vietnam retail analysis (2008-2012)

RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 1 of 81 RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 2 of 81 Published by R RN NC CO OS S E E- -S Se er rv vi ic ce es s P Pv vt t. . L Lt td d. . 29, Functional Industrial Estate Patparganj, Delhi - 110092 Tel: +91-11-4214-1229 Email: [email protected] www.rncos.com Vietnam Retail Analysis (2008-2012) RNCOS, 2008 Edition 1.0 All rights reserved. This publication is protected by copyright. No part of it may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic mechanical, photocopying, recording or otherwise without the prior written permission of the publishers. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 3 of 81 About the Report Vietnam is the fourth most attractive retail market in the world in terms of potential growth owingtobothincreasingdemandforconsumergoodsandrisingdisposableincomes,behind India, Russia and China. The retail market of the country has expanded rapidly over the past fewyearsandwillacceleratefurtheronthebackofrisingdisposableincome,growing consumer spending and sectors liberalization in the coming years, according to new market research report, Vietnam Retail Analysis (2008-2012), by RNCOS. The detailed data and analysis given in the report will help the client to evaluate the leading-edgeopportunitiescriticaltothesuccessoftheretailmarketinVietnam.Thereportgives rational forecast and estimations that are intended as a rough guide to the direction in which the Vietnamese retail market is likely to move. Key Findings ! Retail sales in Vietnam are forecasted to grow at a CAGR of about 13.6% during 2008-2012. ! FoodisthemostimportantcomponentofVietnamsretailsectorandaccountsfor nearly two-third of total retail sales. ! Non-food sector is expected to grow at a faster pace than food, because of the rise in income and consumer spending on non-essential items such as clothing, electrical and DIY goods. ! Demandforinternationalbrandsandluxuryproductswillriseasincomelevelmove upwards in the country. ! Modernretailingformatslikeair-conditionedmini-marts,supermarketsandsmall shoppingcomplexeswillbecomemoreprevalentinthecomingyearsandwilllure consumers away from traditional outdoor markets. Key Issues & Facts Analyzed ! Where Vietnam stands in terms of products affordability index?! What is the consumer behavior? ! Which are the fastest growing products? RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 4 of 81 ! What are the key driving factors to the market?! How the market is likely to move in future? ! What are the key challenges for the market? ! Who are the key players in the market? Research Methodology Used Information Sources Informationhasbeensourcedfrombooks,newspapers,tradejournals,andwhitepapers, industryportals,governmentagencies,tradeassociations,monitoringindustrynewsand developments, and through access to more than 3000 paid databases. Analysis Methods Theanalysismethodsincluderatioanalysis,historicaltrendanalysis,linearregression analysis using software tools, judgmental forecasting, and cause and effect analysis. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 5 of 81 Table of Content 1.Analyst View ..................................................................................................................................... 10 2.Vietnam - An Attractive Retail Market ............................................................................................ 11 3.Growing Retail Market - An Analysis.............................................................................................. 12 3.1Purchasing Power & Consumer Spending ................................................................................ 12 3.2Population.................................................................................................................................. 15 3.3Urbanization............................................................................................................................... 17 3.4Employment ............................................................................................................................... 18 3.5Tourism...................................................................................................................................... 20 3.6Consumer Financing.................................................................................................................. 22 3.7Economic Liberalization............................................................................................................. 23 3.8Economic Stability ..................................................................................................................... 24 4.Retail Market Performance .............................................................................................................. 26 4.1Retail Sales................................................................................................................................ 26 4.1.1Food ...................................................................................................................................... 28 4.1.2Non-food................................................................................................................................ 29 4.1.2.1Clothing......................................................................................................................... 31 4.1.2.2Footwear ....................................................................................................................... 33 4.1.2.3Cosmetics & Toiletries.................................................................................................. 35 4.1.2.4Perfumes & Fragrances................................................................................................ 37 4.1.2.5Furniture........................................................................................................................ 38 4.1.2.6Household Cleaning Products ...................................................................................... 40 4.1.2.7Consumer Electronics................................................................................................... 42 4.1.2.7.1TV Sets.................................................................................................................... 42 4.1.2.7.2Mobile Handsets...................................................................................................... 43 4.1.2.7.3Personal Computers ............................................................................................... 44 4.1.2.7.4Video Recorders...................................................................................................... 45 4.1.2.7.5Washing Machines.................................................................................................. 45 4.1.2.7.6Others...................................................................................................................... 47 4.2By Province................................................................................................................................ 48 4.2.1South East ............................................................................................................................. 48 4.2.2Red River Delta ..................................................................................................................... 49 4.2.3Mekong River Delta............................................................................................................... 50 4.2.4South Central Coast .............................................................................................................. 51 4.2.5North Central Coast............................................................................................................... 52 4.2.6North East.............................................................................................................................. 53 4.2.7Central Highlands.................................................................................................................. 54 4.2.8North West............................................................................................................................. 55 4.3By Ownership ............................................................................................................................ 56 4.3.1State-owned Companies ....................................................................................................... 56 4.3.2Non-state-owned Companies................................................................................................ 57 4.3.3Foreign-owned Companies ................................................................................................... 58 4.4By Retail Format ........................................................................................................................ 59 4.4.1Traditional Market.................................................................................................................. 61 4.4.2Supermarket .......................................................................................................................... 62 4.4.3Hypermarket & Warehouse Clubs......................................................................................... 63 4.4.4Convenience Stores .............................................................................................................. 64 5.Consumer Behavior Pattern............................................................................................................ 65 6.Product Affordability Analysis........................................................................................................ 68 7.Future Growth Prospects ................................................................................................................ 69 7.1Developing Trend of Modern Retailing...................................................................................... 69 7.2Online Retailing ......................................................................................................................... 70 7.3Non-food Retailers..................................................................................................................... 71 7.4POS Terminal ............................................................................................................................ 71 7.5International Brands & Luxury Goods........................................................................................ 72 RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 6 of 81 7.6IT in Retailing............................................................................................................................. 72 7.7High-tech Retailers .................................................................................................................... 73 7.8Hotel & Restaurants................................................................................................................... 74 8.Key Industry Hurdles ....................................................................................................................... 75 8.1Skilled Staff ................................................................................................................................ 75 8.2Consumer Price Index ............................................................................................................... 76 8.3Retail Space & Cost................................................................................................................... 77 8.4Trade Barriers & State Subsidiaries .......................................................................................... 78 8.5Infrastructure.............................................................................................................................. 