In the context of many big brands’ existing stores forced to close due to high rental costs, e-commerce has become savior of the retail industry. According to forecast, the retail e-commerce market will reach 16.4 billion USD in 2022.
Brands closed stores
As of the morning of September 25, according to information on the sales website Bach Hoa Xanh, this department store chain has only 1,738 stores operating nationwide, a decrease of 402 stores in just over 4 months.
According to Nhadautu.vn’s actual survey, besides the closed stores, many stores of Bach Hoa Xanh in Ho Chi Minh City are promoting 50% discount activities, liquidating goods to close.
Speaking to the press recently, a representative of Bach Hoa Xanh said that in a survey in May, only more than 50% of the total 2,140 stores nationwide were operating effectively. This representative also said that after closing low-quality stores, Bach Hoa Xanh will still operate normally, trading activities will not change much. Bach Hoa Xanh expects to achieve an average revenue of 1.3 billion VND/store, strongly developing its online channel to significantly improve operational efficiency.
Similar to Bach Hoa Xanh, a series of famous retail brands also had to close stores, restructure and promote online sales to compensate for losses and grow more.
For example, Pharmacity. Despite setting a target of 1.5 billion USD in revenue by 2025 with 5,000 existing stores, recently, this pharmaceutical company has continuously reported losses.
In 2019, Pharmacity reported a loss after tax of 265.7 billion VND. In the first half of 2020, the company’s after-tax loss was 194.2 billion VND. In 2021, Pharmacity’s revenue reached 3,567 billion VND, double that of 2020. Pharmacity revealed that it will start to be profitable from July 2021, according to the EBITDA index (earnings before tax, interest and depreciation).
The giant in the drug market has “blown up” in just a short time with about 2,000 stores across the country. However, recently, this brand has continuously closed hundreds of inefficient pharmacies to restructure and promote online sales.
Online retail is savior
According to experts, in the context of the high cost of renting space in the center of big cities, as well as the influence of geopolitical tensions and inflation, it is understandable that many big brands close their existing stores. More than ever, Vietnamese retail market needs to be reshaped, with a savior named e-commerce.
Although there are still limitations compared to the direct sales channel, such as poor quality compared to advertising, concerns about personal information being disclosed, high shipping costs, poor quality of shipping and delivery, poor customer service… but forecasts of reputable units show that Vietnam’s online retail will explode.
According to JLL and CBRE Vietnam, retail rents in HCMC are increasing again.
A representative of CBRE Vietnam said: “The average asking price for the ground floor and first floor of shopping centers in the central area reached a new peak of 206 USD/m2/month, an increase of about 50% year-on-year, more than double 5.5 times the rent in the non-CBD area (37 USD/m2/month). Notably, the exchange rate at some prime locations in the CBD is even recorded as high as 250-350 USD/m2/month.”
Meanwhile, according to JLL Vietnam, it is not surprising that net rents in this market increased, as the first quarter of this year saw a significant decrease in rents due to the post-epidemic discount policy.
“Average rents recovered to 41.7 USD/m2/month, up 12.2% y/y.” – representative of JLL Vietnam said.
According to the Vietnam E-Commerce White Paper 2022 (Ministry of Industry and Trade), the retail e-commerce market size in Vietnam in 2021 will reach 13.7 billion USD, an increase of 1.9 billion USD compared to 2020. This number is twice as high as in 2017, when the boom of Vietnam’s e-commerce began, when the market was only 6.2 billion USD.
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. The value of one person’s online shopping also increased from 186 to 251 USD after 5 years. In 2021, Vietnam has more than 58.2% of internet users shopping online every week, while this figure is the global average of 58.4%.
Data from reports from Google, Temasek and Bain&Company shows that Vietnam’s internet economic revenue by 2025 will increase to 57 USD billion (21 USD billion in 2021). Compared to other countries in the region, the size of Vietnam’s internet economy in 2021 is equal to that of Malaysia, less than Indonesia (70 USD billion) and Thailand (30 USD billion), more than the Philippines (17 USD billion) and Singapore (15 USD billion).
The Vietnam E-commerce White Paper predicts that by 2022, the scale of the e-commerce market in Vietnam will reach 16.4 USD billion. And CBRE Asia predicts that Vietnam’s revenue from this market in 2025 will reach about 25-27 billion USD.
@ Cafef
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Source: Vietnam Insider