Retail developers face more darkening clouds

Developers are having to think on their feet to stay ahead of the curve

When it comes to shopping mall development in Vietnam, the trusted theory of “if you build it and they will come” may not work, according to a retail industry analyst.

Chris Mears, director at Retail Analysys, a specialist shopping mall consultancy based in Singapore that has advised a number of retail projects in Vietnam, said retailers were becoming pickier about sites.

Debenhams, Mears said, had relocated its store to another shopping mall situated a kilometre away from the old one after just two years operating in Ho Chi Minh City.

The Debenhams case, he said, showed a foreign retailer could not arrive in Vietnam and expect its mall to work immediately.

“The Vietnamese have not heard of Debenhams. In this case market research is needed to determine the best location for the store. With the rapid expansion in shopping mall developments in Vietnam there are numerous opportunities for retailers to expand their businesses. However, for the developer this means a greater need to get developments right,” Mears said.

Regarding the Paragon shopping mall in Ho Chi Minh City, Mears said he saw this centre open in District 7 and brand itself as an upmarket retail destination. 

However, it soon became obvious that there was not a traffic flow from customers who could afford this merchandise to support the centre, which was then redeveloped with Parkson’s management.

Parkson’s advantage is that it draws customers as they offer a broad range of merchandise at a range of prices that suits their market in that area. 

“This is a good example of how an owner needs to react to a change in the market or a wrong positioning,” Mears said.

In Hanoi, the Trang Tien Plaza is a typical example for an ideal position, but ineffective business. Being one of the first malls in Hanoi, Trang Tien Plaza has not kept pace with the changing market. 

Mears said Trang Tien Plaza was a tired offering that customers were not attracted to. “The current strategy to draw on the strengths of its central business district location is to transform it into a large duty free emporium, thereby catering to local and international travellers. By being the first to take advantage of this gap in the market place gives them a clear market advantage and differentiation to its competitors,” he said.

For the retailer, while they have opportunities in new centres, they must ensure that there is a long term viability of the centre as their capital investment for each shop is significant, he added.