The analysis of retailing service aeon vietnam case study approach

wa FOREIGN TRADE UNIVERSITY HO CHI MINH CITY CAMPUS MID-TERM ASSIGNMENT Major: Logistics and Supply Chain Management Subject: Trade In Services THE ANALYSIS OF RETAILING SERVICE: AE

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FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

MID-TERM ASSIGNMENT

Major: Logistics and Supply Chain Management

Subject: Trade In Services

THE ANALYSIS OF RETAILING SERVICE: AEON VIETNAM CASE-STUDY APPROACH Lecturer: Ph.D Tran Nguyen Chat Class Code: ML185

Full name

Nguyễn Hiểu Minh Thông

Nguyễn Chí Hiểu

Nguyễn Hữu Lộc

Phạm Nguyễn Thư Lê

Cao Hoàng Minh

1.6 Contribution of the research

CHAPTER 2: OVERVIEW OF RETAILING SERVICE I IN J VIETNAM AND” AEON BUSINESS IN VIETNAM

2.1 Trade in Service

2.1.1 Definition ¬ ten vee eeetaeees

2.1.2 Role of trade in services in the economy ¬

2.1.3.1 Brief content

2.1.3.2 Four modes of supply ¬Ừ

2.1.3.3 Vietnam’s commitment schedule to trade services

2.2 Retailing serviE 2n re na

QQ Tntroduction 0.00.0 00 eee ee ee ee ne cee ne tee ne ne ene teense ren eens 2.2.2 Background information of retailing service 00 ccc cence 2.2.2.1 The Retailing Sector In the ECOHOHHj Là vo cà cuc kì Tàn bàn kh hy ky kh hy tes 2.2.2.2 Industry structure ỶẮẦÁiiiiiiiđi 2.2.2.3 The Impact of Electronic Commerce diiiiaiaiáđẳỶŸẳỶẳẳỶẳ ees 2.3 Overview of Case study: AEON, on nh nen he re 2.3.1 General information

2.3.2 Business model

2.3.2.1 Business model ¢ canvas of AEON

2.3.2.2 Value creation model 2 Tnhh nhe neeeeeeei 2.3.2.3 SWOT Analysis

CHAPTER 3: ANALYSIS OF RETAILING SERVICE I IN : VIETNAM FROM

SITUATION OF AEON VIETNAM

3.1 Analysis of retailing service in Vietnam ¬—¬ eee eee ee ees 3.1.1 The position and role of retailing service in the V Vietnam econonyy 3.1.2 Characteristics of retailing Service 0.0.0 ccc eee en cae nets 3.1.3 Components participating in retailing service in Vietnam 3.2 Analysis of AEON service case study co cài cài 3.2.1 AEON penetration into VICÍHQHICSC HYĂkGÍ 3.2.1.1 Journey of AEON in Vietnam

3.2.1.2 Mode of Supply and entering Strategy ty ¬ 3.2.2 AEON'S service strategy and approach to the | Vietnam market, ¬ 3.2.3 AEON Service distribution Channel and comparison to main competitors 3.2.4 Service policy

3.2.4.1 AEON service policy Ắắiááai tee nees tà nà kh bên 3.2.4.2 How Government's trade i in service policy assists 1s AEON' S Service offering

3.3 Implications a1 and I findings bees

3.4 Problem and prospect of retailing service in the » future

3.4.1 Problems to Vietidqrmese r€efQlÏHĐ S€FVIC€ cuc 3.4.2 Prospect 0ƒ` Vietiqmese refqiliHg HFÌẰ€f CONCLUSION

CHAPTER 4: CONCLUSION

LIST OF ABBREVIATION

GDP Gross Domestic Product Tổng sản phẩm nội địa WTO World Trade Organization Tổ chức Thương mại Thế giới FDI Foreign Direct Investment Đầu tư trực tiếp nước ngoài GATS General Agreement on Trade in Hiệp định chung về Thương

