From AEON, The Gioi Di Dong, and Big C to Saigon Co.op, retail giants are competing to adapt to new Vietnamese consumer trends.

Even after social distancing was lifted last October in Ho Chi Minh City, Ms. Minh Ngoc – an office worker in Tan Binh district, still avoids big shopping malls like AEON or Big C (also known as GO!). Instead, she now opts for small, local stores near her house and does some online shopping as it’s convenient and offers various promotions for online payment.  

Retailers are developing small shops in residential areas

Changes in consumer behaviors

“The historic pandemic outbreak made me think twice about going to shopping malls or crowded places,” shared Ms. Minh Ngoc. Living in the capital city, Hanoi, Ms. Lan Anh said: “Online shopping has become increasingly convenient. Orders can be placed at any time you like and payment can be done via bank transfer, with goods delivered to your door; thus, reducing the risks of spreading the virus.”

Ms. Minh Ngoc and Ms. Lan Anh are not the only big city residents whose shopping behaviors changed due to Covid-19. Many people now prefer local stores near their houses and within the neighborhood or shop online instead of visiting shopping malls that offer a variety of activities: restaurants for family dinners, playgrounds for children, and a plethora of stores catering to different needs.

More people are shopping online

Mr. Furusawa Yasuyuki, General Director of AEON Vietnam – a retail chain comprising both large and small stores, reported a distinctive rise in revenues from their ministops and supermarkets, while the volume of customers in their shopping malls has significantly dropped. “Prolonged social distancing has substantially changed the way consumers think and behave,” Mr. Yasuyuki added. Many customers used to come to AEON Mall to dine or watch movies in the cinema until as late as midnight, but that situation has changed as fewer customers are seen at night these days. Shopping frequency has also decreased by a large margin.

Adapting to consumer trends

Given the changes in consumer behaviors, retailers must keep up with the latest trends to transform their businesses quickly, especially in the context of the thriving Industry 4.0 revolution, according to retail experts.

Understanding the importance of staying relevant, AEON Vietnam has presented its future plans. For shopping malls, the company will focus on improving customer experience, providing better services as well as diversifying its retail formats to prepare for future developments. For medium and small supermarkets, the Japanese retailer will expand the AEON MaxValu supermarket chain in Hanoi; specifically, it will increase the number of supermarkets from seven to 20 this year.

Smaller venues are out-performing mega-malls

To cut the costs of opening new stores, AEON looks for premises in residential areas or within apartment buildings. “These small and medium stores will provide fresh, good-quality foods at affordable prices to customers living in surrounding areas,” explained Mr. Yasuyuki. AEON will also develop products with its own brand name to attract customers. On the other hand, it will promote more online sale activities.

AEON is one of many retailers that are stepping up their improvements in retail networks. In early 2022, The Gioi Di Dong (MWG) announced its plan to stop opening new Bach Hoa Xanh stores to direct resources to improve its business operating platform and profit optimization. This shift in business orientation allows the company to start new retail chains that specialize in other service categories. Mr. Nguyen Duc Tai, chairman of MWG Corporation, revealed that a major overhaul is expected regarding their shops, products, and visual merchandising among others as they aim to improve customer experience. “This year, Bach Hoa Xanh will pivot to offer better experiences and products to expand our customer base and the sales volume of each store,” Mr. Tai explained.

Recently, both Saigon Co.op and Satra have been going on a store-closing spree, shutting down many of their inefficient outlets. Mr. Nguyen Duc Anh, CEO of the Saigon Co.op, shared the company’s plans to expand small chains, such as the Co.opSmile, Cheers, and Co.op Food this year. Most notably, each Co.op Food will feature around 8,000 to 10,000 products chosen from an inventory of 30,000 products at Saigon Co.op supermarkets and mega markets, tailored to customers’ needs in different areas.

Smaller venues are out-performing mega-malls

This will help customers to easily find all kinds of necessities, such as packaged food, cosmetics, home utilities, garments, and fresh ingredients among others, despite its status as a grocery store. All products are provided by reputable suppliers with safety certifications of production processes and full traceability.

“Changes in consumer behaviors are the biggest challenge to all retailers in general and AEON in particular. We’ll fall behind other competitors if we don’t take immediate actions to address these changes. 2022 is a crucial year as the competition among retailers heats up. The behavioral changes are forcing the retail industry to make the right adjustments to stay relevant and grow,” remarked Mr. Yasuyuki.

A blessing in disguise

According to some experts, competitive pricing requires retailers to rent a large number of new stores because renting in bulk allows for better price negotiations with suppliers and an increase in brand awareness. However, the establishment of a new shopping mall or mega market in big cities like Ho Chi Minh City, Hanoi, and Hai Phong is simply daunting.

It usually takes four to five years to open a mega market as it requires multiple phases from planning, location selection, site survey, licensing, and construction to the grand opening. This endeavor is even harder for foreign retailers because finding a good location at a reasonable price is not easy.

On the other hand, it is less challenging to open a new mini mart or store of 300 to 1,000sqm in area. Such premises are easier to find, especially since the two-year pandemic put many retailers, restaurant chains, and coffee shops in a tight spot, forcing them to hand over or return their business spaces. It is also simpler to obtain a retail outlet establishment license for this type of store than for a shopping mall.

To succeed with the small and medium store chains, AEON must expand its presence. For the MaxValu chain, at least 100 stores are required to operate efficiently. “For small stores, we’re looking for premises located in residential areas or within apartment buildings to cut down on costs,” said Mr. Yasuyuki. Small stores also need to have “affordable prices that match consumers’ purchasing powers”, making their profitabilities quite low.

Despite having to constantly keep up with the latest shopping trends, many retailers still consider Vietnam a market with “potential”. For AEON, Vietnam is their second key market after Japan. Central Group or MM Mega Market also announced plans to increase their operations in Vietnam.