78 9.Competitive Landscape ................................................................................................................... 79 RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 7 of 81 List of Figures: Figure 3-1: Vietnam - Per Head Personal Disposable Income (in US$), 2002-2007E............................... 12 Figure 3-2: Vietnam - Forecast for Per Head Personal Disposable Income (in US$), 2008-2012............. 13 Figure 3-3: Vietnam - Consumer Spending (in Million US$), 2002-2007E................................................. 13 Figure 3-4: Vietnam - Forecast for Consumer Spending (in Million US$), 2008-2012............................... 14 Figure 3-5: Vietnam - Population (in Million), 2002-2007E......................................................................... 15 Figure 3-6: Vietnam - Forecast for Population (in Million), 2008-2012 ....................................................... 16 Figure 3-7: Vietnam - Urban Population (in Million), 2001-2006P.............................................................. 17 Figure 3-8: Vietnam - Employment (in Million), 2002-2007E...................................................................... 18 Figure 3-9: Vietnam - Forecast for Employment (in Million), 2008-2012 .................................................... 19 Figure 3-10: Vietnam - Tourist Arrivals (in 000), 2003-2007E ................................................................... 20 Figure 3-11: Vietnam - Forecast for Tourist Arrivals (in 000), 2008-2012 ................................................. 21 Figure 3-12: Vietnam - Credit/Debit Cards (in Million Units), 2004-2006 ................................................... 22 Figure 3-13: Vietnam - Nominal GDP (in Million US$), 2002-2007E.......................................................... 24 Figure 3-14: Vietnam - Forecast for Nominal GDP (in Million US$), 2008-2012........................................ 25 Figure 4-1: Vietnam - Retail Sales (in Million US$), 2002-2007E............................................................... 26 Figure 4-2: Vietnam - Forecast for Retail Sales (in Million US$), 2008-2012............................................. 27 Figure 4-3: Vietnam, China & Thailand - Share of Retail Sales in Nominal GDP (%), 2007...................... 27 Figure 4-4: Vietnam - Food Retail Sales (in Million US$), 2002-2007E ..................................................... 28 Figure 4-5: Vietnam - Non-food Retail Sales (in Million US$), 2002-2007E............................................... 29 Figure 4-6: Vietnam - Non-food Retail Sales by Segment (%), 2007E....................................................... 30 Figure 4-7: Vietnam - Clothing Sales (in Million US$), 2002-2007E........................................................... 31 Figure 4-8: Vietnam - Forecast for Clothing Sales (in Million US$), 2008-2012......................................... 32 Figure 4-9: Vietnam - Footwear Sales* (in Million US$), 2002-2007.......................................................... 33 Figure 4-10: Vietnam - Forecast for Footwear Sales (in Million US$), 2008-2012..................................... 34 Figure 4-11: Vietnam - Cosmetics & Toiletries Sales (in Million US$), 2002-2007E.................................. 35 Figure 4-12: Vietnam - Forecast for Cosmetics & Toiletries Sales (in Million US$), 2008-2012................ 36 Figure 4-13: Vietnam - Perfumes & Fragrances Sales (in Million US$), 2002-2007E................................ 37 Figure 4-14: Vietnam - Forecast for Perfumes & Fragrances Sales (in Million US$), 2008-2012.............. 37 Figure 4-15: Vietnam - Furniture Sales (in Million US$), 2002-2007E........................................................ 38 Figure 4-16: Vietnam - Forecast for Furniture Sales (in Million US$), 2008-2012...................................... 39 Figure 4-17: Vietnam - Household Cleaning Product Sales (in Million US$), 2002-2007E........................ 40 Figure 4-18: Vietnam - Forecast for Household Cleaning Product Sales (in Million US$), 2008-2012...... 41 Figure 4-19: Vietnam - TV Set Sales (in 000 Units), 2002-2007E............................................................. 42 Figure 4-20: Vietnam - Forecast for TV Set Sales (in 000 Units), 2008-2012 ........................................... 43 Figure 4-21: Vietnam - Mobile Handset Sales* (in Million Units), 2006 & 2007 ......................................... 44 Figure 4-22: Vietnam - Personal Computer Sales (in Million Units), 2006*-2008F .................................... 44 Figure 4-23: Vietnam - Video Recorder Sales (in 000 Units), 2002-2005 ................................................. 45 Figure 4-24: Vietnam - Washing Machine Sales (in 000 Units), 2002-2007E ........................................... 46 Figure 4-25: Vietnam - Forecast for Washing Machine Sales (in 000 Units), 2008-2012 ......................... 46 Figure 4-26: South East - Goods & Services Retail Sales (in Trillion VND), 2002-2006P ......................... 48 Figure 4-27: Red River Delta - Goods & Services Retail Sales (in Trillion VND), 2002-2006P ................. 49 Figure 4-28: Mekong River Delta - Goods & Services Retail Sales (in Trillion VND), 2002-2006P........... 50 Figure 4-29: South Central Coast - Goods & Services Retail Sales (in Trillion VND), 2002-2006P .......... 51 Figure 4-30: North Central Coast - Goods & Services Retail Sales (in Trillion VND), 2002-2006P........... 52 Figure 4-31: North East - Goods & Services Retail Sales (in Trillion VND), 2002-2006P.......................... 53 Figure 4-32: Central Highlands - Goods & Services Retail Sales (in Trillion VND), 2002-2006P.............. 54 Figure 4-33: North West - Goods & Services Retail Sales (in Trillion VND), 2002-2006P......................... 55 Figure 4-34: Vietnam - Goods & Services Retail Sales by State-owned Companies (in Trillion VND), 2002-2006P................................................................................................................................................. 56 Figure 4-35: Vietnam - Goods & Services Retail Sales by Non-state-owned Companies (in Trillion VND), 2002-2006P................................................................................................................................................. 57 Figure 4-36: Vietnam - Goods & Services Retail Sales by Foreign-owned Companies (in Trillion VND), 2002-2006P................................................................................................................................................. 58 Figure 4-37: Vietnam - Share of Sales by Traditional & Modern Retail Format (%), 2007......................... 59 RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 8 of 81 Figure 4-38: Ho Chi Minh & Hanoi - Share of Traditional & Modern Trade (%), 2004-2006...................... 60 Figure 4-39: Vietnam - Share of Hypermarkets & Supermarkets in Food Retail Sales (%), 2007E & 2020F.................................................................................................................................................................... 63 Figure 5-1: Vietnam - Main Shoppers* & Key Influencers** (%), 2005....................................................... 66 Figure 7-1: Vietnam - Share of Modern Retailing in Retail Sales (%), 2007 & 2017F................................ 69 Figure 7-2: Vietnam - Forecast for Internet Users (in 000), 2008-2012..................................................... 70 Figure 7-3: Vietnam - Forecast for Consumer Expenditure on Hotel & Restaurants (in Million US$), 2008-2012 ............................................................................................................................................................ 74 Figure 8-1: Vietnam - Consumer Price Inflation (%), Sep 2007 to Mar 2008 ............................................. 76 RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 9 of 81 List of Tables: Table 2-1: Top 10 Retail Markets by Global Retail Development Index, 2007........................................... 11 Table 4-1: Vietnam* - Number of Modern Retail Outlets by Brand (2004-2006) ........................................ 60 Table 4-2: Vietnam* - Number of Traditional Stores by Format (2004-2006)............................................. 61 Table 4-3: Vietnam* - Number of Supermarkets (2004-2006) .................................................................... 62 Table 4-4: Vietnam* - Number of Hypermarkets & Warehouse Clubs (2004-2006)................................... 63 Table 4-5: Vietnam* - Number of Convenience Stores (2004-2006) .......................................................... 64 Table 6-1: Vietnam - Price & Affordability Rank by Product, 2007 ............................................................. 68 RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 10 of 81 1.Analyst View RetailmarketinVietnamhasexpandedsignificantlyoverthepastfewyears,butitisstill fragmentedandunderdeveloped,withsmallfamily-ownedbusinesses(basedontraditional formats) dominating the sector. The government also retains a tight control over the entrance ofnewforeignplayersintothemarket.Butdespiteaslowstart,thesectorhasexpanded quickly and recently seen a greater degree of foreign investment. Moreover, the market has experiencedconsolidation,leadingtothecreationoflargeshopsandshoppingcenters.In viewofrapidlyexpandingretailmarket,foreign-ownedretailerstoohaveexpandedtheir operations in the country. However,thereisawidegapbetweenbigcitiesandruralprovincesintermsofretailing infrastructure.Less-developedcitiesandprovinces,whichaccountforabout80%ofthe population, have a large number of retail businesses, especially traditional retail outlets and markets. It is only few big cities, such as Ho Chi Minh City and Hanoi, which have recorded a significantincreaseinthenumberofnewmodernretailoutlets,includingbothlocaland foreign. Segment-wise, the demand for consumer goods has been strong, particularly in urban areas. Whitegoodsandconsumerelectronicssectorshaveseenanumberofforeign-investedjoint venturesthatmanufacturetheirbrandslocally.Mostoftheoutputisexported.Clothing sectoriswell-developedandexport-orientedwhilethecosmeticsandtoiletriessectordoes not possess well-developed local manufacturing facilities. As expected from a developing market, food is the most important component of retail sales, accounting for about two-thirds of the total sales. However, this share has begun declining as income rise and consumers spend more on non-essential items such as clothing, electrical and DIY goods. In rural areas, the development of modern form of retailing will be slow compared to the fast pacedevelopmentinurbancenters.Therefore,thetraditionalretailingsectorwillremain dominant in rural areas in coming few years. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 11 of 81 2.Vietnam - An Attractive Retail Market TherapidgrowthinVietnameseretailmarketintherecentpasthasmadethecountryan attractive destination to multinational retailers. The World Bank ranked Vietnam fourth after India, Russia and China in terms of Global Retail Development Index (GRDI). The retail sales in thecountrygrew18-22%annuallyduring2003-2007.Moreover,Vietnamcurrentlyhouses around140supermarketsandhypermarkets,20tradecenters,andnearly1MillionSquare Meter of floor area is under construction for retail business. Table 2-1: Top 10 Retail Markets by Global Retail Development Index, 2007 RankCountryRegion Country Risk (25%) Market Attractiveness (25%) Market Saturations (30%) Time Pressure (20%) GRDI* Score 1IndiaAsia6742807492 2 Russia Eastern Europe6252539089 3ChinaAsia7546468486 4VietnamAsia5734765974 5 Ukraine Eastern Europe4143448869 6ChileAmericas8051424369 7 Latvia Eastern Europe7732218668 8MalaysiaAsia7044465468 9MexicoAmericas8358333364 10Saudi Arabia Middle East6540663564 Source: Euromoney, World Bank, Global Competitiveness Report 2005-06 & AT Kearney AnalysisNote: *Global Retail Development Index RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 12 of 81 3.Growing Retail Market - An Analysis 3.1Purchasing Power & Consumer Spending Per head personal disposable income has gone up at a CAGR of about 7.3% during 2002-2007 and further it is forecasted to grow at a CAGR of about 10.3% during 2007-2012. Increase in perheadpersonaldisposableincomeresulted in a rise in the purchasing power and in turn, growth in consumer spending on retail products. Thus, rise in disposable income has been the main driver for the growth in Vietnamese retail market and will continue to drive the market in coming years too. Figure 3-1: Vietnam - Per Head Personal Disposable Income (in US$), 2002-2007E 2642823063173413760501001502002503003504002002 2003 2004 2005 2006E 2007Ein US$ Source: Euromonitor & EIU Calculations RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 13 of 81 Figure 3-2: Vietnam - Forecast for Per Head Personal Disposable Income (in US$), 2008-2012 42646851256061501002003004005006007002008 2009 2010 2011 2012in US$ Source: Euromonitor & EIU Calculations Consumerspending,inlinewithdisposableincome,grewataCAGRofabout14.5%during 2002-2007 and is projected to hit a CAGR of about 14.8% during 2007-2012 to reach US$ 89.7 Billion by 2012 end. Figure 3-3: Vietnam - Consumer Spending (in Million US$), 2002-2007E 22,82526,20629,57533,61838,81444,93505,00010,00015,00020,00025,00030,00035,00040,00045,00050,0002002 2003 2004 2005 2006E 2007Ein Million US$ Source: International Financial Statistics RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 14 of 81 Figure 3-4: Vietnam - Forecast for Consumer Spending (in Million US$), 2008-2012 53,10260,73369,51178,76989,685010,00020,00030,00040,00050,00060,00070,00080,00090,000100,0002008 2009 2010 2011 2012in Million US$ Source: International Financial Statistics RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 15 of 81 3.2Population Rapid growth in population is one of the main drivers for growth in Vietnamese retail market. As the population increases, demand for retail products too increases. The population grew at a constant rate with an increment of one million each year to estimated figure of 86 Million at the end of 2007. Figure 3-5: Vietnam - Population (in Million), 2002-2007E 818283848586787980818283848586872002 2003 2004 2005 2006E 2007Ein Million Source:GeneralStatisticalOffice,StatisticalYearbook;WorldBank,1997CountryEconomic Memorandum; World Bank, Rising to the Challenge, 1998 The population of the country is further is anticipated to grow by 5 Million in 2012 over the population of 87 Million in 2008 to reach 92 Million. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 16 of 81 Figure 3-6: Vietnam - Forecast for Population (in Million), 2008-2012 8788899092848586878889909192932008 2009 2010 2011 2012in Million Source:GeneralStatisticalOffice,StatisticalYearbook;WorldBank,1997CountryEconomic Memorandum; World Bank, Rising to the Challenge, 1998 RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 17 of 81 3.3Urbanization MostofthemodernretailformatsinVietnamareconcentratedinurbanareasandurban populationhas comparatively easy asses to various retail formats as compared to their rural counterparts.Thus,increaseinurbanizationgivesabigboosttotheVietnameseretail market.UrbanpopulationincreasedataCAGRofabout3.2%during2001-2006toreacha preliminary figure of 22.8 Million at the end of 2006. Figure 3-7: Vietnam - Urban Population (in Million), 2001-2006P 19.52020.921.722.322.817181920212223242001 2002 2003 2004 2005 2006Pin Million Source: General Statistical Office Note: P = Preliminary RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 18 of 81 3.4Employment Employment is increasing in Vietnam, making it an attractive market for retailing. Employed populationhassourceofregularincomeandtheykeepbuyingretailproductsregularly. Hence,employedpopulationismoreloyalandregulartotheirretailers.Theemployment level has increased at a CAGR of about 2.88% for the period spanning from 2002 to 2007. Figure 3-8: Vietnam - Employment (in Million), 2002-2007E 383940.141.342.643.835363738394041424344452002 2003 2004 2005 2006E 2007Ein Million Source: International Labor Organization & Economic Intelligence Unit (EIU) Thecountryisexpectedtowitnessrisingemploymentinfuture.Itisforecastedthat employed population will grow at a CAGR of 2.42% during 2008-2012 to reach 49.4 Million by the end of 2012. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 19 of 81 Figure 3-9: Vietnam - Forecast for Employment (in Million), 2008-2012 44.946.147.248.349.44243444546474849502008 2009 2010 2011 2012in Million Source: International Labor Organization & EIU RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 20 of 81 3.5Tourism Vietnamisfastemergingasapreferredtourismdestination.TouristarrivalsinVietnam increased at a CAGR of 15% during 2003-2007 to reach an estimated figure of 4.25 Million at theendof2007.Seeingthisconcretegrowth,theVietnamesegovernment,aspartofits economicplans,hasearmarkedthetourismindustryasakeyproviderofgrowthinretail market. The expected increase in the number of tourists will boost retailing in Vietnam. With the local populace growing sophisticated and disposable incomes are rising, industry experts viewthecomingperiodasagoodtimetosetupinternationalstandardretailingoutlets, especially in leading cities such as Ho Chi Minh City and Hanoi. Figure 3-10: Vietnam - Tourist Arrivals (in 000), 2003-2007E 2,4292,9723,4683,5834,24805001,0001,5002,0002,5003,0003,5004,0004,5002003 2004 2005 2006E 2007Ein '000 Source: World Development Indicators & World Tourism Organization RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 21 of 81 Further,touristarrivalsareexpectedtokeeptheVietnameseretailindustryinmotion. Tourist arrivals are anticipated to grow at a CAGR of about 8% during 2008-2012. Figure 3-11: Vietnam - Forecast for Tourist Arrivals (in 000), 2008-2012 4,7975,1575,6076,1036,52201,0002,0003,0004,0005,0006,0007,0002008 2009 2010 2011 2012in'000 Source: World Development Indicators & World Tourism Organization RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 22 of 81 3.6Consumer Financing Easy consumer financing through credit cards and other related products in Vietnam make the country attractive destination for the retailers. Spending by cards is on the rise, which shows thatVietnamesepeoplehaveapositiveattitudetowardtheuseofcardsasapayment method.Consumerscaneasilyaffordtheretailproducts,particularlyconsumerelectronic productslikeTelevisionsandmobilehandsetsbyusingcreditcardsandothermodeof financing.Thus,theavailabilityofeasyconsumerfinancingisfuelinggrowthofretailingin Vietnam. In 2006, total number of credit/debit cards increased by 50% annually. Figure 3-12: Vietnam - Credit/Debit Cards (in Million Units), 2004-2006 0.62300.511.522.533.52004 2005 2006in Million Source: Vietnam Economic Times - No.157 [2007-03-01] RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 23 of 81 3.7Economic Liberalization Althoughthegovernmentcontinuestoexercisetightcontroloverretailing,thesectorhas beenliberalizedundertheconditionsofVietnam'smembershipoftheWorldTrade Organization(WTO).Foreigninvestorsarepermittedtocontributeupto49%ofcapitalin joint ventures from early 2008. From January 1, 2009, Vietnam's retail markets will be open to foreign investors, and wholly foreign-owned firms will be allowed to operate independent outlets.Owingtocompetitivepricingstructuresandmodernoperatingmethods,the popularity of large foreign firms will increase, putting intense pressure on domestic retailers tomodernize.Foreign-ownedretailersthathavealreadybeenpermittedtoestablisha presence are expected to expand their market shares in the coming years. Vietnamese retailers have recently established the Vietnam Distribution Association Network DevelopmentandInvestmentJoint-StockCompanytoenhanceco-operationbetween membersinanticipationofincreasedcompetitionresultingfromtheWTOmembership.The government believes that enhanced co-operation as well as mergers and acquisitions will help to modernize the retail market. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 24 of 81 3.8Economic Stability EconomicstabilityofVietnamisalsooneofthekeydriversoftheretailmarket.Global retailers feel risk-free and confident to penetrate and expand in Vietnam. Vietnams nominal GDP recorded growth at a CAGR of 14.8% during 2002-2007 to reach an estimated value of US$ 69.9 Billion at the end of 2007. Figure 3-13: Vietnam - Nominal GDP (in Million US$), 2002-2007E 35,06439,55345,44552,83261,70769,892010,00020,00030,00040,00050,00060,00070,00080,0002002 2003 2004 2005 2006E 2007Ein Million US$ Source: International Financial Statistics The nominal GDP of Vietnam is expected to grow at a CAGR of about 15.5% during 2008-2012 to reach US$ 147.3 Billion by 2012 end. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 25 of 81 Figure 3-14: Vietnam - Forecast for Nominal GDP (in Million US$), 2008-2012 82,85595,585108,893125,877147,277020,00040,00060,00080,000100,000120,000140,000160,0002008 2009 2010 2011 2012in Million US$ Source: International Financial Statistics RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 26 of 81 4.Retail Market Performance 4.1Retail Sales The value of retail sales in Vietnam has expanded rapidly over the past few years. It reached nearly US$ 30 Billion in 2007 from US$ 16 Billion in 2002 on account of increasing disposable income, improving living standard and growing urban population. Food is the most important component of retail sales and accounts for about two-third of the total sales. Figure 4-1: Vietnam - Retail Sales (in Million US$), 2002-2007E 16,16718,42020,69123,70126,22429,69905,00010,00015,00020,00025,00030,00035,0002002 2003 2004 2005 2006 2007Ein Million US$ Source: Planet Retail Further,theretailsalesareforecastedtogrowataCAGRofapproximately13.6%during 2008-2012.TheliberalizationofretailsectorundertheconditionsofVietnam'sWTO membership (foreign investors have been permitted to contribute up to 49% of capital in joint venturesfrom early 2008. From January 1, 2009, Vietnam's retail market will be opened for foreigninvestorsandwhollyforeign-ownedfirmswillbeallowedtooperateindependent outlets),continuousriseinincomelevel,growingurbanizationandcontinuousculturalshift towards the western markets will drive the retail industry in Vietnam. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 27 of 81 Figure 4-2: Vietnam - Forecast for Retail Sales (in Million US$), 2008-2012 34,52839,01144,33450,39157,487010,00020,00030,00040,00050,00060,00070,0002008 2009 2010 2011 2012in Million US$ Source: EIU ThetotalretailsalesinVietnamduring2007wereequalto42%ofnominalGDP-avalue much higher than that recorded in many other Asian countries, including China and Thailand. However, the retail sector officially accounted for just 12% of total employment in the same year. Figure 4-3: Vietnam, China & Thailand - Share of Retail Sales in Nominal GDP (%), 2007 423533051015202530354045Vietnam China Thailand% Source: EIU RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 28 of 81 4.1.1Food Foodisthemostimportantcomponentofretailindustry.Intermsofsales,itaccountsfor about two-third of the total retail sales in the country. Food retail sales in Vietnam grew at a CAGR of around 11.6% from 2002 to 2007, reaching an estimated value of US$ 19.8 Billion at the end of 2007. Food retailers account for around 80% of the overall retailing sector in terms ofthenumberofoutlets.Moreover,foodretailingisdominatedbywetmarketsand independent grocers, with more than 80% of food retailers being independent grocers. In addition, wet markets are extremely popular in Vietnam and more than 2,500 of them are located in Ho Chi Minh City alone. Although the proportion of overall food sales accounted for by modern retail outlets is low, there has been some growth in the size of supermarket chains and the number of hypermarkets. This is especially the case with Hanoi and Ho Chi Minh City, where consumers are increasingly moving away from traditional grocers and wet markets due to lack of air-conditioning, cramped atmosphere and unhygienic spaces. Figure 4-4: Vietnam - Food Retail Sales (in Million US$), 2002-2007E 11,45312,88014,30016,19117,69619,81405,00010,00015,00020,00025,0002002 2003 2004 2005 2006 2007Ein Million US$ Source: Planet Retail RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 29 of 81 4.1.2Non-food Apart from food retail sales in Vietnam, non-food sales have grown at a rapid pace. Non-food retailsalessurgedataCAGRofnearly16%during2002-2007.Non-foodretailersmainly consistofsmall-scalebusinessesfocusedonsellingwhitegoods,consumerelectronics, clothesandcosmetics & toiletries. However, a large number of modern shopping complexes hasbeenopenedinthemainurbancentersandtheyareattractingwealthyurbanites. Presently, non-food retailing represents nearly one-third of the total retail sales in Vietnam, but this share has started to increase, as high income consumers spend more on non-essential items such as clothing, electrical and DIY (Do-It-Yourself) goods. Figure 4-5: Vietnam - Non-food Retail Sales (in Million US$), 2002-2007E 4,7145,5406,3917,5108,5289,88502,0004,0006,0008,00010,00012,0002002 2003 2004 2005 2006 2007Ein Million US$ Source: Planet Retail Non-foodretailingisbasicallydrivenbyclothing,footwearandcosmetics&toiletries segments. With rising income, consumers are becoming more fashion and look conscious and spendingmoreontheirclothingandcosmeticproducts.Thesethreesub-segmentstogether accountforover40%ofthetotalnon-foodretailsales.Forexample-in2007,clothing, footwear,andcosmetics&toiletrieshadashareof16.5%,17.7%and6.9%respectively, making up for over 41% of the total non-food retail sales. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 30 of 81 Figure 4-6: Vietnam - Non-food Retail Sales by Segment (%), 2007E 54.5%16.5%17.7%6.9%0.2%0.3%4.0%Clothing FootwearCosmetics & Toiletries Perfumes & FragrancesFurniture Household Cleaning ProductsOthers* Source: Planet Retail, Euromonitor & RNCOSNote: *Includes sales of products like Home Appliances, Personal Computers and Mobile Handsets etc. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 31 of 81 4.1.2.1Clothing AlthoughthedomesticgarmentsectorinVietnamisstronglyexport-oriented,localdemand forbetterqualitygarments has grown in line with rising brand-consciousness and consumer-orientedsociety.Thedomestictextile/garmentindustrysclothingsaleshasbeenrecording annualgrowthofover15%peryear,absorbingone-fourthofitsmanufacturers'production. Famousbrandnames,likeMango,Bossini,Gucci,Giordano,D&G,andValentino,arenow availableinthecountrybutgenuinelabelproductsareveryexpensiveformostpeople. Moreover,popularbrandgoods,producedinChina,forexample-Bossini,Mangoand Giordano, sell well in Vietnam's big cities as the prices are not very high. InthewholesalemarketsofTanBinhandBinhTayinHoChiMinhCity,onewillfindabout 70% of Chinese-made textiles and garments in medium to low in quality at relatively cheaper rates. Clothing sold in Tan Binh market ships to Central Vietnam, the Mekong Delta, Cambodia, Laos andThailand.LocalclothingretailerssaythattheChinesegarmentsarethecheapestand those with a nice design sell very well. A Chinese shirt or T-shirt sells for VND 30,000-40,000, while a pair of jeans or khaki trousers sells for VND 70,000-90,000. Seconds are also available andtheycomefromChina,sellingatthecheapestrates-perhapsVND5,000-10,000/item. Thesesecondsareoftensoldinremote,ruralareasandindustrialzonesandsellverywell because of attractive prices. Figure 4-7: Vietnam - Clothing Sales (in Million US$), 2002-2007E 790.7925.01033.01192.91394.51632.105001000150020002002 2003 2004 2005 2006E 2007Ein Million US$ Source: Euromonitor RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 32 of 81 In view of rising brand and fashion consciousness, increasing demand for quality clothes and highconsumption,itisforecastedthatclothingsaleswillgrowataCAGRofaround15% during the period spanning from 2008 to 2012. Figure 4-8: Vietnam - Forecast for Clothing Sales (in Million US$), 2008-2012 1,946.12,235.12,583.92,957.23,396.605001,0001,5002,0002,5003,0003,5004,0002008 2009 2010 2011 2012in Million US$ Source: EIU RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 33 of 81 4.1.2.2Footwear Footwear retail sales in Vietnam rose to US$ 1.75 Billion in 2007 at a CAGR of approximately 15.6%from2002.Thedomesticfootwearmarketisfragmentedwithmanysmallretailers, thusmakingithardforproducerswhotypicallyfillmediumorlargeorderstoaccumulate profits.However,thedomesticdemandforfootwearisincreasinganditneedsaround160 Million pairs of shoes a year, assuming each Vietnamese requires two pairs, according to the Vietnam Leather and Footwear Association (VLFA). Figure 4-9: Vietnam - Footwear Sales* (in Million US$), 2002-2007 847.2991.11106.91278.11494.11748.802004006008001000120014001600180020002002 2003 2004 2005 2006 2007in Million US$ Source: Euromonitor Note: *Values are estimated Withrisingdemand,footwearsalesareexpectedtoreachUS$3.6Billionby2012,upfrom US$2.0Billionin2008,growingataCAGRofnearly15%.Impetusfromthecurrent modernizationdriveandamorestreamlinedlogisticalpatternwillmaketheVietnamese market more attractive to local and foreign players. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 34 of 81 Figure 4-10: Vietnam - Forecast for Footwear Sales (in Million US$), 2008-2012 2,085.12,394.92,768.63,168.63,639.405001,0001,5002,0002,5003,0003,5004,0002008 2009 2010 2011 2012in Million US$ Source: EIU RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 35 of 81 4.1.2.3Cosmetics & Toiletries Retailsalesofcosmetics&toiletriesroseataCAGRof16.5%during2002-2007toan estimatedvalueofUS$683.4Million.Themarketforcosmeticsandskincareproductsis expanding on the back of fast improving living standards and extensive advertising campaigns. But the growth is still centered in urban areas and rural consumers are demanding for basic and affordable toiletries. Realizing the attractiveness and potential of the market, international brands have begun to developing the domestic market. For example - Lancme, a luxury cosmetics brand, opened a beautycounterinadepartmentstoreinHoChiMinhCityinmid-2006,andhasplansto expand further. Considering the increasing brand-awareness among people, foreign cosmetics producers are keen to embark on joint ventures. Firms, with established joint ventures, such asanAnglo-DutchcompanyUnilever,whichoperatesthroughitssubsidiary,Unilever Vietnam, dominate the local market. However, smuggling and fake goods make it difficult to judge the true size of the cosmetics and skincare products market. Figure 4-11: Vietnam - Cosmetics & Toiletries Sales (in Million US$), 2002-2007E 318.9374.7429.8496.1582.3683.401002003004005006007008002002 2003 2004E 2005E 2006E 2007Ein Million US$ Source: Euromonitor Rising income, increasing fashion consciousness, aggressive promotional campaigns, and entry of foreign players will drive the retail sales of cosmetics & toiletries in Vietnam. Resultantly, sales are expected to grow at a CAGR of 16.5% during 2008-2012. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 36 of 81 Figure 4-12: Vietnam - Forecast for Cosmetics & Toiletries Sales (in Million US$), 2008-2012 815.4945.61,096.01,280.91,502.202004006008001,0001,2001,4001,6002008 2009 2010 2011 2012in Million US$ Source: EIU RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 37 of 81 4.1.2.4Perfumes & Fragrances Perfumes & fragrances market in Vietnam is quite developed, and grew at a CAGR of around 14.4%during2002-2007.Thisgrowthwillbefurtherboostedbythegovernmentsmoveof lifting cap on foreign investment. Figure 4-13: Vietnam - Perfumes & Fragrances Sales (in Million US$), 2002-2007E 7.99.410.611.813.515.50246810121416182002 2003 2004 2005 2006E 2007Ein Million US$ Source: Euromonitor Governmentssteptoallowforeigninvestmentandrisingdisposableincomewillpushthe market to grow at a projected CAGR of about 14.6% from 2008 to 2012. Figure 4-14: Vietnam - Forecast for Perfumes & Fragrances Sales (in Million US$), 2008-2012 18.220.723.627.331.4051015202530352008 2009 2010 2011 2012in Million US$ Source: EIU RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 38 of 81 4.1.2.5Furniture FurnituremanufacturingsectorinVietnamismainlyexport-orientedbutthedomestic demandisalsomountinggradually.Duetorisinglivingstandardandrapidlygrowingmiddle classpopulation,thedomesticfurnituresales,bothresidentialaswellascommercial, increased at a CAGR of 11.8% from 2002 to 2007. Presently, the furniture industry in Vietnam is largely dominated by outdoor furniture market, but the demand for indoor furniture is also growingrapidly;consequently,theproductionofindoorfurnitureissurgingatafastpace. Under such scenario, the demand for indoor furniture is expected to surpass the demand for outdoor furniture in coming years. Figure 4-15: Vietnam - Furniture Sales (in Million US$), 2002-2007E 14.316.017.419.422.025.00510152025302002 2003 2004E 2005E 2006E 2007Ein Million US$ Source: Euromonitor The domestic furniture market is projected to see growth at a CAGR of 14.32% during 2008-2012.Thedomesticdemandisexpectedtospurtbyincreasingnumberofhouseholdsand rising income level of higher middle class population in the forecasted period. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 39 of 81 Figure 4-16: Vietnam - Forecast for Furniture Sales (in Million US$), 2008-2012 29.132.937.643.149.701020304050602008 2009 2010 2011 2012in Million US$ Source: EIU RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 40 of 81 4.1.2.6Household Cleaning Products In2007,householdcleaningproductsrecordedrobustgrowthduetotheincreased penetrationinsuburbanandruralareas.Thispenetrationwasmainlydrivenbydomestic players who have extensive knowledge on consumers lifestyle, preferences and needs. Best-sellingandstandardhouseholdcareproducts,suchaslaundrydetergentsandhand dishwashers,areincreasinglyacceptedbyruralconsumers,andareoftencompetitively pricedtoraisesales.Risingawarenessabouthygieneinruralareas,asaresultofseveral campaigns launched by the Vietnamese government, boosted the demand for household care products, especially those that have already attained relatively large exposure in urban areas. Figure 4-17: Vietnam - Household Cleaning Product Sales (in Million US$), 2002-2007E 254.3279.0302.0328.3360.0395.50501001502002503003504004502002 2003 2004 2005 2006E 2007Ein Million US$ Source: Euromonitor Increasinghygienicawarenessinruralareasandrisingnumberofhouseholdswillfurther boostthesalesofhouseholdcleansingproducts.Sothesalesareforecastedtosurgeata CAGR of 8.65% in the next five years from 2008 to 2012. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 41 of 81 Figure 4-18: Vietnam - Forecast for Household Cleaning Product Sales (in Million US$), 2008-2012 440.9480.2523.2566.1614.501002003004005006007002008 2009 2010 2011 2012in Million US$ Source: EIU RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 42 of 81 4.1.2.7Consumer Electronics Demand for consumer electronics has accelerated quickly in Vietnam, reflecting rising income and easier access to such products. The local consumer electronics manufacturing sector has seen significant growth in the past few years largely because of high import tariffs on finished goods.Annualoutputgrowthinelectronicgoodshasbeenimpressiveinrecentyearsat around25%peryear.Moreover,thenumberofjointventuresbetweenleadingforeign manufacturersandlocalpartnershasincreasedasSamsung,DaewooandLGofSouthKorea and Toshiba, Sanyo and Sony of Japan - all are investing in the local production bases. Thedemandforconsumerelectronicsandwhitegoodsisexpectedtoexpandfurtherin coming years, as Vietnamese consumers become more active in this market and regard items such as television sets, washing machines and refrigerators as necessities rather than luxuries. 4.1.2.7.1TV Sets The sales of television sets in the country grew at a CAGR of around 5.5% in the last five years (2002-2007).ThisimpressivegrowthinsalesofTVsetslargelystemmedfromtherising numberofhouseholdsandeasyaccesstoconsumerfinance.Thefutureisalsoexpectedto see the same trend.

