Vietnams main exported items in 2003 Exported items 1. Crude oil 2. Garments-textiles 3. Footwear 4. Aqua products 5. Rice Value (USD million) 3,777 3,630 2,225 2,217 719

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6. Electronics 7. Wood 8. Coffee 9. Rubber 10. Handicrafts TOTAL EXPORT VALUE Source: http://itpc.hochiminhcity.gov.vn

686 563 473 383 367 19,900

Table 4: Evolution of the Vietnamese private consumption (VND billions at current price) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Source : Website of the World Bank, 2003 Private Consumption 111820.7547 114307.8324 122174.4505 124491.2281 133299,0000 144010.2564 159205.1887 165991.1504 173388.2114 176932.7354 182373.9988

Table 5: Evolution of living standard (in percentage) Year Total Low level Temporarily (*)38 stable 27,9 27,5 27 26,5 Average level 32,6 37,4 37,8 38,2 Above average level 19 19,3 20,2 21 High level 6,3 6,2 6,3 6,4

1998 100 10,6 1999 100 9,6 2000 100 8,7 2001 100 7,9 Source : Statistical Year Book of HCMC, 2001

Table 6: Retail sales in Vietnam (VND billion at current prices) Year 1990 1991 1992 1993 1994 1995 1996 1997
38

Retail sales 19031,2 33403,6 51214,5 67273,3 93490,0 121160,0 145974,0 161899,7

Note: dpense mensuel moyenne en 2001 /habitant (milliers VND), misrable <294, temporairement stable : 295-465, moyen 466-801, au dessus de la moyenne 802-1939, haut >1939.

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1998 1999 2000 2001 Source : Statistical Year Book, 2002

185598,1 200923,7 220410,6 245315,0

Table 7: FDI capital in Vietnam (USD million), 1998-2003 Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: General Dept. of Statistics FDI inflows (USD million) 371.8 582,5 839,0 1322.3 2166,0 2900.0 3765.6 6530.8 8497.3 4649.1 3897.0 1568.0 2012.4 2191.9 1703.07 1653.68

Table 8: Vietnams top ten investors in 1998-2003 Country Projects Registered capital (USD million) 7370.11 5997.73 4480.43 4161.33 2974.58 2114.15 2090.43 1768.27 1408.30 1180.33

1. Singapore 288 2. Taiwan 1086 3. Japan 418 4. South Korea 662 5. Hong Kong 288 6. France 134 7. B.V. Islands 187 8. Netherlands 51 9. Thailand 119 10. UK 51 Source: http://itpc.hochiminhcity.gov.vn

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APPENDIX 2: RETAILING IN INDONESIA39

Table 1: Economic Indicators Year 1985 1990 1995 1998 1999 200 2001 Population 193,66 179.38 194,75 201.58 203,91 206.26 208.65 (million) Urban population 30.9 35.9 39.4 (% of the total population) Growth of GDP, 2.5 9.0 8.2 -13.1 0.8 4.9 3.4 annual change, % Per capita GNP, 572107 112193 226514 4473928 4982442 568569 6668294 at current market 2 6 2 price (Rupiah) Exchange rate 1111 1843 2249 10014 7855 8422 10261 (Rupiah per USD) Consumer price 4,7 9.5 58,5 20.5 3.7 11.5 index, annual change (%) Exports (Million 18587 25675 45418 48848 48865 62124 56321 USD) Imports 10260 21837 40629 27337 24003 33515 30962 (Million USD) Trade balance 8327 3838 4789 21511 24662 28609 25359 (Million USD) Source: World Bank, 2004 53% of the population is under less than 25 years old, 39.4 of the population is urban. Table 2: Modern retail institutions in Indonesia Type Supermarkets HERO LION SUPERINDO Number of outlets in 2003 97 37 Location Jakarta, Java, Balmi, Lombok, Sumatera, Kalimantan, Sulawesi, Papua Barat Jakarta, Bogor, Tangerang, Banten, Bekani, Bandung, Surabaya, Palembang, Yogyakarta Jakarta, Jawa, Bali, Umetera, Sulawesi, Batam 2002 211.06

3.7 7259639 9311 11.9 57006 31304 25702

GELAEL

11

39

This section is a compilation of information diffused from several sources : www. Dree;org, www., www.cic.co.id/products/01_hypermarket.htm Post-crisis prospects of hypermarkets & supermarket business in Jabotek, www.expat.or.or.id/info/supermarkets.html Supermarkets in Jakarta, Indonesia, GAIN report 2003 Indonesia, retail food sector report 2003, www.euromonitor.com/retail_trade_international_-_Indonesia Retail trade International, Indonesia.

