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|Saigon Co.op gets hands on Auchan|
One of Vietnam’s leading retailers Saigon Co.op has taken over 18 stores and the entire online retail system of French company Auchan Retail in Vietnam under a mergers and acquisitions deal.
Saigon Co.op will retain the Auchan brand for the three supermarkets in operation until February 2020. The 15 closed supermarkets in Ho Chi Minh City, Hanoi, and Tay Ninh will be renovated and put into operation under Saigon Co.op.
Richard Burrage, managing partner of Cimigo, said that the transaction between Saigon Co.op and Auchan was a fire sale offering good value for Saigon Co.op and a quick exit for Auchan. According to industry insiders, most acquirers in Vietnam’s retail market are foreign companies. This is the first time a Vietnamese retailer acquires the business of a French retailer, especially one of Europe’s largest supermarket chains. The transaction is expected to create ripple effects for Saigon Co.op’s brand.
Furthermore, Saigon Co.op has the chance to tap into Auchan’s know-how in areas like dealing with suppliers or importing and exporting products. In addition, Saigon Co.op can increase its coverage in Ho Chi Minh City, Hanoi, and Tay Ninh through Auchan’s outlets.
Commenting on the losses of Auchan in Vietnam, Burrage said its operations were not effective enough, lacked local knowledge, and misjudged consumers. If it could not reach scale quickly, it would not have been able to cover its head office costs.
Nicholas Bradstreet, managing director of Savills Hong Kong, said he was surprised when Auchan withdrew from Vietnam as it has been a strong operator. He added that all supermarkets operate with very small margins. With increased competition, the going can get tough for both local and foreign retailers. Indeed, Auchan has not found the economic model to match the Vietnamese market. Experts said that it mainly opens and operates its outlets in condominiums rather than central business districts. Thus, the retailer has lower brand awareness than its rivals. Meanwhile, the entertainment retail formats operated by AEON Mall and Lotte are becoming more popular and attract more visitors.
He noted that the work-play habits are changing as people have more time for leisure, sport, gym, yoga, wellness, and health. All these things play a much bigger part in people’s lives than they used to – and retailers need to get into this cookie jar to stay in the game.
According to a recent report themed “The New Reality of Retail” by Savills Vietnam, the key to survival for new retail projects in Vietnam is introducing new designs and facilities and incorporating innovative concepts to attract consumers, such as entertainment attractions, shifting tenant mixes, and amusement parks.
“Tomorrow’s consumers will be digital natives, never having experienced life without smartphones, Facebook, and other tech. Retailers will keep pace so it is crucial for the retail property industry to also keep up,” says the report.