VIETNAM RETAIL MARKET FRONTIERPresent to:R&D Summit

TRAN TINH MINH TRIETtriet@cartridgeworld.com.vntrietttm@yahoo.comPersonal informationVIETNAM RETAIL MARKET FRONTIER

MARKET OVERVIEWRETAIL MARKET PERFORMANCE BY OWNERSHIPRETAIL MARKET PERFORMANCE BY FORMATRETAIL MARKET PERFORMANCE BY CATEGORIESCONSUMER BEHAVIOR PATTERNINDUSTRY CHALLENGESFUTURE GROWTH PROSPECTSVIETNAM RETAIL MARKET FRONTIERContent

OverviewRetail sales in the country grew 18–22% annually during 2003–2007Vietnam currently houses around 230 super markets & hypermarket, 23 trade centers, 165 wholesale markets and nearly 1million M2 of floor area under construction for retail businessForecasted growth as a CAGR of about 10-12% during 2007-2012Source: TNS Worldpanel Asia 2007VIETNAM RETAIL MARKET FRONTIER1.Market overview

Retail sales in the country grew 18–22% annually during 2003–2007

Vietnam currently houses around 230 super markets & hypermarket, 23 trade centers, 165 wholesale markets and nearly 1million M2 of floor area under construction for retail business

Forecasted growth as a CAGR of about 10-12% during 2007-2012

OverviewVIETNAM RETAIL MARKET FRONTIER1.Market overview

Purchasing powerConsumer spending (In Million USD), 2002-2007200220032004200520062007Source: International Financial StatisticsVIETNAM RETAIL MARKET FRONTIER1.Market overview

Purchasing powerForecast for consumer spending (In Million USD), 2008-2012Source: International Financial StatisticsVIETNAM RETAIL MARKET FRONTIER1.Market overview

Overall commentYoung, Attractive but……VIETNAM RETAIL MARKET FRONTIER1.Market overview

Overall Goods & service retail sales ( in trillion VND) in 20072. Retail market performance ByownershipSource: Vietnam Statistic OfficeVIETNAM RETAIL MARKET FRONTIER

Overall commentNonstate-owned companies lead the growth in 20082. Retail market performance ByownershipSource: Vietnam Statistic OfficeVIETNAM RETAIL MARKET FRONTIER

Traditional trade vs Modern tradeRetail Structure 20063. Retail market performance By FormatSource: TNS Worldpanel Asia 2006VIETNAM RETAIL MARKET FRONTIER

Traditional trade vs Modern tradeTraditional channel is still dominating the whole marketMama & Papa shops…still key player as they are part of Vietnamese cultureLess-developed provinces, which account 80% of population, have a larger number of traditional retail businesses. Modern trade will drive the future of retail, just as it will revolutionise the way of Vietnamese shopGrowing middle class and expanding young population are fuelling growth of modern tradeIn the near future, modern trade will offer all commodities at better price and with a better ambience. 3. Retail market performance By FormatVIETNAM RETAIL MARKET FRONTIER

Traditional channel is still dominating the whole market

Mama & Papa shops…still key player as they are part of Vietnamese culture

Less-developed provinces, which account 80% of population, have a larger number

Modern trade will drive the future of retail, just as it will revolutionise the way of Vietnamese shop

Growing middle class and expanding young population are fuelling growth of modern trade

In the near future, modern trade will offer all commodities at better price and with a better ambience.

Wet market and groceries outletsFood distribution is still dominated by wet markets and independent grocersNon-food retailers mainly comprise small-scale businesses focused on selling white goods, consumer electronics, clothes or cosmetics & toiletries3. Retail market performance By FormatVIETNAM RETAIL MARKET FRONTIER

Food distribution is still dominated by wet markets and independent grocers

Non-food retailers mainly comprise small-scale businesses focused on selling white goods, consumer electronics, clothes or cosmetics & toiletries

SupermarketSupermarket concept is rapidly developing in VietnamThe common size of supermarket format here from 500-3000 square meterIt has a wide range of location selectionThere are currently 200 supermarketsThis format is enjoying a healthy growthSupermarket is still play a key role in modern trade for the next 10 yearsCoopmart is a leader in this concept3. Retail market performance By FormatVIETNAM RETAIL MARKET FRONTIER

Supermarket concept is rapidly developing in Vietnam

The common size of supermarket format here from 500-3000 square meter

It has a wide range of location selection

There are currently 200 supermarkets

This format is enjoying a healthy growth

Supermarket is still play a key role in modern trade for the next 10 years

Coopmart is a leader in this concept

Hypermarket , Cash & Carry and department storesHyper market is a bit low in Vietnam but expected increase due to improving infrastructure and changing life style-Cash & Carry format is lead by Metro C&C, which having a certain success here-Department stores is still limited Big challenge for those format is “location, location, location” 3. Retail market performance By FormatVIETNAM RETAIL MARKET FRONTIER