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ALFA MATAHARI RAMAYANA YOGYA Hypermarkets CARREFOUR CLUBSTORE GIANT Wholesalers MAKRO INDO GROSIR ALFA GROSIR CLUB GROSIR Minimarkets ALFA INDOMARET MARKAZ WASERDA STAR MART (HERO) GOSMART LOCAL MINIMARKETS Convenience stores AM/PM CIRCLE K 7- ELEVEN Source: GAIN 2003

32 79 70 39 11 3 6

Jakarta, Java, Bali, Medan, Lampung, Makassar Jakarta, Java, Bali, Sumatera, Kalimantan, Sulawesi, Ambon Jakarta, Java, Bali, Batam, Sumatera, Kalimantan, Nusatenggara Timur Jakarta, West Java Jakarta, Bandung Jakarta, Medan Jakarta, Tangerang, Bekasi, Cimanggis, Bandung, Surabaya Jakarta, Surabaya, Medan, Bandung, Bali, Semarang, Solo, Makassar Jakarta, Bandung, Yogyakarta, Surabaya Java, Bali Jakarta 570 Jakarta, Java Jakarta, Java Java Jakarta, Bogor, Bali Jakarta All over Indonesia Jakarta Jakarta, Bogor, Bandung, Yogyakarta Bandung Bali,

13 6 8 2 800 17 39 9 A lot 27 63 6

Table 3: Sales generated by type of retailers USD million 2000 2001 3,502 2,575 2002 3,852 2,833 (predicted) 8,400 2005

Total retail sales 2,800 Generated by local 2,059 retailers

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Generated by 741 927 927 foreign retailers Source: Castle Asia, cited by Gain report 11/12/2003 (Indonesia, Retail food sector, report 2003, prepared by F.Y. Rankuti) Table 4: Contribution percentage to Indonesian retail sales (%). Outlet type Supermarket/hypermarket Minimarket TOTAL Source/ AC Nielson 1999 - 2000 16,7 3,5 20,2 2000 - 2001 20,5 4,6 25,1 2001 - 2002 20,2 4,9 25,1 2002 - 2003 21,1 5,1 26,2

An Overview of the distribution sector in Indonesia The population of Indonesia is around 212 million. 53% of the population is less than 25 years old, 39.4% of the population is urban. Upper and middle income groups -those most likely to purchase imported products- represent 5 to10%, respectively, of the population. In 1997, the Asian crisis severely impacted the retail industry in Indonesia, with the weakening Rupiah leading to a sharp increase of prices. The distribution sector, then, suffered the 1998 riots that destroyed many retails outlets in many regions, including retail chain and Chinese-owned outlets. Later on, a more stabilised economic and political climate had permitted the industry to recover, especially in the early 2000s. Total retail sales reached Rupiah 320 trillion, with a sales growth of 16.4%40 The number of supermarkets has increased about 20% during the last five years41. Modern stores contribute nearly to 30% of the retail sector in 2003. The success of hypermarkets in Indonesia relies largely on one stop shopping modern retail format and on low prices, while the success of mini-marts lies in air-conditioning and on close proximity. Despite the growth in the modern retail sector, the majority of Indonesian continue to shop in traditional store conveniently located close by their homes or places of work, which are familiar to a majority of consumers (as indicated, still about 72% of purchase are made in traditional markets). . Concerning the modern trade, it has been diffusing and growing in Indonesia, form Jakarta: - As soon as the early 70s, consumers contemplated the beginning of supermarket development when Hero opened its first stores. By the end of the 70s, Kem Chicks and Gelael had also opened small stores in Jakarta. Duty Free stores supplied hard-tofind imported food items and alcoholic beverages for expatriates. - In the late 80s, new supermarkets opened. Supermarkets in close proximity to the traditional markets were not allowed to sell fruits, vegetables, and meat. - In the 90s, wholesalers as Makro and the Club started their operations. - By early 00s, Carrefour had established in Jakarta with 5 locations. If in 1990, the capital had hardly modern outlets, in 1995, about millions of square meters have been build for modern stores. The supermarkets mainly appeared in major cities of Indonesia. During the early 2000s, the development of retail infrastructure had made significant progress, especially in big cities. The building of shopping centres provided an additional 31 500 square meters sales areas to the existing 1.2 million square meters. In
40 41

Retail trade International, website: http//www.euromonitor.com/retail_trade_International_Indonesia Source: Euromonitor

