A research proposal submitted in partial fulfillment of the requirements for the degree of Master of Business Administration

ASSESSMENT THE LONG-TERM VIABILITY OF SUPERMARKETS:
A CUSTOMER SURVEY IN HANOI
by
Ms.Luc Thi Thu Huong
A research proposal submitted in partial fulfillment of the requirements for the degree
of Master of Business Administration
Examination Committee: Dr. Mark Speece (chairman)
Dr. Do Ba Khang
Dr. Bechter Clemens
Luc Thi Thu Huong
Nationality: Vietnam
Previous degree: Bachelor of economics
Donhesk University of Soviet Trade, Ukraine, former Soviet
Union
Scholarship: Swiss government
Asian Institute of Technology
School of management
Bangkok, Thailand
April, 1997.
Acknowledgement
I am most grateful to Dr. Mark Speece, my Research Advisor and Chairman of
Research Committee, for his restless guidance, invaluable suggestion, encouragement
throughout the course of my research study. His profound knowledge and boundless
enthusiasm were a great inspiration for me to complete the study.
I would like to express my gratitude to Dr. Do Ba Khang and Dr. Clemens Bechter for
their valuable contribution in serving as committee members, as well as for their constructive
comments and helpful instructions on the research study.
I would like to take this opportunity to express my deep appreciation to the Swiss-AIT-
Vietnam Management Development Program for providing me with a scholarship to pursue my
MBA at AIT.
Thanks are also extended to many supermarkets managers and staff, as well as Hanoi

Commercial University for helping me in data collection.
I remain indebted to my family, who have not only provided continuous moral support
but also invaluable assistance during my study period in HCM city and in Bangkok.
Last but not least, I would like to thank all the faculty and friends at SOM and AIT for
their help and boundless inspiration.
ii
Abstract
The objective of the study is to investigate the customer shopping behavior at
supermarkets in Hanoi city, then to find out the gaps between what is currently available and
what shoppers want and are expecting.
A personal interview survey was conducted around the stores in the city. The pattern
found is that the target customers are quite sophisticated, they are value-oriented, they are
young working people with above-average income. The top three important store choice
criteria are merchandise quality, price level and product variety. The customers quite satisfy
with product quality in supermarkets, but the stores fail to fulfill what shoppers consider the
second and the third important. There is a big difference in behavior between the two groups:
non-users and heavy-users. The latter hold much more favorable assessment on the stores
and they seemed to prefer convenience, better atmosphere and services against higher
prices.
The market is potential with the growing affluence among urban population, but there is
also a strong need for the supermarkets to adjust and upgrade themselves to get higher
patronage among their customers. Some measurements suggested for improvement are
expansions of product varieties and services, awareness promotion focus, increase in store
size and modernization of facilities.
iii
Tables of contents
INTRODUCTION ........................................................................................................ 5
1.1 Rationale of the study.........................................................................................................................................5
1.2 Problem Statement..............................................................................................................................................6
1.3 Research objectives.............................................................................................................................................6

1.4 Scope of the study................................................................................................................................................6
1.5 Organization of the study...................................................................................................................................6
1.4 Research frame work..........................................................................................................................................7
CHAPTER 2................................................................................................................ 8
2.1 Background and definitions of the supermarket...........................................................................................8
2.2 Supermarket in Asian developing countries...................................................................................................9
2.3 Vietnam retailing environment.......................................................................................................................13
2.3.1 Economic overview and consumer purchasing power..............................................................................13
2.3.2 Retail options...........................................................................................................................................13
2.4. Consumer store choice behavior and retailer strategy.............................................................................15
2.5 The store choice decision process..................................................................................................................16
2.6 Patronage motives.............................................................................................................................................18
CHAPTER 3.............................................................................................................. 20
RESEARCH METHODOLOGY ................................................................................ 20
3.1 Information needs.............................................................................................................................................20
3.2 Research methodology......................................................................................................................................21
3.2.1 Target population.....................................................................................................................................21
3.2.2 Pilot survey and questionnaire development............................................................................................21
3.2.3 Sampling procedure.................................................................................................................................21
3.2.4 Sample characteristics..............................................................................................................................22
CHAPTER 4.............................................................................................................. 26
DISCUSSIONS AND ANALYSIS ............................................................................. 26
4.1. From customer survey.....................................................................................................................................26
4.1.1. Shopping frequency in general and at supermarkets...............................................................................26
4.1.2. Store choice criteria.................................................................................................................................27
4.1.3. Supermarkets evaluation.........................................................................................................................29
4.1.4. Spending at supermarkets......................................................................................................................31
iv
4.1.5 Things bought at supermarkets................................................................................................................32
CHAPTER 5.............................................................................................................. 44

