Foreign Retail Chains Hesitate to Land First on Vietnam’s Capital

Ngan Nguyen

10:03 05/12/2017

BizLIVE - Ho Chi Minh City has been the favorite and safer place for foreign brands' landing in Vietnam.

Foreign Retail Chains Hesitate to Land First on Vietnam’s Capital

The McDonald's restaurant in Hanoi is the first in Vietnam outside of Ho Chi Minh City, where 16 branches have already opened. Photo: AFP

In the past few years, Vietnam has seen growing presence of chains of services and fast food owned by big brands like 7-Eleven, McDonald's, Zara, H&M. However, the country’s southern economic hub of Ho Chi Minh City seems to be their favorite landing while Hanoi, in the North, receives less enthusiasm.
One of the similarities between these chains is that their first openings always take place in Ho Chi Minh City, without any chain choosing to put the first leg on the capital city of Hanoi.
Even some chain representatives have shared that they will not “head for the North” after three or four years.
In early February 2014, U.S.-based fast food giant McDonald’s opened the first Vietnam restaurant in HCM City. Assessed to have been late compared to other competitors when the Vietnamese fast food market has experienced some signs of saturation, McDonald’s is supposed to deploy a specific strategy.
Over the past three years, McDonald’s has not repeated the same way of flourishing as other fast food brands like KFC and Lotteria in the past. However, McDonald’s managed to have 16 restaurants across Vietnam’s largest and busiest city.
Besides its signature products, McDonald’s offers Vietnamese consumers with many products with local flavor such as rice, a move which has been applied by KFC or Lotteria, to gain locals’ love.
Earlier in 2013, the American coffee company and coffeehouse chain Starbucks set the foot on Ho Chi Minh City, and was eagerly welcomed by local youths.
So far, the chain has opened 22 coffeehouses in Ho Chi Minh City, which is reckoned more open to novelties and cultural diversity.
As of the middle of 2017, Ho Chi Minh City greeted 7-Eleven, an American-Japanese international chain of convenience stores, the world’s biggest chain of convenience stores.
The debut of 7-Eleven has attracted great attention of locals, as people kept queuing up for the first purchase at the shop in the crowded District 1, the heart of the city.
Only in five months, 7-Eleven has opened 10 shops in many districts like 1, 2, 3, 7 and Binh Thanh.
Not only fast food chains or convenience stores keep their eyes on Ho Chi Minh City’s market, two worldwide-famous fashion brands which are H&M and Zara also launched openings in the over 8-million-population city.
Specifically, in September 2016, Zara opened the first store in Ho Chi Minh City, marking its appearance in the Vietnamese market.
One year later in September 2017, the Swedish fashion giant H&M followed suit, opening its first store in the city, making Vietnam its 68th market.
It seems to be a common formula that many big chains did not select Hanoi to set their foot on first when entering Vietnamese market.
According to an expert in food and beverage, Ho Chi Minh City owns some outstanding advantages in terms of market scale and consumption habits, which leaves the southern economic hub to be a much safer destination for foreign brands than Hanoi.
It took McDonald’s about three years to stabilize its business in Ho Chi Minh City with 16 restaurants before its debut in Hanoi last weekend.
The restaurant was located in a “golden” area within Hanoi’s most tourist attraction area of the Sword Lake (Ho Hoan Kiem).
If looking at the strategies of other predecessors like Starbucks in choosing locations, McDonald’s does not surprise anyone with this strategy.
It took Starbucks only one year to launch its shop in Hanoi after debuting in Ho Chi Minh City. Now Starbucks has nine shops in Hanoi, compared to 22 in Ho Chi Minh City.
One year is also the Zara needed to expand its presence to Hanoi, while it took H&M around two months.
For 7-Eleven, the chain neither has a shop in Hanoi nor reveals any “Northward plan” at the moment, while its competitors like Circle-K are doing a great job in the market.
The fact that Hanoi customers have to wait to experience foreign chains like 7-Eleven after Ho Chi Minh City might repeat in the future, as Ho Chi Minh City maintained the favorite destination of big chains.