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Two-Minute Tour: Vietnam

The lowdown on retail's burgeoning hotspots.

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The Numbers
Vietnam is currently the world’s 14th most populous country, with roughly 88 million people. That number is expected to top 100 million by 2025. While its GDP has slowed from its once-torrid expansion pace (3.1 percent in the first quarter of 2009, down from 7.4 percent a year earlier), that measure is expected to rebound to a solid 6 percent in the coming year.

The Players
Many global retailers are setting up shop in Vietnam, including South Korea’s Lotte, Japan’s Seiyu, Malaysia’s Parkson, Hong Kong’s Dairy Farm and Germany’s Metro. While that list is notably devoid of major U.S.-based retail chains, several reports in the Asian business press speculate that Walmart may soon enter the country.

The Hotspots
The places to be are Ho Chi Minh City (formerly Saigon) and Hanoi, the country’s two largest metropolitan areas. In addition to their young, indigenous populations, those cities are also major draws for tourists – and their disposable incomes – from such countries as Japan and China. Luxury goods retailer Louis Vuitton, a Western pioneer in the market, established its first two stores in the two cities nearly a decade ago, and more recently, New York-based NexCen brands (one of the few U.S. retailers operating in the country) chose Hanoi as the site of its first franchised store in Asia.

The Opportunities
“Vietnam continues to open its doors to international investors,” says Hana Ben-Shabat, a partner with A.T. Kearney, which recently published a study on the world’s fastest growing retail markets. “For the first time here, foreign retailers can hold a majority stake in a local joint venture.”

The Hurdles
It was recently reported that the country’s government is mulling implementing price controls on a wide variety of privately made or imported goods to contain inflation, a step The Wall Street Journal noted “would serve as a disincentive to direct investment in Vietnam.” In addition, much of the country’s population is still relatively poor, and a lot of its infrastructure (roads, power grids, etc.) is antiquated and in need of upgrading.

The Outlook
“Our long-term outlook for the country remains positive,” says A.T. Kearney’s Ben-Shabat. “Its population is young and growing, and the country also continues to urbanize, making it easier for retail suppliers to fulfill demand.”
 

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