CONCLUSIONS AND RECOMMENDATIONS ........................................................44
5.1 Conclusions.........................................................................................................................................................44
5.2 Recommendations.............................................................................................................................................44

v
List of Tables
Table Title Page
2.1 Vietnamese market 10
3.1 Respondents' job 20
3.2 Education level 20
3.3 Ownership of 14 durable consumer goods 21
4.1 Shopping frequency 23
4.2 Importance ranking of store choice criteria 24
4.3 Comparison in importance ranking of store choice criteria 25
4.4 Customers’ evaluations on supermarket performance 27
4.5 Comparison in supermarkets’ performance 28
4.6 Average spending at supermarkets 29
4.7 Things bought at supermarkets 30
4.8 Prior intention of going supermarkets 31
4.9 Comparison in prior intention of going supermarkets 31
4.10 Reasons for going to supermarkets 32
4.11 Supermarkets concept among shoppers 33
4.12 Expectations on supermarkets 33
4.13 Would probably go more often if 34
4.14 Attitudes towards statements 35
4.15 Comparison in attitudes towards statements 36
4.16 Comparison in demographic profile 37
vi
List of figures
Figure Title Page

1.1 Analytical frame work 3
2.1 Store choice 14
2.1 Patronage model 16
3.1 Respondents’ age 19
3.2 Family’s size 20
3.3 Family monthly income 21
4.1 Differences in store choice criteria 26
4.2 Comparison between what’s important and what’s evaluated
on supermarket 27
4.3 Differences in evaluation of supermarket performance 28
4.4 Differences in spending at supermarkets 29
4.5 Differences in things bought at supermarkets 30
4.6 Differences in purposes of going supermarkets 32
vii
Chapter 1
Introduction
1.1 Rationale of the study
After 20 years of isolation, Vietnam is vigorously embracing its economic freedom and
prosperity and is taking a headlong leap into the next century. With a young population of 76
million, a rapid growth rate and an apparently stable government, Vietnam has vast potential
in the retail industry. Yet there are still a lot of difficulties in logistics and supply and there is
no international group operating shopping centers in Vietnam. To serve the affluent middle-
class Vietnamese and expatriates living in major cities, since 1993, local retailers have opened
dozens western-style stores, which they call “supermarkets”.
It should be noted that, in general, a so-called supermarket in Vietnam is not as large
or as modern as international retailing standards. It has the scale of convenience store or
somewhat bigger. Its merchandise includes various imported product categories, but each
category has limited brands. The prices are fixed and higher than traditional stores and wet
markets. Based on the descriptions above, it can be classified as a “mini supermarket”. The
new kind of store offers self-service, high quality goods, well-designed interiors and shopping

comforts, such as air conditioning, refrigerated storage and electronic check-outs.
Nevertheless the patronage level is still very low.
Meanwhile in neighboring countries, modern retailing is rapidly taking market share
from the domain of “mom and pop” stores, street stalls and wet markets. The modern retailing
concepts are increasingly crossing national boundaries. The 7-eleven convenience stores are
now in Thailand, Malaysia, Singapore, Hong Kong, Mainland China, South Korea, the
Philippines; Macro is in Thailand and Taiwan, Carrefour from France is in Taiwan; and
Wellcome is in Taiwan, Hong Kong, Mainland China and Singapore. Major Japanese
department stores are in most Asian cities. According to Dairy Farm, in Hong Kong in 1980,
32% of housewives visited a supermarket at least once a week. In 1992, that figure had risen
to 75% and now is holding at this level. In Taiwan, Wellcome statistics indicate that in 1991,
26% of Taipei residents visited supermarket once a week, in 1992, it has increased to 32% -
the same as the position in Hong Kong in 1980. The figure is expected to rise to 75% by the
end of the nineties, less than half the time it took in Hong Kong. In the Philippines, despite the
low income per capita, department store and other modern retailing outlets are mushrooming
all over the country’s main cities at an unprecedented growth rate. And in Indonesia, the
changing spending patterns within the Jakarta area are contributing to an increase in the use
of department stores and supermarkets.
The problem of slow sales in Vietnamese supermarkets is a big challenge for their
further development. Studies on how to win increased patronage and how to satisfy customers
receive the greatest attention from the researchers in retailing industry in other countries, but
specific knowledge on Vietnam’s situation is scarce. Without such an understanding of
customers’ shopping behavior, it is difficult for this kind of store to evaluate its business and
grow further.
5
1.2 Problem Statement
This research study will try to assess long-term viability of supermarkets in Vietnam
and give some ideas for performance’s improvement.
1.3 Research objectives
• to identify demographic and psychographic profile of shoppers and non-shoppers

