VN retailers forced to compete for space

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VietStock FI English - 35 month(s) ago 9 readings

VN retailers forced to compete for space

Domestic retailers are facing increasing difficulties in securing retail space in favourable locations due to rising leasing costs and growing demand for space from foreign rivals.

Consumers shop at Co.op Mart Vinh Phuc. Domestic retailers have encoutered difficulties in securing retail space due to rising leasing costs and growing demand for space from foreign rivals.

The Ha Noi-based Nhat Nam Joint Stock Co, owner of the Fivimart supermarket chain, recently shut down its store in HCM City's District 7 after being unable to renew the leasing contract for the site.

Nhat Nam Joint Stock Co Deputy General Director Vu Thi Hau said the company was considering new locations for the store.

However, finding quality retail space at reasonable prices was a huge headache, said Hau, blaming fierce competition from not only foreign companies but also larger domestic firms who are also willing to spend big on retail space.

Previously, the company had opened five supermarkets in HCM City and southern Binh Duong Province, and all of the stores have had to close due to failure to extend leasing contracts.

Hau said her company could secure leasing contracts for terms of only 5 or 10 years.

Finding suitable retail space was the biggest challenge domestic retailers had to face, said Nguyen Thi Tranh, general director of Sai Gon Co.op Investment and Development (SCID), the main investor in the Co.opMart supermarket chain.

Tranh said SCID planned to open more stores in HCM City's District 4 and in the capital city but failed to find suitable space.

"We had to pay above US$20 for each square metre and with such a rate we would not ensure our profits."

Head of the Ministry of Industry and Trade's Domestic Market Department Vu Van Quyen said the majority of Vietnamese retailers, especially private ones, had to lease land for supermarkets and convenience stores as they had failed to benefit from the Government's land resources.

That has resulted in difficulties in negotiating extensions of leasing contracts mainly due to rising leasing costs or owners taking land back for other purposes, Quyen said.

In addition to skyrocketing rental fees, domestic retailers also say administrative barriers and unofficial costs make it even more difficult to secure retail space.

The Government has not provided enough support to local retailers to help them access land and deal with cumbersome administrative procedures, said the Ha Noi Supermarket Association chairman Vu Vinh Phu.

The Ministry of Industry and Trade was closely working with the Ministry of Planning and Investment to revise Decree 108/2006/ND-CP on investment incentives and bringing trade infrastructure into the list of sectors receiving investment incentives is a possibility.

The revised decree would create more favourable conditions for firms to better approach land sources to further develop their distribution and retail chains, Quyen said.

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