NT National Treaty Nguyên tắc đãi ngộ quốc gia CPC Central Product Classification Hệ thống phân loại sản phẩm

trung tâm OECD Organization for Economic Tổ chức Hợp tác và Phát triển

Cooperation and Development Kinh tế

Liên minh Châu Âu - Việt

Figure 3: The quantity and growth rate of wet markets the year 2017-2021

Figure 4: The quantity and growth rate of supermarket the year 2017-2021 Figure 5: The quantity and growth rate of shopping mall the year 2017-2021 Figure 6: Revenue of eight biggest retailers in Vietnam from 2019 to 2021, Vietdata.vn

Figure 7: Total registered FDI to Vietnam from 2010 to 2020, General Statistics office of Vietnam

INTRODUCTION CHAPTER 1: INTRODUCTION

Among the sub-sectors in the distribution service, retailing service is one of the fastest- growing and most potential sectors for future development In Vietnam, as well as the rest of the world, the retailing service is undergoing significant changes in the way it is structured Particularly in the retail industry, bigger chain stores are replacing little retailers that sell basic goods In addition, while the density of retail outlets is decreasing, the average scale of retailing facilities is gradually nsing, on ground of turnover and employment Secondly, the function of conventional wholesalers has generally diminished, having its greatest effect on the "low-price, high throughput" (1.e., fast-moving consumer products) sector of the market Despite its economic importance and growth potential, only 82 members, or half of the WTO membership, have specific commitments on distribution services, and retail services specifically The restrictions on market access and national treatment usually apply to mode 3 (creating subsidiaries to offer services abroad), and they include foreign equity restrictions and economic needs tests (a government determination of whether a specific service or supplier is economically necessary)

Therefore, realizing the untapped potential of the distribution services in general and retail services in particular, our group proposes a deeper analysis of the retailing services in

Vietnam via the case-study approach of AEON Vietnam, from which further understanding of the barriers and niche opportunities for the retailing services in Vietnam shall be implied and taken into consideration for future regulation and development

1.2 Aims & objectives

1.21, Aims:

The aim of the research 1s to synthesize and analyze the characteristics and situation of the retailing service in Vietnam, as well as the service category, operation, and policy of AEON Vietnam, consequently poimting out the opportunities and challenges that can constrain the development of retailing service in Vietnam and FDI companies in the aforementioned sub- sector to join the Vietnamese market Subsequently, Vietnamese governments can draw some conclusions and implications for developing the strategies to encourage domestic growth and FDI in the retail service in particular

1.2.2 Objectives:

To achieve the aim set above, there are some main objectives need to accomplish:

First, a thorough analysis of retailing service in Vietnam is required

Secondly, we need an analysis of AEON Vietnam in terms of service category, operation, and policy

Finally, based on the analytical results, pointing out the opportunities and challenges that can constrain the development of retailing service in Vietnam and FDI companies in the retail service to join the Vietnamese market, as well as implications to encourage domestic growth and FDI in the retail service im particular

1.3 Scope of research

1.3.1 Subject of the research :

Retail service in Vietnam via a case study approach of AEON Vietnam

1.3.2 Scope of the research:

- Chronological: using the database and statistics from Vietnam’s, as well as from AEON Vietnam’s retail service activities

- Geographical: The research and analysis covers only retail service m Vietnam only

1.4 Research questions

What is the current position, contribution and characteristics of the Vietnam retail service?

How does AEON Vietnam offer retail service in the domestic market?

What are the key opportunities and challenges to the retail service in Vietnam?

Synthesis method: we use this method to summarize our key points and important results that we can get from our research paper, then we can conclude some important implications for our research

1.0 Contribution of the research

Vietnam, a developing nation, has a wealth of potential natural and social resources that could support economic growth Recently, Vietnam's service activities have dramatically risen in line with the pace of globalization Vietnam is also drawing more FDI firms, particularly in the retail industry

However, there has been little and insufficient prior research and writing on Vietnam's retail industry Therefore, usnmg AEON Vietnam as a case study, we conduct this research that includes significant earlier findings, recently collected data, and analysis about the retail service in Vietnam Future scholars can gain from this work by getting the data they need to build new theories and recommendations

