Supermarket Statistics in Vietnam

Asian Economic Journal 2007, Vol. 21 No.
1, 1946
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Supermarkets in Vietnam: Opportunities and Obstacles

Masayoshi Maruyama and Le Viet Trung
Received 4 August 2006; accepted 18 December 2006
The present paper is the rst study to link the perceptions of Vietnamese consumers to the barriers and prospects related to the development of supermarkets in Vietnam by applying quantitative and statistical analysis to Hanoi consumer survey data. It is found that shopping habits related to the purchase of fresh produce in traditional markets, combined with the proximity and low prices these outlets provide, act as a major deterrent to supermarket development. Supermarkets have made considerable advances in the sales of processed food and non-food products. However, without expanding their fresh food category, lowering prices and enhancing their location convenience, supermarkets cannot expand their current position. Keywords: supermarkets, consumer behavior, traditional market, probit model. JEL classication codes: D12, L81, M31. doi: 10.1111/j.1467-8381.2007.00245.x
I.
Introduction
Structural adjustments (e.g. economic deregulation and market liberalization), combined with globalization, have created a new food-marketing environment in Vietnam in the past decade. Before 1995, most Vietnamese had no choice except to carry out all of their purchases at traditional markets. Today, instead of shopping at these traditional outlets, consumers can choose to shop at clean, fully stocked and air-conditioned supermarkets, where they do not need to bargain. This modernization process has changed the face of the Vietnamese distribution system; that is, the bazaar-based system, which is being increasingly criticized by local newspapers as functioning poorly and being backward. According to Speece and Huong (2002), early in the 1990s, approximately half of all retail purchases were made at state-owned and collective stores. However, by 1995, state/collective stores accounted for only around one-quarter of retail sales. Although over 80 percent of purchases of household goods were made in
* Maruyama (corresponding author): Graduate School of Business Administration, Kobe University, 2-1 Rokkodai, Nada-ku, Kobe 657-8501, Japan. Email: mmaru@kobe-u.ac.jp. Trung: same address as Maruyama. Email: 029b111b@stu.kobe-u.ac.jp. We would like to express our special thanks to an anonymous referee and to the Managing Editor Hiro Lee for very helpful and constructive comments on an earlier version of our paper. The research for this study was supported by a Grant-inAid for Scientic Research from the Japan Society for the Promotion of Science and the Ministry of Education, Culture, Sports, Science and Technology of the Japanese Government. 2007 The Authors Journal compilation 2007 East Asian Economic Association and Blackwell Publishing Ltd.
ASIAN ECONOMIC JOURNAL
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traditional markets in the early 1990s, this dropped to only half of total purchases by the end of the 1990s. In 1999, just 5 years after the rst supermarkets were opened in Vietnam, supermarkets (almost all are mini supermarkets) accounted for nearly 20 percent of purchases of household products in major cities. Nevertheless, for the most part, in this rst decade, supermarkets, hypermarkets and shopping centers have been limited to major urban areas (mainly in Hanoi and Ho Chi Minh City (HCMC)). At present, such modern distribution networks carry out approximately 10 percent of total food and home product distribution for the entire country (VNS, 1 June 2005). Supermarkets are now spreading from large to secondary cities, and have rapidly increased in number from only 10 supermarkets in 6 of 64 cities and provinces in 1995 to more than 200 supermarkets in 30 cities at the end of 2004 (Nhieu et al., 2005). Surprisingly, however, despite the prevalence of the changes that are occurring in this sector in Vietnam, and despite that this development has economic signicance, relatively little is known about Vietnams supermarkets. Because of the lack of reliable statistical data, this area has been little studied by academics. There are very few ofcial statistics on the supermarket sector in Vietnam. Facing this shortage of data, most of the published studies generate their data from interviews with supermarket and supplier personnel (i.e. surveys of supermarket managers, wholesalers, farmers and other key informants). The majority of these studies focus on smaller farmers, traditional retailers and wholesalers, who are at risk of being further marginalized with the swift introduction of supermarkets, or they compare the performance of modern and traditional supply chains (see Cadilhon et al., 2006). Speece and Huong (2002) present the rst case study on consumer attitudes toward mini supermarkets. Conducted in Hanoi in late 1996 and early 1997 at the very early period of supermarket development ( just slightly over a year after the rst supermarket opened) and using a sample of 176 consumers, they show that mini supermarkets became an important part of the retail scene and that the supermarket concept was successfully introduced into Vietnam. This study mainly focuses on middle class consumers, and their main conclusion is that this consumer segment was actually value-driven rather than price-driven or quality-driven. The previous studies generally collect observations and use qualitative and descriptive approaches to interpret the data. Only very rarely have studies involved the use of survey data and the application of quantitative and statistical analysis methods. In addition, only a few studies have focused on the links between consumer behavior and preferences and the development of supermarkets as well as the matter of consumer shopping behavior that creates barriers to the advancement of supermarkets. The purpose of the present study is, therefore, to focus on this gap in knowledge by analyzing consumer habits with respect to supermarkets and by providing a basis for understanding the barriers and prospects for the development of new retail outlet types. Most of the data in the present paper comes from a detailed consumer survey undertaken by the present authors between March and April 2006. Statistical and quantitative
2007 The Authors Journal compilation 2007 East Asian Economic Association and Blackwell Publishing Ltd.
SUPERMARKETS IN VIETNAM
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methods are used to analyze this data. Because there has been a lack of information regarding the supermarket sector, we also make extensive use of the local trade press. Our study nds that a major tendency among consumers is to split their goods purchases, buying fresh food in wet markets and non-perishable food at supermarkets or mom-and-pop stores. The long-established habit of shopping for fresh produce in traditional outlets combined with the proximity and low prices that these markets provide are found to be the major deterrents to supermarkets gaining market share. Supermarkets occupy the weakest position of all the retail outlet types because they operate in a very competitive environment, where they are considered more expensive than competing shops but not very well differentiated from their competitors in the range of products they carry. Our ndings suggest that retail outlet formats that provide good product quality and a wide range of adequately fresh produce along with low prices have the greatest opportunity to build consumer loyalty and to increase market share. In addition, supermarkets can also attract consumers by opening stores near residential areas. The rest of the paper is organized as follows. Section II presents the literature review. Section III details the methodology for the study. Section IV summarizes the results and discusses the implications of the research ndings, and we conclude our study in Section V. II. II.1 Literature Review Rise of supermarkets in developing countries
Many recent articles have mentioned the signicant and rapid rise of supermarkets throughout the developing countries and forecast their continued rapid spread. In Latin America, the process of supermarketization began in the early 1990s. By 2000, supermarkets delivered 5060 percent of retail food sales in countries in that region. The take-off in Southeast Asia began 57 years later and is registering faster growth (Reardon et al., 2003; Reardon and Berdegue, 2002; Traill, 2006). The expansion of the modern retail sector frequently begins with a smaller mini mart store format. The more capital-intensive supermarkets follow. Innovation occurs rst in markets serving the growing middle class, and later in the lower-income segment. This pattern has been observed in many developing countries (Reardon et al., 2003; Goldman et al., 1999, 2002, 2005). The higher opportunity cost of time makes multi-stop, traditional format shopping more costly than one-stop shopping (Goldman et al., 2002). Studies in developing countries report cases where, in spite of easy accessibility to supermarkets, consumers have preferred to continue purchasing their food in traditional format outlets (Goldman, 1981; Goldman et al., 2002; Maruyama and Trung, 2006). Supermarkets developed rapidly in Taiwan in the early 1990s. As a result of the growth of the modern sector, the market share of traditional markets weakened
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at a rate of between 3 and 5 percent per year (Trappey and Lai, 1996). By 2000, over 60 percent of food sales were transacted by the modern retail sector (Cadilhon et al., 2006). Supermarkets appeared in Hong Kong in the early 1960s, and in mainland China at the beginning of the 1980s. The supermarket sector began to grow rapidly in the 1990s from its initiation in a few metropolitan regions in 1990 to a US$55bn industry today: with 53 000 units in 2002 and 30 percent of the urban food retail markets. Supermarket sales are growing by 3040 percent per year, two to three times faster than in other developing regions (Hu et al., 2004). The most crucial factor contributing to the rapid increase in supermarkets in China during the 1990s was the support from the government (Lo et al., 2001). An explicit government program was launched in 2003 in a number of large cities to convert wet markets to supermarkets through an auction system in order to modernize the retail sector. However, the supermarket food category with the slowest penetration has been fresh food. Supermarkets have only a 10 percent or at most a 20 percent share in fresh food in the major cities (Hu et al., 2004). In Thailand, supermarkets have also become common. By the mid-1990s, approximately one-third of Bangkoks population regularly shopped in supermarkets (Feeny et al., 1996). Current trends in Bangkok include strong growth of newer retail formats, such as hypermarkets, as well as agglomerations (concentrations of stores), including huge shopping malls (Blois et al., 2001). In the cities of Thailand, the modern sectors market share of food sales increased from 25 to 50 percent from 1997 to 2002 (Cadilhon et al., 2006). However, long habits of purchasing fresh food from local markets have made this a difcult area of business in which to expand (Feeny et al., 1996). In Malaysia, supermarkets have been operating for years, but their market share accounts for only 20 percent of food sales across the country (Cadilhon et al., 2006). In the less developed Indonesia, the mini mart format is growing rapidly, but the supermarket category has been slower to take off. The market is just entering the very early stages of growth in modern retailing, and is just beginning to attract the attention of foreign retailers (Speece and Huong, 2002). The rate of spread of supermarkets in developing countries is an issue of interest, and several articles have described the rapid spread of supermarkets. The line of argument is that supermarkets are no longer places where only rich people shop; over the past 10 years, they have spread from high-income areas to poorer areas and much smaller towns. This has happened in response to several forces, many of which are interconnected: for example, increasing incomes, urbanization, more female participation in the labor force and openness to foreign investment. Traill (2006) quantitatively models the level of supermarket penetration (share of the retail food market) on a cross-section of 42 countries for which data could be obtained, representing all stages of development. The ndings are that GDP per capita, income distribution, urbanization, female labor force participation and openness to inward foreign investment are all signicant explanatory variables.
