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South Korean supermarket giant E-Mart is planning a 2015 entry into Vietnam’s increasingly competitive retail sector
Carl Chang-Hun Lee, food grocery sourcing buyer for E-Mart told VIR that at present, the company was seeking partners in Ho Chi Minh City and Hanoi for opening its first supermarket in Vietnam. In addition the firm was seeking wholesale suppliers for its future plans.
At present, the company is assessing vegetables and lobster supplied by Vietnamese firms. However, the retailer has faced difficulties in selecting local suppliers as there remain concerns over quality standards.
Everyday Vietnamese brands such as G7 coffee only hold a two per cent share in E-Mart’s chain of supermarkets. E-Mart’s annual e-commerce in the Vietnamese market currently totals nearly $660,000 per year and this is expected to increase in the coming period, according to Lee.
According to Korean Trade-Investment Promotion Agency’s Private Equity Korea website, the Korean supermarket would likely opt for a joint venture as it prepared to officially tap into Vietnam in 2015. It may need assistance to ease into the local markets and facilitate loan financing, according to the website.
The company announced in July 2011 that it was partnering with Vietnam-based U&I Group and global real-estate business Savills, for E-Mart’s first ever foray into Southeast Asia. The company may strengthen its partnership with U&I into a joint venture, but this has not been officially decided yet. The firm has yet to solidify the size of its investment, as it will ultimately be determined about how it enters the market. Moreover, the process of selecting store locations was continuing.
According to Private Equity Korea website, E-Mart is eyeing Cambodia and Myanmar as the next sites for its Southeast Asia expansion. The company’s plans for overseas expansion follow in the aftermath of intensified regulations in South Korea.
Last year, the South Korean government passed a regulation which requires ‘super supermarkets’ (SSM) like E-Mart’s to close its business for two Sundays per month in order to help support struggling independent convenience stores.
As of July 2013, SSMs will be required to submit an evaluation which outlines the company’s impacts on commercial districts when planning to open up a new store. As a result, the company’s financial report cited slower growth. In 2012, the company posted $11.3 billion in sales and $669 million in operating profits. Analysts forecast E-Mart’s operating profits to drop to $680 million this year.
E-Mart will be the second South Korean retailer to operate in Vietnam, following Lotte Mart which entered the country in 2008.