MAIN BODY

CHAPTER 2: OVERVIEW OF RETAILING SERVICE IN VIETNAM

AND AEON BUSINESS IN VIETNAM

2.1 Trade in Service

2.1.1 Definition:

Trade in Services refers to the sale and delivery of an intangible product, called a service, between a producer and consumer Trade in services that takes place between a producer and consumer that are, in legal terms, based in different countries is called International Trade in Services Moreover, in terms of the GATS, the description of services trade was formed with regards to four modes of supply

2.1.2 Role of trade in services in the economy:

According to the United Nations Conference on Trade and Development, the service trade has always been an affectionate factor towards the world’s economy Along with the developing society, the services trade has generated possibilities and chances for creating jobs through productivity, investment, employment and trade Regarding the data, with the increasing demand for services by consumers, more than two-thirds of the jobs in the societies are in the proportion of workers in the service industries, especially in developed countries The tourism industry alone accounted for 10.6% of the world's workforce in 2002 (1 in 9 people working

in tourism) Greater income due to the increasingly demand-based services is an absolute necessity for the growth of every country Higher GDP helps people improve their quality of life On the other hand, the quality of modern life depends mainly on the ability to satisfy the needs of products and services such as health care, entertainment or daily living services

In fact, production activities and competitiveness are increasingly reliant on services, a phenomenon known as “servicification” Thus, trade m services can directly affect the manufacturing sector and also play the role of supporting and promoting other economic sectors In the investment sector, about 60% of the current foreign direct investment value is invested in the service sector With trade in services accounting for an increasing proportion

in the overall structure of the national economy along with the advent of new service

industries, Vietnam has been able to catch up with the region and the world in a number of sectors such as education, healthcare or finance - telecommunications to promote the balance

of trade

Average percentage of Service Sector in GDP components of Vietnam

™ Service ™ Other Sectors

Figure 1 Average percentage of Service Sector on GDP components of Vietnam from 2011

to 2020, Infographics.vn

Through the above figure, it can be seen that, in the GDP structure of Vietnam, the service sector 1s still not as high as developed countries such as the US, Japan, and South Korea, where services account for more than 60% of GDP This shows that Vietnam still has a lot of potential to develop the service industry, thereby improving the economy and transforming itself into a developed country in the future

2.1.3 GATS :

2.1.3.1 Brief content:

The GATS, or the General Agreement on Trade in Services, is the first global agreement governing trade in services The GATS defines a framework of regulations for the trade in services, creates a system for countries that agree to liberalize trades, and offers a defined mechanism of resolving international conflicts

The GATS was founded on two basic principles The first core principle is the Most-favoured-nation treatment (MFN) with the aim of guaranteeing countries participating GATS have no discrimination

in treating each other’s service and service suppliers And the other main one is The National treatment which regulates that under the terms of conditions of the Schedules of Specific

Commitments, countries who are participants of GATS value services from other members the same level with their own national products

Based on the two foundation principles, the two primary objectives of the GATS have been established first to form a reliable system of international trade rules to make sure that all participants receive equal treatment when entering international markets; and second, to promote progressive liberalization of trade in services

2.1.3.2 Four modes of supply:

The Four Modes of Supply of the General Agreement on Trade in Services (GATS) formed the framework for international trade in services

(Mode 1) Cross-Border Trade - It 1s characterized as the supply of a service from the territory of one nation to the nation of another e.g foreign software or e-commerce sites that allow Vietnamese to use: KPMG Global

(Mode 2) Consumption Abroad - This approach includes providing a service from one country to a customer in any other country, e.g Viet Travel Company offers Visitor Visa service towards foreigners

(Mode 3) Commercial Presence - It comprises services offered by a service provider from one country on the territory of any other, e.g Foreign enterprises set up subsidiaries and provide services

in Vietnam: Coca-cola company

(Mode 4) Presence of Natural Persons - Which provides services performed by a service provider from one nation when natural persons are present on the land of any other country, e.g Foreign singers have tours in Vietnam: B-rain from Entertainment Company JYP performed a tour in Vietnam

2.1.3.3 Vietnam’s commitment scheduled to trade services:

Based on the core principles of the General Agreement on Trade in Services GATS, the Vietnamese government had negotiated to join the international trade organization WTO with the aim of expanding the service market and promoting the integration of services for the commercialization of the country With the completion of this negotiation, the result is a Schedule of Specific Commitments on Trade in Services