of this kind of store in Vietnamese emerging middle class.
• to determine how they choose shopping place: their shopping behavior, store
choice criteria and expectations from such a store
• to find out the likely ways to shift their behavior toward the store’s position
• based on the findings, recommendations will be suggested for improvements of the
store’s offer (merchandise, prices, range, image) to gain more business.
1.4 Scope of the study
First of all, this study is only conducted in Hanoi, the country’s capital. Due to its role
and contributions into the national economy, Hanoi is considered as one of major business
hubs in Vietnam. But the supermarket industry is still in its embryonic stage of development,
and there are only local players in the market. In the near future, international group will come
in and the market picture will be change dramatically, and the paterns identified by this study
may evolve by then.
Secondly, the supermarket shoppers are among the middle and upper-middle income
families in the city, who might not be representative for Vietnamese middle class in other
areas, and difenitely not valid for average Vietnamese shoppers in general. However, they can
represent a segment of sophisticated customers with increasing demand for more modern and
more convenient retailing outlets, and they likely may show the way of behavior which can
serve as a guide for other customers in the Vietnamese market.
1.5 Organization of the study
Chapter I provides an introduction including the rationale of the study, indentification of
the problem, objectives, scope and limitations of the study.
Chapter 2 presents a literature review which contains the background and definitions
of the supermarket, the supermarket penestration in Asian developing countries as well as the
Vietnam retailing enviroment. This part also disscuss on issues of consumer store choice
behavior and patronage motive for them to enter the specific retailing outlet.
6
Chapter 3 deals with the methodology of the study. It will present the information
needs, target population, sampling procedure, as well as the sample charactericstics of the
study.

Chapter 4 contains discussion and analysis of findings from a customer survey in
Hanoi and the result of indepth interviews of supermarket manegers and their staff in another
side.
Chapter 5 draws out the conclusions and recommendation for future improvements of
supermarkets in Hanoi.
1.4 Research frame work
The analysis will be two-dimensional. First, it will focus on shoppers’ points of views.
The shopping behavior of the Vietnamese emerging middle class will be found out as well as
their shopping experiences with the supermarkets. Along with the actual evaluations of the
stores’ performance, the research tries to uncover the shoppers’ expectations of this kind of
store. In addition, the demographic profile of the store’ users and non-users (but potential
ones) will be also describes in terms of purchasing power, occupations and family life cycle.
The shoppers’ dimension leads to defining the gaps between what are currently available and
what shoppers are expecting for.
Emerging middle class shoppers
• General shopping behavior
• Supermarkets shopping experiences
• Expectations of the stores
• Demographic profile
Gap between
what are currently
available & what
shoppers are
expecting
Supermarkets’ owners
• Segmentation strategy
• Policies on merchandises, price,
promotion & store image
• Problems of slow sales
Opportunities

to increase
patronage level
Emerging middle class shoppers
Figure 1.1. Analytical frame work
Second, in-depth discussions with supermarkets’ owners and their staff on issues such
as segmentation strategies and their marketing-mix to examine the problem of slow sales and
the ways to improve the situation.
These two dimensions end up with the opportunities to increase patronage level for
supermarkets in Hanoi. Figure 1.1 shows the flow of the two dimensions (These issues will be
discussed in more details in literature review).
7
Chapter 2
Literature Review
2.1 Background and definitions of the supermarket
The supermarket is native to the US and was one of the most interesting marketing
innovations that has changed the retailing environment of developed countries. Exactly when
and where in the US it was born has been debated for many years. Most authorities cite
December 8, 1932 as the birth date of the supermarket. On that day, a new store called the
Big Bear was opened in New Jersey. This store, along with other early supermarkets, was a
child of the Great Depression. Economic conditions were such that the price was all-important,
and every penny counted. The supermarket was generally accepted as the food retailer until
the years 1970s. By the end of the decade, the changing lifestyle of the customers focused on
convenience had led some operators to a “one-stop-shopping-for-household-goods”
supermarket. The emphasis on one-stop shopping and the adding of new departments and
sections has continued up till now (Peak, 1977).
Today, a supermarket’s upgraded and upscale operations include such non-food lines
as prescription drugs, small appliances, auto accessories, books, magazines, clothing, flowers
, and houseware. Recently many supermarkets have added numerous services, including dry
cleaning, postal, banking, tailoring , medical, dental, insurance, and legal services.
Supermarkets tend to be low-margin operations that depend on very high stock

