Electronic, refrigeration retail market expected to magnetize investment

Many foreign investors said that electronics and refrigeration retail market in Vietnam has not been exploited yet and the country’s consumption of electronic and refrigeration appliances will rise from 7.3 percent to 11.9 percent by 2020.

Foreign-made electronic products dominate Vietnam's market. (Photo: SGGP)

Market research results from GFK Retail and Technology Market Research Vietnam Limited show that improvement in average earnings has greatly affected household final consumption expenditure, especially household electric and electronic appliances. Particularly, Vietnam’s GDP per capita topped US$2,109 last year. In addition, unemployment rate has dropped to 2.31 percent and consumer price index was at 0.63 percent while economic growth is estimated at 6.68 percent this year. Accordingly, household final consumption expenditure will increase to around $3,737 per household per annum.

Expenditure on electronic and refrigeration appliances alone is estimated at around VND157 trillion, of which, electronic products accounts for VND60 trillion, led by mobile phone, notebook, and tablet. Meanwhile household refrigeration products accounts for VND97 trillion with flat-screen television dominating and the rest is distributed to air conditioner, fridge, and washing machine products.

Consumption of electronic and refrigeration products is expected to surge from 7.3 percent in 2016 to 11.9 percent in 2020. Mr. Dang Tran Hai Dang, deputy director of VietinbankSc Research Center, explained that Vietnam has become official member of free trade agreements, including EU - Vietnam, Vietnam – South Korea, Trans Pacific Partnership, and recently ASEAN Economic Community. High-quality electronic and refrigeration products from Japan, South Korea, and Thailand are flowing into Vietnam with competitive prices. This will boost domestic consumption in the future.

Although domestic demand for electronic and refrigeration products increases rapidly, retail distribution network is merely in hands of a few enterprises and at big cities. Market survey by VietinbankSc says that as for genuine mobile phone market, The Gioi Di Dong accounts for 30 percent of market share, FPT 10 percent, provincial stores and electronics supermarkets 20 percent, and small mobile phone stores 40 percent. As for electronics market, there are fewer distributors but in larger scale, including Home Center, Nguyen Kim, Dien May Xanh, Dien May Cho Lon, Pico, and Tran Anh.

Generally, modern retail chains in Vietnam currently hold a market share of 25 percent and are expected to reach 45 percent by 2020, compared to that of 33-60 percent of other countries in the region. This sector is expected to strongly attract foreign investment capital.

According to Mr. Huynh Phuoc Cuong, retail director of GFK, foreign investors opt for buying well-known and prestigious distribution networks and stores instead of building a new risky distribution network. At present, legal factors allow them to carry out this objective easily.

Power Buy Company Limited, an arm of Thailand’s Central Group, acquired 49 percent stake of Nguyen Kim Trading Joint Stock Company, one of the biggest home appliances store chains in Vietnam. Moreover, Central Group also bought 49 percent stake of Pico. Japanese corporations owned 49 percent stake, 91 percent stake, and 30 percent stake of Citimart, Tran Anh, and Fivimart respectively. A few shopping centers have been bought by investors from South Korean and Hong Kong.

The market is changing rapidly. It raised concern that whether Vietnamese businesses are able to withstand the intrusion of experienced and rich competitors from other countries. Industry and Trade deputy minister Tran Quoc Khanh said that there will still be a stand for small businesses as long as they take action and learn to adapt the situation.

By Ai Van – Translated by Thuy Doan

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