Project report vincom mega mall royal city rejuvenate the future of retail experience

VIETNAM MARITIME UNIVERSITY INTERNATIONAL SCHOOL OF EDUCATIONPROJECT REPORT VINCOM MEGA MALL ROYAL CITY Rejuvenate the Future of Retail Experience Lecturer: Ms... Vincom Mega Mall Royal

VIETNAM MARITIME UNIVERSITY INTERNATIONAL SCHOOL OF EDUCATION

PROJECT REPORT

VINCOM MEGA MALL ROYAL CITY Rejuvenate the Future of Retail Experience Lecturer: Ms Nguyễn Thị Cẩm Nhung

Class: BMM09 - Group 02:

1 Vũ Hồng Nhung - 79335

2 Trần Huệ Trúc - 80169

3 Nguyễn Thu Hà - 77789

4 Lê Thị Thu Thủy - 79999

5 Ngô Thị Phương Anh - 77084

HAI PHONG - 2021

TABLE OF CONTENTS

I Executive Summary 3

II Company Overview 4

2.1 Brief introduction 4

2.2 Statement of objective 4

2.3 Statement of mission 4

2.4 Core values 4

2.5 Logo 5

2.6 Ownership structure 5

III Market Research 7

3.1 Industry Analysis 7

3.2 STP analysis 11

3.2.1 Segmentation 11

3.2.2 Targeting 13

3.2.3 Positioning 13

3.3 SWOT Analysis 13

3.3.1 Strengths 14

3.3.2 Weaknesses 15

3.3.3 Opportunities 17

3.3.4 Threats 18

IV Big Actionable Ideas 21

4.1 Redesign customers experience 21

4.2 Innovate tenant mix (rearrange pop-up stores according to customer segments) 22

4.3 Strategically digitalize mall operations 30

4.3.1 Smart parking system 30

4.3.2 Smart automatic payment machine in the supermarket 31

4.3.3 Intelligent service robots 33

V Action plan 35

VI Financial projects and appraisal 36

6.1 Formulation of a financial project 36

6.1.1 Sale projection (Projection of the statement of profit and loss) 36

6.1.2 Cash flow statement 38

6.2 Financial appraisal 39

VII Risk assessment 40

VIII Conclusion 41

IX REFERENCES 42

X APPENDIX 44

I Executive Summary

Vincom Mega Mall Royal City (VMMRC) is the first subterranean shoppingmall complex in Vietnam to comply with international standards and vastparking lots It is dubbed in Hanoi as a "miniaturesque European City" andearned "Vietnam's finest mega-mall" in 2014 Vincom Mega Mall Royal City'skey enticing aspects are a large retail area, many entertainment choices,restaurants, commercial activities, and sales promotions Seventy percent ofvisits to Vincom Mega Mall Royal City currently have an average salary of lessthan VND 15 million per month and are under 35 years old

All shopping malls and tenants are seeking solutions to enhance footfalls andrevenues through trade marketing and promotional campaigns The VincomRetail leaders have been spending a lot of time developing an approach toestablishing VMMRC as the leading position in the Vincom shopping chain Wewant to rejuvenate this Mega Mall to become the “number one” place thatinitiates and spreads trends to the targeted customers

However, in recent years, due to the lack of updates and improvements in terms

of quality as well as not focusing on improving customer experience, thenumber of visitors visiting and shopping at Vincom Mega Mall Royal City hasdecreased significantly Instead, more and more shopping and entertainmentcenters have sprung up, such as Aeon Mall, Discovery Complex, attractingmassive attention from visitors from all over the country

We decided to assist with some innovative solutions to achieve this ambitiousgoal Specifically, we would like to focus the solution on addressing thefollowing aspects:

 Redesigning customer experience

 Innovating tenant mix

 Digital transformation of retail experience

II Company Overview

2.1 Brief introduction

- Business Name: Vincom Mega Mall Royal City

- Legal form

o Sole Proprietorship/ Private Company: VinGroup

o Limited Company: Vingroup Joint Stock Company

- Location: No.72A Nguyen Trai Street, Thanh Xuan district, Hanoi

- Business sector: Retail shopping

- Product/ Services: Provides a wide range of travel, shopping, entertainmentofferings where customers can combine sightseeing, consuming, and familyinteraction in one visit

II.4 Core values

Picture 1: Vincom Retail’s Core values (Source: Vincom Retail annual report,

Figure 1: Organizational chart (Source: vingroup.net)

Picture 3: Leadership chart (Source: vingroup.net)

Picture 4: Executive Board of Business Areas (Source: vingroup.net)

III Market Research

3.1 Industry Analysis

Vietnam's retail real estate market recovered slightly after the anti-Covid-19blockade shock in 2020 In which, Da Nang received clear optimistic signalsafter a period of hiatus Colliers Vietnam, the rapid economic recovery makes

Da Nang an attractive retail market The rent of retail space in commercialcenters in Da Nang in the first quarter of 2021 increased by 6-7 USD/m2/monthcompared to the previous quarter The occupancy rate was recorded at nearly90% In Ho Chi Minh City, the Covid-19 period in February 2021 did not havemuch impact on the retail market, the rent of commercial centers in the centralarea still increased by 5-10 USD/m2/month compared to the fourth quarter of

2020, while the commercial centers in the suburbs had a slight decrease in rent(decreased by about 2 USD/m2/month) Many shopping centers still keepoccupancy rates up to 100% with long-term tenant contracts Vacancy rates athigh-end shopping centers in Districts 1, 2, and 7 have almost recovered or evenimproved compared to last year In Hanoi, the rent at commercial centers inHanoi decreased by 3 - 5 USD/m2/month The occupancy rate remains stable,reaching nearly 100% for retail podiums and nearly 90% for shopping centers(Le Q, 2021)

Vincom Retail's total consolidated net revenue in the first quarter of 2021reached VND 2,226 billion, up 32% over the same period in 2020 In which,investment real estate leasing continued to grow with revenue reaching 1,712billion dongs, up 18% over the same period last year Revenue from the realestate transfer segment reached VND 452 billion - an increase of 125% over thesame period, due to the handover of three large commercial townhouse projects.Consolidated profit after tax of Vincom Retail reached VND 781 billion in thefirst quarter of 2021, up 59% over the same period last year

Regarding the scale of operation, Vincom Retail owns and operates 80 tradecenters (commercial centers) in 43 provinces and cities nationwide as of March

31, the total retail floor area is about 1.7 million square meters Vincom Retailsaims to achieve an after-tax profit of about VND 2,500 billion; net revenue fromproduction and business activities reached 9,000 billion dongs The targets ofrevenue and profit both increased compared to the implementation results in

2020, increasing by 8% and 5% respectively It is expected to continue toprovide the market with nearly 100,000 square meters of retail floor space,

bringing the total retail floor area across the system to 1.8 million squaremeters With various types of shopping malls, this business will focus ondeveloping large-scale Vincom Mega Mall in Hanoi and Ho Chi Minh City Inaddition, this business plans to open two shopping centers under the VincomPlaza brand, Vincom Plaza My Tho and Bac Lieu in 2021.

Regarding cooperation, developing strategic partners and tenant relations is thefocus of the business plan in 2021, according to Vincom Retail's Board ofDirectors Accordingly, the business will continue to expand the network of newtenants in 3 groups, including large international groups, new tenants with thepotential to become chain customers, and Vietnamese tenants (Van P, 2021).With basically successfully controlling the COVID-19 pandemic in 2020, theindustry in the first quarter of 2021 achieved a decent increase of 6.5% over thesame period last year (General statistics office, 2021) Domestic trade has apositive growth rate, up 6.4% over the same period last year thanks to increasedconsumer demand, preparation for Tet holiday and businesses, trade centers,supermarkets… There are many promotions and discounts to stimulate demandand attract people's consumption (Phan, 2021)