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Some recent studies provide evidence for the coexistence of traditional and modern food retail formats. Goldman et al. (2002) examine food retail modernization in Hong Kong, and Goldman and Hino (2005) analyze the state of modernization of food retailing serving the Israeli Arab population. Both of these studies are based on consumer surveys where consumers are no longer restricted by socioeconomic factors. These studies identify a tendency to purchase perishable food items in traditional outlets, and they identify the greater distance to travel to reach supermarkets to be the main limitation on supermarket share growth. This is not only typical to developing countries; consumers in the highly developed Asian economies of Japan, Hong Kong, Taiwan and South Korea regularly utilize traditional formats, and supermarket share has peaked at less than the 50 percent level (Goldman et al., 2002). Consumers might view traditional markets and supermarkets as complementing one another. They might regularly buy fresh food in traditional markets, and purchase processed and packaged foods, as well as non-food products, in supermarkets or at traditional mom-andpop stores. II.2 Traditional retail system in Vietnam
The retail distribution system of Hanoi has passed through many stages. From the feudal period to the French rule in 1828, Vietnamese distribution consisted of traditional markets (often referred to as wet markets or street markets). However, the structure of social and business relations changed under French colonial rule. With the decree to spatially concentrate the sale of perishable goods, traditional street market trading was signicantly reduced (Waibel, 2004). Under the central planned economy (19541984), private trade was reduced to a minimum. The state took over the role of the private traders, and it opened selling locations in the largest retail areas as the governments own enterprises. On the whole, trading activities dropped signicantly after 1955. By 1960, the private sector was virtually eliminated (Waibel, 2004). Under economic policy reforms (Doi Moi in 1986), farmers have long-term leases on plots of land. They may sell their output in markets. As a result, farmers are subject to full market incentives, because any increased effort translates directly into increased income. After 1986, as agricultural output boomed, rural marketplaces developed rapidly. In the towns and cities, many new markets were created. Already in 1988, almost every house in the central streets of Hanoi was using its frontage as a retailing outlet again (Waibel, 2004). The traditional bazaar network was re-established and continuously developed. The number of markets more than doubled from 4000 in 1993 to 8300 in 2003 (VNS, 12 June 2004). In terms of organized markets, Hanoi alone has more than 120 markets with a total area of over 550 000 m2. An organized bazaar (formal bazaar) is dened as a market established by the local authorities. A
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management board usually manages this kind of market. These organized bazaars have basic, but poor, facilities, including water supply and waste treatment systems. They lack refrigeration equipment and do not process fresh foods into branded goods for resale. There are various types of goods sold at organized bazaars. However, the main goods are fresh food. There are a substantial number of the traditional mom-and-pop stores, which are family-owned retailers that sell a limited variety of processed food, dry goods, drinks and household supplies. Specialized stores have also emerged. In Hanoi, many streets often specialize in a single product category. There are often 200300 identical mom-and-pop stores along a few hundred meters of a single street. They mainly specialize in non-food products. They have the characteristic of being the only sales points to offer competitive brands for the same product category. The sales area is nearly always very small, often being less than 10 m2. Such a high spatial and economic density of trade activities can be also found in HCMC. In addition to the boom in private retail shops, Hanoi and HCMC have become the prime areas for the booming, spontaneous development of informal bazaars called Cho Coc: frog markets. The sellers lay out their wares (mainly fresh food) along streets, roads or wherever it is convenient for customers to shop. Retailers in these informal bazaars are mainly farmers and the poor. They commute daily from the surrounding countryside. Because of the small scale of operations, they can easily move or ee the police. In both cities, local authorities have plans to dismantle all these markets, but they have been unable to suppress this kind of selling activity. II.3 Emergence of modern distribution in Vietnam
As previously stated, over the past 10 years, Vietnam has experienced an increase in the number of supermarkets. This modern format did not exist in Vietnam before 1993. The rst supermarket was a state-run enterprise opened in 1993, named Minimart, but it was closed down 4 days after opening, because of insufcient stock levels to meet the enormous demand, despite prices being 2030 percent more than those of traditional retailers (Venard, 1996). Citimart followed in 1994, owned and operated by a Vietnamese expatriate who had gained experience in supermarket operations in the Philippines. The success of Citimart inspired the owners to open another supermarket chain called Maximart in 1995 (Cadilhon et al., 2006). Hanoi got its rst supermarket named Minimart Hanoi in March 1995. After that, approximately 70 supermarkets more were quickly established in HCMC and another 20 in Hanoi. Approximately two-thirds of the original outlets failed, but some survived and have reaped the benets of strong growth in the modern retail sector (Speece and Huong, 2002). The number of supermarkets and shopping malls has increasing rapidly from only 12 (10 supermarkets and 2 trade centers) in 6 of 64 cities and provinces in 1995 to 210 supermarkets and 32 shopping malls in 30 cities at the end of 2004
Table 1 Number of supermarkets 1995 Hanoi Ho Chi Minh City Entire country 2 2 10 2000 20 40 107
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2004 73 82 210
Source: Collected from various different retail statistics sources.
(Nhieu, 2005). Hanoi and HCMC, the countrys two biggest cities, have 155 supermarkets. In Hanoi and HCMC, a system of big shops and larger and more diverse grocery stores has been established. Some have signicant cold storage facilities, and are, therefore, able to offer a greater selection of fresh seafood, meat, vegetables, a large range of imported beer, wine and canned goods, and dry grocery items. These outlets are also beginning to offer ready-to-eat and ready-to-cook foods, which appeal to Vietnams growing middle class and elite group in major cities as well as to the increasing number of international tourists. Besides the rise in the number of supermarkets, the dimensions of these outlets are also on the increase. In the early stages, the average oor space of the typical supermarket store ranged from 500 to 800 m2, but by 2000, a few supermarkets had begun to appear with larger oor spaces of around 2000 m2 or more (Speece and Huong, 2002). In 1994, 95 percent of goods displayed at the city supermarkets were imports. At present, domestic goods account for 70 percent of total stock. Between 85 to 90 percent of goods at big supermarkets, including Co-op, Big C and Metro, are locally made products (VNS, 5 May 2004) (see Tables 1 and 2). Supermarkets initially focused on dry items, packaged and processed food lines and on non-food products. Today, many supermarkets carry fresh food, but offer a relatively weak range, and minimal variety. They have made little progress in fresh food lines where their share accounts for a very small percentage of all fresh food sold. For example, it is estimated that supermarkets sell less than 2 percent of all fresh vegetables in Hanoi (Loc, 2003), and only around 2 percent in HCMC (Cadilhon et al., 2006). Saigon Co-op Mart is the top state-owned retailer in Vietnam, owned and operated by the Saigon Union of Trading Cooperatives. It opened its rst supermarket in 1996. It currently owns the biggest retail supermarket chain in Vietnam, with 14 supermarkets in the country. It has managed to create a turnover that totaled US$126m in 2004 and accounted for 50 percent of the sales of the supermarket system in HCMC (VOV, 14 July 2005). It is planning to increase its number of supermarkets to 40 by 2010 (VOV, 30 September 2005). It is trying to improve its competitiveness and has invested US$1.5m to develop a supermarket management system. It has expanded its warehouses, and has built a large distribution center in an effort to reduce costs. The chain has plans to
Table 2 Retailer name Outlet type
List of major supermarkets, hypermarkets and wholesale stores in Vietnam Ownership Number of outlets Turnover (US$ mil) 136 26 31 20 10 2.5 2.5 2.5 220 17 21 Locations and expansion plan Mainly in HCMC Plan: other cities HCMC, Dong Nai and Hanoi HCMC, Nha Trang Expand to Can Tho soon HCMC, Hanoi, Can Tho, Dong Thap Hanoi, Hai Phong Hanoi and plan to expand to HCMC HCMC HCMC HCMC, Hanoi, Hai Phong, Can Tho, Danang Hanoi Hanoi Percent of domestic goods 8090 More than 90 7090 7090
Co-op Mart Cora Maximart Citimart Intimex Fivimart Satra Diamond Markets Metro Cash & Carry Seiyu Hanoi Marko
Supermarkets, convenience stores Hypermarkets, supermarkets Supermarkets, department stores Supermarkets, convenience stores Supermarkets, department stores
Local company operated under cooperative law Local joint venture with Casino Group of France An Phong privatelyowned company Privately-owned company State-owned company Privately-owned company State-owned company Privately-owned company 100% foreign investment company (Germany) Local joint-venture with Seiyu of Japan Private-owned company
14 supermarkets, 6 convenient stores 3 hypermarkets 1 supermarket 3 6 supermarkets 5 stores 4 3 2 6 6 1 3
More than 70
Supermarkets Wholesale stores Supermarket Supermarket
8590 3040 8090
Note: Metro Cash & Carry has government permission for wholesale operations only, no import license. Sources: USDA Foreign Agricultural Service (2005), Nhieu et al. (2005) and data collected from personal communication with Vietnam Ministry of Trade.
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cooperate with Satra (the Saigon Trading Corporation), which has 35 subsidiaries that play a leading role in the food processing and trading sectors in HCMC (VIR, 28 May 2006). Intimex, a strong operator under the Ministry of Trade, has devised a 10-year development strategy, setting an ambitious goal of annual business growth of 30 percent. The company plans to develop three levels of supermarkets and commercial centers. Convenience stores will sell necessities in small neighborhoods; supermarkets will cater to the majority of consumers, providing them with everyday necessities at an average price; and commercial centers will serve high-income earners and tourists. The company will also develop a large warehousing and distribution center (VIR, 28 May 2006). Fivi, a joint-stock company, is one of the leading companies in Vietnam involved in supermarket management and operation, and it is the owner of 3 supermarkets in Hanoi named Fivimart. It is also going to expand its supermarkets system to other cities in Vietnam. The rst Fivimart supermarket was established at the end of 1997 with an area of 3000 m2. Fivimart supermarkets provide buyers with a large selection of over 25 000 items (www.tctgroup.com.vn). Some distributors are also exploring the development of small-scale convenience stores as an alternative to massive superstores, especially in Vietnams trafc-clogged cities. As part of its plans, Citimart will start to attract consumers living in townships with its 10 convenience stores planned for the end of 2006 (AFP, 21 May 2006). The G7 Mart, a subsidiary of Trung Nguyen Coffee, plans to develop a new domestic distribution system and retail chain worth US$395m. The G7 Mart aims to connect wholesale suppliers to the retail market and to enhance the competitiveness of the domestic distribution system. It plans to open 5500 stores throughout the country in the rst phase and expects to establish 10 000 stores, 18 warehouses, and seven trade centers over 5 years (VIR, 28 May 2006). The French Bourbon Group opened its rst hypermarket in Vietnam in late 1998. Named Cora Dong Nai, it was located in Bien Hoa City, 30 km east of HCMC. Cora opened its second outlet (Cora An Lac) on the other side of HCMC in March 2000. A third operation, a joint venture called Cora Mien Dong, opened in HCMC in mid-2005. The French chain opened its rst outlet in Hanoi in January 2005. It was named Big C Thang Long, and was located in Lang Hoa Lac, approximately 15 min from the center. This 12 000 m2 supermarket is the largest in the north and offers more than 45 000 products, of which 90 percent are made in Vietnam, ranging from fresh food to appliances, garments, home decorations and electronics (VNN, 7 January 2005). The French Bourbon Group plans to open 7 supermarkets nationwide and 5 other stores in urban HCMC (VNN, 8 March 2005). Metro Cash & Carry has opened 2 centers in HCMC (in 2002 and 2003), 1 in Hanoi (in 2003), 1 in Can Tho (in 2004), its fth center in Hai Phong in 2005, and its sixth in Danang. It plans to establish another 8 superstores in Vietnam with a total investment of US$120m (TNN, 26 July 2005; VIR, 28