Figure 4-19: Vietnam - TV Set Sales (in 000 Units), 2002-2007E 936.01067.01126.01105.91161.21221.502004006008001000120014002002 2003 2004 2005 2006E 2007Ein'000 Source: Euromonitor RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 43 of 81 TelevisionsalesareforecastedtosurgeataCAGRofapproximately6.4%during2008-2012. RisingsalesofLCDTVswillbeoneofthekeyfactorsdrivinggrowthintheVietnamese television market. Figure 4-20: Vietnam - Forecast for TV Set Sales (in 000 Units), 2008-2012 1287.71363.41446.11544.91650.402004006008001,0001,2001,4001,6001,8002008 2009 2010 2011 2012in'000 Source: EIU 4.1.2.7.2Mobile Handsets Another important consumer electronics product - mobile phone - has seen strong growth in recentpast.Vietnamconsumednearly4.7Millionmobilephonesin2006androughly6.3 Million in 2007. Nearly 53% of mobile phones sold in the country in 2006 were camera phones. In value terms, Vietnam's mobile phone market was estimated at US$ 877 Million in 2006 and US$ 1,167 Million in 2007. Best-selling mobile phones in 2006 were priced at US$ 100-US$ 200 perunit,whilehandsetswithpricetagsofUS$400-US$500accountedforonly3-4%ofthe total sales in the same year. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 44 of 81 Figure 4-21: Vietnam - Mobile Handset Sales* (in Million Units), 2006 & 2007 4.76.3012345672006E 2007Ein Million Source: GfK Asia & Vietnam News Agency Note: Estimated sales for 2006 and 2007 4.1.2.7.3Personal Computers ThesalesofcomputerarerapidlygrowinginVietnam,withnearlyonemillionunitssoldin the year 2006. The market is further expected to jump about 25% in 2008 over 2007, thanks to the countrys solid economic foundation and growing awareness and interest in IT in both private and public sectors. Figure 4-22: Vietnam - Personal Computer Sales (in Million Units), 2006*-2008F 11.21.500.20.40.60.811.21.41.62006E 2007E 2008Fin Million Source: International Data Group & RNCOS Note: It is assumed that market grew by 20% in 2007 over 2006 *Estimated data for 2006 and 2007

RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 45 of 81 4.1.2.7.4Video Recorders Asvideorecordersarebeingreplacedbyhigh-techmobilesrapidly,thesalesofvideo recorder declined a massive 32.5% between 2002 and 2005, reaching 27,000 Units. Figure 4-23: Vietnam - Video Recorder Sales (in 000 Units), 2002-2005 403933270510152025303540452002 2003 2004 2005in'000 Source: Euromonitor 4.1.2.7.5Washing Machines Thedemandforwhitegoods,particularlywashingmachines,hasseenastrongupsurgein recentyears.SalesofwashingmachinesroseataCAGRofover12%from2002to2007, reaching 98,000 Units at the end of 2007.

RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 46 of 81 Figure 4-24: Vietnam - Washing Machine Sales (in 000 Units), 2002-2007E 55.062.069.077.087.098.00204060801001202002 2003E 2004E 2005E 2006E 2007Ein'000 Source: Euromonitor Furthermore, washing machine sales in Vietnam are projected to grow at a CAGR of over 14% during2008-2012.Risingdisposableincomeandincreasingaccessibilityduetorapid urbanization and consumer financing will propel the growth in washing machine sales during the forecasted period. Figure 4-25: Vietnam - Forecast for Washing Machine Sales (in 000 Units), 2008-2012 112.0127.0146.0167.0191.00501001502002502008 2009 2010 2011 2012in'000 Source: EIU RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 47 of 81 4.1.2.7.6Others Refrigerators The annual sales volume of refrigerators in Vietnam stood at 181,500 in 2002 (latest available data), but since then, it has declined slowly. The penetration rate of refrigerators in 2000 was about 65% in Hanoi, 73% in Ho Chi Minh City and 10-40% in provinces and towns. Air Conditioners The penetration rate of air conditioners is low, averaging 3-8% in 2002,with the highest rate in the southern part of the country. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 48 of 81 4.2By Province The retail sales of goods and services reflect the total sales of goods and services of business establishments(includingcommercialbusinesses,productionunits,farmers,hotels, restaurants,tourism,servicesheldbyindividualsororganizations)retaileddirectlyto consumers in the market. Almost all the provinces in Vietnam are reporting high retail sales, thanks to rising disposable income,increasingdemandforconsumergoods,surgingconsumerspending,rapid urbanization and growing brand- and fashion-consciousness. 4.2.1South East The retail sales of goods and services in Southeast Vietnam increased dramatically at a CAGR ofaround19%during2002-2006toapreliminaryvalueofVND201.8Trillionattheendof 2006 from VND 101.1 Trillion in 2002. Figure 4-26: South East - Goods & Services Retail Sales (in Trillion VND), 2002-2006P 101.1121.6144.5166.0201.80501001502002502002 2003 2004 2005 2006Pin Trillion VND Source: GSONote: P= Preliminary RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 49 of 81 4.2.2Red River Delta RedRiverDeltaofVietnamalsowitnessedasignificantriseinretailsalesofgoodsand services at a CAGR of 20.5% from 2002 to 2006 to a preliminary value of VND 117.9 Trillion at the end of 2006. Figure 4-27: Red River Delta - Goods & Services Retail Sales (in Trillion VND), 2002-2006P 56.066.179.396.4117.90204060801001201402002 2003 2004 2005 2006Pin Trillion VND Source: GSO Note: P= Preliminary RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 50 of 81 4.2.3Mekong River Delta The retail sales of goods and services in Mekong River Delta of Vietnam surged strongly at a CAGR of around 21% during the period spanning from 2002 to 2006. Figure 4-28: Mekong River Delta - Goods & Services Retail Sales (in Trillion VND), 2002-2006P 54.063.976.397.5115.60204060801001201402002 2003 2004 2005 2006Pin Trillion VND Source: GSONote: P= Preliminary RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 51 of 81 4.2.4South Central Coast SouthCentralCoastofVietnamloggedanimpressivegrowthinretailsalesofgoodsand services at a CAGR of about 20.5% during 2002-2006. Figure 4-29: South Central Coast - Goods & Services Retail Sales (in Trillion VND), 2002-2006P 22.027.331.737.846.4051015202530354045502002 2003 2004 2005 2006Pin Trillion VND Source: GSO RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 52 of 81 4.2.5North Central Coast The retail sales of goods and services in North Central Coast of Vietnam stood at a preliminary value of VND 35.7 Trillion at the end of 2006 from VND 17.9 Trillion in 2002, representing a CAGR hike of nearly 19%. Figure 4-30: North Central Coast - Goods & Services Retail Sales (in Trillion VND), 2002-2006P 17.920.624.630.035.705101520253035402002 2003 2004 2005 2006Pin Trillion VND Source: GSO RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 53 of 81 4.2.6North East The retail sales of goods and services in North East of Vietnam also experienced robust growth at a CAGR of approximately 19% from 2002 to 2006, touching a preliminary value of VND 35.9 Trillion. Figure 4-31: North East - Goods & Services Retail Sales (in Trillion VND), 2002-2006P 17.820.725.330.135.905101520253035402002 2003 2004 2005 2006Pin Trillion VND Source: GSO RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 54 of 81 4.2.7Central Highlands Like other regions, Central Highlands also registered strong growth in retail sales of goods and services. It grew at a CAGR of around 23% during 2002-2006 to a preliminary value of VND 21.3 Trillion. Figure 4-32: Central Highlands - Goods & Services Retail Sales (in Trillion VND), 2002-2006P 9.310.512.917.421.305101520252002 2003 2004 2005 2006Pin Trillion VND Source: GSO RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 55 of 81 4.2.8North West TheretailsalesofgoodsandservicesinNorthWestincreasedataCAGRofabout21.5% during 2002-2006 to a preliminary value of VND 6.1 Trillion at the end of 2006 from VND 2.8 Trillion in 2002. Figure 4-33: North West - Goods & Services Retail Sales (in Trillion VND), 2002-2006P 2.83.03.95.06.1012345672002 2003 2004 2005 2006Pin Trillion VND Source: GSO RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 56 of 81 4.3By Ownership Retail sales of goods and services can be further divided into State-owned, Non-state-owned and foreign-owned. Detailed information on these divisions is given below: 4.3.1State-owned Companies State-owned retail sales account for comparatively small share than the private-owned retail sales.ItgrewataCAGRofaround12%during2002-2006toapreliminaryvalueofVND72 Trillion. Figure 4-34: Vietnam - Goods & Services Retail Sales by State-owned Companies (in Trillion VND), 2002-2006P 4652606272010203040506070802002 2003 2004 2005 2006Pin Trillion VND Source: GSO RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 57 of 81 4.3.2Non-state-owned Companies Non-state-ownedretailsalesrepresentmajorityofretailsalesofgoodsandservicesin Vietnam and expanded at a CAGR of about 21% during 2002-2006. Figure 4-35: Vietnam - Goods & Services Retail Sales by Non-state-owned Companies (in Trillion VND), 2002-2006P 22426832440048501002003004005006002002 2003 2004 2005 2006Pin Trillion VND