Until recently, Vietnam has fulfilled a number of commitments with regards to the Schedule’s timeline on trade liberalization of the WTO Vietnam’s commitments to the WTO on trade in services consist of three main types of commitments

1 Multilateral commitments:

- Business rights (rights to export and import goods): In compliance with WTO regulations, Vietnam agreed to allow foreign businesses and individuals to have the nght to import and export goods like Vietnamese, except for goods that are specified on the list of nation trade such as gasoline, cigarettes and some other sensitive items that strongly impact on national security such as rice and pharmaceuticals

- Vietnam has been committing to give freedom to foreign businesses and individuals without physical presence in Vietnam to register for trading rights in Vietnam

- Transparency: Vietnam committed that beginning from the time of joming, the country’s Government will publish draft legal documents promulgated by the National Assembly, the National Assembly Standing Committee and the Government for people's opinions

2 Commitments on import tax:

Specific commitment level: More than one-third of tariff lines will have to be cut, mainly lines with tax rates above 20% Important and sensitive commodities for the economy such as agricultural products, cement, iron and steel, construction materials, automobiles and motorcycles, etc., still maintain a certain level of protection

3 Commitments to service market opening:

General commitment to service industries: Vietnam committed for 11 majors, which are about 110

in a total of 155 subdivision categories based on WTO’s classification A foreign company is not allowed to have a presence in Vietnam in the form of a branch, unless it is allowed by us in specific industries

Also, the Vietnam Government allowed organizations and foreign individuals the right to buy

shares in Vietnamese’ businesses but the ratios must be consistent with the market opening scale

of that specific major However, foreign banks can only buy up to the maximum of 30% of the total share of national banks

In terms of activities related to the retail services industry, the CPC notes that the principal service performed by wholesalers and retailers may be classified as reselling merchandise, accompanied by a variety of related, subordinated services such as: maimtaming inventories level of goods; physical assembling, sorting and grading goods in large lots; breaking bulk and redistribution in smaller lots; delivery services; refrigeration services; sales promotion services conducted by wholesalers; and services associated with retailers’ businesses, e.g processing subordinated to selling, warehousing and garage services

2.2.2 Background information of retailing service:

2.2.2.1 The Retailing Sector in the Economy :

Across all nations where information is obtainable, the distribution sector, which includes both wholesale and retail trade, plays a significant role in the whole economy The contribution of this sector to the GDP varies from 8% in Germany and Ireland to more than 20% m Hong Kong and Panama In several economies, the distribution sector is the second largest contributor to GDP after manufacturing and many other industries The contribution of the sector to the status of employment in the economy is usually even greater than that to GDP, reflecting the relatively high labor-intensity of the sector Typically, retail trade occupies a greater share of employment compared to wholesale trade Another critical index

to consider is the percentage of distributive trade enterprises out of all enterprises in the economy This proportion ranges from under 20% in the United States, and Iceland to 40% in Greece and Portugal The relatively high number of distribution enterprises in certain countries is related to the small size of the typical retail enterprises in those countries

2.2.2.2 Service structure :

The structure of the retailing services sector varies with the level of economical maturity of a country The situation in many developing countries may follow a similar motif: in small towns, the dominant marketing channel 1s a general store, whereas in bigger cities, this category consists of modest but conveniently located stores specializing in a narrowly limited line of items, and a few large department stores selling a much diverse line of goods However, the pattern of development is not uniform It depends on the structural characteristics of a country and the nature of public policy

On top of that, there are some universally acknowledged generalizations about the retailing services sector First, in most countries known, the majority of retail enterprises consist of one individual shop and operate under sole proprietorships These independent stores contribute a greater share of employment compared to other types, yet do not hold the dominance of total retail turnover, especially in countries with well-developed retail systems Secondly, a great part of the sector is engaged in food retailing, both in terms of quantity and retail turnover Other important sales categories are textiles, clothing and footwear, household equipment and motor trades Finally, the industry generally offers low wages, and hires a considerable number of relatively low-skilled workers Nevertheless, changes in consumer preferences and advancements in technology, as reflected in the increasing sophistication of products, are promoting a transformation towards higher service quality and hence require more skillful workers

