Asian Economic Journal 2007, Vol. 21 No.

1, 19–46 19

Supermarkets in Vietnam: Opportunities

and Obstacles

Masayoshi Maruyama and Le Viet Trung

Received 4 August 2006; accepted 18 December 2006

The present paper is the first study to link the perceptions of Vietnamese con-
sumers to the barriers and prospects related to the development of supermarkets
in Vietnam by applying quantitative and statistical analysis to Hanoi consumer
survey data. It is found that shopping habits related to the purchase of fresh
produce in traditional markets, combined with the proximity and low prices these
outlets provide, act as a major deterrent to supermarket development. Supermarkets
have made considerable advances in the sales of processed food and non-food
products. However, without expanding their fresh food category, lowering prices
and enhancing their location convenience, supermarkets cannot expand their
current position.

Keywords: supermarkets, consumer behavior, traditional market, probit model.

JEL classification codes: D12, L81, M31.
doi: 10.1111/j.1467-8381.2007.00245.x

I. Introduction
Structural adjustments (e.g. economic deregulation and market liberalization),
combined with globalization, have created a new food-marketing environment
in Vietnam in the past decade. Before 1995, most Vietnamese had no choice
except to carry out all of their purchases at traditional markets. Today, instead
of shopping at these traditional outlets, consumers can choose to shop at clean,
fully stocked and air-conditioned supermarkets, where they do not need to bar-
gain. This modernization process has changed the face of the Vietnamese dis-
tribution system; that is, the bazaar-based system, which is being increasingly
criticized by local newspapers as functioning poorly and being backward.
According to Speece and Huong (2002), early in the 1990s, approximately half
of all retail purchases were made at state-owned and collective stores. However,
by 1995, state/collective stores accounted for only around one-quarter of retail
sales. Although over 80 percent of purchases of household goods were made in
* Maruyama (corresponding author): Graduate School of Business Administration, Kobe University,
2-1 Rokkodai, Nada-ku, Kobe 657-8501, Japan. Email: [email protected]. Trung: same address
as Maruyama. Email: [email protected]. We would like to express our special thanks to
an anonymous referee and to the Managing Editor Hiro Lee for very helpful and constructive com-
ments on an earlier version of our paper. The research for this study was supported by a Grant-in-
Aid for Scientific Research from the Japan Society for the Promotion of Science and the Ministry
of Education, Culture, Sports, Science and Technology of the Japanese Government.

© 2007 The Authors

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ASIAN ECONOMIC JOURNAL 20

traditional markets in the early 1990s, this dropped to only half of total purchases
by the end of the 1990s. In 1999, just 5 years after the first supermarkets were
opened in Vietnam, supermarkets (almost all are mini supermarkets) accounted
for nearly 20 percent of purchases of household products in major cities.
Nevertheless, for the most part, in this first decade, supermarkets, hyper-
markets and shopping centers have been limited to major urban areas (mainly
in Hanoi and Ho Chi Minh City (HCMC)). At present, such modern distribution
networks carry out approximately 10 percent of total food and home product
distribution for the entire country (VNS, 1 June 2005). Supermarkets are now
spreading from large to secondary cities, and have rapidly increased in number
from only 10 supermarkets in 6 of 64 cities and provinces in 1995 to more than
200 supermarkets in 30 cities at the end of 2004 (Nhieu et al., 2005).
Surprisingly, however, despite the prevalence of the changes that are occur-
ring in this sector in Vietnam, and despite that this development has economic
significance, relatively little is known about Vietnam’s supermarkets. Because
of the lack of reliable statistical data, this area has been little studied by academics.
There are very few official statistics on the supermarket sector in Vietnam.
Facing this shortage of data, most of the published studies generate their data
from interviews with supermarket and supplier personnel (i.e. surveys of super-
market managers, wholesalers, farmers and other key informants). The majority
of these studies focus on smaller farmers, traditional retailers and wholesalers,
who are at risk of being further marginalized with the swift introduction of
supermarkets, or they compare the performance of modern and traditional sup-
ply chains (see Cadilhon et al., 2006). Speece and Huong (2002) present the
first case study on consumer attitudes toward mini supermarkets. Conducted in
Hanoi in late 1996 and early 1997 at the very early period of supermarket
development ( just slightly over a year after the first supermarket opened) and
using a sample of 176 consumers, they show that mini supermarkets became an
important part of the retail scene and that the supermarket concept was success-
fully introduced into Vietnam. This study mainly focuses on middle class con-
sumers, and their main conclusion is that this consumer segment was actually
value-driven rather than price-driven or quality-driven.
The previous studies generally collect observations and use qualitative and
descriptive approaches to interpret the data. Only very rarely have studies
involved the use of survey data and the application of quantitative and statistical
analysis methods. In addition, only a few studies have focused on the links
between consumer behavior and preferences and the development of supermar-
kets as well as the matter of consumer shopping behavior that creates barriers
to the advancement of supermarkets. The purpose of the present study is, there-
fore, to focus on this gap in knowledge by analyzing consumer habits with
respect to supermarkets and by providing a basis for understanding the barriers
and prospects for the development of new retail outlet types. Most of the data
in the present paper comes from a detailed consumer survey undertaken by
the present authors between March and April 2006. Statistical and quantitative
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SUPERMARKETS IN VIETNAM 21

methods are used to analyze this data. Because there has been a lack of informa-
tion regarding the supermarket sector, we also make extensive use of the local
trade press.
Our study finds that a major tendency among consumers is to split their
goods purchases, buying fresh food in wet markets and non-perishable food at
supermarkets or mom-and-pop stores. The long-established habit of shopping
for fresh produce in traditional outlets combined with the proximity and low
prices that these markets provide are found to be the major deterrents to super-
markets gaining market share. Supermarkets occupy the weakest position of all
the retail outlet types because they operate in a very competitive environment,
where they are considered more expensive than competing shops but not very
well differentiated from their competitors in the range of products they carry.
Our findings suggest that retail outlet formats that provide good product quality
and a wide range of adequately fresh produce along with low prices have the
greatest opportunity to build consumer loyalty and to increase market share. In
addition, supermarkets can also attract consumers by opening stores near resi-
dential areas.
The rest of the paper is organized as follows. Section II presents the literature
review. Section III details the methodology for the study. Section IV sum-
marizes the results and discusses the implications of the research findings, and
we conclude our study in Section V.

II. Literature Review

II.1 Rise of supermarkets in developing countries

Many recent articles have mentioned the significant and rapid rise of super-
markets throughout the developing countries and forecast their continued rapid
spread. In Latin America, the process of ‘supermarketization’ began in the early
1990s. By 2000, supermarkets delivered 50–60 percent of retail food sales in
countries in that region. The take-off in Southeast Asia began 5–7 years later
and is registering faster growth (Reardon et al., 2003; Reardon and Berdegue,
2002; Traill, 2006). The expansion of the modern retail sector frequently begins
with a smaller mini mart store format. The more capital-intensive supermarkets
follow. Innovation occurs first in markets serving the growing middle class, and
later in the lower-income segment. This pattern has been observed in many
developing countries (Reardon et al., 2003; Goldman et al., 1999, 2002, 2005). The
higher opportunity cost of time makes multi-stop, traditional format shopping
more costly than one-stop shopping (Goldman et al., 2002). Studies in develop-
ing countries report cases where, in spite of easy accessibility to supermarkets,
consumers have preferred to continue purchasing their food in traditional format
outlets (Goldman, 1981; Goldman et al., 2002; Maruyama and Trung, 2006).
Supermarkets developed rapidly in Taiwan in the early 1990s. As a result of
the growth of the modern sector, the market share of traditional markets weakened
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ASIAN ECONOMIC JOURNAL 22

