Vietnam's small vendors fight supermarkets with social media

A growing middle class in Vietnam is creating a rise in supermarkets and convenience stores, but traditional markets are still holding on.

Shopkeepers at traditional markets -- still important sales channels in the country -- are using social media, building websites, and trying direct sales to restaurants as the country transitions to middle-income status.

Vietnam's per capita gross domestic product of about $2,600 is nearing the $3,000 threshold, after which spending habits tend to alter drastically.

Still, in the face of a dynamic retail landscape, the number of traditional markets remains largely unchanged from five years ago at about 8,500, according to data from Vietnam's statistics office.

Bustling Giang Vo Market in central Hanoi is an example of old ways that refuse to die. Live fish and chickens await customers, who receive their orders cleaned and cooked on the spot. The 100 or so shops are popular for the freshness of their products, compared with supermarkets that offer mostly refrigerated meat and fish.

Nguyen Hoai Thu, a 35-year-old bank employee and mother of two, said she shops almost daily at traditional markets, which offer greater variety than supermarkets and are 20-30% cheaper.

On average, Vietnamese visit traditional markets about 19 times a month, according to a survey conducted by research company Nielsen in 2018 -- a number that increases if variety stores are included. This compares with the 10 times a month spent shopping at supermarkets and other contemporary retail stores.

Despite old habits, however, consumers are changing. Another survey shows that Vietnamese spend only a third to a half of what they drop at supermarkets and convenience stores, indicating that the country uses traditional markets mainly for small purchases.

Duong Thi Ly, a produce shop owner, said sales have declined about 3% annually over the past five years. Ly says she is now "marketing more aggressively." In addition to posting fruit-of-the-day photos on Facebook, she messages clients via social media and is promoting delivery services, though she has seen little change to her bottom line.

Butcher shop owner Ngo Thi Chinh, who has no refrigeration, has begun selling meat left unpurchased by noon to restaurants at a discount. Chinh says this has "eased operations" as she can now easily unload the leftover meat.

Ben Thanh Market in the southern city of Ho Chi Minh City is popular with foreign tourists, but they find it hard to haggle with shop owners over prices, which are mystery to the uninitiated. However, since the market began operating a website that lists products and prices, tourists and others have had more leverage when negotiating with shopkeepers. According to the General Statistics Office of Vietnam, there were just under 1,000 supermarkets in Vietnam in 2017, but a rising middle class is creating demand for more. The country's biggest retailer, Vingroup, plans to double the number of its supermarkets to 200 by 2020 and more than double its convenience stores to about 4,000 over the same period.

Traditional Vietnamese markets sell fresh meat and fish in bulk, as opposed to supermarkets which deal mainly with packaged products.

The changing retail landscape is attracting outside interest. Japanese trading house Sumitomo last year entered Vietnam's supermarket business, while compatriot Aeon Mall will increase the number of its shopping malls in the country.

But despite solid annual growth of 5-10%, the retail business is tough. According to local media, rents in Ho Chi Minh City are among the highest in Southeast Asia, squeezing corporate earnings. Vingroup's retail unit suffered a loss of tens of hundreds of millions of dollars in fiscal 2017.

Japanese convenience store operator Seven-Eleven, a unit of Seven-I Holdings, feels the pain. The company opened its first store in Ho Chi Minh City in 2017 with a plan to operate about 100. But after three years, there are still fewer than 30 stores scattered across the country.

FujiMart Vietnam Retail CEO Keisuke Hitotsumatsu said, "For the time being, we will be competing with the traditional markets, rather than other supermarkets."

VNF ( Nikkei )