Lotte Mart plans third outlet in 2013; E-Mart to open first Hanoi store next year, 52 outlets by 2020
Just two years have passed since Vietnam opened its retail sector to foreign businesses on a full scale. The Vietnamese market has grown so quickly that sales and service revenue in the retail sector are expected to reach $85 billion in 2012.
As global retailers are coveting the growing market without a dominant leader, Korea’s retail giants E-Mart and Lotte Mart have also joined the race.
Customers swarm into a Lotte Mart outlet in Ho Chi Minh City. (Lotte Mart)
(From left) Lotte Group’s Shin Dong-bin, Shinsegae’s Chung Yong-jin
The Korean retail rivals say even though the soaring Chinese market is still their main target, Vietnam is fast emerging as the next promising market.
Lotte Mart, Korea’s third-largest discount chain, entered the Vietnamese market in 2008 first as a Korean retailer, currently operating two outlets in Ho Chi Minh City.
Lotte Mart logged about 2.6 trillion won ($2.4 billion) from its 109 overseas stores last year, of which industry sources said Vietnamese sales made up 80 billion won.
Based on the successful start-up, Lotte plans to open the third store at a 12,500 square meter site in a shopping mall in Binh Duong Province in southern Vietnam by 2013.
The company explained that its strategy of integrating entertainment facilities such as a movie theater and a billiard hall into its discount stores may have appealed to Vietnamese customers.
“The growth potential still seems enough. The Vietnamese market will become our stronghold to expand our overseas operations in southeastern Asia,” said Kim Min-seok, a Lotte Mart official.
However, the Vietnamese government’s tough regulations aimed at protecting local businesses have caused some problems for Lotte’s further expansion there.
Due to resistance from local retailers and the delay in the government’s approval process, it took almost one year for Lotte’s second store to start business even after completion of the building.
It is also currently in dispute with its Vietnamese partner Minh Van Private Enterprise over stock ownership. Lotte has maintained a business partnership with the local company as it is considered essential for smoother business activities there.
“That kind of hostility is a very natural thing that a company has to face when it does business on foreign soil. We are trying to deal with the dispute,” Kim said.
With aims to reduce potential disadvantages as a foreign company, E-Mart, the nation’s largest retail chain, plans to invest a total of $1 billion to set up 52 outlets in Vietnam by 2020 through a joint venture with U&I Group, Vietnam’s seventh-largest company.
Despite its dominant 37 percent market share in Korea, E-Mart has seen disappointing performance overseas. It owns 136 outlets in Korea and 27 in China.
The retail giant, which entered China in 1997, almost a decade earlier than Lotte Mart, posted 620 billion won in sales last year. Due to its lackluster performance, the retailer announced in June that it would sell off part of its Chinese business.
Amid restructuring in its faltering Chinese business, E-Mart announced in July its ambitious plan to test the Vietnamese market.
The initial investment of the joint venture is estimated to be $80 million, with 80 percent coming from E-Mart.
Starting with the first branch in Hanoi, scheduled to open at the end of 2012, the company is currently looking for other locations, industry sources said.
The company, however, denied that its Vietnamese startup should be considered the aftermath of its poor performance in China.
“The markets are totally different. Considering that the domestic market is nearing saturation and government regulations are getting tougher, going global is a very natural strategy and Vietnam has a full market potential,” said Hwang Jong-soon, an E-Mart official.
He would not reveal specific plans regarding the Vietnamese business, saying related discussions were still underway.
Even though industry watchers predict the overseas match between the two local rivals would revive in Vietnam after in China, the companies declined such rivalry saying “we both are still minors on the global stage.”
“We have just started entering the global market. The strategy should be different from those taken for the competition within Korea. It’s up to each of us how we successfully localize ourselves to fit into the local market and appeal to the consumers,” said Kim of Lotte.
By Lee Ji-yoon (firstname.lastname@example.org)