Vietnam’s retail landscape is set to be altered from January 2009, when the market will have to be opened up to 100% foreign ownership as part of the country’s WTO commitments since its accession in 2007. In the first half of 2008, total retail revenue in Vietnam was VND450 trillion (US$28.1 billion), up 30% year-on-year, and the retail industry is predicted to grow at a CAGR of 13.6% during 2008-2012.

Vietnam ranked 9th in Nielsen’s Global Consumer Confidence survey as strong consumer demand was maintained in the face of rising prices, which have led to nearly 300 labor strikes in the first 3 months of this year compared to 541 strikes in 2007 and 391 in 2006. The country has been battling hyper-inflation, which at 28% year-on-year is the highest in Asia and Vietnam’s worst since 1992.

According to a June report by management consulting firm A.T. Kearney, Vietnam has overtaken India as the most attractive emerging market destination for retail investment. With more than half of the population under the age of 25, Vietnamese consumers are among the youngest in Asia with 79 million below the age of 65, and consumer spending grew by more than 75% between 2000 and 2007.

The number of travelers visiting Vietnam exceeded 2.2 million for the first half of 2008, the largest ever for a six month period, which has prompted a new franchise setup from Budget Rent A Car, one of many foreign players poised for a piece of the $50 billion retail pie.

Foreign supermarket chains are scrambling to gain an early foothold in the Vietnamese market by opening many franchises. 7-Eleven is in talks with a Vietnamese partner to open the 24/7 outlets. Another Japanese supermarket chain, Daiso, started a franchise early this year and plans to have 100 franchising outlets throughout Vietnam within the next five years.

Best Carings was the first franchise started by a foreign supermarket chain in Vietnam and was set up two years ago by Best Denki, one of five leading electronics retailers in Japan, and a local partner. Best Carings registered 63% year-on-year increase in total turnover last year, and in the first 8 months of this year, saw a 38% growth compared to the same period last year. It plans to add eight to ten more outlets nationwide by 2010.

In Vietnam, the number of supermarket customers rose by 10-30% in the first half of this year, increasing their share of the retail pie to 20% from 16% at the end of 2007. Vietnam currently has about 140 supermarkets and 20 trade centers.

According to Nielsen, the number of consumers in Vietnam who have average monthly income of more than VND10 million (US$606) accounted for 11%, from VND7-10 million – 12% and VND4-7 million – 54%, compared to 8%, 9% and 39% respectively for 2007.