supermarket statistics in vietnam

Asian Economic Journal 2007, Vol. 21 No. 1, 19–46

19

© 2007 The AuthorsJournal compilation © 2007 East Asian Economic Association and Blackwell Publishing Ltd.

Supermarkets in Vietnam: Opportunities and Obstacles

Masayoshi Maruyama and Le Viet Trung

Received 4 August 2006; accepted 18 December 2006

The present paper is the first study to link the perceptions of Vietnamese con-sumers to the barriers and prospects related to the development of supermarketsin Vietnam by applying quantitative and statistical analysis to Hanoi consumersurvey data. It is found that shopping habits related to the purchase of freshproduce in traditional markets, combined with the proximity and low prices theseoutlets provide, act as a major deterrent to supermarket development. Supermarketshave made considerable advances in the sales of processed food and non-foodproducts. However, without expanding their fresh food category, lowering pricesand enhancing their location convenience, supermarkets cannot expand theircurrent position.

Keywords

: supermarkets, consumer behavior, traditional market, probit model.

JEL classification codes

: D12, L81, M31.

doi

: 10.1111/j.1467-8381.2007.00245.x

I. Introduction

Structural adjustments (e.g. economic deregulation and market liberalization),combined with globalization, have created a new food-marketing environmentin Vietnam in the past decade. Before 1995, most Vietnamese had no choiceexcept to carry out all of their purchases at traditional markets. Today, insteadof shopping at these traditional outlets, consumers can choose to shop at clean,fully stocked and air-conditioned supermarkets, where they do not need to bar-gain. This modernization process has changed the face of the Vietnamese dis-tribution system; that is, the bazaar-based system, which is being increasinglycriticized by local newspapers as functioning poorly and being backward.According to Speece and Huong (2002), early in the 1990s, approximately halfof all retail purchases were made at state-owned and collective stores. However,by 1995, state/collective stores accounted for only around one-quarter of retailsales. Although over 80 percent of purchases of household goods were made in

* Maruyama (corresponding author): Graduate School of Business Administration, Kobe University,2-1 Rokkodai, Nada-ku, Kobe 657-8501, Japan. Email: [email protected]. Trung: same addressas Maruyama. Email: [email protected]. We would like to express our special thanks toan anonymous referee and to the Managing Editor Hiro Lee for very helpful and constructive com-ments on an earlier version of our paper. The research for this study was supported by a Grant-in-Aid for Scientific Research from the Japan Society for the Promotion of Science and the Ministryof Education, Culture, Sports, Science and Technology of the Japanese Government.

ASIAN ECONOMIC JOURNAL

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traditional markets in the early 1990s, this dropped to only half of total purchasesby the end of the 1990s. In 1999, just 5 years after the first supermarkets wereopened in Vietnam, supermarkets (almost all are mini supermarkets) accountedfor nearly 20 percent of purchases of household products in major cities.

Nevertheless, for the most part, in this first decade, supermarkets, hyper-markets and shopping centers have been limited to major urban areas (mainlyin Hanoi and Ho Chi Minh City (HCMC)). At present, such modern distributionnetworks carry out approximately 10 percent of total food and home productdistribution for the entire country (VNS, 1 June 2005). Supermarkets are nowspreading from large to secondary cities, and have rapidly increased in numberfrom only 10 supermarkets in 6 of 64 cities and provinces in 1995 to more than200 supermarkets in 30 cities at the end of 2004 (Nhieu et al., 2005).

Surprisingly, however, despite the prevalence of the changes that are occur-ring in this sector in Vietnam, and despite that this development has economicsignificance, relatively little is known about Vietnam’s supermarkets. Becauseof the lack of reliable statistical data, this area has been little studied by academics.There are very few official statistics on the supermarket sector in Vietnam.

Facing this shortage of data, most of the published studies generate their datafrom interviews with supermarket and supplier personnel (i.e. surveys of super-market managers, wholesalers, farmers and other key informants). The majorityof these studies focus on smaller farmers, traditional retailers and wholesalers,who are at risk of being further marginalized with the swift introduction ofsupermarkets, or they compare the performance of modern and traditional sup-ply chains (see Cadilhon et al., 2006). Speece and Huong (2002) present thefirst case study on consumer attitudes toward mini supermarkets. Conducted inHanoi in late 1996 and early 1997 at the very early period of supermarketdevelopment

( just slightly over a year after the first supermarket opened) andusing a sample of 176 consumers, they show that mini supermarkets became animportant part of the retail scene and that the supermarket concept was success-fully introduced into Vietnam. This study mainly focuses on middle class con-sumers, and their main conclusion is that this consumer segment was actuallyvalue-driven rather than price-driven or quality-driven.

The previous studies generally collect observations and use qualitative anddescriptive approaches to interpret the data. Only very rarely have studiesinvolved the use of survey data and the application of quantitative and statisticalanalysis methods. In addition, only a few studies have focused on the linksbetween consumer behavior and preferences and the development of supermar-kets as well as the matter of consumer shopping behavior that creates barriersto the advancement of supermarkets. The purpose of the present study is, there-fore, to focus on this gap in knowledge by analyzing consumer habits withrespect to supermarkets and by providing a basis for understanding the barriersand prospects for the development of new retail outlet types. Most of the datain the present paper comes from a detailed consumer survey undertaken bythe present authors between March and April 2006. Statistical and quantitative

SUPERMARKETS IN VIETNAM

21


methods are used to analyze this data. Because there has been a lack of informa-tion regarding the supermarket sector, we also make extensive use of the localtrade press.

Our study finds that a major tendency among consumers is to split theirgoods purchases, buying fresh food in wet markets and non-perishable food atsupermarkets or mom-and-pop stores. The long-established habit of shoppingfor fresh produce in traditional outlets combined with the proximity and lowprices that these markets provide are found to be the major deterrents to super-markets gaining market share. Supermarkets occupy the weakest position of allthe retail outlet types because they operate in a very competitive environment,where they are considered more expensive than competing shops but not verywell differentiated from their competitors in the range of products they carry.Our findings suggest that retail outlet formats that provide good product qualityand a wide range of adequately fresh produce along with low prices have thegreatest opportunity to build consumer loyalty and to increase market share. Inaddition, supermarkets can also attract consumers by opening stores near resi-dential areas.

The rest of the paper is organized as follows. Section II presents the literaturereview. Section III details the methodology for the study. Section IV sum-marizes the results and discusses the implications of the research findings, andwe conclude our study in Section V.

II. Literature Review

II.1 Rise of supermarkets in developing countries

Many recent articles have mentioned the significant and rapid rise of super-markets throughout the developing countries and forecast their continued rapidspread. In Latin America, the process of ‘supermarketization’ began in the early1990s. By 2000, supermarkets delivered 50–60 percent of retail food sales incountries in that region. The take-off in Southeast Asia began 5–7 years laterand is registering faster growth (Reardon et al., 2003; Reardon and Berdegue,2002; Traill, 2006). The expansion of the modern retail sector frequently beginswith a smaller mini mart store format. The more capital-intensive supermarketsfollow. Innovation occurs first in markets serving the growing middle class, andlater in the lower-income segment. This pattern has been observed in manydeveloping countries (Reardon et al., 2003; Goldman et al., 1999, 2002, 2005). Thehigher opportunity cost of time makes multi-stop, traditional format shoppingmore costly than one-stop shopping (Goldman et al., 2002). Studies in develop-ing countries report cases where, in spite of easy accessibility to supermarkets,consumers have preferred to continue purchasing their food in traditional formatoutlets (Goldman, 1981; Goldman et al., 2002; Maruyama and Trung, 2006).