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May 2006). Metro offers their business customers a very wide array of over 7000 foods and 8000 non-food items. Consumers are required to use wholesale membership cards to gain entrance, but the cards are frequently circulated among friends, relatives and neighbors. Having an economy of scale with a wide network of suppliers, its prices are lower (at least 10 percent) than any other supermarket in Vietnam (VNS, 1 July 2005). Malaysian retailer, Parkson, also entered the market in June 2005 with the opening of its rst of 10 shopping centers in Vietnam, and with a total invested capital of US$70 million (VIR, 28 May 2006). Japans Seiyu, which has been operating the Hanoi Seiyu for 5 years, is working on obtaining licenses to extend its retail network to other provinces. In addition, a leading pan-Asian retailer, Dairy Farm (Hong Kong) has negotiated an agreement in principle to launch a supermarket chain, and could enter into a partnership with Citimart. South Koreas leading retailer, Lotte Mart, Chinas Shenghui group, Tesco (a robust newcomer from the UK), US giant Wal-Mart and the French group Carrefour are also trying to obtain licenses to crack into the Vietnamese market (VNS, 1 July 2005; AFP, 21 May 2006; VIR, 28 May 2006). Even though these foreign chains account for only a small percentage of the total number of stores in Vietnam, they account for more than half of the total retail sales contributed by supermarkets and trade centers nationwide (VBF, 15 September 2005). Initial supermarket successes have prompted both domestic and foreign investors to expand their businesses in Vietnam. In parallel, Vietnamese authorities strongly encourage the development of modern distribution outlets in the cities to solve their perceived problems related to food sanitation and safety in the production and in the marketing system (Cadilhon et al., 2006). The Ministry of Trade is making an effort to raise the ratio of products distributed by modern channels to 40 percent in the next few years by establishing 20 large-scale distribution companies to serve as a core of the whole network (VET, 8 April 2005). This process of development has been causing a trend to shift away from traditional outlets to modern shopping at supermarkets and department stores. This explains why the modern distribution network gained an average of 1520 percent growth each year during 2000 and 2005, much higher than the growth in the total retail sector (10 percent) and national economic growth (7.7 percent). Supermarkets and trading malls have been gradually changing the traditional distribution system, the bazaar-based system. II.4 Sources of change
The reasons for the increase in supermarkets in the past decade could be attributed to the following factors. Increases in income The healthy expansion of Vietnams economy (more than 7 percent over the past 15 years) has resulted in increased disposable incomes and improved living
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standards. Furthermore, cities account for 70 percent of the national GDP because of industrial and trading activities. This brings annual per capita GDP to US$1395 in the urban center, and this has led to the formation of a relatively afuent middle class and elite group in the major cities whose monthly income continues to increase (over US$500). This can be seen clearly in HCMC and Hanoi, the countrys two major cities, with average annual incomes more than double the national average of US$425. In addition, more than 2.5 million tourists entering Vietnam per year, as well as an estimated US$3bn sent back to their mother country by millions of Vietnamese overseas (Viet Kieu) will fuel the development of the modern retail system (website of the General Statistic Ofce available at: http://www.gso.gov.vn; VIR, 19 September 2005; Cadilhon et al., 2003). Urbanization The rapid growth of urbanization and the boom in new housing projects in the cities has led to a more concentrated population, therefore facilitating the growth of supermarkets. The ratio of the urban population to the total population was approximately 20 percent in 1995, but increased to approximately 26 percent in 2003. The modernization and industrialization of the country has also led to Vietnamese consumers having busier lifestyles, especially urban Vietnamese women who are increasingly joining the workforce and, therefore, have less time to prepare meals. More people are switching from traditional products to packaged foods, which used to be considered luxuries. Consumers are younger and more knowledgeable More than 60 percent of the Vietnamese population is under the age of 30 years, representing a powerful new consumer force. Furthermore, Vietnamese consumers have better knowledge of products, and have increased demand for a bigger variety of consumer goods. It is clear that a modern way of living has emerged, with mobile phones, costly motorbikes and credit cards now a part of everyday life. Vietnamese consumers are still very aware of prices, but they are also conscious that the stores that they go to might enhance their social standing. Weakness of traditional markets All the disadvantages of the traditional bazaar system (dirty, crowed, unorganized, noisy and prevalence of counterfeits) became an important catalyst for city urban consumers to shift away from traditional bazaars. No less important is the matter of consumer condence regarding products. The fear of being cheated facilitated a shift away from traditional bazaars. Searching for a certain product is considered by some as being a wasteful activity, and so some buyers might be willing to pay a higher price for a service that does the search for them. Supermarkets provide that kind of service.
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Support from the Vietnamese Government This is one of the most important factors affecting the development of the distribution system in Vietnam. At present, the Ministry of Trade is drafting policies aimed at encouraging investors from all economic sectors to construct and operate modern distribution networks. In order to establish an effective and modern distribution network dominated by domestic business, the government will assist approximately 20 major goods producers and retail distributors (VNS, 12 March 2005). Supermarkets have also beneted to some extent from government regulations attempting to control hygiene and congestion in traditional markets. It is clear that under this orientation, this modern network is set to grow and continue growing for the foreseeable future. Relaxation of regulations on foreign direct investment and food retailing from the 1990s When FDI regulations were liberalized, a ow of expatriates came into the country. They play a key role in promoting modern retail formats. For example, Citimart, one of the rst supermarkets in Vietnam, is operated by a returnee Vietnamese expatriate who gained experience in the Philippines. In addition, to join the ASEAN Free Trade Area and the WTO, Vietnam is going to open up the retail market to foreign competition. The domestic market will need to welcome global distributors that have the advantage of trademarks, capital and technology. It forces domestic retailers to use their best efforts in building and organizing a modern distribution system to compete. If this cannot be accomplished, they have to withdraw from the competitive environment. III. Data and Methodology
The present study is based on both primary and secondary data. Primary data was gathered using a detailed consumer survey. Hanoi, the capital city of Vietnam, provided a convenient location for the survey, because the citys population (3 million in 2003) and the economic base fairly represent the countrywide ratios of industrial development and population diversity. Our survey on consumer behavior and perceptions of Vietnams supermarkets and traditional retail outlets illustrates the trend concerning how consumers view both these forms of retailing. The detailed consumer survey was conducted intensively over the month from 1 March 2006 to 1 April 2006, and was spread across all districts in the inner city of Hanoi. We sent out questionnaires to 2000 Hanoi consumers. A total of 570 questionnaires were returned and after eliminating uncompleted questionnaires, the remaining 413 questionnaires were used as the sample. The sample survey is biased towards women (350 women and 63 men) who are most often responsible for shopping in their families. It was found that 47.7 percent of shoppers were under 30 years old (197); 30.3 percent were aged between 30 and 39 years (125); and 22.0 percent of shoppers were 40 years
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or older (91). In terms of the average income per person in each family, 45 percent of the respondents have income levels of between VND0.5m and VND1.5m, 37 percent between VND1.5m and VND2.5m, and 18 percent have an income of more than VND2.5m. Nearly 100 percent of respondent households have a television, 99 percent have a motorbike, 92 percent have a refrigerator, 81 percent have a washing machine, 54 percent have air conditioning, and 10 percent have a car. The sample survey is slightly biased towards higher income respondents in comparison with the general population characteristics of Hanoi. However, if we limit our consideration to only urban areas, the sample closely resembles the general population characteristics in the Hanoi urban area. It is expected that those consumers who have good incomes are willing to go shopping at supermarkets. It is also expected that those consumers would have a better perception about both kinds of traditional bazaar and modern retail formats. The present study makes extensive use of a few earlier studies, research reports and statistical data on Vietnam. The authors also toured almost all of the traditional markets and modern retail establishments in Hanoi in August 2005. In addition, to analyze Vietnamese consumer shopping frequency at supermarkets, probit models were estimated. Statistical analysis is also used to analyze the survey data. We will test the hypothesis for a b, the difference between two normal population means. Because we do not ordinarily know the values of variances of populations, tests on the difference in means (the comparison of two means) should be conducted with the t-test. However, when both sample sizes are large (greater than 30), we work with the standard normal distribution; therefore, we replace the value t, which follows Students distribution, by the standard normal variable z (Sachs, 1982; Bowen and Starr, 1982).1 Because every subsample size in our study is greater than 100, we use the z-test. The difference between the two means is equal to, less than, or greater than zero. We are interested in testing which criterion (the mean of element) is more important (greater) than the other in consumer decision-making. The test hypothesis in the present paper involves an inequality; that is, H0: a b 0, Ha: a b > 0. Hence, we use a one-tailed test in this paper. To make the discussion easier to follow, we have only used the 5 percent signicance level for evaluating the signicance of differences between means.
1. If both samples size are large (greater than 30), then we can assume the distribution of xa xb (the difference between two sample means) is normal and we may use the sample standard error of 2 2 the difference between means sxa xb = ( sa /na ) + ( sb /nb ) to estimate the standard error of distribution ( xa xb ) of xa xb. The test statistic z is calculated as z = , where xa , xb are the means of 2 2 ( sa /na ) + ( sb /nb )
2 2 the two samples with sample sizes na, nb and sa , sb are the sample variances (also see Bowen and Starr, 1982). The alternative hypothesis has the > sign; so the test is a right-tail test with the tail area z0.05 = 1.64. Hence, we reject H0 if sample z > 1.64.

