Equity Analysis /

Vietnam Retail Sector: Conquer the no-man's land

    Son Tran
    Son Tran

    Market Strat, Retail, Consumer 

    Rong Viet
    12 September 2019
    Published by

    Vietnam's consumers are among the world's most optimistic, while retail markets are still very fragmented. Together, this presents a fast-changing and attractive growth environment for retailers. In this 18-page report, we provide detailed analysis of Mobile World Investment Corp, Phu Nhuan Jewelry, FPT Digital Retail and FPT Telecom.

    Very optimistic

    In 6M 2019, total retail sales of goods and services in Vietnam grew 11.5% YoY, of which retail sales of goods posted a 12.5% growth. Breaking down: Foods (+13%), household goods (+12.1%), clothing (+11.1%) had the highest growth.

    Even though there was a slight fall in Consumer Confidence index in Q2, Vietnam is still the world’s third most optimistic nation with all key drivers of the index, including job prospects, financial security and spending ready, significantly increased.

    Vietnam’s retail revenue is projected to maintain annual growth of above 10% for the coming years, supported by a rising middle class, young population and changes in consumer behaviour.

    Most markets are still very fragmented

    Beside the smartphone market, which is already saturated and consolidated by two giant retailers (MWG and FRT), others are still very fragmented.

    • Mid-small street shops are favourite shopping places for Vietnamese due to convenience and competitive pricing.
    • Two largest ICT retailers, MWG and FRT, are expanding their footprints to other segments (FMCG, food and pharmaceutical) while some other players such as PNJ, Vinmart, Coop Food, Satra Food and Pharmacity are scaling up to consolidate their current markets.

    Listed companies have different stories

    Revenue growth is in a downtrend for retailers, but volatile for distributors.

    • Due to the ICT market’s saturation, MWG and FRT’s sales growth have been going down since 2016, while PNJ still had healthy growth from gold jewelry until a technical issue related to the new ERP system happened in Q2 2019.
    • DGW, an ICT distributor, found rescue by the exclusive contract with Xiaomi from 2017. On the other hand, PSD is struggling with an obsolete distribution model.

    Profitwise, only industry leaders see improvement

    • MWG and PNJ’s profit pick up due to self-optimization: better SSSG for MWG from store conversion and higher gross margin for PNJ from a change in sales structure.
    • FRT’s margin suffered due to iPhone clearance in 6M 2019 while DGW is heavily dependent on big-sales-but-thin-margin contracts with Xiaomi and Nokia.