Supermarkets developed rapidly in Taiwan in the early 1990s. As a result ofthe growth of the modern sector, the market share of traditional markets weakened


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at a rate of between 3 and 5 percent per year (Trappey and Lai, 1996). By 2000,over 60 percent of food sales were transacted by the modern retail sector(Cadilhon et al., 2006). Supermarkets appeared in Hong Kong in the early1960s, and in mainland China at the beginning of the 1980s. The supermarketsector began to grow rapidly in the 1990s from its initiation in a few metro-politan regions in 1990 to a US$55bn industry today: with 53 000 units in 2002and 30 percent of the urban food retail markets. Supermarket sales are growingby 30–40 percent per year, two to three times faster than in other developingregions (Hu et al., 2004). The most crucial factor contributing to the rapidincrease in supermarkets in China during the 1990s was the support from thegovernment (Lo et al., 2001). An explicit government program was launched in2003 in a number of large cities to convert wet markets to supermarkets throughan auction system in order to modernize the retail sector. However, the super-market food category with the slowest penetration has been fresh food. Super-markets have only a 10 percent or at most a 20 percent share in fresh food in themajor cities (Hu et al., 2004).

In Thailand, supermarkets have also become common. By the mid-1990s,approximately one-third of Bangkok’s population regularly shopped in super-markets (Feeny et al., 1996). Current trends in Bangkok include strong growthof newer retail formats, such as hypermarkets, as well as agglomerations (con-centrations of stores), including huge shopping malls (Blois et al., 2001). In thecities of Thailand, the modern sector’s market share of food sales increasedfrom 25 to 50 percent from 1997 to 2002 (Cadilhon et al., 2006). However, longhabits of purchasing fresh food from local markets have made this a difficultarea of business in which to expand (Feeny et al., 1996).

In Malaysia, supermarkets have been operating for years, but their marketshare accounts for only 20 percent of food sales across the country (Cadilhonet al., 2006). In the less developed Indonesia, the mini mart format is growingrapidly, but the supermarket category has been slower to take off. The market isjust entering the very early stages of growth in modern retailing, and is justbeginning to attract the attention of foreign retailers (Speece and Huong, 2002).

The rate of spread of supermarkets in developing countries is an issue ofinterest, and several articles have described the rapid spread of supermarkets.The line of argument is that supermarkets are no longer places where only richpeople shop; over the past 10 years, they have spread from high-income areas topoorer areas and much smaller towns. This has happened in response to severalforces, many of which are interconnected: for example, increasing incomes,urbanization, more female participation in the labor force and openness toforeign investment. Traill (2006) quantitatively models the level of supermarketpenetration (share of the retail food market) on a cross-section of 42 countriesfor which data could be obtained, representing all stages of development. Thefindings are that GDP per capita, income distribution, urbanization, femalelabor force participation and openness to inward foreign investment are allsignificant explanatory variables.


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Some recent studies provide evidence for the coexistence of traditional andmodern food retail formats. Goldman et al. (2002) examine food retail mod-ernization in Hong Kong, and Goldman and Hino (2005) analyze the state ofmodernization of food retailing serving the Israeli Arab population. Both ofthese studies are based on consumer surveys where consumers are no longerrestricted by socioeconomic factors. These studies identify a tendency to pur-chase perishable food items in traditional outlets, and they identify the greaterdistance to travel to reach supermarkets to be the main limitation on supermarketshare growth.

This is not only typical to developing countries; consumers in the highlydeveloped Asian economies of Japan, Hong Kong, Taiwan and South Korea regu-larly utilize traditional formats, and supermarket share has peaked at less thanthe 50 percent level (Goldman et al., 2002). Consumers might view traditionalmarkets and supermarkets as complementing one another. They might regularlybuy fresh food in traditional markets, and purchase processed and packagedfoods, as well as non-food products, in supermarkets or at traditional mom-and-pop stores.

II.2 Traditional retail system in Vietnam

The retail distribution system of Hanoi has passed through many stages. Fromthe feudal period to the French rule in 1828, Vietnamese distribution consistedof traditional markets (often referred to as ‘wet markets’ or ‘street markets’).However, the structure of social and business relations changed under Frenchcolonial rule. With the decree to spatially concentrate the sale of perishablegoods, traditional street market trading was significantly reduced (Waibel,2004).

Under the central planned economy (1954–1984), private trade was reducedto a minimum. The state took over the role of the private traders, and it openedselling locations in the largest retail areas as the government’s own enterprises.On the whole, trading activities dropped significantly after 1955. By 1960, theprivate sector was virtually eliminated (Waibel, 2004).

Under economic policy reforms (Doi Moi in 1986), farmers have long-termleases on plots of land. They may sell their output in markets. As a result, farm-ers are subject to full market incentives, because any increased effort translatesdirectly into increased income. After 1986, as agricultural output boomed, ruralmarketplaces developed rapidly. In the towns and cities, many new marketswere created. Already in 1988, almost every house in the central streets ofHanoi was using its frontage as a retailing outlet again (Waibel, 2004). The tra-ditional bazaar network was re-established and continuously developed. Thenumber of markets more than doubled from 4000 in 1993 to 8300 in 2003(VNS, 12 June 2004). In terms of organized markets, Hanoi alone has morethan 120 markets with a total area of over 550 000 m

2

. An ‘organized bazaar’(formal bazaar) is defined as a market established by the local authorities. A


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management board usually manages this kind of market. These organizedbazaars have basic, but poor, facilities, including water supply and waste treat-ment systems. They lack refrigeration equipment and do not process fresh foodsinto branded goods for resale. There are various types of goods sold at organ-ized bazaars. However, the main goods are fresh food.

There are a substantial number of the traditional mom-and-pop stores, whichare family-owned retailers that sell a limited variety of processed food, drygoods, drinks and household supplies. Specialized stores have also emerged. InHanoi, many streets often specialize in a single product category. There areoften 200–300 identical mom-and-pop stores along a few hundred meters of asingle street. They mainly specialize in non-food products. They have the char-acteristic of being the only sales points to offer competitive brands for the sameproduct category. The sales area is nearly always very small, often being lessthan 10 m

2

. Such a high spatial and economic density of trade activities can bealso found in HCMC.

In addition to the boom in private retail shops, Hanoi and HCMC havebecome the prime areas for the booming, spontaneous development of informalbazaars called

Cho Coc

: ‘frog markets’. The sellers lay out their wares (mainlyfresh food) along streets, roads or wherever it is convenient for customers toshop. Retailers in these informal bazaars are mainly farmers and the poor. Theycommute daily from the surrounding countryside. Because of the small scale ofoperations, they can easily move or flee the police. In both cities, local author-ities have plans to dismantle all these markets, but they have been unable tosuppress this kind of selling activity.

II.3 Emergence of modern distribution in Vietnam

As previously stated, over the past 10 years, Vietnam has experienced anincrease in the number of supermarkets. This modern format did not exist inVietnam before 1993. The first supermarket was a state-run enterprise openedin 1993, named Minimart, but it was closed down 4 days after opening, becauseof insufficient stock levels to meet the enormous demand, despite prices being20–30 percent more than those of traditional retailers (Venard, 1996). Citimartfollowed in 1994, owned and operated by a Vietnamese expatriate who hadgained experience in supermarket operations in the Philippines. The success ofCitimart inspired the owners to open another supermarket chain called Maximartin 1995 (Cadilhon et al., 2006). Hanoi got its first supermarket named ‘Mini-mart Hanoi’ in March 1995. After that, approximately 70 supermarkets morewere quickly established in HCMC and another 20 in Hanoi. Approximatelytwo-thirds of the original outlets failed, but some survived and have reaped thebenefits of strong growth in the modern retail sector (Speece and Huong, 2002).

The number of supermarkets and shopping malls has increasing rapidly fromonly 12 (10 supermarkets and 2 trade centers) in 6 of 64 cities and provinces in1995 to 210 supermarkets and 32 shopping malls in 30 cities at the end of 2004


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(Nhieu, 2005). Hanoi and HCMC, the country’s two biggest cities, have 155supermarkets. In Hanoi and HCMC, a system of big shops and larger and morediverse grocery stores has been established. Some have significant cold storagefacilities, and are, therefore, able to offer a greater selection of fresh seafood,meat, vegetables, a large range of imported beer, wine and canned goods, anddry grocery items. These outlets are also beginning to offer ready-to-eat andready-to-cook foods, which appeal to Vietnam’s growing middle class and elitegroup in major cities as well as to the increasing number of international tourists.