turnover rates to sustain profits. Operation out of clean, modern facilities, the supermarket is
basically a self-service operation supported by such services as parking, check cashing, fast
checkout, and bagging. Cash and carry is the preferred method of doing business (Lewison,
1994).
No one definition of a supermarket exists because of the wide range of business
formula used in this industry. There are 3 criteria used to define a supermarket: the minimum
size requirements, the characteristics and extent of self-service, and the stock requirements.
In the US, a supermarket was first defined by the Supermarket Institute as a self-service
departmentalized food store having a minimum sales volume of $ 250,000 per year. In 1954,
the minimum sales volume was revised to $ 500,000 (Charvat, 1961; Mccleland, 1963). Prior
to 1981, supermarket included food stores with annual sales of at least $ 1 million. Now, the
minimum annual sales requirement is $ 2 million (Lewinson, 1994). In the UK, a supermarket
is defined as a self-service food store with centralized check-outs and a sales area of over
2000 square feet (Khalifa Othman, 1990).
In the US, supermarkets, using 80% of the retail food industry’s employees, account
for about 90% of all retail food sales (Peak, 1977). In the UK and Canada, supermarkets and
large superstores account for about 85% of grocery trade. Similarly in other European
countries, supermarkets dominate the food retailing system (Khafifa Othman, 1990).
8
2.2 Supermarket in Asian developing countries
In contrast with supermarket use in developed countries which is characterized by a
large-volume, multi-line store that serves mass market at competitive prices, the modern
supermarket in developing countries tends to cater the middle and upper class customers
(Goldman, 1982; Khafifa Othman, 1990; AR, Nov. 1992). They do not represent the common
channel for food distribution. They tend to be scarce, smaller in size, and more expensive than
traditional outlets.
However, the growing affluence of Asia is presenting international retailers with
tremendous opportunities for investment and expansions. But the cost of entry is high and
investors can not expect an immediate payback, the prizes are also large if investors get it
right (AR, Nov. 1992)

The retail environments of the Asia can be classified into 4 categories:
• Mature - Japan (as we discuss here only developing countries, we won’t
go for more details about Japan retailing industry)
• Sophisticated - Hong Kong and Singapore
• Transitional - Taiwan, South Korea, Thailand and Malaysia
• Traditional - Indonesia, the Philippines, and China
Hong Kong’s population of 6.4 million enjoys one of the highest per capita incomes in
Asia (US$ 23,200, Asiaweek, Feb., 1997) and a standard of living to march. The country is
characterized by high investment, high concentration of sophisticated retailers, central
warehousing and plenty of competition. By 1990 there were well over 800 supermarkets, and
the major chains were still growing rapidly (Kawahara and Speece, 1994). The number-one
supermarket chain is Wellcome, which accounts for 40% of the grocery market and 18% of
food sales. Following it is Park ‘N Shop, which has traditionally been in ruthless and keen price
competition with Wellcome (AR, April 1993). Besides, Japanese supermarkets are a very
important element of food retailing in the territory. They are Yaohan, Jusco, Seiyu and Uny,
which are catering the broad market among middle to upper middle local Chinese. Other
Japanese supermarket are more like specialty niche marketers (Daimaru, Sogo, Tokyu) which
maintain their Japanese identities strongly and serve relatively upscale customers. Finally,
one Japanese supermarket, Seibu, has positioned itself as the top quality supplier for the
upper end of the market and tries to present an international image (Kawahara and Speece,
1994).
Singapore is the easiest place in Asia for international retailers to enter the market. A
number of very big name retailers are gearing up to provide the island’s 3.1 million inhabitants
with per capita incomes of US$ 26,400 and 5 million tourists with retail facilities for a
population twice the size. The 1990s is shakeout time in the Singapore retail sector. Dramatic
developments along the Orchard Road shopping belt and further afield are due to collide with
high rentals, a labour shortage and a distinct lack of competitiveness. Meanwhile,
Singaporeans’ shopping patterns are changing. Nowadays, many are not so concerned about
prices. They want convenience and a wide variety of goods. They want shopping to be lively
and fun (AR, Mar. 1993).