Table 3 Reasons for going to supermarkets Total Sample size Reasons Self-service Guarantee of quality Fixed price Safe and clean The ability to search for something unique One-stop service Enjoyable and relaxing To buy everyday necessities Good service of salespersons Reasonable prices Freshness Quick examination of prices Curiosity Prestige image Fashionable 409 80.7 76.3 75.6 68.5 61.6 60.1 40.6 38.4 37.7 29.3 26.9 22.5 21.8 2.7 2.4 Hard shoppers 144 82.6 81.3 82.6 78.5 54.2 59.7 37.5 53.5 42.4 41.0 36.1 18.1 17.4 2.1 3.5
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Infrequent shoppers 265 79.6 73.6 71.7 63.0 65.7 60.4 42.3 30.2 35.1 23.0 21.9 24.9 24.2 3.0 1.9
Note: Reported gures are the percentages of respondents who selected the reasons in the checklist.
IV. IV.1
Results and Discussion Reasons for visiting supermarkets
The development of supermarkets has started in Vietnam. We found that supermarkets have made further inroads during the years since the 1997 survey of Speece and Huong (2002). We found that 35 percent of shoppers reported visiting supermarkets at least once a week (compared with 28 percent in 1997) and that supermarkets have made considerable advances in selling processed food and drinks and non-food products. Supermarkets offer a clean and efcient alternative to the noisy, pungent old bazaars where consumers haggle over everything. Table 3 summarizes the reasons consumers cite for going to supermarkets. Self-service, guarantee of quality, xed prices, safe and clean goods, the ability to search for something unique, and a one-stop service were the major reasons identied by respondents for shopping at supermarkets. We divided the respondents into two sub-groups: hard shoppers who go to supermarkets at least once a week and infrequent shoppers who go to supermarkets less than once a week. Hard shoppers apparently like the rst 4 reasons in the checklist better than the infrequent shoppers. Fewer than half of respondents (both hard shoppers and infrequent shoppers) say they go to supermarkets because it is enjoyable and a good place for relaxing. Quick examination of prices, curiosity, reasonable prices, freshness, prestige and fashionableness are rarely cited as reasons among both hard shoppers and infrequent shoppers. In the 1997 survey
33
done by Speece and Huong (2002), consumers indicated that the most important reason to go into a supermarket was for quick examination of prices, but this was one of the lowest ranked reasons in the recent survey. Curiosity also used to be a key reason, but this is no longer an important reason for infrequent shoppers. One of the striking ndings is that shoppers are clearly quality-oriented. Shoppers choose their places of purchase (supermarkets) by looking rst at quality for all different categories of goods (Table 4). Looking at the criteria and priority for choosing stores for each category of goods (vertical comparison), apart for non-food items, consumers identied the safety of goods for health considerations, freshness or newly produced products, quality, and clarity as to the origin of goods as the most important criteria. Consumers do not trade off these store factors (freshness, quality and safety) for price. Price is at a much lower level of importance. In the case of fresh food, the differences among the importance of freshness, safety and quality are not signicant at the 5 percent level. In the case of non-food items, price is also at a lower level of importance in comparison with quality. However, it is rated at a level similar to safety, service of salespersons and variety of product lines (insignicant difference at the 5 percent level). Criteria of mid-level importance included price level, variety of product lines, a well-known brand name, distance, and service of salespersons for all kinds of goods. It is interesting to note that the location of stores, return and adjustment policy, decorations and advertising at stores and shopping atmosphere seem to have a low level of importance. Conventional wisdom suggests that supermarkets should be viewed as having a good shopping atmosphere (clean, bright windows and air conditioning), a large scale or be located at a good place with remarkable decorations. However, our results suggest that investing much money in these things will increase costs but might have a small effect in attracting consumers. Instead of this kind of investment, supermarkets should promote more trade by concentrating on quality, safety of goods, clarity as to the origin of goods, or making the effort to provide a greater variety of fresh foods with adequate levels of hygiene and freshness. In addition, regardless of the lack of nance for domestic companies, in a very crowded area like Hanoi, it is very difcult for domestic companies to nd a place to build a supermarket in the central areas of the city. However, it seems that a small-scale and neighborhood supermarket format will be able to effectively compete with the traditional mom-and-pop stores and even with traditional wet markets. Supermarkets located in suburban areas are not able to attract consumers. Local consumers are afraid of going to supermarkets far away from their homes or in city centers for daily food purchases, because their means of transportation is mainly motorbikes. In addition, the serious shortage of management expertise and technical skills in supermarket operations in Vietnam might make large-scale supermarkets less efcient than small-scale ones. Therefore, developing networks of small-scale, neighborhood supermarkets appears to be a better strategy, given the nancial conditions and managerial abilities of domestic companies.