Besides the rise in the number of supermarkets, the dimensions of these out-lets are also on the increase. In the early stages, the average floor space of thetypical supermarket store ranged from 500 to 800 m

2

, but by 2000, a few super-markets had begun to appear with larger floor spaces of around 2000 m

2

ormore (Speece and Huong, 2002). In 1994, 95 percent of goods displayed at thecity supermarkets were imports. At present, domestic goods account for70 percent of total stock. Between 85 to 90 percent of goods at big supermar-kets, including Co-op, Big C and Metro, are locally made products (VNS,5 May 2004) (see Tables 1 and 2).

Supermarkets initially focused on dry items, packaged and processed foodlines and on non-food products. Today, many supermarkets carry fresh food,but offer a relatively weak range, and minimal variety. They have made littleprogress in fresh food lines where their share accounts for a very small percent-age of all fresh food sold. For example, it is estimated that supermarkets sellless than 2 percent of all fresh vegetables in Hanoi (Loc, 2003), and onlyaround 2 percent in HCMC (Cadilhon et al., 2006).

Saigon Co-op Mart is the top state-owned retailer in Vietnam, owned andoperated by the Saigon Union of Trading Cooperatives. It opened its first super-market in 1996. It currently owns the biggest retail supermarket chain in Viet-nam, with 14 supermarkets in the country. It has managed to create a turnoverthat totaled US$126m in 2004 and accounted for 50 percent of the sales of thesupermarket system in HCMC (VOV, 14 July 2005). It is planning to increaseits number of supermarkets to 40 by 2010 (VOV, 30 September 2005). It is try-ing to improve its competitiveness and has invested US$1.5m to develop asupermarket management system. It has expanded its warehouses, and has builta large distribution center in an effort to reduce costs. The chain has plans to

Table 1 Number of supermarkets

1995 2000 2004

Hanoi 2 20 73Ho Chi Minh City 2 40 82Entire country 10 107 210

Source: Collected from various different retail statistics sources.

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© 2007 T

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ublishing Ltd.

Table 2 List of major supermarkets, hypermarkets and wholesale stores in Vietnam

Retailer name Outlet type Ownership Number of outlets Turnover(US$ mil)

Locations and expansion plan

Percent of domestic goods

Co-op Mart Supermarkets, Local company operated 14 supermarkets, 136 Mainly in HCMC 80–90convenience stores under cooperative law 6 convenient stores Plan: other cities

Cora Hypermarkets, Local joint venture with 3 hypermarkets 26 HCMC, Dong Nai and Hanoi More than supermarkets Casino Group of France 1 supermarket 90

Maximart Supermarkets, An Phong privately- 3 31 HCMC, Nha Trang 70–90department stores owned company Expand to Can Tho soon

Citimart Supermarkets, Privately-owned 6 supermarkets 20 HCMC, Hanoi, 70–90convenience stores company 5 stores Can Tho, Dong Thap

Intimex Supermarkets, State-owned company 4 10 Hanoi, Hai Phongdepartment stores

Fivimart Privately-owned 3 2.5 Hanoi and plan to More than company expand to HCMC 70

Satra Supermarkets State-owned company 2 2.5 HCMCDiamond Markets Privately-owned company 6 2.5 HCMCMetro Cash & Carry Wholesale stores 100% foreign investment 6 220 HCMC, Hanoi, Hai 85–90

company (Germany) Phong, Can Tho, DanangSeiyu Supermarket Local joint-venture with 1 17 Hanoi 30–40

Seiyu of JapanHanoi Marko Supermarket Private-owned company 3 21 Hanoi 80–90

Note: Metro Cash & Carry has government permission for wholesale operations only, no import license.Sources: USDA Foreign Agricultural Service (2005), Nhieu et al. (2005) and data collected from personal communication with Vietnam Ministry of Trade.


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cooperate with Satra (the Saigon Trading Corporation), which has 35 subsidiar-ies that play a leading role in the food processing and trading sectors in HCMC(VIR, 28 May 2006).

Intimex, a strong operator under the Ministry of Trade, has devised a 10-yeardevelopment strategy, setting an ambitious goal of annual business growth of30 percent. The company plans to develop three levels of supermarkets andcommercial centers. Convenience stores will sell necessities in small neighbor-hoods; supermarkets will cater to the majority of consumers, providing themwith everyday necessities at an average price; and commercial centers willserve high-income earners and tourists. The company will also develop a largewarehousing and distribution center (VIR, 28 May 2006).

Fivi, a joint-stock company, is one of the leading companies in Vietnam involvedin supermarket management and operation, and it is the owner of 3 supermar-kets in Hanoi named Fivimart. It is also going to expand its supermarkets sys-tem to other cities in Vietnam. The first Fivimart supermarket was establishedat the end of 1997 with an area of 3000 m

2

. Fivimart supermarkets provide buyerswith a large selection of over 25 000 items (www.tctgroup.com.vn).

Some distributors are also exploring the development of small-scale conveni-ence stores as an alternative to massive superstores, especially in Vietnam’straffic-clogged cities. As part of its plans, Citimart will start to attract consum-ers living in townships with its 10 convenience stores planned for the end of2006 (AFP, 21 May 2006). The G7 Mart, a subsidiary of Trung Nguyen Coffee,plans to develop a new domestic distribution system and retail chain worthUS$395m. The G7 Mart aims to connect wholesale suppliers to the retail mar-ket and to enhance the competitiveness of the domestic distribution system. Itplans to open 5500 stores throughout the country in the first phase and expectsto establish 10 000 stores, 18 warehouses, and seven trade centers over 5 years(VIR, 28 May 2006).

The French Bourbon Group opened its first hypermarket in Vietnam in late1998. Named Cora Dong Nai, it was located in Bien Hoa City, 30 km east ofHCMC. Cora opened its second outlet (Cora An Lac) on the other side ofHCMC in March 2000. A third operation, a joint venture called Cora MienDong, opened in HCMC in mid-2005. The French chain opened its first outletin Hanoi in January 2005. It was named Big C Thang Long, and was located inLang Hoa Lac, approximately 15 min from the center. This 12 000 m

2

super-market is the largest in the north and offers more than 45 000 products, ofwhich 90 percent are made in Vietnam, ranging from fresh food to appliances,garments, home decorations and electronics (VNN, 7 January 2005). TheFrench Bourbon Group plans to open 7 supermarkets nationwide and 5 otherstores in urban HCMC (VNN, 8 March 2005).

Metro Cash & Carry has opened 2 centers in HCMC (in 2002 and 2003), 1in Hanoi (in 2003), 1 in Can Tho (in 2004), its fifth center in Hai Phong in2005, and its sixth in Danang. It plans to establish another 8 superstores inVietnam with a total investment of US$120m (TNN, 26 July 2005; VIR, 28


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May 2006). Metro offers their business customers a very wide array of over7000 foods and 8000 non-food items. Consumers are required to use wholesalemembership cards to gain entrance, but the cards are frequently circulatedamong friends, relatives and neighbors. Having an economy of scale with awide network of suppliers, its prices are lower (at least 10 percent) than anyother supermarket in Vietnam (VNS, 1 July 2005).

Malaysian retailer, Parkson, also entered the market in June 2005 with theopening of its first of 10 shopping centers in Vietnam, and with a total investedcapital of US$70 million (VIR, 28 May 2006). Japan’s Seiyu, which has beenoperating the Hanoi Seiyu for 5 years, is working on obtaining licenses toextend its retail network to other provinces. In addition, a leading pan-Asianretailer, Dairy Farm (Hong Kong) has negotiated an agreement in principle tolaunch a supermarket chain, and could enter into a partnership with Citimart.South Korea’s leading retailer, Lotte Mart, China’s Shenghui group, Tesco(a robust newcomer from the UK), US giant Wal-Mart and the French groupCarrefour are also trying to obtain licenses to crack into the Vietnamese market(VNS, 1 July 2005; AFP, 21 May 2006; VIR, 28 May 2006).

