In the context of the existing stores of many major brands having to close due to high rental costs, e-commerce has become the savior of retail. The retail e-commerce market is forecast to reach USD 16.4 billion by 2022.
Brands closed stores
According to information on the sales website Bach Hoa Xanh, as of the morning of September 25, this department store chain only has 1,738 stores nationwide, down from 402 stores in just over 4 months.
According to Nhadautu.vn’s actual research, many of Bach Hoa Xanh’s stores in Ho Chi Minh City, in addition to the closed stores, promote 50%-discount activities, liquidating goods to close.
A representative of Bach Hoa Xanh recently said in a press conference that in a May survey, only more than 50% of the total of 2,140 stores nationwide were operating effectively. This representative also said that after the closure of low-quality stores, Bach Hoa Xanh will still operate normally, trading activities will not change much. Bach Hoa Xanh expects to achieve an average turnover of 1.3 billion VND/store, which will greatly develop its online channel to significantly improve operational efficiency.
Like Bach Hoa Xanh, a range of well-known retail brands also had to close stores, restructure and promote online sales to offset losses and grow more.
Pharmacy for example. Despite having set a revenue target of USD 1.5 billion by 2025 with 5,000 existing stores, this pharmaceutical company has recently reported continuous losses.
In 2019, Pharmacity reported an after-tax loss of VND 265.7 billion. In the first half of 2020, the company’s after-tax loss was VND 194.2 billion. In 2021, Pharmacity’s revenue was VND 3.567 billion, double the figure for 2020. Pharmacity announced that it will become profitable from July 2021, according to the EBITDA (earnings before tax, interest and depreciation) index.
The drug market giant has “blown up” in a short time with about 2,000 stores across the country. Recently, however, this brand has continuously closed hundreds of inefficient pharmacies to restructure and promote online sales.
Online retail is the savior
According to experts, in the context of the high cost of renting space in the center of major cities, as well as the impact of geopolitical tensions and inflation, it is understandable that many major brands are closing their existing stores. More than ever, the Vietnamese retail market needs to be reformed, with a savior called e-commerce.
Although there are still limitations compared to the direct sales channel such as poor quality compared to advertising, concerns about disclosing personal information, high shipping costs, poor quality of shipping and delivery, poor customer service… but forecasts from reputable units show that Vietnam’s online retail will explode.
According to JLL and CBRE Vietnam, retail rents in HCMC are rising again.
A representative of CBRE Vietnam said: “The average asking price for the ground and first floors of shopping centers in the central area reached a new peak of USD 206/m2/month, an increase of about 50% year-over-year, more than double 5.5 times the rent in the non-CBD area (37 USD/m2/month). Strikingly, the exchange rate in some prime locations in the CBD is as high as USD 250-350/m2/month.”
Meanwhile, according to JLL Vietnam, it is not surprising that net rents increased in this market, as rents fell significantly in the first quarter of this year due to the post-epidemic discount policy.
“Average rents recovered to USD 41.7/m2/month, up 12.2% year-on-year.” – said representative of JLL Vietnam.
According to the Vietnam E-Commerce White Paper 2022 (Ministry of Industry and Commerce), the size of the retail e-commerce market in Vietnam will reach USD 13.7 billion in 2021, an increase of USD 1.9 billion compared to 2020. This The number is twice as high as in 2017, when Vietnam’s e-commerce boom began, when the market was only USD 6.2 billion.
Also in the past 5 years, the number of online shoppers in Vietnam has increased from 33.6 million in 2017 to 54.6 million in 2021. Also, the value of one person’s online shopping increased after 5 years from 186 to 251 USD. In 2021, Vietnam will have more than 58.2% of internet users who shop online every week, while this figure is the global average of 58.4%.
Data from reports from Google, Temasek and Bain&Company show that Vietnam’s economic revenues will rise to $57 billion by 2025 (US$21 billion in 2021). Compared to other countries in the region, the size of Vietnam’s internet economy in 2021 will be equal to that of Malaysia, less than Indonesia (USD 70 billion) and Thailand (30 USD billion), more than the Philippines (17 USD billion) and Singapore ( $15 billion).
The Vietnam E-commerce White Paper predicts that by 2022, the size of the e-commerce market in Vietnam will reach $16.4 billion. And CBRE Asia predicts that Vietnam’s revenue from this market will reach about USD 25-27 billion in 2025.
@ cafefu