Furthermore, the retailing services are currently witnessing significant changes, especially in the more developed countries First, retail services are positively enhanced in accordance with the fact that the distribution sector is becoming more concentrated This can be clearly seen in the emergence of numerous large operators, and the closer links between manufacturers, wholesalers and retailers, particularly through the creation of networks The average size of shops is also generally rising, both in terms of turnover and employment, and the density of retail outlets is declining In some cases, small shops have not disappeared but have reemerged as part of large retail chains or have cooperated in franchise agreements Secondly,

a large number of retailers and manufacturers in certain countries, apparently seek to take control of distribution channels previously carried out by traditional wholesalers, and subsequently outsource the physical stages of these activities to logistic service providers

2.2.2.3 The Impact of Electronic Commerce :

The advent of e-commerce can be expected to fundamentally change the distribution sector as

a whole and the retailing services to be specific A megawave of cybermalls has accompanied more successful specialized retailers, and, recently, multi-product megastores have appeared Online-vendors of cas, computers, music, books or software, and even groceries have noticeably affected traditional retailing by specializing on certain items or product lines The boom of Internet shops can be explained by various benefits it brings about: lower transactions and inventory costs, wider variation of products, more rapid turnover, higher throughput level, cheaper suppliers, and better market information transparency

2.3 Overview of Case study: AEON

2.3.1 General information:

AEON has a history dating back to 1758 when Shinohara (now Jusco) was established in Yokkaichi It wasn't until 1970 that the company started to expand, and in 1989, it changed its name to AEON Considered one of the leading retailers in Asia for many years, AEON currently operates nearly 200 shopping malls and other facilities both in Japan and overseas, using a profit model that emphasizes partnership with other companies AEON's main business is shopping mall operations, which generates fixed rental income from store tenants Besides, the company offers a range of stores, goods, and services, such as general merchandise stores, supermarkets, drugstores, home centers, convenience stores, specialty stores, financial services, entertainment, and food services AEON strives to develop partnerships that incentivize revenue growth, generating fees based on the success of these partnerships

Recently, the company has focused on implementing advanced technologies to offer high- value-added solutions in Japan and making its malls more versatile AEON also tailors its mall network expansion to the unique characteristics of each community it serves overseas

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2.3.2.1 Business model canvas of AEON:

With the Basic Principle of “The Customer Comes First" and the vision to become a Life Design Developer, AEON's business model is focused on delivering value to its customers, shareholders, and society at large through a combination of high-quality products and services, strong customer service, and a commitment to sustainability and _ social responsibility

- Key Activities: AEON's core activities revolve around operating and managing various retail formats, such as general merchandise stores, supermarkets, and convenience stores These stores offer a wide range of products, including groceries, clothing, electronics, and household goods The company also provides financial services such as credit cards and personal loans, which complement its retail operations and provide additional value to customers AEON's large-scale shopping centers, such as AEON MALL, are another key activity, as they provide a one-stop shopping experience that includes a range of entertainment and leisure options

- Key Resources: AEON's key resources include its extensive network of stores and shopping centers, its well-established brand, and its expertise in retail operations and financial services The company's size and scale allow it to negotiate favorable terms with suppliers and vendors, and to invest in the latest technologies and systems to improve its operations AEON's sustainability initiatives and commitment to social responsibility are also key resources, as they help to differentiate the company and attract customers and partners

- Value Proposition: AEON's value proposition is centered around providing high-quality products and services at reasonable prices, with a focus on customer service and convenience The company's financial services are designed to complement its retail operations and provide customers with additional value and convenience AEON's commitment to sustainability and social responsibility 1s also a key part of its value proposition, as it helps to build trust with customers and partners By offering a range of products and services in a convenient and accessible way, AEON aims to make shopping a stress-free and enjoyable experience for its

customers

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- Customer Segments: AEON's customer segments include a wide range of individuals and households, as well as businesses and other organizations that may be tenants or use the company's services The company also targets specific customer segments with different store formats and product offerings, such as families with children or customers looking for premium products By tailoring its offerings to different customer segments, AEON can better meet the diverse needs and preferences of its customers