at a rate of between 3 and 5 percent per year (Trappey and Lai, 1996). By 2000,
over 60 percent of food sales were transacted by the modern retail sector
(Cadilhon et al., 2006). Supermarkets appeared in Hong Kong in the early
1960s, and in mainland China at the beginning of the 1980s. The supermarket
sector began to grow rapidly in the 1990s from its initiation in a few metro-
politan regions in 1990 to a US$55bn industry today: with 53 000 units in 2002
and 30 percent of the urban food retail markets. Supermarket sales are growing
by 30–40 percent per year, two to three times faster than in other developing
regions (Hu et al., 2004). The most crucial factor contributing to the rapid
increase in supermarkets in China during the 1990s was the support from the
government (Lo et al., 2001). An explicit government program was launched in
2003 in a number of large cities to convert wet markets to supermarkets through
an auction system in order to modernize the retail sector. However, the super-
market food category with the slowest penetration has been fresh food. Super-
markets have only a 10 percent or at most a 20 percent share in fresh food in the
major cities (Hu et al., 2004).
In Thailand, supermarkets have also become common. By the mid-1990s,
approximately one-third of Bangkok’s population regularly shopped in super-
markets (Feeny et al., 1996). Current trends in Bangkok include strong growth
of newer retail formats, such as hypermarkets, as well as agglomerations (con-
centrations of stores), including huge shopping malls (Blois et al., 2001). In the
cities of Thailand, the modern sector’s market share of food sales increased
from 25 to 50 percent from 1997 to 2002 (Cadilhon et al., 2006). However, long
habits of purchasing fresh food from local markets have made this a difficult
area of business in which to expand (Feeny et al., 1996).
In Malaysia, supermarkets have been operating for years, but their market
share accounts for only 20 percent of food sales across the country (Cadilhon
et al., 2006). In the less developed Indonesia, the mini mart format is growing
rapidly, but the supermarket category has been slower to take off. The market is
just entering the very early stages of growth in modern retailing, and is just
beginning to attract the attention of foreign retailers (Speece and Huong, 2002).
The rate of spread of supermarkets in developing countries is an issue of
interest, and several articles have described the rapid spread of supermarkets.
The line of argument is that supermarkets are no longer places where only rich
people shop; over the past 10 years, they have spread from high-income areas to
poorer areas and much smaller towns. This has happened in response to several
forces, many of which are interconnected: for example, increasing incomes,
urbanization, more female participation in the labor force and openness to
foreign investment. Traill (2006) quantitatively models the level of supermarket
penetration (share of the retail food market) on a cross-section of 42 countries
for which data could be obtained, representing all stages of development. The
findings are that GDP per capita, income distribution, urbanization, female
labor force participation and openness to inward foreign investment are all
significant explanatory variables.
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SUPERMARKETS IN VIETNAM 23

Some recent studies provide evidence for the coexistence of traditional and
modern food retail formats. Goldman et al. (2002) examine food retail mod-
ernization in Hong Kong, and Goldman and Hino (2005) analyze the state of
modernization of food retailing serving the Israeli Arab population. Both of
these studies are based on consumer surveys where consumers are no longer
restricted by socioeconomic factors. These studies identify a tendency to pur-
chase perishable food items in traditional outlets, and they identify the greater
distance to travel to reach supermarkets to be the main limitation on supermarket
share growth.
This is not only typical to developing countries; consumers in the highly
developed Asian economies of Japan, Hong Kong, Taiwan and South Korea regu-
larly utilize traditional formats, and supermarket share has peaked at less than
the 50 percent level (Goldman et al., 2002). Consumers might view traditional
markets and supermarkets as complementing one another. They might regularly
buy fresh food in traditional markets, and purchase processed and packaged
foods, as well as non-food products, in supermarkets or at traditional mom-and-
pop stores.

II.2 Traditional retail system in Vietnam

The retail distribution system of Hanoi has passed through many stages. From
the feudal period to the French rule in 1828, Vietnamese distribution consisted
of traditional markets (often referred to as ‘wet markets’ or ‘street markets’).
However, the structure of social and business relations changed under French
colonial rule. With the decree to spatially concentrate the sale of perishable
goods, traditional street market trading was significantly reduced (Waibel,
2004).
Under the central planned economy (1954–1984), private trade was reduced
to a minimum. The state took over the role of the private traders, and it opened
selling locations in the largest retail areas as the government’s own enterprises.
On the whole, trading activities dropped significantly after 1955. By 1960, the
private sector was virtually eliminated (Waibel, 2004).
Under economic policy reforms (Doi Moi in 1986), farmers have long-term
leases on plots of land. They may sell their output in markets. As a result, farm-
ers are subject to full market incentives, because any increased effort translates
directly into increased income. After 1986, as agricultural output boomed, rural
marketplaces developed rapidly. In the towns and cities, many new markets
were created. Already in 1988, almost every house in the central streets of
Hanoi was using its frontage as a retailing outlet again (Waibel, 2004). The tra-
ditional bazaar network was re-established and continuously developed. The
number of markets more than doubled from 4000 in 1993 to 8300 in 2003
(VNS, 12 June 2004). In terms of organized markets, Hanoi alone has more
than 120 markets with a total area of over 550 000 m2. An ‘organized bazaar’
(formal bazaar) is defined as a market established by the local authorities. A
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ASIAN ECONOMIC JOURNAL 24

management board usually manages this kind of market. These organized

bazaars have basic, but poor, facilities, including water supply and waste treat-
ment systems. They lack refrigeration equipment and do not process fresh foods
into branded goods for resale. There are various types of goods sold at organ-
ized bazaars. However, the main goods are fresh food.
There are a substantial number of the traditional mom-and-pop stores, which
are family-owned retailers that sell a limited variety of processed food, dry
goods, drinks and household supplies. Specialized stores have also emerged. In
Hanoi, many streets often specialize in a single product category. There are
often 200–300 identical mom-and-pop stores along a few hundred meters of a
single street. They mainly specialize in non-food products. They have the char-
acteristic of being the only sales points to offer competitive brands for the same
product category. The sales area is nearly always very small, often being less
than 10 m2. Such a high spatial and economic density of trade activities can be
also found in HCMC.
In addition to the boom in private retail shops, Hanoi and HCMC have
become the prime areas for the booming, spontaneous development of informal
bazaars called Cho Coc: ‘frog markets’. The sellers lay out their wares (mainly
fresh food) along streets, roads or wherever it is convenient for customers to
shop. Retailers in these informal bazaars are mainly farmers and the poor. They
commute daily from the surrounding countryside. Because of the small scale of
operations, they can easily move or flee the police. In both cities, local author-
ities have plans to dismantle all these markets, but they have been unable to
suppress this kind of selling activity.

II.3 Emergence of modern distribution in Vietnam

As previously stated, over the past 10 years, Vietnam has experienced an
increase in the number of supermarkets. This modern format did not exist in
Vietnam before 1993. The first supermarket was a state-run enterprise opened
in 1993, named Minimart, but it was closed down 4 days after opening, because
of insufficient stock levels to meet the enormous demand, despite prices being
20–30 percent more than those of traditional retailers (Venard, 1996). Citimart
followed in 1994, owned and operated by a Vietnamese expatriate who had
gained experience in supermarket operations in the Philippines. The success of
Citimart inspired the owners to open another supermarket chain called Maximart
in 1995 (Cadilhon et al., 2006). Hanoi got its first supermarket named ‘Mini-
mart Hanoi’ in March 1995. After that, approximately 70 supermarkets more
were quickly established in HCMC and another 20 in Hanoi. Approximately
two-thirds of the original outlets failed, but some survived and have reaped the
benefits of strong growth in the modern retail sector (Speece and Huong, 2002).
The number of supermarkets and shopping malls has increasing rapidly from
only 12 (10 supermarkets and 2 trade centers) in 6 of 64 cities and provinces in
1995 to 210 supermarkets and 32 shopping malls in 30 cities at the end of 2004
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SUPERMARKETS IN VIETNAM 25

Table 1 Number of supermarkets

1995 2000 2004

Hanoi 2 20 73
Ho Chi Minh City 2 40 82
Entire country 10 107 210

Source: Collected from various different retail statistics sources.

