New Regulations for Establishing Retail Stores in Vietnam
Vietnam has issued Decree 09/2018/ND-CP (Decree 09) regarding conditions on the establishment of retail outlets by a foreign-invested enterprise (FIEs). Effective as of 15 January 2018, the decree aims to provide a more transparent framework for foreign investors in the retail sector.
Establishing the first outlet
FIEs have to meet certain conditions with regard to the establishment of the first retail store.
- Have a financial plan to set up the first retail outlet;
- No overdue tax debts if they have been established in Vietnam for one or more years;
- Location of the retail outlet should comply with the local planning schemes.
Economic needs testing
Economic needs testing (ENT), a test that conditions market access upon the fulfillment of certain economic criteria, will be applicable for the establishment of the second and subsequent outlets, as per Decree 09.
ENT does not apply for retail outlets less than 500 m2, located at commercial centers and not categorized as mini-supermarket or convenience store. ENT also does not apply to the first retail store, which only requires a store establishment license.
ENT criteria includes:
- The effect of the retail outlet on the scale of the geographical area;
- Number of retails outlets operating in the geographical market area;
- Impact of the outlet on the market stability and operation of other retail outlets and traditional markets in the geographical area;
- Impact on traffic, environmental sanitation and fire prevention in the geographical market area;
- Contributions of the retail outlet to the region’s socio-economic development in creating local jobs, development of the region’s retail sector, improvement of environment and living conditions for local people, and contributions to the State budget.
The provincial people’s committee in the locality of the retail store will establish an ENT Committee (ENTC) within 07 business days from the date of receipt of the request for the establishment. The outcome of ENT will be issued within 30 days from the date of establishment of ENT Committee.
Once the evaluations are complete, the provincial Department of Industry and Trade (DoIT) will need to submit the results to the Ministry of Industry and Trade (MoIT) within 03 working days. The MoIT will have to respond within 10 working days from the date of receipt of application.
The store establishment license required will be granted within 03 working days from the date of receipt of the MoIT’s response.
In 2017, retail sales of consumer goods and services reached VND 3934 trillion (US$ 130 billion), increasing by 10.9 percent, compared to 2016. Retail sales of goods accounted for 74.7 percent of the total sales, while accommodation, catering, and travel services accounted for the rest.
The modern trade channels grew by 7.7 percent, while traditional retail grew by 6.1 percent from April 2016 to March 2017. Vietnam’s retail market is projected to reach US$ 179 billion by 2020, driven by a growing economy, urbanization, young population, and rise in incomes.
As per the 2017 Global Retail Development Index (GRDI), released by A.T. Kearney, Vietnam ranks sixth amongst the 30 most attractive retail markets in the world. The rise in rankings is attributed to the rapid expansion of convenience stores and mini-marts and the increase in the use of technology in the industry.
Convenience stores – fastest growing segment
Convenience stores in Vietnam are one of the fastest growing segments in the industry, along with mini-marts. As of 2017, there were 1,765 convenience stores in Vietnam, with over 70 percent owned by foreign enterprises.
In spite of the rapid growth, convenience stores account for only two percent of the retail market, providing much room for growth. As per a recent study by the Institute of Grocery Distribution (IGD), Vietnam will be Asia’s fastest growing convenience store market by 2021, growing by a compounded rate of about 37.4 percent in the next four years.
For the next two to three years, foreign retailers have major investment and expansion plans in Vietnam. Lotte Mart is planning to open 60 stores by 2020, while FamilyMart will open 800 franchised stores in the same period. South Korea’s GS25 will be opening 2,500 stores in the next decade, while VinMart, the largest retail chain in Vietnam will open 100 stores in 2018. The retail industry, especially the convenience stores segment, will continue to remain one of the most attractive options for foreign investors.
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