Source: GSO RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 58 of 81 4.3.3Foreign-owned Companies At present, foreign-owned retail sales of goods and services account for a small share of total retailsalesinVietnam.However,itgrewstronglyataCAGRofapproximately20%during 2002-2006, and stood at a preliminary value of VND 23 Trillion in 2006. In coming years, this sector will see rapid growth due to the liberalization of retail sector. Figure 4-36: Vietnam - Goods & Services Retail Sales by Foreign-owned Companies (in Trillion VND), 2002-2006P 111415182305101520252002 2003 2004 2005 2006Pin Trillion VND Source: GSO RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 59 of 81 4.4By Retail Format ThedomesticretailsectorinVietnamishighlyfragmentedandunderdeveloped,withsmall family-ownedbusinessesdominatingthesector.Thesectorhasrecentlyseenagreater degreeofforeigninvestment,andthemarkethasexperiencedsomeinstancesof consolidation leading to the formation of larger shops and shopping centers. However, despite increasing foreign investment, around 90% of the total retail sales are still under the control of traditional outdoor markets (as of 2007). Figure 4-37: Vietnam - Share of Sales by Traditional & Modern Retail Format (%), 2007 Modern Retail10%Traditional Retail90% Source: Ministry of Trade However, in cities like Ho Chi Minh and Hanoi, the share of modern trade is rapidly increasing. It increased by 6 percentage points to 21% in 2006 over 2004. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 60 of 81 Figure 4-38: Ho Chi Minh & Hanoi - Share of Traditional & Modern Trade (%), 2004-2006 1518218582790204060801002004 2005 2006%Modern Trade Traditional Trade Source: AC NeilsenNote: Based on FMCG Trade Withstrongeconomicgrowth,risingincomelevel(especiallydisposableincome),growing middleclass,expandingyoungpopulationandincreasingexposuretowesternlifestyleare fuellinggrowthinmoderntradeofretailinginVietnam.Moderntradeachievedanaverage growth of 18% per annum during the period 2000-2006, and is expected to continue growing at thesamelevelincomingyears.Thedemandforaninternationalshoppingexperienceby urbanconsumershasrisenandincreasingnumberofconsumersisshiftingfromthe traditional to the modern trade. Table 4-1: Vietnam* - Number of Modern Retail Outlets by Brand (2004-2006) Modern Trade20042005 2006 Vissan2119 10 CoopMart1413 20 Citimart67 9 Medicare66 5 Big C34 4 Fivimart33 4 Marko33 3 Maximark34 6 Metro33 6 Intimex33 6 Hanoi Star Mart22 2 CMC22 3 Source: AC Nielsen Note: *Data for Ho Chi Minh & Hanoi RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 61 of 81 4.4.1Traditional Market Although the number of traditional grocery outlets, street vendors and market stalls has been decreasing YOY, the traditional outdoor markets accounted for around 90% of the total retail sales in the year 2005-06, according to the Ministry of Trade. Hence, it is a good opportunity forforeignretailerstoopenmodernretailoutletsandconvertVietnamsunorganizedretail market into organized one. Table 4-2: Vietnam* - Number of Traditional Stores by Format (2004-2006) Format200420052006 Traditional Grocery Outlet23,26918,183 17936Street Vendors1,102712 647Market Stalls3,1772,839 3189 Source: AC Nielsen Note: *Data for Ho Chi Minh & Hanoi RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 62 of 81 4.4.2Supermarket The concept of supermarket is rapidly developing in Vietnam. Ho Chi Minh City and Hanoi, the country'stwomajorcities,hadaround104supermarketsin2005,accountingfor75%of thetotal number of superstores. The popularity of superstores is attributed to the fact that they offeralargevarietyofimportedproductswithintheambienceofahighquality-shopping environment.Moreover,withrisingnumberofsupermarketsinVietnam,thedimensionsof superstores in operation are changing. The size of supermarkets now average between 25,000 Square Feet and 50,000 Square Feet compared with 5,000 Square Feet to 8,000 Square Feet attheirinitialdevelopmentstageinthemid-90s.MostofthesupermarketsinHoChiMinh City are located in the downtown area where majority of expatriates are based. Table 4-3: Vietnam* - Number of Supermarkets (2004-2006) YearNumber of Supermarkets 2004104 2005104 2006140 Source: AC Nielsen & Bao kinh te Vietnam Note: *2004-2005 data for Hanoi & Ho Chi Minh City and 2006 data for Ho Chi Minh City, Hanoi, Da Nang and Can Tho RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 63 of 81 4.4.3Hypermarket & Warehouse Clubs HypermarketpenetrationislowinVietnam but it is expected that the number will increase duetochanginglifestyleandincreaseinthemiddleclassbase.Manybigretailershave started opening hypermarkets in the big cities like Hanoi and Ho Chi Minh City of Vietnam. Table 4-4: Vietnam* - Number of Hypermarkets & Warehouse Clubs (2004-2006) Format20042005 2006 Hypermarkets33 3 Warehouse Club33 6 Source: AC Nielsen Note: *Data for Ho Chi Minh & Hanoi In-spite of rapid growth in Vietnams food retail market, hypermarkets represent a minuscule share in retail food sales. Hypermarkets and supermarkets together accounted for around 3% oftheretailfoodsalesin2007.Assumingnogrowthinfoodretailsalesand10%annual growthinthesalesofhypermarketsandsupermarkets,shareofhypermarketsand supermarkets in food retail sales will reach 12% by 2020, indicating that retail sector will take time to be dominated by hypermarkets and supermarkets. Figure 4-39: Vietnam - Share of Hypermarkets & Supermarkets in Food Retail Sales (%), 2007E & 2020F 312024681012142007E 2020F%

Source: BMI, 2004 RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 64 of 81 4.4.4Convenience Stores Convenience stores have been on the rise in Ho Chi Minh City, transforming the city into one with modern retail channels. As Vietnam is a developing market and convenience stores have still not reached full developed stage, coupled with rising disposable income in urban areas, theoutlookfortheconveniencestoresisverypromising.Thus,bigretailercompaniesare heading to open new convenience stores in the country. Table 4-5: Vietnam* - Number of Convenience Stores (2004-2006) Format20042005 2006 Convenience Store2119 17 Source: AC Nielsen Note: Data for Ho Chi Minh & Hanoi RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 65 of 81 5.Consumer Behavior Pattern Average Household Spending Patterns Similar to other developing countries, majority of Vietnamese are poor. Therefore, it is likely that a large proportion of income in the country is spent on basic goods and services such as food, clothing, hygiene products and transportation. Lifestyles/Shopping Habits An average Vietnamese consumer relies on small open markets and domestic, owner-managed shopsforhisbasicneedssuchasfoodandclothing.Althoughlargeforeign-ownedretail outletsandshoppingmallsinmajorurbancenters,suchasHoChi Minh City and Hanoi, are attractingattentionandvisitors,itisunlikelythatanaverageconsumercanaffordtoshop regularly at such establishments. Brand/Price Sensitivity Vietnamese people generally prefer foreign brands to domestic brands; therefore, it is likely thattheyremainfairlyprice-sensitivegiventheirmoderateincomeposition.Anexampleof this foreign product preference was shown in a survey conducted by an international market researchinstitutewhereintheVietnameseproductsaccountedfor6%ofthedomestic electronicaudio-visualmarketin2004,whileJapanesetrademarkproductsheld48%and South Korean trademarks 35% share in the market. Emerging Middle & Upper Class Likemanyemergingeconomies,recentreformsinVietnamhaveincreasedtheincomegap betweentherichandthepoor.Growingurbanmiddleandupperclasseshaveshowna particularinterestinforeignluxurybrands,electronicsandcosmetics.Thisisevidentfrom thefactthatduring2003-2005,theconsumptionofelectronicproductssuchasdigital cameras and televisions increased more than 250%. Consumer Purchasing Behavior Consumers in Vietnam spend a big proportion of their money on food items. According to the Gainreport,expenditureonfoodstoodbetween42%and45%ofthetotalconsumption expenditure in 2005. A major part was spent on staple and basic food items like rice, meat, salt, sugar, vegetable oils, and sauces; very little proportion of the expenditure was spent on RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 66 of 81 highvalueprocessedfoodproducts.However,somerecentconsumersurveysindicateto increased spending on high-value products also, such as dairy products (UHT milk, fresh milk, yogurt, cheese etc.), meat, eggs, fresh fruits, vegetables, confectionary and snack foods. Important Trends in Consumer Behavior ! High concern for food safety ! Prefer eating at home ! Spend a big proportion of their income on food items ! Spend little on high-value processed food products ! Shop daily for their food use ! Prefer fresh products ! Low percentage of people who have refrigerators and microwave ! Urban people are more concerned about nutrition, quality, hygiene and food safety ! Brand loyal but still receptive to new products ! Consumers, especially kids, influenced by advertisement