Table 4 Importance of criteria for choosing stores for different categories of goods (Sample size = 409) Fresh food Processed food Drinks
34
Non-food items
Mean Standard Mean Standard Mean Standard Mean Standard deviation deviation deviation deviation Criteria Health safety Freshness or newly produced product Quality Clarity as to the origin of goods Service of salespersons Price Distance (convenience for shopping) Well-known brand names Variety of product lines Shopping atmosphere Return and adjustment policy Location of store, market Scale of store Decorations and advertising at stores
4.74 4.69 4.68 4.05 3.58 3.57 3.49 3.38 3.20 2.95 2.93 2.83 2.67 2.49
0.56 0.62 0.57 1.09 1.03 0.91 1.08 1.00 0.93 1.06 1.18 1.01 0.93 1.01
4.61 3.81 4.52 4.31 3.54 3.54 3.15 3.64 3.22 2.87 3.09 2.88 2.78 2.64
0.71 1.08 0.73 0.91 1.04 0.92 1.11 0.93 0.90 1.05 1.12 1.02 0.96 1.01
4.65 4.24 4.53 4.35 3.51 3.45 3.19 3.70 3.22 2.86 3.06 2.85 2.80 2.68
0.65 0.98 0.69 0.86 1.05 0.96 1.10 0.94 0.95 1.03 1.12 1.02 0.95 1.03
3.61 2.93 4.09 3.55 3.69 3.70 2.69 3.40 3.67 3.12 3.42 3.02 2.96 3.03
1.21 1.14 0.92 1.17 1.03 0.93 1.18 1.03 1.02 1.05 1.12 1.08 1.06 1.14
Notes: 1 to 5 scale: 1 = not important at all, 5 = very important. To compare whether the means for two different categories, for example fresh food and processed food for the health safety category (a horizontal comparison) or for the health safety criteria and the quality criteria for fresh food (a vertical comparison), are the same or different, the following test statistic
2 2 z = ( xa xb )/ ( sa /na ) + ( sb /nb ) ,
where na and nb are the sample sizes for the two groups, xa and xb are the sample means for two groups, and sa and sb are the standard deviations for the two groups, can be used. Under the null hypothesis that the two population means are the same, the test statistic is distributed asymptotically as a standard normal distribution. For a two-tail test conducted at the 5% signicance level, the relevant critical values are 1.96 and 1.96. For a one-tail test where the rst mean assumed to be higher than the second mean, the relevant critical value is 1.64. This test statistic assumes that the responses for the two categories are uncorrelated. When we used a one-tailed test for the difference between the two means (greater than zero), for vertical comparison, if the difference between any two sample means is greater than 0.15, then the difference between these two normal population means is signicant at the 5% level. The same results hold in the case of horizontal comparison.
By comparing the importance of choice criteria between different categories of goods (horizontal comparison), we found that, except for freshness or newly produced criteria, consumers rated the criteria similarly for processed food and drinks. Consumers rated price level in choosing their shopping place for
Table 5 Channels for getting information on supermarkets Number Television advertisements Newspaper Friends Seen on the street Others 91 71 190 177 15
35
Percentage 22.2 17.4 46.5 43.3 3.7
non-food products signicantly higher than other kinds of goods. Distance (convenience) plays a much more important role in the case of fresh food than the other kinds of goods. Respondents were asked about the channels through which they get information on supermarkets to go shopping. Almost 46.5 percent of the respondents indicated that they got to know supermarkets through friends; 43.3 percent indicated that they got information mainly by seeing the outlets on their shopping routes. Respondents that indicated they got information through newspapers and television advertisements accounted for only 17.4 and 22.2 percent, respectively (Table 5). This data shows that consumers seem devoid of information about the supermarkets. Word of mouth seems to be the main source of information for consumer shopping. This suggests that supermarket managers must pay much more attention to the idea of advertising and promotion to convey information to consumers. Table 6 summarizes the different kinds of goods consumers purchase when they go shopping at supermarkets. In general, shoppers at supermarkets are most likely to buy toiletries and household amenities. Shoppers buy a medium amount of processed food, ready-to-eat food, frozen food, confectionery and drinks. Very few consumers buy fresh food, personal care products, clothes, consumer durables and footwear. By comparing the means for certain kinds of goods bought by hard shoppers and infrequent shoppers, we found that hard shoppers go to supermarkets for a much broader range of products. Hard shoppers go to buy fresh food, processed food, frozen food and drinks at a middle level of frequency, signicantly higher than infrequent shoppers. Footwear, personal care products, clothes and consumer durables are still signicantly lower than the middle level of frequency for both groups. This shopping pattern has not changed since the 1997 survey of Speece and Huong (2002). IV.2 Factors affecting supermarket shopping frequency
Table 7 summarizes the frequency of shopping at supermarkets among consumers in the sample. The data shows that only 0.7 percent of the respondents