(Nhieu, 2005). Hanoi and HCMC, the country’s two biggest cities, have 155
supermarkets. In Hanoi and HCMC, a system of big shops and larger and more
diverse grocery stores has been established. Some have significant cold storage
facilities, and are, therefore, able to offer a greater selection of fresh seafood,
meat, vegetables, a large range of imported beer, wine and canned goods, and
dry grocery items. These outlets are also beginning to offer ready-to-eat and
ready-to-cook foods, which appeal to Vietnam’s growing middle class and elite
group in major cities as well as to the increasing number of international tourists.
Besides the rise in the number of supermarkets, the dimensions of these out-
lets are also on the increase. In the early stages, the average floor space of the
typical supermarket store ranged from 500 to 800 m2, but by 2000, a few super-
markets had begun to appear with larger floor spaces of around 2000 m2 or
more (Speece and Huong, 2002). In 1994, 95 percent of goods displayed at the
city supermarkets were imports. At present, domestic goods account for
70 percent of total stock. Between 85 to 90 percent of goods at big supermar-
kets, including Co-op, Big C and Metro, are locally made products (VNS,
5 May 2004) (see Tables 1 and 2).
Supermarkets initially focused on dry items, packaged and processed food
lines and on non-food products. Today, many supermarkets carry fresh food,
but offer a relatively weak range, and minimal variety. They have made little
progress in fresh food lines where their share accounts for a very small percent-
age of all fresh food sold. For example, it is estimated that supermarkets sell
less than 2 percent of all fresh vegetables in Hanoi (Loc, 2003), and only
around 2 percent in HCMC (Cadilhon et al., 2006).
Saigon Co-op Mart is the top state-owned retailer in Vietnam, owned and
operated by the Saigon Union of Trading Cooperatives. It opened its first super-
market in 1996. It currently owns the biggest retail supermarket chain in Viet-
nam, with 14 supermarkets in the country. It has managed to create a turnover
that totaled US$126m in 2004 and accounted for 50 percent of the sales of the
supermarket system in HCMC (VOV, 14 July 2005). It is planning to increase
its number of supermarkets to 40 by 2010 (VOV, 30 September 2005). It is try-
ing to improve its competitiveness and has invested US$1.5m to develop a
supermarket management system. It has expanded its warehouses, and has built
a large distribution center in an effort to reduce costs. The chain has plans to
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© 2007 The Authors

ASIAN ECONOMIC JOURNAL

Table 2 List of major supermarkets, hypermarkets and wholesale stores in Vietnam

Retailer name Outlet type Ownership Number of outlets Turnover Locations and Percent of
(US$ mil) expansion plan domestic goods

Co-op Mart Supermarkets, Local company operated 14 supermarkets, 136 Mainly in HCMC 80–90
convenience stores under cooperative law 6 convenient stores Plan: other cities
Cora Hypermarkets, Local joint venture with 3 hypermarkets 26 HCMC, Dong Nai and Hanoi More than
supermarkets Casino Group of France 1 supermarket 90
Maximart Supermarkets, An Phong privately- 3 31 HCMC, Nha Trang 70–90
department stores owned company Expand to Can Tho soon
Citimart Supermarkets, Privately-owned 6 supermarkets 20 HCMC, Hanoi, 70–90
convenience stores company 5 stores Can Tho, Dong Thap
Intimex Supermarkets, State-owned company 4 10 Hanoi, Hai Phong
department stores
Fivimart Privately-owned 3 2.5 Hanoi and plan to More than
company expand to HCMC 70
Satra Supermarkets State-owned company 2 2.5 HCMC
Diamond Markets Privately-owned company 6 2.5 HCMC
Metro Cash & Carry Wholesale stores 100% foreign investment 6 220 HCMC, Hanoi, Hai 85–90
company (Germany) Phong, Can Tho, Danang
Seiyu Supermarket Local joint-venture with 1 17 Hanoi 30–40
Seiyu of Japan
Hanoi Marko Supermarket Private-owned company 3 21 Hanoi 80–90

Note: Metro Cash & Carry has government permission for wholesale operations only, no import license.
Sources: USDA Foreign Agricultural Service (2005), Nhieu et al. (2005) and data collected from personal communication with Vietnam Ministry of Trade.

26
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SUPERMARKETS IN VIETNAM 27

cooperate with Satra (the Saigon Trading Corporation), which has 35 subsidiar-
ies that play a leading role in the food processing and trading sectors in HCMC
(VIR, 28 May 2006).
Intimex, a strong operator under the Ministry of Trade, has devised a 10-year
development strategy, setting an ambitious goal of annual business growth of
30 percent. The company plans to develop three levels of supermarkets and
commercial centers. Convenience stores will sell necessities in small neighbor-
hoods; supermarkets will cater to the majority of consumers, providing them
with everyday necessities at an average price; and commercial centers will
serve high-income earners and tourists. The company will also develop a large
warehousing and distribution center (VIR, 28 May 2006).
Fivi, a joint-stock company, is one of the leading companies in Vietnam involved
in supermarket management and operation, and it is the owner of 3 supermar-
kets in Hanoi named Fivimart. It is also going to expand its supermarkets sys-
tem to other cities in Vietnam. The first Fivimart supermarket was established
at the end of 1997 with an area of 3000 m2. Fivimart supermarkets provide buyers
with a large selection of over 25 000 items (www.tctgroup.com.vn).
Some distributors are also exploring the development of small-scale conveni-
ence stores as an alternative to massive superstores, especially in Vietnam’s
traffic-clogged cities. As part of its plans, Citimart will start to attract consum-
ers living in townships with its 10 convenience stores planned for the end of
2006 (AFP, 21 May 2006). The G7 Mart, a subsidiary of Trung Nguyen Coffee,
plans to develop a new domestic distribution system and retail chain worth
US$395m. The G7 Mart aims to connect wholesale suppliers to the retail mar-
ket and to enhance the competitiveness of the domestic distribution system. It
plans to open 5500 stores throughout the country in the first phase and expects
to establish 10 000 stores, 18 warehouses, and seven trade centers over 5 years
(VIR, 28 May 2006).
The French Bourbon Group opened its first hypermarket in Vietnam in late
1998. Named Cora Dong Nai, it was located in Bien Hoa City, 30 km east of
HCMC. Cora opened its second outlet (Cora An Lac) on the other side of
HCMC in March 2000. A third operation, a joint venture called Cora Mien
Dong, opened in HCMC in mid-2005. The French chain opened its first outlet
in Hanoi in January 2005. It was named Big C Thang Long, and was located in
Lang Hoa Lac, approximately 15 min from the center. This 12 000 m2 super-
market is the largest in the north and offers more than 45 000 products, of
which 90 percent are made in Vietnam, ranging from fresh food to appliances,
garments, home decorations and electronics (VNN, 7 January 2005). The
French Bourbon Group plans to open 7 supermarkets nationwide and 5 other
stores in urban HCMC (VNN, 8 March 2005).
Metro Cash & Carry has opened 2 centers in HCMC (in 2002 and 2003), 1
in Hanoi (in 2003), 1 in Can Tho (in 2004), its fifth center in Hai Phong in
2005, and its sixth in Danang. It plans to establish another 8 superstores in
Vietnam with a total investment of US$120m (TNN, 26 July 2005; VIR, 28
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ASIAN ECONOMIC JOURNAL 28

May 2006). Metro offers their business customers a very wide array of over
7000 foods and 8000 non-food items. Consumers are required to use wholesale
membership cards to gain entrance, but the cards are frequently circulated
among friends, relatives and neighbors. Having an economy of scale with a
wide network of suppliers, its prices are lower (at least 10 percent) than any
other supermarket in Vietnam (VNS, 1 July 2005).
Malaysian retailer, Parkson, also entered the market in June 2005 with the
opening of its first of 10 shopping centers in Vietnam, and with a total invested
capital of US$70 million (VIR, 28 May 2006). Japan’s Seiyu, which has been
operating the Hanoi Seiyu for 5 years, is working on obtaining licenses to
extend its retail network to other provinces. In addition, a leading pan-Asian
retailer, Dairy Farm (Hong Kong) has negotiated an agreement in principle to
launch a supermarket chain, and could enter into a partnership with Citimart.
South Korea’s leading retailer, Lotte Mart, China’s Shenghui group, Tesco
(a robust newcomer from the UK), US giant Wal-Mart and the French group
Carrefour are also trying to obtain licenses to crack into the Vietnamese market
(VNS, 1 July 2005; AFP, 21 May 2006; VIR, 28 May 2006).
Even though these foreign chains account for only a small percentage of the
total number of stores in Vietnam, they account for more than half of the total
retail sales contributed by supermarkets and trade centers nationwide (VBF, 15
September 2005). Initial supermarket successes have prompted both domestic
and foreign investors to expand their businesses in Vietnam. In parallel, Viet-
namese authorities strongly encourage the development of modern distribution
outlets in the cities to solve their perceived problems related to food sanitation
and safety in the production and in the marketing system (Cadilhon et al.,
2006). The Ministry of Trade is making an effort to raise the ratio of products
distributed by modern channels to 40 percent in the next few years by establish-
ing 20 large-scale distribution companies to serve as a core of the whole net-
work (VET, 8 April 2005). This process of development has been causing a
trend to shift away from traditional outlets to modern shopping at supermarkets
and department stores. This explains why the modern distribution network
gained an average of 15–20 percent growth each year during 2000 and 2005,
much higher than the growth in the total retail sector (10 percent) and national
economic growth (7.7 percent). Supermarkets and trading malls have been
gradually changing the traditional distribution system, the bazaar-based system.