- Channels: AEON's channels include its extensive network of stores and shopping centers, as well as its online store and other digital channels The company also uses advertising and marketing to reach customers and promote its products and services AEON's focus on providing a seamless and integrated shopping experience across multiple channels helps to build brand loyalty and increase customer engagement

- Customer Relationships: AEON's customer relationships are built on a foundation of customer service and convenience The company places a strong emphasis on creating a positive shopping experience for its customers, and provides a range of unique services and events to engage with customers and build loyalty

- Revenue Streams: AEON's revenue streams come from the sale of products and services through its retail operations, as well as from the fees and interest charged on its financial services The company also generates revenue from leasing space in its shopping centers to other businesses By diversifying its revenue streams across multiple sources, AEON can mitigate the risk of relymg too heavily on any one source of income

2.3.2.2 Value creation model of AEON:

Grounded in the AEON Basic Principles of “Pursuing peace, respecting humanity, and contributing to local communities, always with the customer's point of view as its core” AEON is not only interested in its own development in business but also in the development

of the community and society through the practice of its sustainable management standards AEON's business philosophy is embedded in the corporate governance, investment and development management systems along with a will to adapt to the rapidly changing environment of the retail mndustry This is what Aeon terms the “concentration and decentralization” philosophy, meaning that the holding company aims to maximize group

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synergies and take advantage of scale, while allowing individual companies to specialize and allow enough room for innovation and flexibility in operations

Changes in New Business Model to prepare for the Next Generation demands

AEON's vision is to evolve rapidly according to the changing lifestyles of the times, expressed through the vision to become a "Life Design Developer" and always in the hearts of

5 billion Asians

The 1970s witnessed tremendous changes in Japanese people's consumption trends from single retail to establishing chain stores, AEON was constantly expanding in scale, improving operation methods and modernizing distribution

Afterwards Japan's bubble economy of the 1980s changed lifestyles, and the consumer market expanded rapidly In step with these trends, AEON developed convenience store and specialty store businesses and diversified operations with a focus on the retail mdustry in ways such as conducting financial service businesses to provide settlement methods, and deployed the modern retailing technology of Japan in Southeast Asian countries

After the Japanese economic bubble burst in the late 1980s, unpredictable changes in consumption trends in the direction of rapidity made AEON once again learn to adapt with the advent of new convenience stores format and specialty stores, besides diversifying sales organization, payment methods and applying many advanced technologies

Sudden changes occurred in the operating environment of the retail industry during the 1990s, such as the collapse of the bubble economy and deregulation of the Large Scale Retail Stores Location Law AEON therefore restructured its businesses overally from scratch by accelerating its scrap-and-build strategy for existing stores and developed large Maxvalu supermarkets Furthermore, AEON rolled out its drugstore business in light of changes 1n the operating environment such as the arrival of the aging society and revisions to the national health insurance system

The 2000s marked the expansion of AEON to foreign markets in the current globalization trend among Japanese enterprises AEON focuses on expanding its store network, conducting

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mergers and acquisitions with foreign retailers to expand its market especially in China and ASEAN Besides, AEON also develops retail models for Japanese urban areas and introduces many innovations like WAON cards

2.3.2.3 SWOT Analysis

AEON possesses five key strengths that enable them to expand their overseas businesses Based on these advantages, they have implemented an aggressive strategy of opening new stores First of all, AEON has a large parking capacity that caters to the needs of motorization Secondly, they have the ability to create a sales area that is tailored to the community Another outstanding merit of AEON is the provision of various entertainment options to meet the growing demand for experiential consumption In addition, several events are organized all year round to attract customers Lastly, safe, secure, and pleasant facilities are always ensured at a high level by AEON through strict procedures

All of the superior traits mentioned above have opened up many opportunities for this giant retail group One of the most promising prospects for AEON is to continue expanding its operations in the overseas market As the middle class continues to grow in developing countries, AEON can take advantage of this trend by expanding its presence in these markets and capitalizing on the growing consumer base