Table 6 Sample size Kinds of goods consumers bought at supermarkets Total 409 Mean Standard deviation Mean Hard shoppers 144 Standard deviation Mean
36
Infrequent Shoppers 265 Standard deviation
Kinds of goods Toiletries Household amenities Confectionery Frozen food Drinks Processed food Fresh food Personal care products Ready-to-eat food Clothes Consumer durables Footwear
3.59 3.48 3.13 3.09 3.05 3.04 2.75 2.65 2.56 2.38 2.00 1.99
0.81 0.86 0.91 0.95 0.96 0.93 1.13 1.09 1.00 0.95 0.99 0.95
3.63 3.57 3.19 3.35 3.29 3.26 3.04 2.78 2.74 2.51 1.94 2.12
0.70 0.82 0.83 0.89 0.88 0.92 1.07 1.07 1.03 0.89 0.97 0.94
3.57 3.43 3.09 2.95 2.92 2.92 2.60 2.57 2.46 2.31 2.02 1.92
0.87 0.88 0.95 0.96* 0.98* 0.91* 1.13* 1.10* 0.97* 0.98* 1.00 0.96
Notes: 1 to 5 scale; 1 = never, 2 = rarely, 3 = sometimes, 4 = often, 5 = always. To compare whether the means for two different categories, for example hard shoppers and infrequent shoppers for toiletries (a horizontal comparison) or for toiletries and household amenities for hard shoppers (a vertical comparison), are the same or different, the following test statistic
2 2 z = ( xa xb )/ ( sa /na ) + ( sb /nb ) ,
where na and nb are the sample sizes for the two groups, xa and xb are the sample means for two groups, and sa and sb are the standard deviations for the two groups, can be used. Under the null hypothesis that the two population means are the same, the test statistic is distributed asymptotically as a standard normal distribution. For a two-tail test conducted at the 5% signicance level, the relevant critical values are 1.96 and 1.96. For a one-tail test where the rst mean assumed to be higher than the second mean, the relevant critical value is 1.64. This test statistic assumes that the responses for the two categories are uncorrelated. When we used a one-tailed test for the difference between the two means (greater than zero), for vertical comparison, if the difference between any two sample means is greater than 0.2, then the difference between these two normal population means is signicant at the 5% level. The same results hold in the case of horizontal comparison (* means signicant difference between hard and infrequent shoppers).
indicated that they go to a supermarket everyday, 9.9 percent of the respondents indicated that they shop at supermarkets more than twice a week, and 24.2 percent said that they go to supermarkets once a week. Almost 40 percent of respondents indicated that they go to supermarkets from 1 to 3 times a month and 24.9 percent reported that they go to supermarkets less than once a month. Of our sample, 1 percent indicated that they never went to supermarkets. To measure the factors that inuence the decisions that consumers make regarding shopping frequency (determinants of shopping frequency), we
Table 7 Shopping frequency at supermarkets Number Every day Twice a week or more Once a week 13 times a month Less than once a month Never Total 3 41 100 162 103 4 413
37
Percentage 0.7 9.9 24.2 39.2 24.9 1.0 100.0
estimated an ordered probit model using Stata (version 9.0) (see Borooah, 2002). Shopping frequency for each consumer was treated as an individual observation, Yi taking the value of 1 if a consumer went to supermarkets less than once a week (13 times a month or less than once a month); 2 if a consumer went once week; and 3 if a consumer went twice a week or more. Independent variables used to explain a consumers shopping frequency level are described in Table 8. Consequently, the shopping frequency level can be represented as: Di =
k X i + ui = Z + ui ,
i =1
(1)
where k is the coefcient associated with the kth variable (k = 1, . . . , K) and ui is the error term, which is assumed to be normally distributed. Di is the latent variable, which is unobservable. The categorization of the persons in the sample in the terms of three levels of shopping frequency is implicitly based on the values of the latent valuable Di, in conjunction with threshold values k (i = 1, 2) such that: Yi = 1, if Yi = 2, if Yi = 3, if Di 1 1 Di 2 D i 2.
1 and 2 are unknown parameters (1 < 2) to be estimated along with k of Equation (1). The set of the coefcients k will be estimated using maximum likelihood estimation. The results are reported in Table 9. The empirical results show that INCOME has signicant impacts on shopping frequency, suggesting that the respondents with higher income are likely to shop more frequently. This reects the generally low level of incomes in Vietnam, where many consumers still do not have sufcient resources to make supermarket shopping practical. The positive and signicant coefcient for FRESH implies that it is highly probable that consumer shopping frequency will be higher if she/he judges that the fresh produce at a given supermarket is