II.4 Sources of change

The reasons for the increase in supermarkets in the past decade could be attrib-
uted to the following factors.

Increases in income
The healthy expansion of Vietnam’s economy (more than 7 percent over the past
15 years) has resulted in increased disposable incomes and improved living
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SUPERMARKETS IN VIETNAM 29

standards. Furthermore, cities account for 70 percent of the national GDP

because of industrial and trading activities. This brings annual per capita GDP
to US$1395 in the urban center, and this has led to the formation of a relatively
affluent middle class and elite group in the major cities whose monthly income
continues to increase (over US$500). This can be seen clearly in HCMC and
Hanoi, the country’s two major cities, with average annual incomes more than
double the national average of US$425. In addition, more than 2.5 million tour-
ists entering Vietnam per year, as well as an estimated US$3bn sent back to
their mother country by millions of Vietnamese overseas (Viet Kieu) will fuel
the development of the modern retail system (website of the General Statistic
Office available at: http://www.gso.gov.vn; VIR, 19 September 2005; Cadilhon
et al., 2003).

Urbanization
The rapid growth of urbanization and the boom in new housing projects in
the cities has led to a more concentrated population, therefore facilitating the
growth of supermarkets. The ratio of the urban population to the total popu-
lation was approximately 20 percent in 1995, but increased to approximately
26 percent in 2003. The modernization and industrialization of the country
has also led to Vietnamese consumers having busier lifestyles, especially
urban Vietnamese women who are increasingly joining the workforce and,
therefore, have less time to prepare meals. More people are switching
from traditional products to packaged foods, which used to be considered
luxuries.

Consumers are younger and more knowledgeable

More than 60 percent of the Vietnamese population is under the age of
30 years, representing a powerful new consumer force. Furthermore, Vietnam-
ese consumers have better knowledge of products, and have increased demand
for a bigger variety of consumer goods. It is clear that a modern way of living
has emerged, with mobile phones, costly motorbikes and credit cards now a part
of everyday life. Vietnamese consumers are still very aware of prices, but they
are also conscious that the stores that they go to might enhance their social
standing.

Weakness of traditional markets

All the disadvantages of the traditional bazaar system (dirty, crowed, unorgan-
ized, noisy and prevalence of counterfeits) became an important catalyst for city
urban consumers to shift away from traditional bazaars. No less important is the
matter of consumer confidence regarding products. The fear of being cheated
facilitated a shift away from traditional bazaars. Searching for a certain product
is considered by some as being a wasteful activity, and so some buyers might
be willing to pay a higher price for a service that does the search for them.
Supermarkets provide that kind of service.
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ASIAN ECONOMIC JOURNAL 30

Support from the Vietnamese Government

This is one of the most important factors affecting the development of the
distribution system in Vietnam. At present, the Ministry of Trade is drafting
policies aimed at encouraging investors from all economic sectors to construct
and operate modern distribution networks. In order to establish an effective and
modern distribution network dominated by domestic business, the government
will assist approximately 20 major goods producers and retail distributors
(VNS, 12 March 2005). Supermarkets have also benefited to some extent from
government regulations attempting to control hygiene and congestion in tradi-
tional markets. It is clear that under this orientation, this modern network is set
to grow and continue growing for the foreseeable future.

Relaxation of regulations on foreign direct investment and food retailing from

the 1990s
When FDI regulations were liberalized, a flow of expatriates came into the
country. They play a key role in promoting modern retail formats. For example,
Citimart, one of the first supermarkets in Vietnam, is operated by a returnee
Vietnamese expatriate who gained experience in the Philippines. In addition, to
join the ASEAN Free Trade Area and the WTO, Vietnam is going to open up the
retail market to foreign competition. The domestic market will need to welcome
global distributors that have the advantage of trademarks, capital and techno-
logy. It forces domestic retailers to use their best efforts in building and organ-
izing a modern distribution system to compete. If this cannot be accomplished,
they have to withdraw from the competitive environment.

III. Data and Methodology

The present study is based on both primary and secondary data. Primary data
was gathered using a detailed consumer survey. Hanoi, the capital city of
Vietnam, provided a convenient location for the survey, because the city’s
population (3 million in 2003) and the economic base fairly represent the
countrywide ratios of industrial development and population diversity. Our
survey on consumer behavior and perceptions of Vietnam’s supermarkets and
traditional retail outlets illustrates the trend concerning how consumers view
both these forms of retailing.
The detailed consumer survey was conducted intensively over the month
from 1 March 2006 to 1 April 2006, and was spread across all districts in the
inner city of Hanoi. We sent out questionnaires to 2000 Hanoi consumers. A
total of 570 questionnaires were returned and after eliminating uncompleted
questionnaires, the remaining 413 questionnaires were used as the sample. The
sample survey is biased towards women (350 women and 63 men) who are
most often responsible for shopping in their families. It was found that
47.7 percent of shoppers were under 30 years old (197); 30.3 percent were
aged between 30 and 39 years (125); and 22.0 percent of shoppers were 40 years
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SUPERMARKETS IN VIETNAM 31

or older (91). In terms of the average income per person in each family,
45 percent of the respondents have income levels of between VND0.5m and
VND1.5m, 37 percent between VND1.5m and VND2.5m, and 18 percent have
an income of more than VND2.5m. Nearly 100 percent of respondent house-
holds have a television, 99 percent have a motorbike, 92 percent have a refri-
gerator, 81 percent have a washing machine, 54 percent have air conditioning,
and 10 percent have a car. The sample survey is slightly biased towards higher
income respondents in comparison with the general population characteristics
of Hanoi. However, if we limit our consideration to only urban areas, the sample
closely resembles the general population characteristics in the Hanoi urban area.
It is expected that those consumers who have good incomes are willing to go
shopping at supermarkets. It is also expected that those consumers would have
a better perception about both kinds of traditional bazaar and modern retail formats.
The present study makes extensive use of a few earlier studies, research
reports and statistical data on Vietnam. The authors also toured almost all of the
traditional markets and modern retail establishments in Hanoi in August 2005.
In addition, to analyze Vietnamese consumer shopping frequency at supermar-
kets, probit models were estimated.
Statistical analysis is also used to analyze the survey data. We will test the
hypothesis for µa – µb, the difference between two normal population means.
Because we do not ordinarily know the values of variances of populations, tests
on the difference in means (the comparison of two means) should be conducted
with the t-test. However, when both sample sizes are large (greater than 30), we
work with the standard normal distribution; therefore, we replace the value t,
which follows Student’s distribution, by the standard normal variable z (Sachs,
1982; Bowen and Starr, 1982).1 Because every subsample size in our study is
greater than 100, we use the z-test. The difference between the two means is
equal to, less than, or greater than zero. We are interested in testing which
criterion (the mean of element) is more important (greater) than the other in
consumer decision-making. The test hypothesis in the present paper involves an
inequality; that is, H0: µa – µb ≤ 0, Ha: µa – µb > 0. Hence, we use a one-tailed
test in this paper. To make the discussion easier to follow, we have only used the
5 percent significance level for evaluating the significance of differences
between means.