Figure 2: Revenue structure of the retail industry (Source: GSO, 2020)

Total sales of consumer goods and services reached 5,073 trillion thanks to astrong recovery in demand at the end of 2020 According to the fourth quarterdata of the General Statistics Office, the total sales of consumer goods andservices increased by 7.8% y/y mainly thanks to a 12.2% YoY increase in retailsales, accounting for 78% of total sales The remaining industry groupdecreased by -5.8% over the same period, accounting for 21.4%, includingaccommodation and catering, travel, and others

Figure 3: Essential and non-essential spending structure

(Source: Fitch Solution, 2020)

Vietnam is still spending a lot on consumer staples due to the low averageincome but is expected to gradually switch to more consumer discretionary asincome improves The disposable income of Vietnamese people affected byCOVID-19 and high thrift should focus on consumer staples spending Theconsumption structure still focuses on essential products, accounting for 61% oftotal household spending F&B with the largest value reached VND 767,940billion, growing 12% YoY in 2020-2024 In the medium and long term,opportunities for consumer discretionary retailers will increase as lifestyledemands increase

Experts estimate that in 2021, Vietnam's retail segment may soon recover,returning to pre-epidemic levels and many growth trends Specifically,according to a forecast of VNDirect Securities Joint Stock Company, it isexpected that consumption will recover to pre-pandemic growth, total retailsales of consumer goods and services is expected to increase by 8.5%- 9%compared to 2020 Retail sales in 2021 increased thanks to the recovery ofconsumer confidence and the spread of vaccines for the pandemic

Besides, from the differentiation of the retail industry in 2020, experts alsoforecast that in 2021 this industry will have 4 main trends: Large retailcompanies seize opportunities to increase market share; shift consumerspending toward essentials, favoring grocery retailers; Covid-19 boosts the

online economy; Commercial property developers enjoy the flow ofinternational brands into Vietnam.

In particular, the Covid-19 trend promotes the online economy According toGoogle, Temasek and Bain & Company, Vietnam's online economy is boomingwith revenue growing 38% per year in the period 2015-2019 to reach a value of

12 billion USD, accounting for more than 5% of the country's GDP, mainlydriven by the thriving e-commerce segment According to a statistical report byWeAreSocial, as of January 2020, Vietnam had more than 68 million Internetservice users, equivalent to more than two-thirds of the population and morethan 146 million mobile data network connections As such, the online channelwill become more important in the next phase of the retail economy

In 2020, in addition to retailers such as Saigon Co.op, Vinmart & Vinmart+quickly grasping the online trend by promoting the sales app model on mobilephones, many manufacturing enterprises also "encroach" through this model.Vietnam Animal Industry Joint Stock Company (VISSAN) also joined theonline business by launching the website http://vissanmart.com

Figure 4: Total Retail Value of Vietnam and Estimated Growth to 2025

(Source: VNDIRECT RESEARCH, 2019)

According to Vietnamcredit (2020), The Ministry of Industry and Trade (MoIT)forecasts that by 2025 the added value of domestic commerce will contributeapproximately 13.5% of GDP and the total retail sales of goods and serviceswill increase by 9-9.5% each year over the period 2020-2025

If the total retail value is the same for 2020 as for 2019, by 2025 the generalretail value is estimated to amount to almost USD 350 billion, which is 1,6times higher than in 2020

3.2 STP analysis

3.2.1 Segmentation

Figure 5: Customers’ Location (Source: The Authors)

- Geographic segmentation:

Based on our survey, up to 75% of customers live and work in the North, 10%

of customers in Central, and 15% of customers come from the South Thisproves that customers of Vincom Mega Royal City can come from manydifferent cities and provinces in Vietnam, even foreign visitors

Figure 6: Customers’ Job (Source: The Authors)

Figure 7: Customers’ Gender (Source: The Authors)

- Demographic segmentation:

As reported by Vincom (2020), we find that customers of VMMRC areprimarily young people under the age of 35 (about 70%) and with incomesbelow 15 million According to our survey, the current VMMRC customersinclude students (56%), office workers (10%), business people (27%), and 7%are other professions In addition, customers of VMMRC have both men andwomen with percentages of 58% and 42%, respectively

Figure 8: Customers’ Purpose (Source: The Authors)

- Behavioral segmentation:

We found that up to 45% of people come to VMMRC for window shopping,24% come for entertainment, 20% come to eat with family and friends, 11%come to shop

Figure 9: How do you want VMMRC to change? (Source: The Authors)

- Psychological segmentation:

According to our survey, 85% of customers want to have more new, modern,and trendy things, and those who do not want VMMRC to change only 15%

3.2.2 Targeting

With the above-mentioned market segments, VMMRC focuses on customers inthe Northern provinces, who are under 35 years old, with an income of less than

15 million VND, are young dynamic students and young businessmen who like

to explore and use technology

3.2.3 Positioning

VMMRC is Asia's largest underground shopping mall with a luxurious, catching, European-style design, with a total area of 230,000 square meters Inaddition, VMMRC also has the largest indoor real ice rink in Vietnam

eye-Figure 10: What area would you like Vincom Mega Mall Royal City to have?

(Source: The Authors)

VMMRC should focus on promoting the development of the food and beverageindustry because the number of customers who recommend the mid-rangesegment of food stalls accounts for 43.9% and up to 59.6% of customers wantthe area to eat and rest conveniently and intelligently

3.3 SWOT Analysis

Strengths

- Modern and inspiring exterior and

interior design

- Attracts tenants who want to

penetrate the Vietnamese market

- Wide customers base

- Financial support from VinGroup

Threats

- The negative impact of Covid-19

- Intense Competition+ Brick-and-mortar shopping malls

- Unprofessional staff behavior

- The billing process

Table 1: SWOT Analysis (Source: The Authors)

3.3.1 Strengths

● Modern and inspiring exterior and interior design

Impressively, the building is designed in a classic European style with a massivescale covered by luxurious white Vincom Center for Contemporary Art is aunique feature of Vincom, this is a success helping to attract more customers, agroup of art lovers It is invested with the most modern equipment and spaciouscomfortable space to create for different events

● Attracts tenants who want to penetrate the Vietnamese market

Picture 5: VMMRC's tenants (Source: Vincom Retail Presentation, 2020)

● Wide customers base

Organized under the slogan "All in One'', VMMRC provides a wide range oftravel, shopping, and entertainment offerings where customers can combinesightseeing, consumption, and family interaction in one visit The Vincom MegaMall Royal City welcomes on average more than 35 thousand visitors/day 70%

of current visitors to VMMRC are under 35 years old and have an averageincome of below 15 million VND per month

● Financial support from VinGroup

VIC is one of the few real estate giants in Vietnam that owns a complete realestate value chain from development to transfer, investment, ownership, andoperation through subsidiaries Although the Covid 19 pandemic has caused animpact on the entire retail industry, including the retail real estate segment,Vincom Retail still achieved a relatively good growth rate in 2020

3.3.2 Weaknesses

After surveying more than 100 customers, we found that customers have beenexperiencing some main types of customer pain points at Vincom Mega MallRoyal City.

● High costs

More than half of customers said that the prices of items here are higher thansupermarkets or other shopping centers, which significantly affects the store'srevenue as well as VMMRC's Besides products that focus on high customersegments, VMMRC also has more products, brands, and restaurants with lowerprices, but has not really hit the tastes of consumers Making it difficult for themajority of mid-range customers to come here for the most optimal shoppingexperience

Picture 6: Customer reviews of prices at VMMRC (Source: Internet)

Figure 11: Customer reviews about the prices of items at VMMRC

(Source: The Authors)