Hyper market is a bit low in Vietnam but expected increase due to improving infrastructure and changing life style

Mini market &Convenience storesThey are self-service air-conditioner Grocery stores-Local player can prove their anticipation by link with street shops by add more convenience for consumers-The growth of this format will be faster by franchising concept- G7 Mart is a volunteer of this concept Big challenge for those format is “franchise concept & knowledge”3. Retail market performance By FormatVIETNAM RETAIL MARKET FRONTIER

They are self-service air-conditioner Grocery stores

Speciality storesThey are really category killers-There currently are some category players work very good withElectrical-electronic, Jewelery, Clothings, IT, mobilephones, Books-stationery, Perfumes-fragrances-They offer very good service for consumers and enjoy great success3. Retail market performance By FormatVIETNAM RETAIL MARKET FRONTIER

They are really category killers

Non-store retailersThey are doing direct sell-Customer order from catalogues, by phones, through TV or internet-This channel is growing very fast ( around 35% last year)Common categories in this channel are cosmetic and other special non-foodThis channel will take a foothold in retail marketing sooner or later but limited in major urban centers3. Retail market performance By FormatVIETNAM RETAIL MARKET FRONTIER

They are doing direct sell

Common categories in this channel are cosmetic and other special non-food

This channel will take a foothold in retail marketing sooner or later but limited in major urban centers

FoodFood is most important component of retail industry, which account 2/3 of total sales in the country-Food retailer account for around 80%of the overall retailing sector in terms of No of outlets-Independent grocers still is a biggest channel Food sales in supermarket chain grow substantial2007 Retailer share by sector (value%)Source: TNS Worldpanel VN 20074. Retail market performance By CategoriesVIETNAM RETAIL MARKET FRONTIER

Food is most important component of retail industry, which account 2/3 of total sales in the country

Food sales in supermarket chain grow substantial

Non-FoodNon food sales have grown at a rapid pace-Non food retailer mainly consist of small scale of businesses focused on selling white goods, consumer electronics, clothes, cosmetic & toiletries -A large number of modern complexes has been opened successfully -Non food retailers will grow quickly as category killers2007 non food retail sales (value%)Source: Euromonitor4. Retail market performance By CategoriesVIETNAM RETAIL MARKET FRONTIER

Non food sales have grown at a rapid pace

Average household spending patternsSpending on basic goods and services such as food, clothing, hygiene products and transportationBrand/Price sensitivityVietnamese generally prefer foreign brands to domestic brands, therefore, it is likely that they remain fairly price sensitive given their moderate income positionEmerging middle & upper classGrowing middle & upper classes have shown particular interest inForeign luxury brands, electronics, cosmeticsGeographicConsumer behavior difference from the south to the north5. Consumer behavior patternVIETNAM RETAIL MARKET FRONTIER

General consumer behavior75% tend to buy what children want-70% like to grocery shop with their family-73% ask for recommendations when shopping-66% enjoy shopping in supermarketsA competitive and attractive shopping environment and a vast Fresh food offer, is key if modern trade wish to appeal to moreConsumers regularlySource: TNS Worldpanel VN 20075. Consumer behavior patternVIETNAM RETAIL MARKET FRONTIER

75% tend to buy what children want

Skilled staffs A serious shortage of skill staffs-All positions being on demanded -Retailer should also work with foreign partner to share management experience and informationConsumer price index-Rising consumer price inflation is definitely hitting the demand of consumer goodsTrade barriers & State subsidiaries-The retail barriers have been removed in 2009 for foreign retailer6. Industry challengesVIETNAM RETAIL MARKET FRONTIER

A serious shortage of skill staffs

Retail space & Cost According to CBRE at the end of Sept 2007, retail space average USD 40 per square meter in HCMC & HN-In district 1 & 3 in HCMC, the best retail space had climbed to USD 200 per square meter -Very hard to find a location for a supermarketInfrastructure-Poor logistics network and service for all retailers6. Industry challengesVIETNAM RETAIL MARKET FRONTIER

According to CBRE at the end of Sept 2007, retail space average USD 40 per square meter in HCMC & HN

Developing trend of modern retailing-Online retailing-Non food retailers-POS terminal-International brands and luxury goods-High-tech retailers-Food services7. Future growthprospectsVIETNAM RETAIL MARKET FRONTIER

Developing trend of modern retailing

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