Retail business in an emerging economy: The case of Vietnam

Abstract

In the recent decades, emerging economies have developed rapidly attracting foreign direct investment and advanced services, especially in the retail business sector. This research paper aims to point out the trend of retail business in a Southeast Asian emerging country, Vietnam. Retail business in Vietnam is more attractive due to its young population occupying 65% of the national population who maintain optimistic shopping behaviors. Since 2008, the negative impact of the global financial crisis and Vietnam’s economic instability have affected the Vietnam’s retail market negatively. It seems that potential retail market is on the decrease when the attractive index of the retail market was number one in 2008, number sixth in 2009 and number fourteen in 2010 in the world. This research assesses whether an emerging economy like Vietnam would continue to be an attractive destination for international retail market and what deterred big retailers from investing in Vietnamese market? Furthermore, are local retail businesses ready for competition? If so, what is the current trend in arapidly changing and risky environment as Vietnamese economy is experiencing at the moment.This research employs integrated statistical comparison and analysis. Demand and supply model in retail business is employed to identify the trend of retail business in Vietnam. Furthermore, this paper proposes strategies for retail business development in Vietnam in order to refocus the role of government to support the development of retail business.Our assessment suggests that Vietnamese businesses which utilize modern business concepts have grown swiftly while local businesses that follow traditional retail channel are under increased pressure for change due to market competition. The urban market remains attractive to domestic and foreign investors while the rural market is largely unexplored. Consequently, a combination between modern and traditional concepts could be utilized to promote and exploit full potentials of Vietnam’s retail business. This adaptation, which requires businesses to shift from traditional concepts into modern concepts, demands drastic change in business modeling such as size, structure and business practices. The research also provides policy suggestions including improvement of facility development, refining local supply chain, and simplifying procedural logistics for businesses to help them smoother this transition.