In the supermarket business, there are 11 players competing at all market segments:
Cold Storage, Daimaru, Jasons, Kimisawa, Smart Supermarkets, Sogo, and St Michael Foods
are in the medium and high end targets. While NTUC FairPrice, Oriental Emporium, Prime
Supermarkets and Yaohan are located in low and medium broad markets. In general, the
market is dominated by the “political” NTUC FairPrice chain and a large presence of Japanese
players (AR, Mar. 1992.).
9
In Taiwan supermarkets are getting more popular than ever. Business is booming for
the one-stop shopping that supermarkets offer and the 24-hour service provided by
convenience stores. Changes in Taiwan society are influencing the retail sector. The Taiwan
consumer has experienced spectacular rises in income in the last few decades. The
population of 21,7 million people with a GNP per capita of US$ 12,300 leads to retail business
expanding at 10% yearly.(AR, June 1992).
Like most places in Asia , retailing used to be the domain of mom and pop stores and
streets stalls. In 1987, when foreign investment was first allowed in retailing, there is
considerable investment from the Japanese, the French (Carrefour), Hong Kong (Wellcome)
and Europe (Markro). Today, supermarkets and fast food outlets are so common they have
become part of the lifestyle in the main cities. Statistics figures of May 1993 showed the
number of supermarkets at 450 stores with size more than 330 sq.m. The largest supermarket
chain on the island is Wellcome from Hong Kong, which has 58 outlets and offers a vast
product range, better service, lower prices and aesthetic appeal to Taiwan consumers.
Following it are Produce Co., Park ‘N Shop, Kasumi , Marsuse, Inageya, Great Wholesalers,
President and Summit (AR, June 1993).
South Korea has 45 million people, who have a US$ 10,076 GNP per capita. As
disposable income increases and consumption patterns change, the retail business will get
more diversified, more specialized and larger. Foreign investment was not allowed until
recently and even now foreign investment is limited to 28 stores not exceeding 800 sq m.
Existing retailers are sophisticated , aggressive and big. In general retailing, foreign business
will participate in an indirect way, through licensing or joint venture. Therefore the retail market
is expected to grow under the lead of local companies (AR, Jan. 1992).

Thailand has 61.5 million people with a GNP of US$ 2,680 per capita (AR, Nov. 1992).
The traditional retail market is strong all over the country while in Bangkok there has been an
explosion of modern stores. Forty percent of processed foods in the city are sold through
supermarkets. The Thais have always been open about encouraging foreign investment as
long as it does not exceed 49%. The largest grocery chain is Foodland, which has seven
stores after 18 years in business. Following it, Central Supermarket Co (CSC) aligned with
Carrefour from France and the Charoen Pokphand (CP) with Markro from Holland are together
dominating the marketplace (AR, June 1996). Both groups have plans to expand rapidly by
building stand-alone supermarkets, and both have developed their own concept for big
discount stores - Central with Big C SuperCentre, and the CP group with Lotus. Further in mid
1996, Dutch-based supermarket operator Royal Ahold has signed an agreement with
Thailand’ Central Group to jointly develop the supermarket business in the country (AR,
Sep.1996).
10
Malaysia has 20.6 million population and a per capita GNP of US$ 3900. Eighty
percent of business is still done through small family stores. The large sophisticated chains
are present and doing well. However, supermarkets have to stock a wide variety of goods to
meet the needs of a multi-racial, multi-religious society, yet at the same time they have to
maintain competitive prices. Cold Storage supermarket is the oldest chain in the country.
Opened in early 1970s, it served a then relatively large expatriate market as well as affluent
and curious Malaysians. Supermarkets are by now attracting a much wider clientele.(AR, Nov.
1992; AR, Mar. 1993).
Indonesia is often called a land of contrasts - and the description is certainly fitting for
the retailing industry where thousands of hawkers and pasars (general markets) compete with
modern supermarkets and department stores. The 197.6 million population has a GNP per
capita income of US$ 940. More than 40% of the urban population lives in Jakarta where most
money is concentrated. Traditional stores still play a major role and there is a high
dependence on wholesalers and distributors, who are very strong (AR, Nov. 1992)
Despite a lack of structure in the retail business there is a slowly emerging
supermarket and self-service network. It accounts for about 10% of all packaged goods sales.

Indonesia has 250 supermarkets of which 150 are in Jakarta. The leading group is Hero, a 20-
year-old publicly listed company with 42 outlets, which is positioned itself to cater to the
expanding needs of the upper middle and high income groups. It is followed by Matahari, a
combination department store and grocery operation of 39 outlets, and Golden Truly which
has five outlets (AR, Feb./Mar. 1993).
Officially, outsiders are banned from direct ownership, but big names signs such as
Sogo, Yaohan (Japan), Markro (Holland) are appearing all over Jakarta as local
entrepreneurs get together with overseas interests in joint ventures. August 1996, the world’s
largest retailer, Wal-Mart from the US has opened the largest shopping and entertainment
center , 30 km west of Jakarta, which carries a large assortment of 30% food, 25% apparel
and 45% hard-line products (AR, Sep. 1996)
The Philippines has population 69.3 million and a GNP per capita of US$ 1130, but
there is a big disparity between the rich and the poor. In the entire country, 10 million people
account for 60% of the business. The retail industry is dominated by Filipino-Chinese. There
are 100,000 sari-sari stores and a tremendous dependence on distributors and wholesalers.
While the more middle and up-market supermarkets and department stores enjoy a large
share of Malina’s retailing activity, the wet market complexes take on their share of the so-
called “underground” economy (AR, Nov. 1992).
The key players in supermarket business are local companies. Shoemart (SM) was
pioneered in the concept of the one-stop shopping complex in the mid 1970. Now the company
has 3 “mega-mall” in big cities, each spans one to two sq. hectares, and is equipped with the
latest facilities for the modern shopper. Its competitor, the Ayala group, owners of the Makati
Commercial center in Manila, is also rushing the nine-hectare Ayala Center in the Cebu
Business Park (AR, Feb. 1994)
In the Philippines, the wholly-owned foreign retailer is , in principle, non-existent. The
government promotes foreign investment, but laws mandate that retailers should be Filipino
nationals. Corporations are not allowed to have more than 40% foreign ownership (AR, sep.
1992)
China has a 1,225 million population and a GNP per capita income of US$ 540 and is
rated highly on the list of promising places. The coastal cities have 40 million people who are