Table 8 Variable Denitions and descriptives of the variables used in the ordered probit model Denition Mean
38
Standard Deviation 9.36 0.36 1.29 0.37 1.52
AGE SEX FAMILY EDUC INCOME
REFRI CAR EDGOOD SEEPRICE CURI RELAX RPRICE FIXPRICE FASHION QUALITY FRESH ONESTOP SELFSER GSERVICE EPENSIVE LIKESUPE DISTANCE
PAYLEVEL
Age of the respondents (continuous variable) = 1 if male; 0 otherwise Total number of members in the family (continuous variable) = 1 if has university degree and above; 0 otherwise Average monthly income per person in family, in Vietnamese dong (VND) = 1 if 0.51.0 m; = 2 if 1.01.5m; = 3 if 1.52.0 m; = 4 if 2.02.5 mil.; = 5 if 2.53.0 m.; = 6 if more than 3.0 m = 1 if owns a refrigerator; 0 otherwise = 1 if owns a car; 0 otherwise = 1 if goes to buy everyday necessities; 0 otherwise = 1 if quick look price and then goes to buy outside; 0 otherwise = 1 if goes to supermarket because of curiosity; 0 otherwise = 1 if goes to supermarket in order to enjoy and relax; 0 otherwise = 1 if price at supermarket is reasonable; 0 otherwise = 1 if because price is xed and does not have to bargain; 0 otherwise = 1 if goes to supermarket because fashionable; 0 otherwise = 1 if goes to supermarket because of guarantee in quality; 0 otherwise = 1 if rates high freshness at supermarket; 0 otherwise = 1 if goes to supermarket because one can buy everything at one stop; 0 otherwise = 1 if goes to supermarket because of self-service at supermarket; 0 otherwise = 1 if goes to supermarket because of good service of salespersons = 1 if goes to supermarket less than once a month because of expensive prices; 0 otherwise = 1 if prefers shopping at supermarket than at traditional market; 0 otherwise How far is it from your house to the closest supermarket = 1 if less than 0.2 km; = 2 if 0.21 km; = 3 if 12 km; = 4 if 25 km; = 5 if 510 km; = 6 if more than 10 km How much do you pay on average each time you shop at supermarket? = 1 if less than 100 000; = 2 if 100 000200 000; = 3 if 200 000300 000; = 4 if 300 000400 000; = 5 if 0.51 m; = 6 if more than 1 m (Vietnamese dong)
35.25 0.15 3.88 0.84 3.00
0.93 0.10 0.38 0.22 0.22 0.41 0.29 0.76 0.02 0.76 0.27 0.60 0.81 0.38 0.12 0.64 3.15
0.26 0.30 0.49 0.42 0.41 0.49 0.46 0.43 0.15 0.43 0.44 0.49 0.40 0.49 0.33 0.48 1.11
3.18
1.16
Table 9 Variables AGE SEX FAMILY EDUC INCOME REFRI CAR EDGOOD UNIQ SEEPRICE RELAX /cut1 (1) /cut2 (2) Results of ordered probit model Variables RPRICE FIXPRICE QUALITY FRESH ONESTOP SELFSER GSERVICE EPENSIVE LIKESUPE DISTANCE PAYLEVEL
39
Coefcient 0.01 0.13 0.03 0.05 0.16*** 0.18 0.32 0.28* 0.23 0.04 0.08 0.46 1.48
Coefcient 0.24 0.14 0.08 0.55*** 0.35** 0.02 0.11 1.00*** 0.13 0.10* 0.05
Log likelihood = 306.60; Number of observations = 409; LR 2 (22) = 104.21; Probability > 2 = 0.0000; Pseudo R2 = 0.1338 Note: *, **, *** Signicance at the 10%, 5% and 1% level, respectively.
fresher. The variable EDGOOD also shows a signicant and positive effect, suggesting that the probability of shopping more frequently is higher if a consumer goes to a supermarket to buy everyday necessities. Negative and signicant coefcients for DISTANCE imply that the closer the distance (to the closest supermarket), the higher the shopping frequency. EPENSIVE shows a signicant and negative effect, suggesting that those respondents who consider prices at supermarkets to be expensive are likely to go to supermarkets less frequently. A negative and signicant coefcient for ONESTOP suggests that shopping frequency will be lower if she/he rates the one-stop service as an important reason to go to supermarkets. The other variables do not have a signicant impact on consumer shopping frequency. Freshness, high price (expensive) and distance had signicant effects on a consumers shopping frequency at supermarkets, suggesting that without expanding the perishable category, lowering the price and enhancing convenience (distance), supermarkets cannot strengthen their competitive position. IV.3 Evaluation of market performance
Table 10 summarizes the consumer evaluations for the forms of retail outlets: supermarkets and traditional organized markets. In general, supermarket performance is perceived to be rather poor in several respects. All of the elements rated lower than a good level of performance. By comparing the evaluation of supermarkets on a given element between hard shoppers and infrequent shoppers, we found that except for the freshness factor,
Table 10 Sample size Total 409 Mean Standard deviation Mean
Evaluations of market performance Evaluation of traditional organized markets Total 409 Mean Standard deviation Mean Hard shoppers 144 Standard deviation Mean Infrequent shoppers 265 Standard deviation
Evaluation of supermarkets Hard shoppers 144 Standard deviation Mean Infrequent shoppers 265 Standard deviation
Elements Variety of product lines Air conditioning Cold storage (infrastructure at indoor) Variety in each kind of product Quality of merchandise Product display Location Scale Parking lot Services of salesperson Advertisement and promotion
3.70 3.70 3.67 3.60 3.56 3.51 3.42 3.40 3.29 3.25 3.23
0.62 0.61 0.60 0.65 0.54 0.61 0.64 0.62 0.79 0.68 0.71
3.69 3.65 3.64 3.58 3.59 3.53 3.42 3.41 3.33 3.24 3.28
0.55 0.60 0.60 0.64 0.55 0.60 0.65 0.62 0.73 0.65 0.72
3.70 3.73 3.69 3.60 3.54 3.49 3.42 3.39 3.26 3.25 3.20
0.65 0.61 0.60 0.66 0.54 0.61 0.64 0.62 0.82 0.70 0.71
3.66 2.71 3.48 3.33 2.89 3.19 3.20 2.81 3.11 2.63
0.77 0.84 0.79 0.58 0.77 0.70 0.68 0.84 0.70 0.89
3.63 2.71 3.50 3.33 2.98 3.24 3.22 2.88 3.11 2.75
0.77 0.85 0.83 0.60 0.74 0.74 0.71 0.85 0.71 0.88
3.68 2.71 3.46 3.34 2.85 3.16 3.18 2.77 3.11 2.56
0.78 0.84 0.77 0.57 0.78 0.68 0.67 0.84 0.70 0.89
40
409 Mean Standard deviation 0.75 0.70 0.70 0.50 1.04 0.79 Mean
144 Standard deviation 0.75 0.72 0.65 0.49 0.95 0.78 Mean
265 Standard deviation 0.75 0.69 0.73 0.51 1.06 0.80 Mean
409 Standard deviation 0.77 0.71 0.60 0.70 0.91 Mean
144 Standard deviation 0.79 0.71 0.70 0.75 0.92 Mean
265 Standard deviation
Checkout Development of reputation (honesty of sellers) Distance (density of supermarkets) Price level Freshness Return and adjustment policy
3.12 3.07 2.99 2.94 2.70 2.63
3.13 3.04 3.02 3.01 2.96 2.64
3.12 3.08 2.98 2.91 2.56 2.62
2.87 3.34 3.20 3.69 2.39
2.88 3.30 3.20 3.65 2.42
2.87 3.36 3.20 3.71 2.37
0.76 0.71 0.54 0.67 0.90
Notes: 1 to 5 scale, 1 = very bad, 2 = bad, 3 = normal, 4 = good, 5 = very good. To compare whether the means for two different categories, for example hard shoppers and infrequent shoppers for a variety of product lines (a horizontal comparison) or for a variety of product lines and air conditionings for hard shoppers (a vertical comparison), are the same or different, the following test statistic
2 2 z = ( xa xb )/ ( sa /na ) + ( sb /nb ) ,
where na and nb are the sample sizes for the two groups, xa and xb are the sample means for two groups, and sa and sb are the standard deviations for the two groups, can be used. Under the null hypothesis that the two population means are the same, the test statistic is distributed asymptotically as a standard normal distribution. For a two-tail test conducted at the 5% signicance level, the relevant critical values are 1.96 and 1.96. For a one-tail test where the rst mean assumed to be higher than the second mean, the relevant critical value is 1.64. This test statistic assumes that the responses for the two categories are uncorrelated. When we used a one-tailed test for the difference between the two means (greater than zero), for vertical comparison, if the difference between any two sample means is greater than 0.1, then the difference between these two normal population means is signicant at the 5% level. Comparing the mean values of evaluation on each element of supermarkets and traditional indoor bazaars (horizontal comparison), the same results hold in the case of horizontal comparison. In the case of supermarkets, except for the freshness element, hard shoppers evaluated the rest of the other elements at a similar level as infrequent shoppers, with an insignicant difference at the 5% level. In the case of indoor markets, except for product display and advertisement and promotion, hard shoppers also evaluated the rest of the other elements at a similar level as infrequent shoppers, with an insignicant difference at the 5% level.
41
42
both hard shoppers and infrequent shoppers rated supermarket performance almost the same for most factors. Although hard shoppers rated freshness at supermarkets signicantly higher than infrequent shoppers, this evaluation is only at the normal level (not good, not bad). Supermarkets were evaluated highly in some areas, such as quality of merchandise, variety of product lines, product variety within a single category of product, cold storage and air conditioning. Return and adjustment policy factor was rated at a very low level. Price level, checkout, service of salesperson, density of supermarkets, parking lot, advertisement and promotion, and development of reputation were also rated at fairly low levels. By comparing the evaluations for each element of supermarkets and that of traditional organized bazaars, we found that consumers evaluated the traditional bazaars at signicantly higher levels than supermarkets in terms of freshness, price levels and convenience (distance). There was no statistically signicant difference between organized markets and supermarkets in terms of variety of product lines, but consumers evaluated supermarkets signicantly higher for the rest of the listed elements. This information suggests that freshness, price levels and convenience (distance) are the key factors attracting consumers to the traditional organized markets. Respondents were asked where they do most of their shopping for three kinds of products: fresh food, processed foods and drinks, and non-food items. The ndings suggest that consumers tend to split their purchasing among different retail outlets for different kinds of products. They mainly purchase fresh produce at traditional organized markets or informal bazaars (more than 90 percent of respondents), whereas they purchase processed food and drinks and non-food products at traditional mom-and-pop stores or at supermarkets (mainly at mom-and-pop stores in both cases of processed food and drinks and non-food items). The percentage of respondents who regularly purchase at supermarkets has increased signicantly to nearly 30 percent in the case of processed foods and drinks, and 14 percent in the case of non-food items. These results suggest that supermarkets are gradually gaining a foothold for processed food and non-food products. However, they have to compete with mom-and-pop stores for the same group of customers. Although a majority of the survey sample did most of their shopping for food and non-food products at traditional retail outlets, 64 percent of the respondents indicated they preferred supermarkets, whereas only 36 percent of the respondents said they preferred shopping at traditional bazaars. This data indicates that supermarkets in Vietnam can increase market share by improving consumer satisfaction and building customer loyalty. Only 37 percent of the respondents indicated that they are loyal to one supermarket. Supermarkets can likewise attract consumers by opening stores near consumers homes and mimicking the merchandising approaches of the traditional bazaars or adopting store layouts to encourage social interaction. It is apparent that supermarkets could take a number of steps to attract more shoppers. They could try to extend their range of goods so as to differentiate themselves from their competitors or they could
Table 11 Sample size Conditions to attract shoppers to supermarkets more frequently Total 413 Hard shoppers 144 Mean
43
Infrequent shoppers 269 Standard deviation
Mean Standard Mean Standard deviation deviation Conditions (1) Fresh produce has more freshness (2) More variety of fresh foods and daily necessities (3) Supermarket near house (4) More product variety of non-perishables (processed food and drink and non-food items) (5) Higher income (6) Lower prices (7) Better service of salespersons
3.91 3.86 3.45 3.41
0.98 0.98 1.04 0.93
4.03 3.98 3.46 3.36
0.88 0.92 0.96 0.96
3.85 3.80 3.45 3.44
1.02* 1.00* 1.08 0.91
3.27 3.23 3.14
1.16 1.08 1.07
3.05 3.08 3.16
1.18 1.07 1.03
3.39 3.30 3.13
1.13* 1.08* 1.10
Notes: 1 to 5 scale, 1 = not important at all, 5 = very important. To compare whether the means for two different categories, for example hard shoppers and infrequent shoppers for the lower prices conditions (a horizontal comparison) or for higher income and lower prices for hard shoppers (a vertical comparison), are the same or different, the following test statistic
2 2 z = ( xa xb )/ ( sa /na ) + ( sb /nb ) ,
where na and nb are the sample sizes for the two groups, xa and xb are the sample means for two groups, and sa and sb are the standard deviations for the two groups, can be used. Under the null hypothesis that the two population means are the same, the test statistic is distributed asymptotically as a standard normal distribution. For a two-tail test conducted at the 5% signicance level, the relevant critical values are 1.96 and 1.96. For a one-tail test where the rst mean assumed to be higher than the second mean, the relevant critical value is 1.64. This test statistic assumes that the responses for the two categories are uncorrelated. When we used a one-tailed test for the difference between the two means (greater than zero), vertical comparison, if the difference between any two sample means is greater than 0.14, then the difference between these two normal population means is signicant at the 5% level. The same results hold in case of horizontal comparison (* means signicant difference between hard shoppers and infrequent shoppers).
lower prices on many items. However, such policies would be pointless unless the shoppers were informed. Table 11 presents the types of factors that might attract consumers to supermarkets in the future. Respondent ratings for more variety of fresh foods and daily necessities, and fresh produce has more freshness were both at the highest level. Hard shoppers rated these two factors signicantly higher than infrequent shoppers. Consumers also rated supermarket near my house at about the same level of importance as more product variety of non-perishables.
44
Respondent ratings for higher income and lower prices were both at the lowest level. However, infrequent shoppers rated these two criteria signicantly higher than hard shoppers. V. Conclusion
The rapid growth of the economy and improvements in technology, as well as the efforts of the government in building a modern distribution system, will lead to dramatic changes in its structure and position. Modern wholesale outlets and retail style outlets like supermarkets could eventually leave behind small sellers and intermediaries who have served traditional Vietnamese markets. Technology development and the exploitation of economies of scale will give modern players advantages both in costs and service over traditional retailers. However, our analysis shows that at present, the traditional markets remain the major distribution channels for both non-food and food products. In the case of fresh food, we veried the continued dominance of the traditional markets in terms of proximity, freshness and price as the main barrier to the development of supermarkets. However, supermarkets were perceived as providing advantages related to processed food and drinks as well as non-food items. They are gaining market share in the market for these kinds of products. Our study suggests that supermarkets would be more attractive to Vietnamese consumers if they: (i) were located nearer consumers and (ii) incorporated some elements of wet markets. Refrigeration and wrapping to avoid spoilage, however, mean added costs and contribute to the impression that supermarket products are not as fresh as those in the traditional markets. In addition, an effort to build a large-scale, well-decorated supermarket with a comfortable shopping atmosphere might not necessarily attract a signicant number of new customers. Developing networks of small-scale, neighborhood supermarkets appears to be a better strategy, given the nancial conditions and managerial abilities of domestic companies. It could also be a wise strategy for competing with foreign distributors who will become competitors once Vietnam opens its markets. Supermarkets that provide various types of products, that continue to add new, high-quality products at reasonable prices, and that are built near consumers homes, have the opportunity to build store loyalty and to increase market share. References
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Asian Economic Journal 2007, Vol. 21 No.