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Jakarta, there were 313 outlets of supermarkets and mini-markets before the crisis (185 supermarkets and 128 mini-markets) and about 940 supermarkets nationwide. The two major retailers in Indonesia being Matahari and Hero, their target customers are mostly the middle to upper level Indonesian citizens. Some foreign investors had started early to open hypermarkets. Two hypermarkets are already operational, Carrefour and Continent, both under French control. Foreign companies investing in retail have been granted, in 1999, rights from the government, through the new regulation no 99 of 1998 and a Government Decree of 1999, similar to those of local investors in the business. According to decree n99, the retail and whole sale sectors are open to large, and medium scale investment as long as the investor enters into an equity partnership with a small scale Indonesian enterprise. As a result, since, Joint Ventures with foreign operators were a rising trend, as Indonesian retailers sought technical and managerial expertise from abroad. Most notable are Heros strategic alliance with Diary Farm International Holdings from Hongkong. At least, 11 foreign retailers have set up operations in Indonesia over the past five years.42 Although the traditional sector still dominates the retail business, Indonesias retail industry continues to evolve from the traditional market largely local structures to a network of modern hypermarkets and supermarkets. According to a GAIN report, in 2003, consumer purchasing habits changed remarkably after the Asian financial crisis and continue to evolve. Current Indonesian consumer purchasing patterns can be generalised as follows: 1. Purchasing more staple products, rather than luxury items, and minimizing impulse buying. 2. Extreme price consciousness in purchasing and less store and brand loyalty. 3. Shopping more frequently for food and buying smaller quantities per shopping trip. 4. Shifting purchases of some staple items to traditional outlets and shopping more frequently at discount venues in the modern sector. 5. Buying local products rather than imported goods when satisfactory local substitutes are available. 6. Consuming more fresh food. 7. Increasing preference for shopping in supermarkets/modern stores rather than in wet markets, due to more comfortable shopping space, more complete range of goods, guaranteed quality of products (food safety and cleanliness), competitive prices, good service, and easier accessibility. It is worth noted that these generalisations apply less to higher income consumers, like expatriates and high-income Indonesian. Those continue to look for branded and imported products. Competition among modern retail formats became more tense than with traditional outlets, in particular in urban areas, as number of intermediate formats tends to develop between supermarkets and hypermarkets,, offering a larger assortment. In addition, traditional stores, also, had to compete with modern stores. Wet markets and independent grocers continue to dominate rural areas, as competition with modern retail outlets in these areas do not exist.
42

Indonesias Hero supermarket reports 35% drop in net profit (Nov 28,02), http://www.siamfuture.com/asiannews

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28

APPENDIX 3: RETAILING IN THAILAND43

Table 1: Economic Indicators Year 1985 Population 51.58 (million) Urban population (% of the total population) Growth of GDP, 4,6 annual change, % Per capita GNP, 20483 at current market price (Baht) Exchange rate 27,16 (Baht per USD) Exports (Million 193366 USD) Imports 251169 (Million USD) Trade balance - 57803 (Million USD) Source: World Bank, 2004 1990 55.84 1995 59,40 1998 61,20 1999 61,81 2000 62,41 22 11,2 39104 25,59 589813 9,2 70474 24,92 -10,2 75594 41,56 4,4 75026 37,81 4,6 78783 40,11 2001 62,91 20 1,9 81435 44,43 5,2 85614 42,96 2002 63,43

140631 2247454 2215178 277382 1 6 844448 176358 1774076 1907392 249414 7 1 -254635 -357276 473378 307786 279685

2893178 2955715 2756655 2778042 136523 177673

Table 2: Percentage of different types of retail formats in Thailand (% of the turnover of the sector in 2001) Modern trading outlets 40% Traditional channels 60% The modern trade sector was estimated to go up to 50% in 2003. Source: Dree.org, La distribution en Thalande, 15/8/2002 Table 3: Turnover of modern retailers in 2000 Type of formats Turnover (Baht billion) Hypers 70 Supers, convenience stores, specialty stores 43 Department stores 87 Source: Dree.org, La distribution en Thalande, 15/8/2002

43

This section is a compilation of information diffused from several sources : www. Dree;org, www..atnriac.ca/asean,