According to our research, up to 89 percent of clients who visit VMMRC believe that the prices of items here are greater than market pricing Only 4% of clients believe the prices at VMMRC are cheaper than the market pricing

● Unprofessional staff behavior

In addition, the service attitude of the restaurants or shops here is not polite andattentive to customer service This leads to customers having a bad impressionand they gradually spread the bad news more and more Since then, the number

of customers coming to the shopping experience has decreased sharply

Figure 12: VMMRC's car park customer satisfaction level

(Source: The Authors)

Looking at the graph showing customer satisfaction about the parking lot ofVMMRC, customers who are unsatisfied with the VMMRC parking lot accountfor up to 50% of the total, while satisfied customers account for just 8.8% of thetotal Therefore, customers' shopping experiences at VMMRC are also affected

Picture 7: VMMRC's car park customer reviews (Source: Internet)

Moreover, the garage is so large that customers waste so much time looking forcars in the VMMRC parking lot that there is currently no smart way to optimizethis process In addition, the bad attitude of the security guards makes customersfeel that they are not respected, thereby giving them a bad look at VMMRC Inaddition, the billing process was also complained about by customers The slow

checkout process affects customer satisfaction during the purchase process andproduct experience The late payment takes a lot of time for the customer,causing a certain annoyance Since then, overcrowding at peak hours oftenoccurs, affecting customers’ shopping experience when coming to VMMRC.

by 18 percent to $11.8 billion, accounting for 5.5 percent of the total retail sales

in 2020 In other words, many individuals are shopping online now VMMRC isable to make an income by creating and selling online shops At the same time,

it also possesses a relatively young population, with 40% of its populationbelow the age of 24 With their greater propensity for digital technology, many

of these younger consumers are driving the rapid expansion of Vietnam’s commerce market, as they spend more time shopping on their digital devicesthan in physical stores

e-● Social Media

The coverage of social networking sites in Vietnam is becoming stronger In

2019 the number of people using social networks in Vietnam was 62 million;but as of January 2021, the number is 72 million Specifically, 61 millioncustomers can be reached through Facebook advertising, 5.4 million onInstagram, 3.3 million on LinkedIn, and 1.27 million via Twitter They mayutilize social media to market their products, communicate and gather feedbackfrom customers

Picture 8: Essential headlines for mobile, internet, and social media use in

Vietnam (Source: Hootsuite, 2021)

● Technological developments

Technology comes with numerous benefits among many departments.Operations can be automated to reduce costs Technology allows better clientdata to be obtained and boosts marketing efforts

● Population

The population has been growing and is expected to grow at a positive rate forthe upcoming years This is beneficial for VMMRC as there will be an increase

in the number of potential customers that it can target

Figure 12: The average age of the population in Vietnam from 1950 to 2050

(median age in years) (Source: Statista, 2020)

3.3.4 Threats

● The negative impact of Covid-19

It is the big confusion in buying decision-making of customers The demand forconsumption decreases seriously and consumers tend to spend their money,which badly affects the revenue of the mall in the current time

Figure 13: Impact on shopping and out-of-home activities due to coronavirus COVID-19 among urban citizens in Vietnam in 2020 (Source: Statista, 2020)

After the COVID-19 outbreak, around half of the surveyed Vietnamese citizens

in urban areas reduced their frequency of visiting a supermarket, grocery store,

or wet market

● Intense Competition

+ Brick-and-mortar shopping malls

The retail market in Vietnam continued to witness the expansion of existingretailers and the increasing participation of many foreign retailers Some newcompetitors such as Lotte Mart, Aeon, Takashimaya, and Big C (nowundergoing many other names: GO!, Tops market, go!) have increased thecompetition on the market Lotte Mart Vietnam is a company that has 100%capital owned by Korea After being bought by Central Group, Big C has alsobeen upgraded and improved in terms of service quality In this way, VincomMega Mall should have suitable policies to attract customers, such as choosingsuitable products and customer segments and applying discounts, which willincrease the company’s expenses