11
increasing affluent and who offer the would-be retailers some exciting possibilities. China has
agreed to test retailing, and on May 1994, Yaohan opened its first supermarket with sales area
of 580 sq.m in Shanghai, the joint venture with Shanghai City Agricultural Committee. Until mid
1996, it already has 27 supermarkets in China and has an ambitious expansion plans of a
chain of 1000 supermarkets operating across the country by the year 2005. Meanwhile, Wal-
Mart with its openings of 2 superstores in Shenzhen (each one has size more or less 15000
sq.m) on august 1996 represent that it will play a significant role in the future (AR, Aug. 1996)
From above facts and figures we can see that the sophisticated group such as Hong
Kong and Singapore are characterized by well-structured markets and fierce competition in
the supermarket business. Traditional outlets still remain, and include both small
neighborhood stores and the wet markets. However they continue to lose sales to
supermarkets which have strong produce and meat sections.
Meanwhile, business is booming for one-stop shopping supermarket in the transitional
markets of Taiwan, South Korea, Thailand and Malaysia. Local middle class customers show
ever-increasing preference to supermarkets which are considered more modern, cleaner and
with better atmosphere. At the same time, the traditional retailing methods still have strong
presence in national economies.
The traditional groups are characterized by high populations, low capita incomes, low
consumers expectations and few self-service. Sales still concentrate in wet markets and
traditional “mom and pop” shops, the wholesalers play a major role. They are “sellers’ markets
and there is limited direct sales involvement between manufacturers and retailers. There are
limited but growing opportunities in those countries for modern supermarkets and those that
exist tend to cater for the top end of the market. They are markets of the futures. What took 20
years to achieve in Hong Kong and Singapore has been achieved in less than 10 years in
Taiwan. And what has been achieved in 10 years in Taiwan will be achieved in even less time
in other newly developing Asian markets (AR, April 1993).
Vietnam, based on its economic conditions and retailing environment (more details will
discussed in the next paragraph), can be included in the group of traditional markets. As there
are government restrictions on foreign involvement in distributions channels as well as many

difficulties in logistics and supply, there is still no international player operating supermarkets
in Vietnam. Since the first local supermarket opened in HCM city in October 1993, this kind of
store is mushrooming to serve for affluent middle-class Vietnamese and expatriates living in
major cities. They are now 31 outlets in HCM city and 13 outlets in Hanoi. The situation
presents considerable opportunities for the development of these minisupermarkets.
12
2.3 Vietnam retailing environment
2.3.1 Economic overview and consumer purchasing power
The World Bank has predicted that Vietnam’s economy is likely to grow at a rate of
approximately 8% per annum until the end of the century (Ashwood, 1994). In a country with a
population of 74 million, the emerging consumer market is a substantial market and if the
Government’s goal to double GNP by the year 2000 is achieved, the consumer market will
blossom into one of Asia’s most rewarding (Business in Vietnam: illusion & reality, 1995). The
Vietnamese market, measured in terms of nominal GNP at market prices and the GNP per
head were estimated by BMI are showed in table 2.1:
Table 2.1: Vietnamese market size/GDP per head
1993 1994 1995 1996 1997(f)
Market size (US$ bn) 17.3 19.9 24.5 26.6 29.6
GDP per head (US$) 240 270 330 344 373
Source: Business Monitor International Ltd., General statistical office
Moreover, the role of the parallel economy in Vietnam should not be underestimated,
possibly accounting for half, or more, of the country’s total GNP. Further ‘working capital’ is
provided by the estimated US$ 130 million remitted annually by families overseas. Obviously,
the hidden economy in Vietnam is enormous (Ashwood, 1994). Today, the most significant
consumer growth is concentrate in the urban areas. And Hanoi is one of the most affluent
centers. One need not be a genius to realize that urban Vietnamese are richer than official
figures indicate (Doing business in Vietnam, 1995). Another important point is that Vietnamese
families do not live as nuclear units; instead, extended families live together with as many as
three generations in one house. As a result, income is pooled, which increases buying power
on a collective level.