Even though these foreign chains account for only a small percentage of thetotal number of stores in Vietnam, they account for more than half of the totalretail sales contributed by supermarkets and trade centers nationwide (VBF, 15September 2005). Initial supermarket successes have prompted both domesticand foreign investors to expand their businesses in Vietnam. In parallel, Viet-namese authorities strongly encourage the development of modern distributionoutlets in the cities to solve their perceived problems related to food sanitationand safety in the production and in the marketing system (Cadilhon et al.,2006). The Ministry of Trade is making an effort to raise the ratio of productsdistributed by modern channels to 40 percent in the next few years by establish-ing 20 large-scale distribution companies to serve as a core of the whole net-work (VET, 8 April 2005). This process of development has been causing atrend to shift away from traditional outlets to modern shopping at supermarketsand department stores. This explains why the modern distribution networkgained an average of 15–20 percent growth each year during 2000 and 2005,much higher than the growth in the total retail sector (10 percent) and nationaleconomic growth (7.7 percent). Supermarkets and trading malls have beengradually changing the traditional distribution system, the bazaar-based system.

II.4 Sources of change

The reasons for the increase in supermarkets in the past decade could be attrib-uted to the following factors.

Increases in income

The healthy expansion of Vietnam’s economy (more than 7 percent over the past15 years) has resulted in increased disposable incomes and improved living


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standards. Furthermore, cities account for 70 percent of the national GDPbecause of industrial and trading activities. This brings annual per capita GDPto US$1395 in the urban center, and this has led to the formation of a relativelyaffluent middle class and elite group in the major cities whose monthly incomecontinues to increase (over US$500). This can be seen clearly in HCMC andHanoi, the country’s two major cities, with average annual incomes more thandouble the national average of US$425. In addition, more than 2.5 million tour-ists entering Vietnam per year, as well as an estimated US$3bn sent back totheir mother country by millions of Vietnamese overseas (Viet Kieu) will fuelthe development of the modern retail system (website of the General StatisticOffice available at: http://www.gso.gov.vn; VIR, 19 September 2005; Cadilhonet al., 2003).

Urbanization

The rapid growth of urbanization and the boom in new housing projects inthe cities has led to a more concentrated population, therefore facilitating thegrowth of supermarkets. The ratio of the urban population to the total popu-lation was approximately 20 percent in 1995, but increased to approximately26 percent in 2003. The modernization and industrialization of the countryhas also led to Vietnamese consumers having busier lifestyles, especiallyurban Vietnamese women who are increasingly joining the workforce and,therefore, have less time to prepare meals. More people are switchingfrom traditional products to packaged foods, which used to be consideredluxuries.

Consumers are younger and more knowledgeable

More than 60 percent of the Vietnamese population is under the age of30 years, representing a powerful new consumer force. Furthermore, Vietnam-ese consumers have better knowledge of products, and have increased demandfor a bigger variety of consumer goods. It is clear that a modern way of livinghas emerged, with mobile phones, costly motorbikes and credit cards now a partof everyday life. Vietnamese consumers are still very aware of prices, but theyare also conscious that the stores that they go to might enhance their socialstanding.

Weakness of traditional markets

All the disadvantages of the traditional bazaar system (dirty, crowed, unorgan-ized, noisy and prevalence of counterfeits) became an important catalyst for cityurban consumers to shift away from traditional bazaars. No less important is thematter of consumer confidence regarding products. The fear of being cheatedfacilitated a shift away from traditional bazaars. Searching for a certain productis considered by some as being a wasteful activity, and so some buyers mightbe willing to pay a higher price for a service that does the search for them.Supermarkets provide that kind of service.

http://www.gso.gov.vn


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Support from the Vietnamese Government

This is one of the most important factors affecting the development of thedistribution system in Vietnam. At present, the Ministry of Trade is draftingpolicies aimed at encouraging investors from all economic sectors to constructand operate modern distribution networks. In order to establish an effective andmodern distribution network dominated by domestic business, the governmentwill assist approximately 20 major goods producers and retail distributors(VNS, 12 March 2005). Supermarkets have also benefited to some extent fromgovernment regulations attempting to control hygiene and congestion in tradi-tional markets. It is clear that under this orientation, this modern network is setto grow and continue growing for the foreseeable future.

Relaxation of regulations on foreign direct investment and food retailing from the 1990s

When FDI regulations were liberalized, a flow of expatriates came into thecountry. They play a key role in promoting modern retail formats. For example,Citimart, one of the first supermarkets in Vietnam, is operated by a returneeVietnamese expatriate who gained experience in the Philippines. In addition, tojoin the ASEAN Free Trade Area and the WTO, Vietnam is going to open up theretail market to foreign competition. The domestic market will need to welcomeglobal distributors that have the advantage of trademarks, capital and techno-logy. It forces domestic retailers to use their best efforts in building and organ-izing a modern distribution system to compete. If this cannot be accomplished,they have to withdraw from the competitive environment.

III. Data and Methodology

The present study is based on both primary and secondary data. Primary datawas gathered using a detailed consumer survey. Hanoi, the capital city ofVietnam, provided a convenient location for the survey, because the city’spopulation (3 million in 2003) and the economic base fairly represent thecountrywide ratios of industrial development and population diversity. Oursurvey on consumer behavior and perceptions of Vietnam’s supermarkets andtraditional retail outlets illustrates the trend concerning how consumers viewboth these forms of retailing.

The detailed consumer survey was conducted intensively over the monthfrom 1 March 2006 to 1 April 2006, and was spread across all districts in theinner city of Hanoi. We sent out questionnaires to 2000 Hanoi consumers. Atotal of 570 questionnaires were returned and after eliminating uncompletedquestionnaires, the remaining 413 questionnaires were used as the sample. Thesample survey is biased towards women (350 women and 63 men) who aremost often responsible for shopping in their families. It was found that47.7 percent of shoppers were under 30 years old (197); 30.3 percent wereaged between 30 and 39 years (125); and 22.0 percent of shoppers were 40 years


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or older (91). In terms of the average income per person in each family,45 percent of the respondents have income levels of between VND0.5m andVND1.5m, 37 percent between VND1.5m and VND2.5m, and 18 percent havean income of more than VND2.5m. Nearly 100 percent of respondent house-holds have a television, 99 percent have a motorbike, 92 percent have a refri-gerator, 81 percent have a washing machine, 54 percent have air conditioning,and 10 percent have a car. The sample survey is slightly biased towards higherincome respondents in comparison with the general population characteristicsof Hanoi. However, if we limit our consideration to only urban areas, the sampleclosely resembles the general population characteristics in the Hanoi urban area.It is expected that those consumers who have good incomes are willing to goshopping at supermarkets. It is also expected that those consumers would havea better perception about both kinds of traditional bazaar and modern retail formats.

The present study makes extensive use of a few earlier studies, researchreports and statistical data on Vietnam. The authors also toured almost all of thetraditional markets and modern retail establishments in Hanoi in August 2005.In addition, to analyze Vietnamese consumer shopping frequency at supermar-kets, probit models were estimated.

Statistical analysis is also used to analyze the survey data. We will test thehypothesis for

µ

a

–

µ

b

, the difference between two normal population means.Because we do not ordinarily know the values of variances of populations, testson the difference in means (the comparison of two means) should be conductedwith the

t

-test. However, when both sample sizes are large (greater than 30), wework with the standard normal distribution; therefore, we replace the value

t

,which follows Student’s distribution, by the standard normal variable

z

(Sachs,1982; Bowen and Starr, 1982).

