Vingroup disbanded VinPro supermarket chain: The foreground from the fierce bloodbath of the electronics retail market?

On December 18, 2019, Vingroup Group officially announced its withdrawal from the direct retail segment to focus resources for Industry – Technology. Accordingly, the e-commerce site Adayroi will merge with VinID; The whole electronics supermarket system of VinPro will be dissolved. The deadline for completion is the end of December 2019.

According to Vingroup, after nearly 5 years of launching, the VinPro electronics supermarket system will be dissolved due to the change of development strategy, the retail sector is no longer a core priority of this Group. However, the fact that the retail of electronics for a few years has been likened to the red ocean, the competition has been extremely fierce.

In 2018, the electronics retail market witnessed the largest merger from the acquisition of Tran Anh Mobile World. A few years earlier, the market witnessed a series of big and small events taking place related to the termination of the operation of big names in the electronics industry: from the Vingroup deal to acquire Telecommunications A, Central Group (Thailand). ) acquiring Nguyen Kim, chains of Topcare, Viet Long, WonderBuy, Best Carings, HomeOne closed respectively.

Former leader Tran Anh – Mr. Tran Xuan Kien, when sharing the reasons for reselling this electronics supermarket chain after 16 years of construction admitted: " The main reason is that I see this market not much future. In some countries, in developed markets and in countries around the region, the information that we see and see, the consumption of electronics in some countries is starting to reach saturation threshold. "

In the 2018 analysis report, KIS Securities Joint Stock Company once made negative comments about the electronics retail market in the future. Accordingly, there are 3 factors that make the competition more and more fierce.

The penetration rate of electronic products is about to reach the maximum threshold

Considered to be one of the fastest-growing digitized economies and societies in the world, within a mere 5 years, the number of Vietnamese people accessing smartphones in big cities has nearly doubled. double according to Nielsen statistics. Specifically, in key cities such as Ho Chi Minh City, Hanoi, Da Nang, Can Tho, Hai Phong, … the number of users accounts for 84% of the population, while in the second tier cities, the number of users Smartphone has reached 71%.

According to Euromonitor statistics, over 70% of Vietnamese households already own basic items such as refrigerators, washing machines, televisions, personal computers, electric cookers , and about 30% of households own these items. more advanced goods such as air conditioners, microwaves, vacuum cleaners, etc. Despite the growth potential, the large chains covering the total of nearly 700 district-level administrative units or more make the competition more harsh than ever.

Source: KIS Securities Corporation

Competition from e-commerce channels

According to Statista's statistics on e-commerce, only 6% of Vietnamese consumers use smartphones / computers to search online. The total value of Vietnam's online purchases in 2017 was approximately US $ 3 billion, accounting for only 2.3% of the total US $ 129 billion of retail sales of consumer goods nationwide (GSO data). Of which, electronics / hand-held devices reached US $ 841 million, up 16% over the same period and will soon surpass the US $ 1 billion mark. The organization also forecasts that the value of Vietnam's E-commerce industry will grow over 30% of CAGR in the next 5 years, and soon occupy the main proportion in the sales channels similar to developed countries.

By 2018, other data from Google e-Conomy SEA Report 2018 and Temasek assessed the size of Vietnam's e-commerce market of US $ 9 billion. The report also forecasts the Compound Average Growth Rate (CAGR) of the period 2015 – 2018 to be 25% and the market to reach $ 33 billion by 2025. If this scenario happens, the size of the market Vietnam e-commerce market in 2025 ranked third in Southeast Asia, after Indonesia (100 billion USD) and Thailand (43 billion USD).

Previously, e-commerce platforms such as Lazada, Shopee, Tiki focused mainly on low-value consumer goods or consumer goods, but now the purchase of electronics from these channels gradually becomes popular. dissipate consumers. KIS assesses that this will create considerable competitive pressure for the traditional electronics retail industry in the next few years. Rong Viet Securities Company also noted in a recent report, confirming the development of e-commerce as a "time bomb" for retail businesses.

A good example in the US is Best Buy Co., Inc. Since Amazon joined the online retail industry, and the boom of E-commerce in the US from 2006-2010, Best Buy's operating profit margin, revenue and net profit have stalled or even decreased. . Although Best Buy has stepped up its multi-channel retail and online websites, the company's valuation (P / E, EV / EBITDA) in the past 5 years (as of 2018) has dropped by an average of 20% over the period. paragraph 5 years ago.

The cost of renting space in big cities will become increasingly expensive

By the end of Q1 / 2018, the data from the financial report showed that in the case of Mobile World, the total committed to lease operations was VND 8,900 billion, of which nearly VND 5,000 billion were store floor rental commitments. from 2-5 years (accounting for 56%), commitment to hire less than 1 year reaches VND 1,400 billion (accounting for 16%). Meanwhile, the number of rent commitments over 5 years only accounts for 28%.

With the trend of urbanization, population concentration plus the explosion of retail chains such as Circle K, VinMart, Family mart, FPT Shop, … and recently 7-Eleven and GS25, the rental price is in US dollars. Large cities such as Ho Chi Minh City and Hanoi (currently at an average of 60USD-150USD / m2 depending on the area) are increasing at a dizzying rate, approximately 10% per year according to CBRE Vietnam's statistics. This causes a great barrier of space costs for businesses, while also supporting the trend of e-commerce to gradually replace traditional retail channels.