2.3.2 Retail options
These few overall figures and facts support the coexistence of many kinds of retailing
business. Vietnam has its owned well-developed distribution system and, although it would be
considered primitive by Western standards, it does effectively distribute products to
consumers. As for retailers, the majority of them are privately owned, but many are state-
owned as well. Of the 45,000 officially registered units in the country, two-third are in private
hands with some 14,000 owned by the state. Total retail sales of consumer goods rose 26.7%
between 1993 and 1994, reaching 85.25 trillion dong, the equivalent of roughly $8.5 billion
(Doing business in Vietnam, 1995). During three years 1991-1994, trade by State enterprises
and collectives, as a percentage of retail sales, declined from 50% to 25%. Although the
State’s role in distribution is being quickly dwarfed by the growing private sector, these store
still keep the large piece of the distribution system and well located in the central areas of the
cities.
Most retailing in urban centers is done through large comprehensive markets, street-
front shops, specialized retail streets and local meat and produce markets. There are twelve
large comprehensive markets in HCM City and three in Hanoi. Most stalls in these large
markets are small but hold high levels of stock due to erratic distribution and supply. Many
stalls sell similar products and carry few brands; however, there is greater diversity for
packaged foods and clothing. Refrigeration is not available and products that require
refrigeration are rarely seen. Those goods are cooled and packed in ice. There is great
13
variance in the attention paid to displays, with cosmetic products, for example, being
attractively displayed and packaged foods being stacked in piles. Point-of-sale materials are
rarely seen, though they are becoming more prevalent.
Street-front shops are located around city centers and along main roads. They are
similar to shop houses found in other areas in Southeast Asia. Privately-owned shops often
lack sufficient stock to fill their shelves and any point-of-purchase material displayed is either
out-of-date or not associated with the products being sold. Government shops display fixed
prices, but prices are always negotiable in private shops.
Specialized retail streets consisting of up to 30 street-front shops sell the same product

categories within a single city block. Street-front shops selling shoes, sports equipment,
bicycle parts, clothes, hardware and electronic goods can be found. Street-front shops are
more specialized than others and carry only specific types of products. These shops generally
are run by the more entrepreneurial-minded shopkeepers. Street-front shops carry the most
current stock available, have good displays but don’t display point-of-sale materials. Prices are
always negotiable, with no prices displayed , as many of the goods are smuggled. The
tradition of single-item street distribution has early roots. In the Old Quarter section of Hanoi,
each street was named after the goods produced along it, from hats to horsehair.
Local fresh-produce markets are found on back streets and in alleyways, where 20 to
50 vendors may congregate their stalls. These local markets serve neighborhood populations
of up to 10,000 people. Sometimes, dry and packaged foods are sold by these temporary
stalls. Food retailing is still very much associated with the traditional Asian wet markets where
product are brought in fresh and unrefrigerated from farms and abattoirs each morning and
sold off a slab in small portions.
The rural environment offers fewer retailing options than do urban areas. Only street-
front shops and roadside stalls are found, and there are no stores selling high-value consumer
goods. There are some general-store types of shops selling a limited range of packaged
foods, including some international brands, but most goods are either locally produced or
imported form other Southeast Asian countries, with stock organized - or disorganized -
according the shopkeeper’s state of mind (Business in Vietnam: illusion & reality, 1995).
A Singapore based consultant, Mr. Ronald Tan had commented in AR, Oct. 1992 that
“the retail industry in Vietnam is in a state of flux and it would take another three to five years
to settle down before there is a radical change”. Up to now, we can see some upgrades in
retailing industry: the stores are brighter, there are much more product varieties on shelve,
self-service are more popular, and supermarkets are mushrooming, etc. But still these
movements can not be considered as “radical” based on scale and speed of changes.
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2.4. Consumer store choice behavior and retailer strategy
Rogers (1992) in his book has revealed that a retailer’s ability to develop and apply a
sound strategy depends on how well that retailer identifies and understands its customers.

This involves determining which types of target market to reach (mass market, market
segment, or multiple segments), identifying the characteristics and needs of the retailer’s
specific target market, and understanding how consumers make decisions.
The target market is the customer group that a retailer tries to satisfy. When deciding
on the type of target market to reach, a firm would consider its goods/service category, its
goals, what competitors are doing, the size of various consumer segments, the relative
efficiency of each target-market alternative for the particular company, the resources required,
and other factors.
After the retailer chooses a target-market method, it identifies the characteristics and
needs of those customers to whom it wants to appeal and endeavors to understand how they
make purchase decisions. Consumer characteristics include demographic and life-style
factors. Consumer needs relate to a firm’s store location, goods/service assortment, prices
and so on. Purchase decisions can be made impulsively or may encompass a detailed thought
process.
Demographics are easily identifiable and measurable population statistics. However,
consumer demographics vary widely by geographic area and because most retailers are local
or regional, they must comply information about the people living in their particular trading
areas and/or those most likely to patronize them. A retailer could identify its target market in
terms of some combination of the following demographic factors:
• Market size - How many consumers are in the target market?
• Where people live - How large is the trading area from which customers can realistically
drawn?
• Mobility - What percentage of the target market moves each year?
• Gender - Is the target market predominantly male or female, or are they equal in
proportion?
• Employment status - Does the target market contain working women, retirees, and so on?
• Age - What are the prime age groups to which the firm appeals?
• Occupation - In what industries and occupations are customers working?
• Marital and family status - Are consumers single or married? Do families have children?
• Education - Are customers college-educated?