1

Because every subsample size in our study isgreater than 100, we use the

z

-test. The difference between the two means isequal to, less than, or greater than zero. We are interested in testing whichcriterion (the mean of element) is more important (greater) than the other inconsumer decision-making. The test hypothesis in the present paper involves aninequality; that is,

H

0

: µ

a

–

µ

b

≤

0,

H

a

: µ

a

–

µ

b

> 0. Hence, we use a one-tailedtest in this paper. To make the discussion easier to follow, we have only used the5 percent significance level for evaluating the significance of differencesbetween means.

1. If both samples size are large (greater than 30), then we can assume the distribution of (the difference between two sample means) is normal and we may use the sample standard error of

the difference between means to estimate the standard error of distribution

of . The test statistic

z

is calculated as , where are the means of

the two samples with sample sizes

n

a

,

n

b

and are the sample variances (also see Bowen andStarr, 1982). The alternative hypothesis has the > sign; so the test is a right-tail test with the tailarea

z

0.05

=

1.64. Hence, we reject H

0

if sample

z

> 1.64.

x xa b −

s s n s nx x a a b ba b− = +

( / ) ( / )2 2

x xa b − zx x

s n s n

a b

a a b b

( )

( / ) ( / )=

−

+2 2x xa b,

s sa b2 2,


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IV. Results and Discussion

IV.1 Reasons for visiting supermarkets

The development of supermarkets has started in Vietnam. We found that super-markets have made further inroads during the years since the 1997 survey ofSpeece and Huong (2002). We found that 35 percent of shoppers reported vis-iting supermarkets at least once a week (compared with 28 percent in 1997) andthat supermarkets have made considerable advances in selling processed food anddrinks and non-food products. Supermarkets offer a clean and efficient alterna-tive to the noisy, pungent old bazaars where consumers haggle over everything.

Table 3 summarizes the reasons consumers cite for going to supermarkets.Self-service, guarantee of quality, fixed prices, safe and clean goods, the abilityto search for something unique, and a one-stop service were the major reasonsidentified by respondents for shopping at supermarkets. We divided therespondents into two sub-groups: ‘hard shoppers’ who go to supermarkets atleast once a week and ‘infrequent shoppers’ who go to supermarkets less thanonce a week. Hard shoppers apparently like the first 4 reasons in the checklistbetter than the infrequent shoppers. Fewer than half of respondents (both hardshoppers and infrequent shoppers) say they go to supermarkets because it isenjoyable and a good place for relaxing. Quick examination of prices, curio-sity, reasonable prices, freshness, prestige and fashionableness are rarely cited asreasons among both hard shoppers and infrequent shoppers. In the 1997 survey

Table 3 Reasons for going to supermarkets

Total Hard shoppers Infrequent shoppers

Sample size 409 144 265Reasons

Self-service 80.7 82.6 79.6 Guarantee of quality 76.3 81.3 73.6 Fixed price 75.6 82.6 71.7 Safe and clean 68.5 78.5 63.0 The ability to search for something unique 61.6 54.2 65.7 One-stop service 60.1 59.7 60.4 Enjoyable and relaxing 40.6 37.5 42.3 To buy everyday necessities 38.4 53.5 30.2 Good service of salespersons 37.7 42.4 35.1 Reasonable prices 29.3 41.0 23.0 Freshness 26.9 36.1 21.9 Quick examination of prices 22.5 18.1 24.9 Curiosity 21.8 17.4 24.2 Prestige image 2.7 2.1 3.0 Fashionable 2.4 3.5 1.9

Note: Reported figures are the percentages of respondents who selected the reasons in the checklist.


33


done by Speece and Huong (2002), consumers indicated that the most importantreason to go into a supermarket was for ‘quick examination of prices’, but thiswas one of the lowest ranked reasons in the recent survey. Curiosity also used tobe a key reason, but this is no longer an important reason for infrequent shoppers.

One of the striking findings is that shoppers are clearly quality-oriented.Shoppers choose their places of purchase (supermarkets) by looking first atquality for all different categories of goods (Table 4).

Looking at the criteria and priority for choosing stores for each category ofgoods (vertical comparison), apart for non-food items, consumers identified thesafety of goods for health considerations, freshness or newly produced prod-ucts, quality, and clarity as to the origin of goods as the most important criteria.Consumers do not trade off these store factors (freshness, quality and safety)for price. Price is at a much lower level of importance. In the case of fresh food,the differences among the importance of freshness, safety and quality are notsignificant at the 5 percent level. In the case of non-food items, price is also ata lower level of importance in comparison with quality. However, it is rated ata level similar to safety, service of salespersons and variety of product lines(insignificant difference at the 5 percent level). Criteria of mid-level importanceincluded price level, variety of product lines, a well-known brand name, dis-tance, and service of salespersons for all kinds of goods. It is interesting to notethat the location of stores, return and adjustment policy, decorations and advertisingat stores and shopping atmosphere seem to have a low level of importance.

Conventional wisdom suggests that supermarkets should be viewed as havinga good shopping atmosphere (clean, bright windows and air conditioning), alarge scale or be located at a good place with remarkable decorations. However,our results suggest that investing much money in these things will increasecosts but might have a small effect in attracting consumers. Instead of this kindof investment, supermarkets should promote more trade by concentrating onquality, safety of goods, clarity as to the origin of goods, or making the effortto provide a greater variety of fresh foods with adequate levels of hygiene andfreshness. In addition, regardless of the lack of finance for domestic companies,in a very crowded area like Hanoi, it is very difficult for domestic companies tofind a place to build a supermarket in the central areas of the city. However, itseems that a small-scale and neighborhood supermarket format will be able toeffectively compete with the traditional mom-and-pop stores and even with tra-ditional wet markets. Supermarkets located in suburban areas are not able toattract consumers. Local consumers are afraid of going to supermarkets faraway from their homes or in city centers for daily food purchases, because theirmeans of transportation is mainly motorbikes. In addition, the serious shortageof management expertise and technical skills in supermarket operations in Viet-nam might make large-scale supermarkets less efficient than small-scale ones.Therefore, developing networks of small-scale, neighborhood supermarketsappears to be a better strategy, given the financial conditions and managerialabilities of domestic companies.


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By comparing the importance of choice criteria between different categoriesof goods (horizontal comparison), we found that, except for freshness or newlyproduced criteria, consumers rated the criteria similarly for processed foodand drinks. Consumers rated price level in choosing their shopping place for

Table 4 Importance of criteria for choosing stores for different categories of goods (Sample size ==== 409)

Fresh food Processed food Drinks Non-food items

Mean Standarddeviation




CriteriaHealth safety 4.74 0.56 4.61 0.71 4.65 0.65 3.61 1.21Freshness or newly

produced product4.69 0.62 3.81 1.08 4.24 0.98 2.93 1.14

Quality 4.68 0.57 4.52 0.73 4.53 0.69 4.09 0.92Clarity as to the origin

of goods4.05 1.09 4.31 0.91 4.35 0.86 3.55 1.17

Service of salespersons 3.58 1.03 3.54 1.04 3.51 1.05 3.69 1.03Price 3.57 0.91 3.54 0.92 3.45 0.96 3.70 0.93Distance (convenience

for shopping)3.49 1.08 3.15 1.11 3.19 1.10 2.69 1.18

Well-known brand names 3.38 1.00 3.64 0.93 3.70 0.94 3.40 1.03Variety of product lines 3.20 0.93 3.22 0.90 3.22 0.95 3.67 1.02Shopping atmosphere 2.95 1.06 2.87 1.05 2.86 1.03 3.12 1.05Return and adjustment

policy2.93 1.18 3.09 1.12 3.06 1.12 3.42 1.12

Location of store, market 2.83 1.01 2.88 1.02 2.85 1.02 3.02 1.08Scale of store 2.67 0.93 2.78 0.96 2.80 0.95 2.96 1.06Decorations and

advertising at stores2.49 1.01 2.64 1.01 2.68 1.03 3.03 1.14

Notes: 1 to 5 scale: 1 = not important at all, 5 = very important. To compare whether the means fortwo different categories, for example fresh food and processed food for the health safety category(a horizontal comparison) or for the health safety criteria and the quality criteria for fresh food(a vertical comparison), are the same or different, the following test statistic

,

where na and nb are the sample sizes for the two groups, are the sample means fortwo groups, and sa and sb are the standard deviations for the two groups, can be used. Underthe null hypothesis that the two population means are the same, the test statistic isdistributed asymptotically as a standard normal distribution. For a two-tail test conducted atthe 5% significance level, the relevant critical values are –1.96 and 1.96. For a one-tail testwhere the first mean assumed to be higher than the second mean, the relevant critical valueis 1.64. This test statistic assumes that the responses for the two categories are uncorrelated.When we used a one-tailed test for the difference between the two means (greater than zero),for vertical comparison, if the difference between any two sample means is greater than0.15, then the difference between these two normal population means is significant at the5% level. The same results hold in the case of horizontal comparison.

z x x s n s na b a a b b ( )/ ( / ) ( / )= − +2 2

x xa b and

SUPERMARKETS IN VIETNAM 35


non-food products significantly higher than other kinds of goods. Distance(convenience) plays a much more important role in the case of fresh food thanthe other kinds of goods.