+ E-commerce Sites

The development of E-commerce and the change in customers' shoppingpreferences also affect customers’ buying behavior from traditional ways toonline shopping or many other high-tech retail platforms It could lead to adecrease in the number of consumers coming to Vincom’s shops E-commerce

is feared to adversely affect brick-and-mortar shopping malls given that online

shopping channels could offer better prices, convenience, and variety ofchoices According to Deloitte’s recent survey (2019), nearly 75% ofrespondents are familiar with online shopping Vietnam’s consumers arebecoming more willing to purchase online especially with selected goodsincluding fashion items and cosmetics products which are major productcategories of shopping malls.

Table 2: The Mapping of E-commerce in Vietnam (Source: Iprice, 2019)

IV Big Actionable Ideas

4.1 Redesign customers experience

● Customers’ 3 senses marketing

- Sight:

The spatial design layout should have the highlight: A harmonious combination

of the primary colors

o Adjacent stores should have background designs with different colors toattract customers' attention, and at the same time easy to distinguish eachstore However, each area must be unified with its own color gamut,avoiding the clutter that takes aesthetics

o The stalls placed in the middle position should be formed in differentshapes, making space more neatly arranged

o In addition to the light of the ceiling lights, string lights should bedecorated with special shapes to create a more creative and new style.Vincom's waterfall can be improved by using the digital waterfall curtain It isparticularly designed for the shopping experience, which means that it worksalmost all day, every day of the year, is almost maintenance-free, and does notsplash out of the wet areas Cleanliness is also part of the visual appeal, soVincom should ensure hygiene within their area Green trees should be usedmore, evenly, and neatly distributed with different sizes of trees Increasing thefreedom of customer experience by creating lots of open spaces and being able

to freely touch products before checkout Building many new iconicarchitectural styles at empty spaces or outdoors for customers' check-in.Employees must be guaranteed to wear 100% uniform and only move around intheir work area All employees should be well trained to be enthusiastic andprofessional with customers Taking advantage of banner ads in crowded places

- Hearing:

Composing a song of Vincom's catchy melody: When customers listen to it, itwill remind Vincom With the development of the rap music world, Vincomeasily chooses talented young rappers to create a music product Creative,youthful, trendy lyrics with addictive melodies will help attract customers'attention The content can use adjectives that highlight the core values ofVincom and the values that Vincom brings to customers Do not allowemployees to talk on cell phones or gossip during business hours and in front ofcustomers

- Smell:

Using more fresh air filtration systems to keep the air cooler Encouraging thefood & beverage shops to arrange products with signature scents of the brand tostimulate customers' smells as they pass by Coffee, for example, should be

placed near the entrance, where it is easy to impress Shopping stores should useessential oils of the shop to keep the impression of customers in mind.

● Rest place-seat area

With a large area like Vincom, seat areas should be more distributed in theshopping center to help customers conveniently travel and rest Increasing thenumber of massage chairs along the path area and map directions near the restplace-seat area

● Charging phone area

Nowadays, people have to use their phones often, leading to a very fast batterylife that cannot be enough for a day With the above inconveniences, the freemobile charging service for customers should be provided in the mall, mainlythe types for Apple and Samsung This makes customers more comfortable toexperience at the mall and keeps them from staying longer

4.2 Innovate tenant mix (rearrange pop-up stores according to customer segments)

We have conducted a survey with 114 participants, purchasing level, andcustomer satisfaction with existing stores at VMMRC And these are boothswith low customer satisfaction

Table 3: Booths with low customer satisfaction (Source: The Authors)

We recommend VMMRC let these stores leave and re-optimize their stores toenhance the shopping experience of customers coming here as well as to matchtarget segmentation After removing some booths that were not highlyappreciated by customers, VMMRC should open bidding to lease the vacantbooths According to our survey, many people recommend the following brands:Zara, Phuc Long, Mc Donald, Lego, MLB, Le Monde Steak, Degrey, La RochePosay