Supermarkets in Vietnam: Opportunities and Obstacles

ASIAN ECONOMIC JOURNAL

ASIAN ECONOMIC JOURNAL

ASIAN ECONOMIC JOURNAL

Source: Collected from various different retail statistics sources.

ASIAN ECONOMIC JOURNAL

Table 2 Retailer name Outlet type

14 supermarkets, 6 convenient stores 3 hypermarkets 1 supermarket 3 6 supermarkets 5 stores 4 3 2 6 6 1 3

Supermarkets Wholesale stores Supermarket Supermarket

8590 3040 8090

ASIAN ECONOMIC JOURNAL

ASIAN ECONOMIC JOURNAL

ASIAN ECONOMIC JOURNAL

Results and Discussion Reasons for visiting supermarkets

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Percentage 22.2 17.4 46.5 43.3 3.7

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Infrequent Shoppers 265 Standard deviation

Percentage 0.7 9.9 24.2 39.2 24.9 1.0 100.0

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Standard Deviation 9.36 0.36 1.29 0.37 1.52

AGE SEX FAMILY EDUC INCOME

35.25 0.15 3.88 0.84 3.00

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Table 10 Sample size Total 409 Mean Standard deviation Mean

409 Standard deviation 0.77 0.71 0.60 0.70 0.91 Mean

144 Standard deviation 0.79 0.71 0.70 0.75 0.92 Mean

265 Standard deviation

3.12 3.07 2.99 2.94 2.70 2.63

3.13 3.04 3.02 3.01 2.96 2.64

3.12 3.08 2.98 2.91 2.56 2.62

2.87 3.34 3.20 3.69 2.39

2.88 3.30 3.20 3.65 2.42

2.87 3.36 3.20 3.71 2.37

0.76 0.71 0.54 0.67 0.90

ASIAN ECONOMIC JOURNAL

Infrequent shoppers 269 Standard deviation

3.91 3.86 3.45 3.41

0.98 0.98 1.04 0.93

4.03 3.98 3.46 3.36

0.88 0.92 0.96 0.96

3.85 3.80 3.45 3.44

1.02* 1.00* 1.08 0.91

3.27 3.23 3.14

1.16 1.08 1.07

3.05 3.08 3.16

1.18 1.07 1.03

3.39 3.30 3.13

1.13* 1.08* 1.10

ASIAN ECONOMIC JOURNAL

ASIAN ECONOMIC JOURNAL

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