Respondents were asked about the channels through which they get informa-tion on supermarkets to go shopping. Almost 46.5 percent of the respondentsindicated that they got to know supermarkets through friends; 43.3 percent indi-cated that they got information mainly by seeing the outlets on their shoppingroutes. Respondents that indicated they got information through newspapersand television advertisements accounted for only 17.4 and 22.2 percent, respec-tively (Table 5).

This data shows that consumers seem devoid of information about the super-markets. Word of mouth seems to be the main source of information for con-sumer shopping. This suggests that supermarket managers must pay much moreattention to the idea of advertising and promotion to convey information toconsumers.

Table 6 summarizes the different kinds of goods consumers purchase whenthey go shopping at supermarkets. In general, shoppers at supermarkets aremost likely to buy toiletries and household amenities. Shoppers buy a mediumamount of processed food, ready-to-eat food, frozen food, confectionery anddrinks. Very few consumers buy fresh food, personal care products, clothes,consumer durables and footwear.

By comparing the means for certain kinds of goods bought by hard shoppersand infrequent shoppers, we found that hard shoppers go to supermarkets for amuch broader range of products. Hard shoppers go to buy fresh food, processedfood, frozen food and drinks at a middle level of frequency, significantly higherthan infrequent shoppers. Footwear, personal care products, clothes and con-sumer durables are still significantly lower than the middle level of frequencyfor both groups. This shopping pattern has not changed since the 1997 surveyof Speece and Huong (2002).

IV.2 Factors affecting supermarket shopping frequency

Table 7 summarizes the frequency of shopping at supermarkets among con-sumers in the sample. The data shows that only 0.7 percent of the respondents

Table 5 Channels for getting information on supermarkets

Number Percentage

Television advertisements 91 22.2 Newspaper 71 17.4 Friends 190 46.5 Seen on the street 177 43.3 Others 15 3.7

ASIAN ECONOMIC JOURNAL 36


indicated that they go to a supermarket everyday, 9.9 percent of the respond-ents indicated that they shop at supermarkets more than twice a week, and24.2 percent said that they go to supermarkets once a week. Almost 40 percentof respondents indicated that they go to supermarkets from 1 to 3 times a monthand 24.9 percent reported that they go to supermarkets less than once a month.Of our sample, 1 percent indicated that they never went to supermarkets.

To measure the factors that influence the decisions that consumers makeregarding shopping frequency (determinants of shopping frequency), we

Table 6 Kinds of goods consumers bought at supermarkets

Sample size Total Hard shoppers Infrequent Shoppers

409 144 265




Kinds of goodsToiletries 3.59 0.81 3.63 0.70 3.57 0.87 Household amenities 3.48 0.86 3.57 0.82 3.43 0.88 Confectionery 3.13 0.91 3.19 0.83 3.09 0.95 Frozen food 3.09 0.95 3.35 0.89 2.95 0.96*Drinks 3.05 0.96 3.29 0.88 2.92 0.98*Processed food 3.04 0.93 3.26 0.92 2.92 0.91*Fresh food 2.75 1.13 3.04 1.07 2.60 1.13*Personal care products 2.65 1.09 2.78 1.07 2.57 1.10*Ready-to-eat food 2.56 1.00 2.74 1.03 2.46 0.97*Clothes 2.38 0.95 2.51 0.89 2.31 0.98*Consumer durables 2.00 0.99 1.94 0.97 2.02 1.00 Footwear 1.99 0.95 2.12 0.94 1.92 0.96

Notes: 1 to 5 scale; 1 = never, 2 = rarely, 3 = sometimes, 4 = often, 5 = always. To compare whetherthe means for two different categories, for example hard shoppers and infrequent shoppersfor toiletries (a horizontal comparison) or for toiletries and household amenities for hardshoppers (a vertical comparison), are the same or different, the following test statistic

,

where na and nb are the sample sizes for the two groups, are the sample means fortwo groups, and sa and sb are the standard deviations for the two groups, can be used. Underthe null hypothesis that the two population means are the same, the test statistic isdistributed asymptotically as a standard normal distribution. For a two-tail test conducted atthe 5% significance level, the relevant critical values are –1.96 and 1.96. For a one-tail testwhere the first mean assumed to be higher than the second mean, the relevant critical valueis 1.64. This test statistic assumes that the responses for the two categories are uncorrelated.When we used a one-tailed test for the difference between the two means (greater thanzero), for vertical comparison, if the difference between any two sample means is greaterthan 0.2, then the difference between these two normal population means is significant atthe 5% level. The same results hold in the case of horizontal comparison (* meanssignificant difference between hard and infrequent shoppers).

z x x s n s na b a a b b ( )/ ( / ) ( / )= − +2 2

x xa b and



estimated an ordered probit model using Stata (version 9.0) (see Borooah,2002). Shopping frequency for each consumer was treated as an individualobservation, Yi taking the value of 1 if a consumer went to supermarkets lessthan once a week (1–3 times a month or less than once a month); 2 if a con-sumer went once week; and 3 if a consumer went twice a week or more.Independent variables used to explain a consumer’s shopping frequency levelare described in Table 8. Consequently, the shopping frequency level can berepresented as:

(1)

where βk is the coefficient associated with the kth variable (k = 1, . . . , K) and ui

is the error term, which is assumed to be normally distributed. Di is the latentvariable, which is unobservable. The categorization of the persons in the samplein the terms of three levels of shopping frequency is implicitly based on thevalues of the latent valuable Di, in conjunction with ‘threshold’ values δk (i = 1, 2)such that:

Yi = 1, if Di ≤ δ1

Yi = 2, if δ1 ≤ Di ≤ δ2

Yi = 3, if Di ≥ δ2.

δ1 and δ2 are unknown parameters (δ1 < δ2) to be estimated along with βk ofEquation (1). The set of the coefficients βk will be estimated using maximumlikelihood estimation. The results are reported in Table 9.