In spite of being one of the leading brands in its industry, like any other organization, AEON

is not immune to weaknesses that can hinder its growth and success One of the significant weaknesses of AEON is its heavy reliance on the Japanese market for revenue Another weakness of AEON is its slow adoption of e-commerce and online retail platforms While many retailers have aggressively promoted their online sales through various strategies as a way to reach customers and generate revenue in this era of cyberspace, AEON has been rather slow to adapt to this trend, especially m terms of the variety of products and services available online This slow adoption of e-commerce and online retail platforms could cause AEON to lose market share to competitors who have fully embraced this trend Moreover, AEON also faces a challenge in maintaining its brand image and reputation The company has faced criticism in the past for labor practices, including allegations of overtime violations and other

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labor law violations, which may cause a negative impact on the company's revenue and profitability

AEON, as a global retailer, faces several risks and challenges in terms of business strategies, finance and operation, particularly in the overseas market One of the primary risks is the continuous changing in customer’s purchasing behaviors as well as preferences, im accordance with cultural differences like in Thailand Another issue that analysts pointed out after AEON's failure in Thailand is their relatively monotonous visual merchandising and fewer promotional campaigns, while Thai consumers enjoy nearly 365 promotional days from local retail chains This problem is closely related to another challenge for AEON, which is the competition from local retailers Therefore, AEON needs to carefully consider and develop appropriate competitive strategies if it wants to expand its business in these markets Another critical point to be considered is the impact of currency fluctuations and economic uncertainty Fluctuations in currency exchange rates can affect AEON's profit margins and make it difficult to forecast revenue accurately Furthermore, economic downturns after pandemic in the countries where AEON operates can lead to reduced consumer spending and

a decline in demand for its products and services

CHAPTER 3: ANALYSIS OF RETAILING SERVICE IN VIETNAM

FROM SITUATION OF AEON VIETNAM

3.1 Analysis of retailing service in Vietnam:

3.1.1 The position and role of retailing service in the Vietnam economy: The retailing service sector plays a significant role in the development of the Vietnamese economy The Vietnamese retail market is estimated to be valued 142 billion USD at present and 350 billion USD by 2025, accounting for 59% of the nation's GDP, up approximately 2.5 times, according to the Ministry of Industry and Trade According to the economic report Q4

2022, the retailing service increased by 10.15% compared to last year and contributed 0.97%

to the growth rate of total added value of the whole economy, the highest in the service sector The retail sector has been growing rapidly in recent years, creating jobs and contributing to overall economic growth In Vietnam, the domestic retail industry and distribution system

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account for 15% of the GDP and create jobs for almost 6 million people, according to a statement by economist Vu Minh Phu in a post published on Vietnamnet e-newspaper in 2019 It shows that the trade in services, particularly in the retailing industry, is a crucial component of the economy and is responsible for providing goods and services to the public

Total value trade in goods and services of retailing industry by actual price (billion VND)

Figure 2 Total value trade in goods and services of retailing industry by actual price (billion

USD), General Statistics office of Vietnam The retail sector is also the most promising consumption market which is the reason why most of the enterprises have maximum foreign ownership ratio Notably, there were just 90 merchants operating under FDI firms nationwide Nonetheless, due to their extensive operations, these shops' revenues were 3-4 times larger or even 7-8 times higher than those of a neighborhood grocery Even though the Ministry of Industry and Trade has legislation prohibiting foreign investors from distributing certain goods, enforcement, for instance, is not taken seriously According to the Commerce Law (Circular 34/2013/TT-BCT), "foreign retailers are not allowed

to distribute rice, sugar cane, cigarettes, and cigars," although a market survey reveals that most FDI-invested supermarkets’ retail stores openly sell these products

The role of the retail and distribution industry is extremely important to the economy, because as the economy grows, an increasing volume of goods is produced, in addition as incomes are improved, it also contributes to boosting shopping demand The retail industry can be seen as the conduit for all manufacturing, and a strong economy must be supported and built on a strong retail foundation The retail industry is also an effective absorption channel for the manufacturing

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