1. If both samples size are large (greater than 30), then we can assume the distribution of xa − xb
(the difference between two sample means) is normal and we may use the sample standard error of
 
the difference between means sxa − xb = ( sa2 /na ) + ( sb2 /nb ) to estimate the standard error of distribution
 
( xa − xb )
of xa − xb. The test statistic z is calculated as z = , where xa , xb are the means of
( sa2 /na ) + ( sb2 /nb )
the two samples with sample sizes na, nb and sa2 , sb2 are the sample variances (also see Bowen and
Starr, 1982). The alternative hypothesis has the > sign; so the test is a right-tail test with the tail
area z0.05 = 1.64. Hence, we reject H0 if sample z > 1.64.

© 2007 The Authors

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ASIAN ECONOMIC JOURNAL 32

Table 3 Reasons for going to supermarkets

Total Hard shoppers Infrequent shoppers

Sample size 409 144 265

Reasons
Self-service 80.7 82.6 79.6
Guarantee of quality 76.3 81.3 73.6
Fixed price 75.6 82.6 71.7
Safe and clean 68.5 78.5 63.0
The ability to search for something unique 61.6 54.2 65.7
One-stop service 60.1 59.7 60.4
Enjoyable and relaxing 40.6 37.5 42.3
To buy everyday necessities 38.4 53.5 30.2
Good service of salespersons 37.7 42.4 35.1
Reasonable prices 29.3 41.0 23.0
Freshness 26.9 36.1 21.9
Quick examination of prices 22.5 18.1 24.9
Curiosity 21.8 17.4 24.2
Prestige image 2.7 2.1 3.0
Fashionable 2.4 3.5 1.9

Note: Reported figures are the percentages of respondents who selected the reasons in the checklist.

IV. Results and Discussion

IV.1 Reasons for visiting supermarkets

The development of supermarkets has started in Vietnam. We found that super-
markets have made further inroads during the years since the 1997 survey of
Speece and Huong (2002). We found that 35 percent of shoppers reported vis-
iting supermarkets at least once a week (compared with 28 percent in 1997) and
that supermarkets have made considerable advances in selling processed food and
drinks and non-food products. Supermarkets offer a clean and efficient alterna-
tive to the noisy, pungent old bazaars where consumers haggle over everything.
Table 3 summarizes the reasons consumers cite for going to supermarkets.
Self-service, guarantee of quality, fixed prices, safe and clean goods, the ability
to search for something unique, and a one-stop service were the major reasons
identified by respondents for shopping at supermarkets. We divided the
respondents into two sub-groups: ‘hard shoppers’ who go to supermarkets at
least once a week and ‘infrequent shoppers’ who go to supermarkets less than
once a week. Hard shoppers apparently like the first 4 reasons in the checklist
better than the infrequent shoppers. Fewer than half of respondents (both hard
shoppers and infrequent shoppers) say they go to supermarkets because it is
enjoyable and a good place for relaxing. Quick examination of prices, curio-
sity, reasonable prices, freshness, prestige and fashionableness are rarely cited as
reasons among both hard shoppers and infrequent shoppers. In the 1997 survey
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SUPERMARKETS IN VIETNAM 33

done by Speece and Huong (2002), consumers indicated that the most important
reason to go into a supermarket was for ‘quick examination of prices’, but this
was one of the lowest ranked reasons in the recent survey. Curiosity also used to
be a key reason, but this is no longer an important reason for infrequent shoppers.
One of the striking findings is that shoppers are clearly quality-oriented.
Shoppers choose their places of purchase (supermarkets) by looking first at
quality for all different categories of goods (Table 4).
Looking at the criteria and priority for choosing stores for each category of
goods (vertical comparison), apart for non-food items, consumers identified the
safety of goods for health considerations, freshness or newly produced prod-
ucts, quality, and clarity as to the origin of goods as the most important criteria.
Consumers do not trade off these store factors (freshness, quality and safety)
for price. Price is at a much lower level of importance. In the case of fresh food,
the differences among the importance of freshness, safety and quality are not
significant at the 5 percent level. In the case of non-food items, price is also at
a lower level of importance in comparison with quality. However, it is rated at
a level similar to safety, service of salespersons and variety of product lines
(insignificant difference at the 5 percent level). Criteria of mid-level importance
included price level, variety of product lines, a well-known brand name, dis-
tance, and service of salespersons for all kinds of goods. It is interesting to note
that the location of stores, return and adjustment policy, decorations and advertising
at stores and shopping atmosphere seem to have a low level of importance.
Conventional wisdom suggests that supermarkets should be viewed as having
a good shopping atmosphere (clean, bright windows and air conditioning), a
large scale or be located at a good place with remarkable decorations. However,
our results suggest that investing much money in these things will increase
costs but might have a small effect in attracting consumers. Instead of this kind
of investment, supermarkets should promote more trade by concentrating on
quality, safety of goods, clarity as to the origin of goods, or making the effort
to provide a greater variety of fresh foods with adequate levels of hygiene and
freshness. In addition, regardless of the lack of finance for domestic companies,
in a very crowded area like Hanoi, it is very difficult for domestic companies to
find a place to build a supermarket in the central areas of the city. However, it
seems that a small-scale and neighborhood supermarket format will be able to
effectively compete with the traditional mom-and-pop stores and even with tra-
ditional wet markets. Supermarkets located in suburban areas are not able to
attract consumers. Local consumers are afraid of going to supermarkets far
away from their homes or in city centers for daily food purchases, because their
means of transportation is mainly motorbikes. In addition, the serious shortage
of management expertise and technical skills in supermarket operations in Viet-
nam might make large-scale supermarkets less efficient than small-scale ones.
Therefore, developing networks of small-scale, neighborhood supermarkets
appears to be a better strategy, given the financial conditions and managerial
abilities of domestic companies.
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ASIAN ECONOMIC JOURNAL 34

Table 4 Importance of criteria for choosing stores for different categories of goods
(Sample size = 409)

Fresh food Processed food Drinks Non-food items

Mean Standard Mean Standard Mean Standard Mean Standard

deviation deviation deviation deviation

Criteria
Health safety 4.74 0.56 4.61 0.71 4.65 0.65 3.61 1.21
Freshness or newly 4.69 0.62 3.81 1.08 4.24 0.98 2.93 1.14
produced product
Quality 4.68 0.57 4.52 0.73 4.53 0.69 4.09 0.92
Clarity as to the origin 4.05 1.09 4.31 0.91 4.35 0.86 3.55 1.17
of goods
Service of salespersons 3.58 1.03 3.54 1.04 3.51 1.05 3.69 1.03
Price 3.57 0.91 3.54 0.92 3.45 0.96 3.70 0.93
Distance (convenience 3.49 1.08 3.15 1.11 3.19 1.10 2.69 1.18
for shopping)
Well-known brand names 3.38 1.00 3.64 0.93 3.70 0.94 3.40 1.03
Variety of product lines 3.20 0.93 3.22 0.90 3.22 0.95 3.67 1.02
Shopping atmosphere 2.95 1.06 2.87 1.05 2.86 1.03 3.12 1.05
Return and adjustment 2.93 1.18 3.09 1.12 3.06 1.12 3.42 1.12
policy
Location of store, market 2.83 1.01 2.88 1.02 2.85 1.02 3.02 1.08
Scale of store 2.67 0.93 2.78 0.96 2.80 0.95 2.96 1.06
Decorations and 2.49 1.01 2.64 1.01 2.68 1.03 3.03 1.14
advertising at stores

Notes: 1 to 5 scale: 1 = not important at all, 5 = very important. To compare whether the means for
two different categories, for example fresh food and processed food for the health safety category
(a horizontal comparison) or for the health safety criteria and the quality criteria for fresh food
(a vertical comparison), are the same or different, the following test statistic

z = ( xa − xb )/ ( sa2 /na ) + ( sb2 /nb ) ,

where na and nb are the sample sizes for the two groups, xa and xb are the sample means for
two groups, and sa and sb are the standard deviations for the two groups, can be used. Under
the null hypothesis that the two population means are the same, the test statistic is
distributed asymptotically as a standard normal distribution. For a two-tail test conducted at
the 5% significance level, the relevant critical values are –1.96 and 1.96. For a one-tail test
where the first mean assumed to be higher than the second mean, the relevant critical value
is 1.64. This test statistic assumes that the responses for the two categories are uncorrelated.
When we used a one-tailed test for the difference between the two means (greater than zero),
for vertical comparison, if the difference between any two sample means is greater than
0.15, then the difference between these two normal population means is significant at the
5% level. The same results hold in the case of horizontal comparison.