and promotion Main Shopper & Key Influencer InVietnam,womenarethekeyinfluencersandconstituted83%ofthetotalinfluencersin 2005. Women also topped the list of main shoppers with a whooping 97% share. Figure 5-1: Vietnam - Main Shoppers* & Key Influencers** (%), 2005 3179783020406080100120Main Shoppers Key Influencers(%)Male Female Source: AC Nielsen Note: *Data for Main Shoppers is for Hanoi City**Data for Key Influencers is for Ho Chi Minh RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 67 of 81 Consumer Behavior for Clothes People of North and South Vietnam mostly wear cotton clothes but in different styles. North VietnamInNorthVietnam,mostmenandwomenwearblacktrouserswithwhiteorblackbuttons.They prefer sandals because sandals are more comfortable to wear in a hot climate. Farmers preferanuppergarmentandbaggy cotton trousers so that they can be rolled up above the kneestosavefromgettingwetwithwaterandmudinricefields.Thereisalargecone shapedhatwhichisusuallyworntoprotectagainstthebrightlightofthesunandheavy rains.ItiscalledNonlainVietnamese.Itismadeoutofstrawandisveryhelpfuland importanttoVietnamesefarmers.Sometimes,insteadofahat,aclothistiedaroundthe head. South VietnamThe people of South Vietnam also wear trousers and sandals, but they also wear Western-style clothes, especially men. Many women and girls still wear the traditional dress called ao dai. Ao dai is a long tunic with a slit on each side. They also wear skirts over a black or white color trouser.Itisusuallywornonholidaysandspecialoccasions.Aodaiisembroideredwith colorful pictures of animals, dragons and birds on the front and back. Menwearaodaiaswell,buttheyareusuallysolidblackorwhite.SouthVietnamesemen don't wear ao dai as often as the North Vietnamese unless they are going to a special party or special occasions because they are heavily influenced by the American way of life. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 68 of 81 6.Product Affordability Analysis Costandaffordabilityanalysisofsomeimportantconsumergoodsshowsthatinspiteof rapidlygrowingpersonaldisposableincomeofVietnamese,theiraffordabilityindexisquite lowcomparedtotheircounterpartsinothercountries.Thus,highpriceofconsumergoods and low income are the major concerns for the retail market. For example, average cost of 66 cmcolortelevisionsetwasUS$983attheendof2007,almost36timesofanaverage monthly disposable income of a Vietnamese. And in terms affordability index of this product, Vietnamranked57thinagroupof58countriesworldwide.Similarly,childrenshoes, sportswear and women shoes cost an average of US$ 93.62 and US$ 130 respectively in 2007. Table 6-1: Vietnam - Price & Affordability Rank by Product, 2007

ProductsPrice (in US$) Monthly Disposable Income (%) Affordability Rank* Hand lotion, 125 ml (supermarket) 2.167.8356 out of 57 Lipstick, deluxe type (chain store) 17.7964.3554 out of 56 Men's business shirt, white (chain store) 50.68183.356 out of 57 Women's shoes, town (chain store) 130468.556 out of 57 Child's jeans (chain store) 24.990.0855 out of 56 Child's shoes, sportswear (chain store) 93.62338.756 out of 56 Compact disc album (average) 20.2873.3855 out of 56 Television, color, 66 cm (average) 983355557 out of 58 Source: EIU Note: *Affordability Rank: For each country, the price of an item as a percentage of monthly personal disposableincomeiscalculated.Countriesarerankedaccordingtothesepercentages.Themost affordable country will have the lowest percentage and be ranked first. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 69 of 81 7.Future Growth Prospects 7.1Developing Trend of Modern Retailing Modernretailformatslikeair-conditionedmini-marts,supermarketsandsmallshopping complexes will become more prevalent in coming years and will attract consumers away from traditionaloutdoormarkets.Thepaceofchangewillbemorerapidinthemainurban centers,whicharehometorelativelyaffluentconsumers(comparedwiththoseinrural areas) with increasing purchasing power. In rural areas, independent small-scale retailers and outdoor markets will continue to dominate the retail trade. Development in urban areas will beencouragedbythegovernmenteffortstopreparethelocalretailsectorforincreased foreigncompetitionresultingfromVietnam'smembershipoftheWTO.InHanoi,thecapital city,forexample,theauthoritieshaveofferedtaxpreferencesandquickerlandand administrative procedures to encourage the development of modern retail outlets. Atpresent,retailsalesviasupermarketsaccountforonly10%ofsales,withtheremaining distributed among traditional, small markets, shops and direct sellers. However, consumption habitsofVietnameseresidents,especiallytheyouth,arechanging.Vietnameseincreasingly prefertoshopatmodernsupermarketswithbetterqualityandservice.Itishopedthatby 2017,retailsalesfromsupermarketsinVietnamwillaccountfor60%ofsales,equaltothe current level in Thailand. Figure 7-1: Vietnam - Share of Modern Retailing in Retail Sales (%), 2007 & 2017F 10600102030405060702007 2017% Source: AT Kearney RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 70 of 81 7.2Online Retailing InternetretailingisintheearlystagesofdevelopmentinVietnambutitshowedsteady growth and is expected to offer great potential in future. It is expected to grow fast because of the increasing affordability and availability of computers, and consumers familiarity with theInternetandelectronicpaymentmethods.Previously,Vietnamesebusinesscitedhigh telecommunications and Internet service costs, along with poor quality as the reasons for the lackofencouragementtofundgoodqualityWebsites.However,thenumberandqualityof Internet service providers is improving and this augurs well for growth over the coming years. Figure 7-2: Vietnam - Forecast for Internet Users (in 000), 2008-2012 18,54120,94823,24725,03026,65205,00010,00015,00020,00025,00030,0002008 2009 2010 2011 2012in'000 Source: Pyramid Research RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 71 of 81 7.3Non-food Retailers Vietnamoffersampleopportunitiestonon-foodretailersasincomehasbeenrisingand consumersarespendingmoreonnon-essentialitemssuchasclothing,electricalandDIY goods.Personal-careandhouseholdproductshavebeenrecordingthehighestgrowthrates since2000.Althoughthedomesticgarmentsectorisstrongly export-oriented, local demand forbetterqualitygarmentshasgrowninlinewiththedevelopmentofamorebrand-conscious,consumer-orientedsociety.Risingdisposableincomeshavemeantthatessential toiletries, particularly in the oral hygiene subsector, have become more affordable. Hair care andbathandshowerproductsaccountforthesecond-andthird-largestsharesrespectively afteroralhygieneproducts.Inadditiontorisingincomes,awarenessprogrammesand aggressivepromotionalcampaignshavehelpedtopushupthesalesoftheseitemsandto drive penetration rates in rural areas. Sales of cosmetics and toiletries are estimated to have reached over US$ 683 Million in 2007. 7.4POS Terminal ThereishugerequirementforPOSterminalsinVietnam.Asperthelatestinformation available, there were only about 11,000 POS terminals in Vietnam. Thus, retailers in Vietnam are not able to exploit the potential of those customers who do not possess hard cash during visitingtheretailshopsandwantedtoshopthroughcreditordebitcardsviausingPOS terminals. To exploit this potential market, banks need to develop a larger network of POS, especiallyatsupermarkets,restaurantsandtradingcenters.Thus,therewillbehuge opportunity for POS manufacturers in Vietnam in near future. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 72 of 81 7.5International Brands & Luxury Goods InternationalbrandsareexpandingtheirpresenceintheVietnamesemarketasthedemand for luxury goods increases with rising incomes. As competition among rival brands intensifies, priceswillremainfairlystableinnominalterms,butwillfallinrealterms.Luxurybrands suchasLouisVuitton,Dolce&Gabbana,Burberry,EscadaandRolexarebecoming increasingly popular, especially among young consumers, who see them as status symbol. The government expects spending on luxury goods to increase by 5% per year during by 2010. AlthoughmostofVietnam'sfootwearandgarmentmanufacturingindustryisgearedtowards exports,domesticdemandforclothingandfootwear,andparticularlyformorefashionable items,isgrowing.Somelocalmanufacturers,whichuntilrecentlyhaveconcentratedon producing goods for export, are turning their attention towards the domestic market. Seeing thedemandforqualityandluxuryitems,theynowarecomingupwithqualityproductsto leverage the opportunity. 7.6IT in Retailing Risingwaveofforeignretailerswithprofessionalmanagementskillsandlargecapital potential are arriving in Vietnam. But to survive, these retailers will have to apply IT in their management in terms of commodity classification, clients, employees and strategic partners, amongotherthings.Thus,thereisahugeexpecteddemandforITinVietnamretailingin coming years. The demand may be in terms of Radio Frequency Identification (RFID), barcode readers,orsomeothernewtechnologywhichwillhelpinimprovingthemanagement efficiency of Vietnam retailers.

RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 73 of 81 7.7High-tech Retailers Therearehugeopportunitiesforhi-techretailers in Vietnam as consumer purchasing power for such products has gone significantly up. The volume of technological products available in Vietnamhasincreasedsharplyinrecentyears,sinceVietnamjoinedtheWTO.Over500 technologicalbrandsareonsale.Manyproductshavepostedhighsaleratesandincluding mobile phones, Information Technology (IT) products, and high quality TVs. With a population of 86 Million, Vietnams high-tech retail market will be more attractive in years to come. In 2006, revenue from 26 key items of the Vietnamese electronic technology sector reached US$ 3.1Billion.Thisyeartoo,thehi-techconsumergoodssectorwillseestronggrowthwith categoriesofaudioandvideoproducts,technologicalequipment,andlaptopandhome appliances. The revenues of these products on the domestic retail market were estimated to reach US$ 4 Billion by the end of 2007. At present, mobile phones are one of the best-selling products. Chains of shops selling mobile phones account for 35% of those trading technological products.Itwasestimatedthataboutsixmillionmobilephoneswillbepurchasedin2007, followed by TVs with around 1.2 Million sets, laptops and other IT products. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 74 of 81 7.8Hotel & Restaurants Vietnamesefoodretailsectorofferssignificnatopportunitiesforhotelandrestaurantsas consumer spending on hotel and restaurants is growing at it fastest pace and is forecasted to grow at a CAGR of about 16% during 2008-2012. Figure 7-3: Vietnam - Forecast for Consumer Expenditure on Hotel & Restaurants (in Million US$), 2008-2012 4,6745,4426,3277,2728,38801,0002,0003,0004,0005,0006,0007,0008,0009,0002008 2009 2010 2011 2012in Million US$ Source: Euromonitor RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 75 of 81 8.Key Industry Hurdles Inadequatemanagementexperience,inabilitytoaccessfinanceandpoordistribution networks are the major problems faced by domestic retailers. In addition, major international retailers such as Wal-Mart, Carrefour, Tesco and Lotte Shopping have indicated their interest insettingupretailbranchesinVietnaminnearfuture,whichislikelytohaveanegative impact on smaller domestic retailers. 8.1Skilled Staff The deadline for Vietnam to open its doors to foreign retailers is only one year away (as per its entry to the WTO), but domestic retailers are already facing a serious shortage of skilled staff. Vietnamese retailers have not yet recognized the importance of trained sales staff. As on end of 2007, only about 5% of retail staff in the country was properly trained. Most of the departments staff lacks professional skills, foreign language ability and ability to adapt to a new environment. They (the staff) contribute up to 60% to the markets revenue. Manysmallandmedium-sizedretailbusinessesdon'thaveenoughcapitalandexperienceto train personnel and thus, are not able to forecast turnover. Supermarketsanddepartmentstoresaccountfor12-15%amongtheretailmarketandare predicted to increase from 35 to 40% by 2020. Directors, managers, supervisors and sale clerks will all be in demand. Companies can borrow capital and technology, but personnel must be trained. So the companies should give training priority to people in senior positions who can outline a companyvisionandhumanresourcestrategies.Retailersshouldalsoworkwithforeign partners to share management experience and information. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 76 of 81 8.2Consumer Price Index Rising consumer price inflation is definitely hitting the demand of consumer goods in Vietnam. Vietnam'sannualinflationratesoaredto19.4%inMarch2008from15.7%inFebruary2008, hitting the double digits for a fifth consecutive month. The cost of food and foodstuffs surged by30.6%yearonyear,upfroma25.2%gaininFebruary.Foodpriceinflationhasbeen acceleratingrapidlysincemid-2007.Housingandconstructioncostsjumpedby20.6%in March,following16.4%growthamonthearlier,whiletransportandcommunicationcosts expanded by 14.3% year on year after increasing by 8.3% in February. Figure 8-1: Vietnam - Consumer Price Inflation (%), Sep 2007 to Mar 2008 8.89.31012.614.115.719.40510152025Sep, 07 Oct,07 Nov,07 Dec,07 Jan,08 Feb,08 Mar, 08% Source: General Statistics Office of Vietnam RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 77 of 81 8.3Retail Space & Cost RetailshopspaceislimitedinVietnamasthecountry'sretailsectorchangesfromthe traditionaltoanewstyleofretailtrade.Theshortageofretailspaceisaproblemfor domesticandforeigncompanies.FourVietnameseretailers,SaigonCo-op,Satra,PhuThai and Hapro, have, while keeping their old companies intact, established a new company, the VDA Company, which will be looking for and building retail space, and then transferring it to the parent companies. Foreign retailers lease space in existing store property, supermarkets andplazasandwhentheygetestablishedandfindsomethingthatbettersuitstheirneeds, they move to a new location. Becausedemandexceedssupply,thecostofretailspaceinHanoiandHo Chi Minh City has gone up rapidly. According to CBRE, at the end of September 2007, retail space averaged US 40 per Sq Meter in both Hanoi and Ho Chi Minh City. In Districts 1 and 3 in Ho Chi Minh City, the best retail space had climbed to US$ 200 per Sq Meter. Thus, the shortage of retail space is definitely putting a serious threat to the Vietnamese retail market. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 78 of 81 8.4Trade Barriers & State Subsidiaries Trade barriers and state subsidies for the local retail industry will be removed in January 2009 as part of Vietnams commitments to the WTO and the Association of South East Asian Nations (ASEAN)ofwhichthecountryisamember.Localretailerswillnolongerbeabletoenjoy preferential treatment, while foreign players will have free access to the retail market. Thus, there are chances that local retailers may loose their existing market share in Vietnam. 8.5Infrastructure Poorlogisticsnetworksandservices,unequalinfrastructuredevelopmentbetweenregions, and low financial capacity, are problems local retailers currently face as they try to expand theirmarketsharesbeforetheincreasedforeignretailcompetitionincomingyears. Infrastructure is also going to be a great challenge to the foreign players coming to Vietnam. Thus,thereisaneedtoovercomeinfrastructure-relatedproblemsooninordertomaintain the growth rate of retail market in Vietnam.

RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 79 of 81 9.Competitive Landscape Thekeyplayersinthedomestically-ownedsupermarketsegmentareSaigonCo-opMart,G7 MartandMaximark.SaigonCo-opMartwasmodernizedinthemid-1990sandsincethen,it hasopenedlargestores.TheCompanyhasmadeaconsiderableefforttointroducemodern retailing methods in Vietnam. By November 2007, the chain had 28 stores in operation, which set aside around 25% of retail space for non-food items. In 2007, Saigon Co-op Mart recorded revenue of nearly US$ 164 Million. G7Marthasexpandedrapidlybyfranchisingalreadyexistingstoresatgoodlocationsand having a strong customer base. With sales of US$ 739 Million and a market share of 19.7%, G7 Mart is now the largest organized retailer in Vietnam. It has already opened over 5,000 stores and has set a target of 10,000 stores in coming years. Maximark, which opened its first store in the mid-1990s, now operates six outlets in Hanoi and Ho Chi Minh City. One of the largest foreign-owned retail players in Vietnam is Espace Bourbon, which operates BigCsupermarketsunderfranchisemode.TheGroup'sfirstFrench-styleshoppingmallin Vietnam,BigCDongNai,wasopenedoutsideHoChiMinhCityin1998.Twoothermalls openedinHoChiMinhCityinearly2001.ThefirstBigCsupermarketinHanoi,theBigC Thang Long Trade Centre, opened in 2005, and around 90% of the goods stocked there are of Vietnamese origin. Metro operates ten wholesale Cash & Carry stores across the country and is the second-largest player in the market. The Company has stores in Ho Chi Minh City, Hanoi, Can Tho, Haiphong and Danang. Although these stores are technically wholesale outlets and require members to providebusinessregistrationswhilejoining,businessesarenotrestrictedtohotels, restaurants and food retailers. Metro has attracted retail customers away from local retailing outlets. According to Metro, each center has more than 90,000 registered customers. Parkson opened its first department store in downtown Ho Chi Minh City in 2005 and plans to operate ten more stores by 2009. The chain targets middle- to high-income consumers. As the marketopensfurthertoforeigninvestors,multinationalretailgiantssuchasTesco(UK), Carrefour (France) and Wal-Mart (US) are looking to enter the market. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 80 of 81 About the Company RNCOS,formedintheyear2002,aimstooutsourceallyourbusinessneedsandserveyour customersintheirquestfortheinformation.RNCOSistransformingtheconceptof Outsourcingbyadaptingitintoastrategicmanagementpreferencetoattainworld-class operational excellence and competitive advantage. RNCOSspecializesinIndustryintelligenceandcreativesolutionsforcontemporarybusiness segments. Our professionals study and analyze the industry and its various components, with comprehensivestudyofthechangingmarketbehavior.Weprovidecorporationswithan insightoftheindustry,competitiveandmarketnecessarytocompeteintoday'sbusiness environment.Additionally,ourteamfocusesonthecauseandeffectrelationshipbetween federal and state regulations and the industries affected by regulation. Thecompanyalsoworkscloselywithsmallandmediumsizedconsultancyfirms,invarious industry sectors. We assist in back-end research and data gathering processes. Our accuracy and data precision proves beneficial in terms of pricing and time management that assist the consultants in meeting their objectives in a cost-effective and timely manner. RNCOSVietnam Retail Analysis (2008-2012) Online Business Research RNCOS Page 81 of 81 Disclaimer Most of the information available in this report is within the public domain. The submitting authors or other copyright holders retains rights for reproduction or redistribution. All persons reproducing or redistributing this information are expected to adhere to the terms and constraints invoked by the copyright holder. Such protected material, however, may be used under the terms of "fair use as defined in the copyright laws, which generally permit use for non-commercial educational purposes such as teaching, research, criticism, and news reporting. With respect to documents available, neither the company nor any of its employees makes any warranty, express or implied, including the warranties of merchantability and fitness for a particular purpose, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Unless otherwise stated, the copyright, database rights, and similar rights in all material published on this manual is solely owned by Research and Consultancy Outsourcing Services. 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vietnam retail analysis (2008-2012)

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