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Table 4: Market share of modern retail institutions in 2000 (%) Type of formats Market share (%) Department stores 32 Supermarkets 8 Convenience stores 12 Hypermarkets 45 Specialty stores 3 Source: Dree.org, La distribution en Thalande, 15/8/2002 Table 5: Market share of hypermarkets (2001) Hypermarkets Market share (%) TESCO LOTUS 33 CARREFOUR 11 BIG C 29 MAKRO 30 Source: Dree.org, La distribution en Thalande, 15/8/2002 Table 6: Modern retail institutions in Thailand in 2001 Types of stores Number of stores Hypermarkets MAKRO 20 BIG C 37 TESCO LOTUS 37 CARREFOUR 16 Supermarkets TOPS 43 FOOD LION 22 SIAM JUSCO 14 FOODLAND 8 VILLA MARKET 7 SUNNYS 8 Convenience stores 7 ELEVEN 1740 FAMILY MART 500 AM/PM 174 TIGER MART 300 STAR MART 300 Department stores LOCAL: Central, The Mall, Robinson, Zen, Imperial, Teng Hua Seng FOREIGN: Isetan, Sogo, Tokyo Source: Dree.org, La distribution en Thalande, 15/8/2002, The food retailing sector in Thailand, market information, SEA, august 2000

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Table 7: Number of major retail operators Company 2001 2002 2003 Tesco Lotus 34 42 48 Big C 29 33 37 Carrefour 15 17 18 Makro 20 21 22 Tops 41 49 55 Food Lion 28 38 48 Central 12 13 14 Boots 67 67 56 Watsons 55 61 Na* 7-Eleven 1800 2050 2300 Family -Mart 150 250 Na* Source: The food retailing sector in Thailand, market information, SEA, august 2000 Note: Na*: not available An Overview of the distribution sector in Thailand The distribution sector in Thailand is divided into two sets of formats: traditional and modern. The turnover of the retail sector is Baht billion 500 (of which, traditional, bath billion 300 and, modern, Baht billion 200) in 2001. Growth rate of hypermarkets in this country is due to reach 20% per year. The traditional distribution system in Thailand is composed of wet or outdoor markets and mom and pop stores. However, the rapid growth of the economy, particularly during the decade previous to the financial crisis, led to dramatic changes in the structure of the retailing sector. Modern stores developed to serve a growing middle class asking for more sophisticated food stores had a greater variety of products. In Thailand, there are five types of retail outlets: hypermarkets, supermarkets, convenience stores, traditional markets, and specialty stores. There are, also, more or less, 300,000 small mom and pop stores in Thailand selling rice and dry grocery products and some 600,000 wet market vendors selling mainly fruit and vegetable, meat and fish. 60% of the food retail trade in the Bangkok area is channelled now through supermarkets, superstores, or convenience stores. The percentage of food distribution through the wet markets is, however, much higher in the provinces. As the Thai economy continues to develop, there is a significant shift in consumer buying habits from the traditional markets to the new supermarkets and superstores that offer every day low price . The Asian crisis, in 1997, has accelerated the quick development of hypermarkets and discounters. This evolution is explained by the decrease of the purchasing power. Heavily in debt local companies enterprises had to sell their stake to foreign partners. Supermarkets and superstores are concentrated in the Bangkok area. With only 20% of the population, Bangkok accounts for about two-half of these formats in the country. Carrefour has opened its first hypermarket in Thailand in 1996. In order to meet local shoppers it used street-front stores, dedicating 70% of the space to vegetable, fruits, fish, Makro, another European banner had become, in Thailand, the leader of the cash and carry sub-sector. Convenience stores(40 to 100 square meters) opened 24/24, have developed rapidly in Thailand, targeting all customers. This new format gradually raises its market share over traditional stores.

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Foo d retail in Thailand has traditionally been dominated by 2 large corporate groups, the Central Retail Corporation (CRC) and the Charoen Pokphand Group (CP). Before the financial crisis, Central had 38 TOPS supermarkets, 20 BIG C superstores, and 7 CARREFOUR superstores, As a result of the crisis, Central sold its JV shares in TOPS supermarkets to Royal Ahol (Netherland) which now owns 100% of TOPS. Its shares in CARREFOUR stores in Thailand were sold to CARREFOUR which now owns 100% of the operation. Lastly, it sold 68% share of its Big C superstore chain to the Casino group. Meanwhile, the CP group, the biggest private sector company in Thailand, before the crisis, owned 14 Lotus superstores, was partnering with Makro of Holland, through 17 Makro stores. It, also, owned 8 Sunnys supermarkets, and the franchise rights for 7-Eleven convenience stores in Thailand. Later on, after the crisis, CP sold most of its holding share in SIAM Makro to the European partner company, its 75% share of the Lotus Superstore chain to Tesco of the UK, and the Sunnys supermarket chain to Delhaize Lion of Belgium. As a result, the fall-out of the financial crisis in the retail sector is that now all major retailers in Thailand are owned by foreign companies. And foreign retailers plan to expand their activities and compete aggressively for new market share.

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