Vietnam is the most eastern country geographically on the Indochinese peninsula and shares a border with China, Cambodia and Laos. Vietnam’s population is estimated at 86.5 million. It has a very young population, with over one third of it aged below19 years old, and more than half are under the age of 30 years. Consumers are young, have middle-class incomes and are open-minded to new products and brands. The Red River Delta region is the most densely populated area of the country, and includes the capital city, Hanoi. With 6.6 million inhabitants in 2010, Hanoi is the second most populous city in Vietnam, behind Ho Chi Minh City with 7.4 million inhabitants. Since the 1990s Vietnam has become a major tourist destination.
The retail market is developing and currently the market share of modern retail trade channels remains low at around 20% in Vietnam in general. This represents a great potential opportunity to develop this format further in major urban centres. Foreign retailers can also benefit from the Government’s investment in modern infrastructure as well as the increase in property supply offering increasing the opportunities for expansion across the market.
Vietnam has been welcoming to foreign investment in retail with the likes of France’s Casino Group, South Korea’s Lotte and Germany Metro Group all present in the market and seeking to expand. Foreign investment is increasing, although the current pattern has largely been one of cooperation with domestic operators, a legal requirement until the beginning of 2009 when the Government relaxed rules to allow 100% ownership by foreign companies.
|Unemployment rate (%)||4.9||4.4||4.1||4.0||4.0|
|Interest rates 3-month (%)||10.7||11.6||14.9||N/A||N/A|
|Interest rates 10-year (%)||12.7||14.0||16.4||N/A||N/A|
Note: *annual % growth rate unless otherwise indicated. E estimate F forecast
|Population||86.928 million (2010)|
|GDP||US$ 123.961 billion (2011)|
|Public sector balance||N/A|
|Head of State||Truong Tan Sang|
|Prime Minister||Nguyen Tan Dung|
|Election dates||July 2016|
|RETAIL SALES GROWTH: % CHANGE ON PREVIOUS YEAR|
|LARGEST CITIES (2011)|
|Ho Chi Minh||7,396,000|
MAJOR DOMESTIC FOOD RETAILERS
Hapro, Saigon Co-op, Citimart, Maximart, Pho 24
MAJOR INTERNATIONAL FOOD RETAILERS
Metro Cash & Carry, Big C (Casino), Ministop (Aeon)
MAJOR DOMESTIC non-FOOD RETAILERS
Nino-Maxx, Viet Brothers, Blue Exchange, Vinatex, Viet Tien, May 10, May Ho Guom, Hong Ha
INTERNATIONAL RETAILERS in country
Louis Vuitton, Hermès, Gucci, The Body Shop, Dior, Mango, Levi’s, Naf Naf, FCUK, BCBGMaxazria, Just Cavalli, Furla, Lotte
Food & Beverage Operators
SaiGon Gourmet, High-land Coffee, KFC, Lotteria, Burger King, Domino’s Pizza, ZPizza, JoliiBee, Pizza Hut, McDonald’s, ThaiExpress, SumoBBQ, Kichi Kichi
|MONDAY - FRIDAY||SATURDAY||SUNDAY|
New Entrants to the Market
|Christian Louboutin||Jimmy Choo||Warehouse||Gap||Guess|
In Vietnam, there are two biggest retail markets, namely Hanoi and Hochiminh City. The total retail stock of these two markets is approximately 1.4 million sq.m. In next 4 years, the supply is expected to reach 3.2 million sq.m. There are several popular retail property formats, including shopping centres, retail podiums, department stores, supermarkets and hypermarkets. Shopping centres account for most of the supply of retail floorspace.
Ecommerce has been developing strongly thanks for the projected growth of internet users from around 30 million in 2011 to 37 million in next 5 years and the expansion of broadband services will boost consumers’ ability to shop online. Increasingly people, and particularly the young, are spending more time on the internet. A study by market research company Cimigo found that in the period 2008-2011 time spent on the internet had tripled from 43 to 130 minutes per day. In late 2010, group-buying websites were introduced and creates significant changes in the Vietnamese e-commerce industry. The monetary benefits generated by group-buying websites have encouraged customers to engage in e-commerce more and more.
Currently 90% of brands coming to the Vietnamese market use local distributors, mainly as a consequence of current government policy towards foreign retailers, for instance ENT (Economic Needs Test) which restricts foreign retailers from opening second stores. To do so, retailers have to demonstrate that people in the specific area need a store. It is mainly because of some current policy applied on the foreign retailers, for example ENT (refers to Economic Needs Test) which restricts the foreign retailers in opening the second stores. It is explained as the allowance of opening the second store must be compliance with the actual people need in that specific area.
The Vietnamese property market is still small and not generally transparent. On average it might take 3-6 months to acquire a store, including examination of opportunities, store design assessments, lease negotiations and approval.
|KEY FEATURES OF LEASE|
|Lease Terms||The most typical term is 3-5 years, except some specific kinds of tenants like supermarket, hypermarket, or F&B tenants who have heavy investment in the store where the term ranges from 10-20 years. Break options not standard market practice.|
|Rental Payment||Rents are typically payable quarterly in advance, and monthly payment is very rarely accepted. Turnover/percentage rents are not common and usually apply for anchor tenants such as cinemas, book stores and hypermarkets. A security deposit is strictly applied on a lease and normally equals 3 months rent.|
|Rent Review||Rent reviews are usually every 3 years and usually there is an interest rate cap for rent reviews (15-20% is most common).|
|Service Charges, Repairs and Insurance||A service charge is usually payable in multi-tenanted buildings and covers management fees, security, cleaning, landscaping, internal maintenance of common parts, external maintenance like regular cleaning of external glass, and insurance, elevator servicing, utilities etc. Tenants are responsible for internal repairs over and above reasonable wear and tear. The landlord is responsible for repair of any mechanical systems it has installed and the structure of the property. The tenant is responsible for insurance of the property and must use a reputable insurance company.|
|Property Taxes and other costs||The Tenant shall pay to the Landlord all Value Added Tax (V.A.T) or any similar tax, levy or duty which may be payable by the Landlord upon demand. VAT at 10% is charged on rental payments but it is usually recoverable by most tenants (tax advice should be sought). Each party will meet their own legal and other professional costs.|
|Disposal of a Lease||Tenant is expressly prohibited from ceding, transferring, pledging or in any way disposing of its rights in terms of the lease and may not sub-let the leased premises or any part thereof without the prior consent of the Landlord.|
|Valuation Methods||Shops are valued on a location and size basis. In general, the lower the floor is, the higher the rental rate. The shop size is also a factor in the evaluation of rent. A rental discount is normally offered for large stores, mini anchor and anchor tenants (defined as leasing area of 500 sq.m and over).|
|Legislation||The lease must be in writing. No amendment or addition to this Lease Agreement shall be effective unless made in writing and signed by or on behalf of all Parties in the Lease.|