Vietnam verges on a retail
revolution By David Fullbrook
HO CHI MINH CITY - Retailing in Vietnam is
starting to change, with malls emerging to meet the
tastes of those with rising wealth and aspirations.
Vietnamese developers are leading the charge, but
international trade deals will open up the market to
foreign retailers, possibly spurring the greatest
interest from foreign developers.
Vacant shop
space, despite almost overwhelmingly being of the
narrow, deep and often dingy shophouse type, does not
stay empty for more than a few days before new tenants
move in. "It's very rare that you see an empty shop in
Ho Chi Minh. Most shops are still shophouse retail,
about five meters wide," says Marc Townsend, CB Richard
Ellis' (CBRE's) Vietnam managing director. "Rents are
creeping up."
Awareness is growing that
shophouses do not necessarily offer the best environment
for displaying products, nor encourage customers to
linger. "Now more and more developers and retailers are
looking for wider space, square layout and better
lighting," says Townsend.
Overwhelmingly,
Vietnamese family businesses still dominate the retail
sector, with few owning more than a few shops. But
bigger players are starting to emerge, building chains
such as Khai Silk, an upmarket silk weaving concern, and
Citimart, a grocer whose branches are getting larger,
becoming supermarkets. Others remain behind the scenes,
winning concessions for foreign chains, especially in
cosmetics, thus needing smaller units.
If
clothing retailers like Benetton and Mango are en route,
Hong Kong brands Esprit and Giordano cannot be far
behind. There are a handful of department stores, though
perhaps only one or two are well-managed. Generally, the
layout and lighting are poor, the space plagued by
columns and other signs of bad or unsuitable design.
"Proper, international-standard retail has been
very successful, but there aren't that many of them.
They are concentrated along Dong Khoi," says Brett
Ashton, property consultant Chesterton Petty's Ho Chi
Minh director. Dong Khoi is a thoroughfare in Ho Chi
Minh City's Saigon district lined with boutiques,
tourist emporia, hotels and restaurants. Its
architecture is largely French colonial. Rents, around
US$120 per square meter, are equivalent to those in
Chicago.
In Hanoi, a few streets in the bustling
old Vietnamese mercantile quarter bear comparison,
though it seems something similar to Dong Khoi will
emerge in the former French Indochina administrative
quarter, whose streets, lined with elegant and handsome
buildings, radiate out from the restored Opera House to
recreate a slice of Paris on the Red River. Diamond
Plaza, Saigon's first modern mall and office complex
opened a few years ago, is just catching the economic
boom. Now competition, of sorts, is emerging. An Dong
Plaza in Cholon (District 5), a 60,000 square meter
development with four floors of retail plus 18 five-star
hotel floors above, soft-opened in November. Most
tenants are locals. "Local retailers are predominantly
distributors, they want to expand off Dong Khoi to reach
a wider audience," says Ashton.
However, despite
strong demand and almost zero supply, not all malls will
rack up profits. "A lot of builders think that if you
build it, they will come. Obviously that is not the
case. You have to build at the right time in the right
place," Ashton maintains.
An Dong's Hong Kong
developer, Eric Chu, leads the Larkhall joint venture
preparing to start work on an even larger project on a
prime Dong Khoi site next year that will bring together
retail plus apartments and a hotel above covering 90,000
square meters. That twin-tower development will soar 43
stories, making it the tallest building in Vietnam.
Another Vietnamese consortium is working on
Saigon Five, on the edge of Districts 5 and 10, within a
10-minute motorcycle ride of 2 million people. It will
be the city's largest mall by far, four times bigger
than Saigon's Diamond Plaza. Its target tenants are
international brands that will spread over four floors.
Above them will be a novelty in Vietnam, the Cineplex,
plus a food court, 400 apartments and perhaps most
importantly, a 2,000-seat wedding hall.
"That
will be full most evenings," says Ashton, who counts
Saigon Five as a client. "Wedding centers do phenomenal
business here. So in addition to shoppers, diners, and
movie-goers, you're going to have an additional 2,000
people funneling up and down the retail." Rising wealth
and a desire to demonstrate have seen a return of lavish
weddings commonplace before the communist era. A similar
trend is apparent in China, too. It seems almost certain
that a large wedding hall will be a feature of future
malls across that country.
Though foreign
retailers currently have to operate through
distributors, they are looking for sites themselves in
preparation for 2008, when trade deals with the United
States, the Asia-Pacific Economic Cooperation group and
the World Trade Organization kick in, opening up the
market. "They will be able to get licenses to operate
here. Then I think you will see a significant boom,"
says Ashton. "The fast-food companies are already
looking."
Northeast Asian brands and department
stores are as likely to set up shop as their Western
competitors, given that they already dominate
manufacturing investment. "The biggest investors are
Korean, Taiwanese and Japanese groups," says Townsend.
Foreign fast-food chains are also savoring the
opportunities. "There's only KFC here now, but we've
been contacted by quite a lot of groups."
Success of Vietnam's home-grown café chains,
Trung Nguyen and Highlands Coffee, suggests the right
formula could strike gold in Vietnam. In some ways,
Hanoi and Ho Chi Minh are reminiscent of Bangkok in the
early 1990s, when McDonald's and 7-Eleven had but a few
branches. A decade later, they, and local imitations,
dominate malls and shopping areas.
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2004 Asia Times Online Ltd. All rights reserved. Please
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