By comparing the importance of choice criteria between different categories

of goods (horizontal comparison), we found that, except for freshness or newly
produced criteria, consumers rated the criteria similarly for processed food
and drinks. Consumers rated price level in choosing their shopping place for
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SUPERMARKETS IN VIETNAM 35

Table 5 Channels for getting information on supermarkets

Number Percentage

Television advertisements 91 22.2

Newspaper 71 17.4
Friends 190 46.5
Seen on the street 177 43.3
Others 15 3.7

non-food products significantly higher than other kinds of goods. Distance

(convenience) plays a much more important role in the case of fresh food than
the other kinds of goods.
Respondents were asked about the channels through which they get informa-
tion on supermarkets to go shopping. Almost 46.5 percent of the respondents
indicated that they got to know supermarkets through friends; 43.3 percent indi-
cated that they got information mainly by seeing the outlets on their shopping
routes. Respondents that indicated they got information through newspapers
and television advertisements accounted for only 17.4 and 22.2 percent, respec-
tively (Table 5).
This data shows that consumers seem devoid of information about the super-
markets. Word of mouth seems to be the main source of information for con-
sumer shopping. This suggests that supermarket managers must pay much more
attention to the idea of advertising and promotion to convey information to
consumers.
Table 6 summarizes the different kinds of goods consumers purchase when
they go shopping at supermarkets. In general, shoppers at supermarkets are
most likely to buy toiletries and household amenities. Shoppers buy a medium
amount of processed food, ready-to-eat food, frozen food, confectionery and
drinks. Very few consumers buy fresh food, personal care products, clothes,
consumer durables and footwear.
By comparing the means for certain kinds of goods bought by hard shoppers
and infrequent shoppers, we found that hard shoppers go to supermarkets for a
much broader range of products. Hard shoppers go to buy fresh food, processed
food, frozen food and drinks at a middle level of frequency, significantly higher
than infrequent shoppers. Footwear, personal care products, clothes and con-
sumer durables are still significantly lower than the middle level of frequency
for both groups. This shopping pattern has not changed since the 1997 survey
of Speece and Huong (2002).

IV.2 Factors affecting supermarket shopping frequency

Table 7 summarizes the frequency of shopping at supermarkets among con-
sumers in the sample. The data shows that only 0.7 percent of the respondents
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ASIAN ECONOMIC JOURNAL 36

Table 6 Kinds of goods consumers bought at supermarkets

Sample size Total Hard shoppers Infrequent Shoppers

409 144 265

Mean Standard Mean Standard Mean Standard

deviation deviation deviation

Kinds of goods
Toiletries 3.59 0.81 3.63 0.70 3.57 0.87
Household amenities 3.48 0.86 3.57 0.82 3.43 0.88
Confectionery 3.13 0.91 3.19 0.83 3.09 0.95
Frozen food 3.09 0.95 3.35 0.89 2.95 0.96*
Drinks 3.05 0.96 3.29 0.88 2.92 0.98*
Processed food 3.04 0.93 3.26 0.92 2.92 0.91*
Fresh food 2.75 1.13 3.04 1.07 2.60 1.13*
Personal care products 2.65 1.09 2.78 1.07 2.57 1.10*
Ready-to-eat food 2.56 1.00 2.74 1.03 2.46 0.97*
Clothes 2.38 0.95 2.51 0.89 2.31 0.98*
Consumer durables 2.00 0.99 1.94 0.97 2.02 1.00
Footwear 1.99 0.95 2.12 0.94 1.92 0.96

Notes: 1 to 5 scale; 1 = never, 2 = rarely, 3 = sometimes, 4 = often, 5 = always. To compare whether

the means for two different categories, for example hard shoppers and infrequent shoppers
for toiletries (a horizontal comparison) or for toiletries and household amenities for hard
shoppers (a vertical comparison), are the same or different, the following test statistic

z = ( xa − xb )/ ( sa2 /na ) + ( sb2 /nb ) ,

where na and nb are the sample sizes for the two groups, xa and xb are the sample means for
two groups, and sa and sb are the standard deviations for the two groups, can be used. Under
the null hypothesis that the two population means are the same, the test statistic is
distributed asymptotically as a standard normal distribution. For a two-tail test conducted at
the 5% significance level, the relevant critical values are –1.96 and 1.96. For a one-tail test
where the first mean assumed to be higher than the second mean, the relevant critical value
is 1.64. This test statistic assumes that the responses for the two categories are uncorrelated.
When we used a one-tailed test for the difference between the two means (greater than
zero), for vertical comparison, if the difference between any two sample means is greater
than 0.2, then the difference between these two normal population means is significant at
the 5% level. The same results hold in the case of horizontal comparison (* means
significant difference between hard and infrequent shoppers).

indicated that they go to a supermarket everyday, 9.9 percent of the respond-

ents indicated that they shop at supermarkets more than twice a week, and
24.2 percent said that they go to supermarkets once a week. Almost 40 percent
of respondents indicated that they go to supermarkets from 1 to 3 times a month
and 24.9 percent reported that they go to supermarkets less than once a month.
Of our sample, 1 percent indicated that they never went to supermarkets.
To measure the factors that influence the decisions that consumers make
regarding shopping frequency (determinants of shopping frequency), we
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SUPERMARKETS IN VIETNAM 37

Table 7 Shopping frequency at supermarkets

Number Percentage

Every day 3 0.7

Twice a week or more 41 9.9
Once a week 100 24.2
1–3 times a month 162 39.2
Less than once a month 103 24.9
Never 4 1.0
Total 413 100.0

estimated an ordered probit model using Stata (version 9.0) (see Borooah,
2002). Shopping frequency for each consumer was treated as an individual
observation, Yi taking the value of 1 if a consumer went to supermarkets less
than once a week (1–3 times a month or less than once a month); 2 if a con-
sumer went once week; and 3 if a consumer went twice a week or more.
Independent variables used to explain a consumer’s shopping frequency level
are described in Table 8. Consequently, the shopping frequency level can be
represented as:
K
Di = ∑ βk X i + ui = Z + ui , (1)
i =1

where βk is the coefficient associated with the kth variable (k = 1, . . . , K) and ui

is the error term, which is assumed to be normally distributed. Di is the latent
variable, which is unobservable. The categorization of the persons in the sample
in the terms of three levels of shopping frequency is implicitly based on the
values of the latent valuable Di, in conjunction with ‘threshold’ values δk (i = 1, 2)
such that:
Yi = 1, if Di ≤ δ1
Yi = 2, if δ1 ≤ Di ≤ δ2
Yi = 3, if D i ≥ δ 2.
δ1 and δ2 are unknown parameters (δ1 < δ2) to be estimated along with βk of
Equation (1). The set of the coefficients βk will be estimated using maximum
likelihood estimation. The results are reported in Table 9.
The empirical results show that INCOME has significant impacts on shop-
ping frequency, suggesting that the respondents with higher income are likely
to shop more frequently. This reflects the generally low level of incomes in
Vietnam, where many consumers still do not have sufficient resources to
make supermarket shopping practical. The positive and significant coefficient
for FRESH implies that it is highly probable that consumer shopping frequency
will be higher if she/he judges that the fresh produce at a given supermarket is
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ASIAN ECONOMIC JOURNAL 38

Table 8 Definitions and descriptives of the variables used in the ordered probit model