• Income - Is the target market lower-income, middle-income, or upper-income? Is
discretionary income available for luxury purchases? etc.
Life-styles are the ways in which individual consumers and families live and spend time
and money. Consumer life-styles are based on a combination of social and psychological
factors. They are greatly affected by people’s demographic backgrounds. A retailer could
develop a life-style profile of its target market by analyzing these concepts:
• Culture - What cultural values, norms , and customs are most important to the target
market?
• Social class - Are consumers lower-, middle-, or upper-class? Are they socially mobile?
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• Reference groups - Whom do consumers look to for purchasing advice? Does this differ by
good or service category? How can the retailer appeal to opinion leaders?
• Social performance - Are customers high or low performers? How do they react to this
status?
• Family life cycle - In what stages of the cycle are the bulk of the customers?
• Time utilization - How do consumers spend their time? How do they view the time spent
shopping?
• Personality - Do customers have identifiable personality traits?
• Class consciousness - Are consumers status conscious?
• Attitudes - How does the target market feel about the retailer and its offerings in terms of
specific strategy components?
• Perceived risk - Do customers feel risk in connection with the retailer? Which goods and
services have the greatest perceived risk?
• Importance of the purchase - How important are the goods/services offered by the retailer
to the target market?
2.5 The store choice decision process
Engel and colleagues in their book “Customer Behavior” have concluded that: the
process of choosing a specific store is a function of consumer characteristics and store
characteristics . Consumers in each market segment form images of various store based on
their perceptions of the attributes they consider important. Store choice is thus a function of

four variables shown in figure 2.2: (1) evaluative criteria, (2) perceived characteristics of
stores, (3) comparison process, and (4) acceptable and unacceptable stores (figure 2.1).
Determinants of store-choice decision vary by market segment and by product class.
They usually fall into the following categories: location, nature and quality of assortment, price,
advertising and promotion, sales personnel, services offered, physical store attributes, nature
of clientele, sotre atomsphere, and post-transaction service and satisfaction.
Location is in many ways a response to the convenience component of customer
expectations. It may be perceived by consumers in terms of time and hassle as well as actual
distance. Many shopping decisions are based upon ease of access, parking and travelling
time, and bulk food shopping. The growth of “convenience stores” demonstrates the response
of some retailers to changing aspects of consumer behaviour, as for some consumers ready
access at late hours to a limited range of products has become a requirement.
Depth, breadth, and quallity of assortment are often the importnant determinants of
store choice. There is little doubt that product range decisions are fundamental and the role of
merchandise management is to match the product offering of the company to the
requirements of the target customer group. This requires an understanding of customer
expectations regarding choice, quality, style, uniqueness, etc.
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Evaluative criteria
•
location (distance)
•
assortment breadth & depth
•
price
•
advertising &
sales promotion
•
store personnel

•
services
Perceived characteristics of stores
•
location
•
assortment
•
price
•
advertising &
sales promotion
•
store personnel
•
services
store
image
Comparison
process
Acceptable
stores
Unacceptable
stores
Figure 2.1: Store choice process (Engel, Blackwell, and Miniard, 1995)
The importance of price as a determinant of store patronage varies by type of product.
Supermarkets in the US have placed great emphasis on price since its early days.
Price is of crucial importance in the customers’s selection of store and it is interesting to note
the changing nature of the price equation. Many retailers continue to assume that price is
quantity, based on the customers’ view of “value for money”. In fact, other features such as

quality, design and exclusivity are now just as important. The importance of price also
depends on the nature of the buyer. Some customers prefer on other factors, such as
convenience, will probably trade off that consideration against higher prices.
Advertising and promotion can be used in at least two ways in retailing. One way is to
communicate information about price or other attributes of the store. The second way is in
positioning - creating perceptions about attributes or overall image of the store.
Knowledgeable and helpful salespeople were rated as an important onsideration in
choice of a shopping center by more than three-quarters of those interviewed in five major
metropolitan areas (Engel, 1995).
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