The empirical results show that INCOME has significant impacts on shop-ping frequency, suggesting that the respondents with higher income are likelyto shop more frequently. This reflects the generally low level of incomes inVietnam, where many consumers still do not have sufficient resources tomake supermarket shopping practical. The positive and significant coefficientfor FRESH implies that it is highly probable that consumer shopping frequencywill be higher if she/he judges that the fresh produce at a given supermarket is

Table 7 Shopping frequency at supermarkets

Number Percentage

Every day 3 0.7Twice a week or more 41 9.9Once a week 100 24.21–3 times a month 162 39.2Less than once a month 103 24.9Never 4 1.0

Total 413 100.0

D X u Z ui ki

K

i i i ,= + = +=∑ β

1



Table 8 Definitions and descriptives of the variables used in the ordered probit model

Variable Definition Mean StandardDeviation

AGE Age of the respondents (continuous variable) 35.25 9.36 SEX = 1 if male; 0 otherwise 0.15 0.36 FAMILY Total number of members in the family (continuous variable) 3.88 1.29 EDUC = 1 if has university degree and above; 0 otherwise 0.84 0.37 INCOME Average monthly income per person in family, in

Vietnamese dong (VND)3.00 1.52

= 1 if 0.5–1.0 m; = 2 if 1.0–1.5m; = 3 if 1.5–2.0 m; = 4 if 2.0–2.5 mil.; = 5 if 2.5–3.0 m.; = 6 if more than 3.0 m

REFRI = 1 if owns a refrigerator; 0 otherwise 0.93 0.26 CAR = 1 if owns a car; 0 otherwise 0.10 0.30 EDGOOD = 1 if goes to buy everyday necessities; 0 otherwise 0.38 0.49 SEEPRICE = 1 if quick look price and then goes to buy outside;

0 otherwise0.22 0.42

CURI = 1 if goes to supermarket because of curiosity; 0 otherwise 0.22 0.41 RELAX = 1 if goes to supermarket in order to enjoy and

relax; 0 otherwise0.41 0.49

RPRICE = 1 if price at supermarket is reasonable; 0 otherwise 0.29 0.46 FIXPRICE = 1 if because price is fixed and does not have to

bargain; 0 otherwise0.76 0.43

FASHION = 1 if goes to supermarket because fashionable; 0 otherwise

0.02 0.15

QUALITY = 1 if goes to supermarket because of guarantee in quality; 0 otherwise

0.76 0.43

FRESH = 1 if rates high freshness at supermarket; 0 otherwise 0.27 0.44 ONESTOP = 1 if goes to supermarket because one can buy

everything at one stop; 0 otherwise0.60 0.49

SELFSER = 1 if goes to supermarket because of self-service at supermarket; 0 otherwise

0.81 0.40

GSERVICE = 1 if goes to supermarket because of good service of salespersons

0.38 0.49

EPENSIVE = 1 if goes to supermarket less than once a month because of expensive prices; 0 otherwise

0.12 0.33

LIKESUPE = 1 if prefers shopping at supermarket than at traditional market; 0 otherwise

0.64 0.48

DISTANCE How far is it from your house to the closest supermarket 3.15 1.11 = 1 if less than 0.2 km; = 2 if 0.2–1 km; = 3 if 1–2 km; = 4 if 2–5 km; = 5 if 5–10 km; = 6 if more than 10 km

PAYLEVEL How much do you pay on average each time you shop at supermarket?

3.18 1.16

= 1 if less than 100 000; = 2 if 100 000–200 000; = 3 if 200 000–300 000; = 4 if 300 000–400 000; = 5 if 0.5–1 m; = 6 if more than 1 m (Vietnamese dong)



fresher. The variable EDGOOD also shows a significant and positive effect, sug-gesting that the probability of shopping more frequently is higher if a consumergoes to a supermarket to buy everyday necessities. Negative and significantcoefficients for DISTANCE imply that the closer the distance (to the closestsupermarket), the higher the shopping frequency. EPENSIVE shows a significantand negative effect, suggesting that those respondents who consider prices atsupermarkets to be expensive are likely to go to supermarkets less frequently. Anegative and significant coefficient for ONESTOP suggests that shopping fre-quency will be lower if she/he rates the one-stop service as an important reasonto go to supermarkets. The other variables do not have a significant impact onconsumer shopping frequency.

Freshness, high price (expensive) and distance had significant effects ona consumer’s shopping frequency at supermarkets, suggesting that withoutexpanding the perishable category, lowering the price and enhancing conven-ience (distance), supermarkets cannot strengthen their competitive position.

IV.3 Evaluation of market performance

Table 10 summarizes the consumer evaluations for the forms of retail outlets:supermarkets and traditional organized markets.

In general, supermarket performance is perceived to be rather poor in severalrespects. All of the elements rated lower than a ‘good level’ of performance. Bycomparing the evaluation of supermarkets on a given element between hardshoppers and infrequent shoppers, we found that except for the freshness factor,

Table 9 Results of ordered probit model

Variables Coefficient Variables Coefficient

AGE –0.01 RPRICE 0.24SEX 0.13 FIXPRICE 0.14FAMILY –0.03 QUALITY –0.08EDUC 0.05 FRESH 0.55***INCOME 0.16*** ONESTOP –0.35**REFRI 0.18 SELFSER –0.02CAR 0.32 GSERVICE –0.11EDGOOD 0.28* EPENSIVE –1.00***UNIQ –0.23 LIKESUPE 0.13SEEPRICE –0.04 DISTANCE –0.10*RELAX –0.08 PAYLEVEL –0.05

/cut1 (δ1) 0.46 /cut2 (δ2) 1.48

Log likelihood = –306.60; Number of observations = 409; LR χ2 (22) = 104.21; Probability > χ2 = 0.0000; Pseudo R2 = 0.1338

Note: *, **, *** Significance at the 10%, 5% and 1% level, respectively.

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Table 10 Evaluations of market performance

Sample size Evaluation of supermarkets Evaluation of traditional organized markets

Total Hard shoppers Infrequent shoppers Total Hard shoppers Infrequent shoppers

409 144 265 409 144 265







ElementsVariety of product lines 3.70 0.62 3.69 0.55 3.70 0.65 3.66 0.77 3.63 0.77 3.68 0.78Air conditioning 3.70 0.61 3.65 0.60 3.73 0.61Cold storage (infrastructure

at indoor)3.67 0.60 3.64 0.60 3.69 0.60 2.71 0.84 2.71 0.85 2.71 0.84

Variety in each kind of product

3.60 0.65 3.58 0.64 3.60 0.66 3.48 0.79 3.50 0.83 3.46 0.77

Quality of merchandise 3.56 0.54 3.59 0.55 3.54 0.54 3.33 0.58 3.33 0.60 3.34 0.57Product display 3.51 0.61 3.53 0.60 3.49 0.61 2.89 0.77 2.98 0.74 2.85 0.78Location 3.42 0.64 3.42 0.65 3.42 0.64 3.19 0.70 3.24 0.74 3.16 0.68Scale 3.40 0.62 3.41 0.62 3.39 0.62 3.20 0.68 3.22 0.71 3.18 0.67Parking lot 3.29 0.79 3.33 0.73 3.26 0.82 2.81 0.84 2.88 0.85 2.77 0.84Services of salesperson 3.25 0.68 3.24 0.65 3.25 0.70 3.11 0.70 3.11 0.71 3.11 0.70Advertisement and

promotion3.23 0.71 3.28 0.72 3.20 0.71 2.63 0.89 2.75 0.88 2.56 0.89

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Checkout 3.12 0.75 3.13 0.75 3.12 0.75 — — — — — —Development of reputation

(honesty of sellers)3.07 0.70 3.04 0.72 3.08 0.69 2.87 0.77 2.88 0.79 2.87 0.76

Distance (density of supermarkets)

2.99 0.70 3.02 0.65 2.98 0.73 3.34 0.71 3.30 0.71 3.36 0.71

Price level 2.94 0.50 3.01 0.49 2.91 0.51 3.20 0.60 3.20 0.70 3.20 0.54Freshness 2.70 1.04 2.96 0.95 2.56 1.06 3.69 0.70 3.65 0.75 3.71 0.67Return and adjustment

policy2.63 0.79 2.64 0.78 2.62 0.80 2.39 0.91 2.42 0.92 2.37 0.90

Notes: 1 to 5 scale, 1 = very bad, 2 = bad, 3 = normal, 4 = good, 5 = very good. To compare whether the means for two different categories, for example hardshoppers and infrequent shoppers for a variety of product lines (a horizontal comparison) or for a variety of product lines and air conditionings forhard shoppers (a vertical comparison), are the same or different, the following test statistic

,

where na and nb are the sample sizes for the two groups, are the sample means for two groups, and sa and sb are the standard deviations forthe two groups, can be used. Under the null hypothesis that the two population means are the same, the test statistic is distributed asymptotically as astandard normal distribution. For a two-tail test conducted at the 5% significance level, the relevant critical values are –1.96 and 1.96. For a one-tailtest where the first mean assumed to be higher than the second mean, the relevant critical value is 1.64. This test statistic assumes that the responsesfor the two categories are uncorrelated. When we used a one-tailed test for the difference between the two means (greater than zero), for verticalcomparison, if the difference between any two sample means is greater than 0.1, then the difference between these two normal population means issignificant at the 5% level. Comparing the mean values of evaluation on each element of supermarkets and traditional indoor bazaars (horizontalcomparison), the same results hold in the case of horizontal comparison. In the case of supermarkets, except for the freshness element, hard shoppersevaluated the rest of the other elements at a similar level as infrequent shoppers, with an insignificant difference at the 5% level. In the case of indoormarkets, except for product display and advertisement and promotion, hard shoppers also evaluated the rest of the other elements at a similar level asinfrequent shoppers, with an insignificant difference at the 5% level.