Variable Definition Mean Standard

Deviation

AGE Age of the respondents (continuous variable) 35.25 9.36

SEX = 1 if male; 0 otherwise 0.15 0.36
FAMILY Total number of members in the family (continuous variable) 3.88 1.29
EDUC = 1 if has university degree and above; 0 otherwise 0.84 0.37
INCOME Average monthly income per person in family, in 3.00 1.52
Vietnamese dong (VND)
= 1 if 0.5–1.0 m; = 2 if 1.0–1.5m; = 3 if 1.5–2.0 m;
= 4 if 2.0–2.5 mil.; = 5 if 2.5–3.0 m.; = 6 if more than 3.0 m
REFRI = 1 if owns a refrigerator; 0 otherwise 0.93 0.26
CAR = 1 if owns a car; 0 otherwise 0.10 0.30
EDGOOD = 1 if goes to buy everyday necessities; 0 otherwise 0.38 0.49
SEEPRICE = 1 if quick look price and then goes to buy outside; 0.22 0.42
0 otherwise
CURI = 1 if goes to supermarket because of curiosity; 0 otherwise 0.22 0.41
RELAX = 1 if goes to supermarket in order to enjoy and 0.41 0.49
relax; 0 otherwise
RPRICE = 1 if price at supermarket is reasonable; 0 otherwise 0.29 0.46
FIXPRICE = 1 if because price is fixed and does not have to 0.76 0.43
bargain; 0 otherwise
FASHION = 1 if goes to supermarket because fashionable; 0.02 0.15
0 otherwise
QUALITY = 1 if goes to supermarket because of guarantee 0.76 0.43
in quality; 0 otherwise
FRESH = 1 if rates high freshness at supermarket; 0 otherwise 0.27 0.44
ONESTOP = 1 if goes to supermarket because one can buy 0.60 0.49
everything at one stop; 0 otherwise
SELFSER = 1 if goes to supermarket because of self-service 0.81 0.40
at supermarket; 0 otherwise
GSERVICE = 1 if goes to supermarket because of good service 0.38 0.49
of salespersons
EPENSIVE = 1 if goes to supermarket less than once a month 0.12 0.33
because of expensive prices; 0 otherwise
LIKESUPE = 1 if prefers shopping at supermarket than at 0.64 0.48
traditional market; 0 otherwise
DISTANCE How far is it from your house to the closest supermarket 3.15 1.11
= 1 if less than 0.2 km; = 2 if 0.2–1 km; = 3 if 1–2 km;
= 4 if 2–5 km; = 5 if 5–10 km; = 6 if more than 10 km
PAYLEVEL How much do you pay on average each time you 3.18 1.16
shop at supermarket?
= 1 if less than 100 000; = 2 if 100 000–200 000;
= 3 if 200 000–300 000; = 4 if 300 000–400 000; = 5 if
0.5–1 m; = 6 if more than 1 m (Vietnamese dong)

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SUPERMARKETS IN VIETNAM 39

Table 9 Results of ordered probit model

Variables Coefficient Variables Coefficient

AGE –0.01 RPRICE 0.24

SEX 0.13 FIXPRICE 0.14
FAMILY –0.03 QUALITY –0.08
EDUC 0.05 FRESH 0.55***
INCOME 0.16*** ONESTOP –0.35**
REFRI 0.18 SELFSER –0.02
CAR 0.32 GSERVICE –0.11
EDGOOD 0.28* EPENSIVE –1.00***
UNIQ –0.23 LIKESUPE 0.13
SEEPRICE –0.04 DISTANCE –0.10*
RELAX –0.08 PAYLEVEL –0.05
/cut1 (δ1) 0.46
/cut2 (δ2) 1.48
Log likelihood = –306.60; Number of observations = 409; LR χ2 (22) = 104.21;
Probability > χ2 = 0.0000; Pseudo R2 = 0.1338

Note: *, **, *** Significance at the 10%, 5% and 1% level, respectively.

fresher. The variable EDGOOD also shows a significant and positive effect, sug-
gesting that the probability of shopping more frequently is higher if a consumer
goes to a supermarket to buy everyday necessities. Negative and significant
coefficients for DISTANCE imply that the closer the distance (to the closest
supermarket), the higher the shopping frequency. EPENSIVE shows a significant
and negative effect, suggesting that those respondents who consider prices at
supermarkets to be expensive are likely to go to supermarkets less frequently. A
negative and significant coefficient for ONESTOP suggests that shopping fre-
quency will be lower if she/he rates the one-stop service as an important reason
to go to supermarkets. The other variables do not have a significant impact on
consumer shopping frequency.
Freshness, high price (expensive) and distance had significant effects on
a consumer’s shopping frequency at supermarkets, suggesting that without
expanding the perishable category, lowering the price and enhancing conven-
ience (distance), supermarkets cannot strengthen their competitive position.

IV.3 Evaluation of market performance

Table 10 summarizes the consumer evaluations for the forms of retail outlets:
supermarkets and traditional organized markets.
In general, supermarket performance is perceived to be rather poor in several
respects. All of the elements rated lower than a ‘good level’ of performance. By
comparing the evaluation of supermarkets on a given element between hard
shoppers and infrequent shoppers, we found that except for the freshness factor,
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ASIAN ECONOMIC JOURNAL

Table 10 Evaluations of market performance

Sample size Evaluation of supermarkets Evaluation of traditional organized markets

Total Hard shoppers Infrequent shoppers Total Hard shoppers Infrequent shoppers

409 144 265 409 144 265

Mean Standard Mean Standard Mean Standard Mean Standard Mean Standard Mean Standard
deviation deviation deviation deviation deviation deviation

Elements
Variety of product lines 3.70 0.62 3.69 0.55 3.70 0.65 3.66 0.77 3.63 0.77 3.68 0.78
Air conditioning 3.70 0.61 3.65 0.60 3.73 0.61
Cold storage (infrastructure 3.67 0.60 3.64 0.60 3.69 0.60 2.71 0.84 2.71 0.85 2.71 0.84
at indoor)
Variety in each kind of 3.60 0.65 3.58 0.64 3.60 0.66 3.48 0.79 3.50 0.83 3.46 0.77
product
Quality of merchandise 3.56 0.54 3.59 0.55 3.54 0.54 3.33 0.58 3.33 0.60 3.34 0.57
Product display 3.51 0.61 3.53 0.60 3.49 0.61 2.89 0.77 2.98 0.74 2.85 0.78
Location 3.42 0.64 3.42 0.65 3.42 0.64 3.19 0.70 3.24 0.74 3.16 0.68
Scale 3.40 0.62 3.41 0.62 3.39 0.62 3.20 0.68 3.22 0.71 3.18 0.67
Parking lot 3.29 0.79 3.33 0.73 3.26 0.82 2.81 0.84 2.88 0.85 2.77 0.84
Services of salesperson 3.25 0.68 3.24 0.65 3.25 0.70 3.11 0.70 3.11 0.71 3.11 0.70
Advertisement and 3.23 0.71 3.28 0.72 3.20 0.71 2.63 0.89 2.75 0.88 2.56 0.89

40
promotion
 409 144 265 409 144 265

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Mean Standard Mean Standard Mean Standard Mean Standard Mean Standard Mean Standard
deviation deviation deviation deviation deviation deviation

SUPERMARKETS IN VIETNAM
Checkout 3.12 0.75 3.13 0.75 3.12 0.75 — — — — — —
Development of reputation 3.07 0.70 3.04 0.72 3.08 0.69 2.87 0.77 2.88 0.79 2.87 0.76
Journal compilation © 2007 East Asian Economic Association and Blackwell Publishing Ltd.

(honesty of sellers)
Distance (density 2.99 0.70 3.02 0.65 2.98 0.73 3.34 0.71 3.30 0.71 3.36 0.71
of supermarkets)
Price level 2.94 0.50 3.01 0.49 2.91 0.51 3.20 0.60 3.20 0.70 3.20 0.54
Freshness 2.70 1.04 2.96 0.95 2.56 1.06 3.69 0.70 3.65 0.75 3.71 0.67
Return and adjustment 2.63 0.79 2.64 0.78 2.62 0.80 2.39 0.91 2.42 0.92 2.37 0.90
policy

Notes: 1 to 5 scale, 1 = very bad, 2 = bad, 3 = normal, 4 = good, 5 = very good. To compare whether the means for two different categories, for example hard
shoppers and infrequent shoppers for a variety of product lines (a horizontal comparison) or for a variety of product lines and air conditionings for
hard shoppers (a vertical comparison), are the same or different, the following test statistic

z = ( xa − xb )/ ( sa2 /na ) + ( sb2 /nb ) ,

where na and nb are the sample sizes for the two groups, xa and xb are the sample means for two groups, and sa and sb are the standard deviations for
the two groups, can be used. Under the null hypothesis that the two population means are the same, the test statistic is distributed asymptotically as a
standard normal distribution. For a two-tail test conducted at the 5% significance level, the relevant critical values are –1.96 and 1.96. For a one-tail
test where the first mean assumed to be higher than the second mean, the relevant critical value is 1.64. This test statistic assumes that the responses
for the two categories are uncorrelated. When we used a one-tailed test for the difference between the two means (greater than zero), for vertical
comparison, if the difference between any two sample means is greater than 0.1, then the difference between these two normal population means is
significant at the 5% level. Comparing the mean values of evaluation on each element of supermarkets and traditional indoor bazaars (horizontal
comparison), the same results hold in the case of horizontal comparison. In the case of supermarkets, except for the freshness element, hard shoppers
evaluated the rest of the other elements at a similar level as infrequent shoppers, with an insignificant difference at the 5% level. In the case of indoor
markets, except for product display and advertisement and promotion, hard shoppers also evaluated the rest of the other elements at a similar level as
infrequent shoppers, with an insignificant difference at the 5% level.
© 2007 The Authors

41
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ASIAN ECONOMIC JOURNAL 42

both hard shoppers and infrequent shoppers rated supermarket performance

almost the same for most factors. Although hard shoppers rated freshness at
supermarkets significantly higher than infrequent shoppers, this evaluation is
only at the normal level (not good, not bad). Supermarkets were evaluated
highly in some areas, such as quality of merchandise, variety of product
lines, product variety within a single category of product, cold storage and air
conditioning. Return and adjustment policy factor was rated at a very low level.
Price level, checkout, service of salesperson, density of supermarkets, parking
lot, advertisement and promotion, and development of reputation were also
rated at fairly low levels.
By comparing the evaluations for each element of supermarkets and that of
traditional organized bazaars, we found that consumers evaluated the traditional
bazaars at significantly higher levels than supermarkets in terms of freshness,
price levels and convenience (distance). There was no statistically significant
difference between organized markets and supermarkets in terms of variety of
product lines, but consumers evaluated supermarkets significantly higher for the
rest of the listed elements. This information suggests that freshness, price levels
and convenience (distance) are the key factors attracting consumers to the tra-
ditional organized markets.
Respondents were asked where they do most of their shopping for three kinds of
products: fresh food, processed foods and drinks, and non-food items. The findings
suggest that consumers tend to split their purchasing among different retail outlets
for different kinds of products. They mainly purchase fresh produce at traditional
organized markets or informal bazaars (more than 90 percent of respondents),
whereas they purchase processed food and drinks and non-food products at tra-
ditional mom-and-pop stores or at supermarkets (mainly at mom-and-pop stores
in both cases of processed food and drinks and non-food items). The percentage
of respondents who regularly purchase at supermarkets has increased significantly
to nearly 30 percent in the case of processed foods and drinks, and 14 percent
in the case of non-food items. These results suggest that supermarkets are gradually
gaining a foothold for processed food and non-food products. However, they
have to compete with mom-and-pop stores for the same group of customers.
Although a majority of the survey sample did most of their shopping for food
and non-food products at traditional retail outlets, 64 percent of the respondents
indicated they preferred supermarkets, whereas only 36 percent of the respond-
ents said they preferred shopping at traditional bazaars. This data indicates that
supermarkets in Vietnam can increase market share by improving consumer
satisfaction and building customer loyalty. Only 37 percent of the respondents
indicated that they are loyal to one supermarket. Supermarkets can likewise
attract consumers by opening stores near consumers’ homes and mimicking the
merchandising approaches of the traditional bazaars or adopting store layouts to
encourage social interaction. It is apparent that supermarkets could take a
number of steps to attract more shoppers. They could try to extend their range
of goods so as to differentiate themselves from their competitors or they could
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SUPERMARKETS IN VIETNAM 43

Table 11 Conditions to attract shoppers to supermarkets more frequently

Sample size Total Hard shoppers Infrequent shoppers

413 144 269

Mean Standard Mean Standard Mean Standard

deviation deviation deviation

Conditions
(1) Fresh produce has 3.91 0.98 4.03 0.88 3.85 1.02*
more freshness
(2) More variety of fresh foods 3.86 0.98 3.98 0.92 3.80 1.00*
and daily necessities
(3) Supermarket near house 3.45 1.04 3.46 0.96 3.45 1.08
(4) More product variety of 3.41 0.93 3.36 0.96 3.44 0.91
non-perishables (processed food
and drink and non-food items)
(5) Higher income 3.27 1.16 3.05 1.18 3.39 1.13*
(6) Lower prices 3.23 1.08 3.08 1.07 3.30 1.08*
(7) Better service of salespersons 3.14 1.07 3.16 1.03 3.13 1.10

Notes: 1 to 5 scale, 1 = not important at all, 5 = very important. To compare whether the means for
two different categories, for example hard shoppers and infrequent shoppers for the lower
prices conditions (a horizontal comparison) or for higher income and lower prices for hard
shoppers (a vertical comparison), are the same or different, the following test statistic

z = ( xa − xb )/ ( sa2 /na ) + ( sb2 /nb ) ,

where na and nb are the sample sizes for the two groups, xa and xb are the sample means for
two groups, and sa and sb are the standard deviations for the two groups, can be used. Under
the null hypothesis that the two population means are the same, the test statistic is
distributed asymptotically as a standard normal distribution. For a two-tail test conducted at
the 5% significance level, the relevant critical values are –1.96 and 1.96. For a one-tail test
where the first mean assumed to be higher than the second mean, the relevant critical value
is 1.64. This test statistic assumes that the responses for the two categories are uncorrelated.
When we used a one-tailed test for the difference between the two means (greater than
zero), vertical comparison, if the difference between any two sample means is greater than
0.14, then the difference between these two normal population means is significant at the
5% level. The same results hold in case of horizontal comparison (* means significant
difference between hard shoppers and infrequent shoppers).

lower prices on many items. However, such policies would be pointless unless
the shoppers were informed.
Table 11 presents the types of factors that might attract consumers to super-
markets in the future. Respondent ratings for ‘more variety of fresh foods and
daily necessities’, and ‘fresh produce has more freshness’ were both at the
highest level. Hard shoppers rated these two factors significantly higher than
infrequent shoppers. Consumers also rated ‘supermarket near my house’ at about
the same level of importance as ‘more product variety of non-perishables’.
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ASIAN ECONOMIC JOURNAL 44

Respondent ratings for ‘higher income’ and ‘lower prices’ were both at the lowest
level. However, infrequent shoppers rated these two criteria significantly higher
than hard shoppers.

V. Conclusion
The rapid growth of the economy and improvements in technology, as well as
the efforts of the government in building a modern distribution system, will
lead to dramatic changes in its structure and position. Modern wholesale outlets
and retail style outlets like supermarkets could eventually leave behind small
sellers and intermediaries who have served traditional Vietnamese markets.
Technology development and the exploitation of economies of scale will give
modern players advantages both in costs and service over traditional retailers.
However, our analysis shows that at present, the traditional markets remain the
major distribution channels for both non-food and food products. In the case of
fresh food, we verified the continued dominance of the traditional markets in
terms of proximity, freshness and price as the main barrier to the development
of supermarkets. However, supermarkets were perceived as providing advan-
tages related to processed food and drinks as well as non-food items. They are
gaining market share in the market for these kinds of products.
Our study suggests that supermarkets would be more attractive to Vietnamese
consumers if they: (i) were located nearer consumers and (ii) incorporated some
elements of wet markets. Refrigeration and wrapping to avoid spoilage, how-
ever, mean added costs and contribute to the impression that supermarket
products are not as fresh as those in the traditional markets. In addition, an
effort to build a large-scale, well-decorated supermarket with a comfortable
shopping atmosphere might not necessarily attract a significant number of new
customers. Developing networks of small-scale, neighborhood supermarkets
appears to be a better strategy, given the financial conditions and managerial
abilities of domestic companies. It could also be a wise strategy for competing
with foreign distributors who will become competitors once Vietnam opens
its markets. Supermarkets that provide various types of products, that continue
to add new, high-quality products at reasonable prices, and that are built near
consumers’ homes, have the opportunity to build store loyalty and to increase
market share.

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