409 144 265 409 144 265







z x x s n s na b a a b b ( )/ ( / ) ( / )= − +2 2

x xa b and



both hard shoppers and infrequent shoppers rated supermarket performancealmost the same for most factors. Although hard shoppers rated freshness atsupermarkets significantly higher than infrequent shoppers, this evaluation isonly at the normal level (not good, not bad). Supermarkets were evaluatedhighly in some areas, such as quality of merchandise, variety of productlines, product variety within a single category of product, cold storage and airconditioning. Return and adjustment policy factor was rated at a very low level.Price level, checkout, service of salesperson, density of supermarkets, parkinglot, advertisement and promotion, and development of reputation were alsorated at fairly low levels.

By comparing the evaluations for each element of supermarkets and that oftraditional organized bazaars, we found that consumers evaluated the traditionalbazaars at significantly higher levels than supermarkets in terms of freshness,price levels and convenience (distance). There was no statistically significantdifference between organized markets and supermarkets in terms of variety ofproduct lines, but consumers evaluated supermarkets significantly higher for therest of the listed elements. This information suggests that freshness, price levelsand convenience (distance) are the key factors attracting consumers to the tra-ditional organized markets.

Respondents were asked where they do most of their shopping for three kinds ofproducts: fresh food, processed foods and drinks, and non-food items. The findingssuggest that consumers tend to split their purchasing among different retail outletsfor different kinds of products. They mainly purchase fresh produce at traditionalorganized markets or informal bazaars (more than 90 percent of respondents),whereas they purchase processed food and drinks and non-food products at tra-ditional mom-and-pop stores or at supermarkets (mainly at mom-and-pop storesin both cases of processed food and drinks and non-food items). The percentageof respondents who regularly purchase at supermarkets has increased significantlyto nearly 30 percent in the case of processed foods and drinks, and 14 percentin the case of non-food items. These results suggest that supermarkets are graduallygaining a foothold for processed food and non-food products. However, theyhave to compete with mom-and-pop stores for the same group of customers.

Although a majority of the survey sample did most of their shopping for foodand non-food products at traditional retail outlets, 64 percent of the respondentsindicated they preferred supermarkets, whereas only 36 percent of the respond-ents said they preferred shopping at traditional bazaars. This data indicates thatsupermarkets in Vietnam can increase market share by improving consumersatisfaction and building customer loyalty. Only 37 percent of the respondentsindicated that they are loyal to one supermarket. Supermarkets can likewiseattract consumers by opening stores near consumers’ homes and mimicking themerchandising approaches of the traditional bazaars or adopting store layouts toencourage social interaction. It is apparent that supermarkets could take anumber of steps to attract more shoppers. They could try to extend their rangeof goods so as to differentiate themselves from their competitors or they could



lower prices on many items. However, such policies would be pointless unlessthe shoppers were informed.

Table 11 presents the types of factors that might attract consumers to super-markets in the future. Respondent ratings for ‘more variety of fresh foods anddaily necessities’, and ‘fresh produce has more freshness’ were both at thehighest level. Hard shoppers rated these two factors significantly higher thaninfrequent shoppers. Consumers also rated ‘supermarket near my house’ at aboutthe same level of importance as ‘more product variety of non-perishables’.

Table 11 Conditions to attract shoppers to supermarkets more frequently

Sample size Total Hard shoppers Infrequent shoppers

413 144 269




Conditions(1) Fresh produce has

more freshness3.91 0.98 4.03 0.88 3.85 1.02*

(2) More variety of fresh foods and daily necessities

3.86 0.98 3.98 0.92 3.80 1.00*

(3) Supermarket near house 3.45 1.04 3.46 0.96 3.45 1.08(4) More product variety of

non-perishables (processed food and drink and non-food items)

3.41 0.93 3.36 0.96 3.44 0.91

(5) Higher income 3.27 1.16 3.05 1.18 3.39 1.13*(6) Lower prices 3.23 1.08 3.08 1.07 3.30 1.08*(7) Better service of salespersons 3.14 1.07 3.16 1.03 3.13 1.10

Notes: 1 to 5 scale, 1 = not important at all, 5 = very important. To compare whether the means fortwo different categories, for example hard shoppers and infrequent shoppers for the lowerprices conditions (a horizontal comparison) or for higher income and lower prices for hardshoppers (a vertical comparison), are the same or different, the following test statistic

,

where na and nb are the sample sizes for the two groups, are the sample means fortwo groups, and sa and sb are the standard deviations for the two groups, can be used. Underthe null hypothesis that the two population means are the same, the test statistic isdistributed asymptotically as a standard normal distribution. For a two-tail test conducted atthe 5% significance level, the relevant critical values are –1.96 and 1.96. For a one-tail testwhere the first mean assumed to be higher than the second mean, the relevant critical valueis 1.64. This test statistic assumes that the responses for the two categories are uncorrelated.When we used a one-tailed test for the difference between the two means (greater thanzero), vertical comparison, if the difference between any two sample means is greater than0.14, then the difference between these two normal population means is significant at the5% level. The same results hold in case of horizontal comparison (* means significantdifference between hard shoppers and infrequent shoppers).

z x x s n s na b a a b b ( )/ ( / ) ( / )= − +2 2

x xa b and



Respondent ratings for ‘higher income’ and ‘lower prices’ were both at the lowestlevel. However, infrequent shoppers rated these two criteria significantly higherthan hard shoppers.

V. Conclusion

The rapid growth of the economy and improvements in technology, as well asthe efforts of the government in building a modern distribution system, willlead to dramatic changes in its structure and position. Modern wholesale outletsand retail style outlets like supermarkets could eventually leave behind smallsellers and intermediaries who have served traditional Vietnamese markets.Technology development and the exploitation of economies of scale will givemodern players advantages both in costs and service over traditional retailers.However, our analysis shows that at present, the traditional markets remain themajor distribution channels for both non-food and food products. In the case offresh food, we verified the continued dominance of the traditional markets interms of proximity, freshness and price as the main barrier to the developmentof supermarkets. However, supermarkets were perceived as providing advan-tages related to processed food and drinks as well as non-food items. They aregaining market share in the market for these kinds of products.

Our study suggests that supermarkets would be more attractive to Vietnameseconsumers if they: (i) were located nearer consumers and (ii) incorporated someelements of wet markets. Refrigeration and wrapping to avoid spoilage, how-ever, mean added costs and contribute to the impression that supermarketproducts are not as fresh as those in the traditional markets. In addition, aneffort to build a large-scale, well-decorated supermarket with a comfortableshopping atmosphere might not necessarily attract a significant number of newcustomers. Developing networks of small-scale, neighborhood supermarketsappears to be a better strategy, given the financial conditions and managerialabilities of domestic companies. It could also be a wise strategy for competingwith foreign distributors who will become competitors once Vietnam opensits markets. Supermarkets that provide various types of products, that continueto add new, high-quality products at reasonable prices, and that are built nearconsumers’ homes, have the opportunity to build store loyalty and to increasemarket share.

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