$1 price tag for Shop&Go chain showcases brutal retail market

Shop&Go became the newest loser in Vietnam’s retail market Monday when it was bought out by conglomerate Vingroup for $1.

The company reported an aggregated loss of almost VND205 billion ($8.81 million) by 2016, the latest year for which figures are available. VinCommerce, the retail arm of Vingroup, took over its 87 stores and its debts in the latest deal.

Vietnam’s retail market has become increasingly crowded with both local and international players over the last five years. Although experts have said that the market has a lot of growth potential, many businesses have quit or scaling back expansion plans.

Coffee giant Trung Nguyen has twice attempted and failed with its G7 Mart and G7-Ministop.

Super market chain Saigon Co.op established its first retail store Co.op Smiles in 2016 with the hope of opening 500 such outlets a year, but two years later, the number is around 100.

Japanese convenience store chain FamilyMart previously said it wanted to have 1,000 stores by 2020, but it announced last year that it won’t invest in new stores. The number of its stores stay at 151.

Vietnamese food company Vissan said early last year that it has closed nearly 60 of 100 convenience stores. Nguyen Ngoc An, CEO of Vissan, said that the stores had failed to attract a large number of customers.

A senior manager of the Family Mart said that they “could no longer pour more resources into the chain.”

Industry insiders say that retail chains fail to compete because they don’t have deep pockets to bear the losses. Pham Viet Anh, a strategic business expert, said that cash flow is among the most important factors in the retail business. If a company cannot collect enough revenue before it has to pay suppliers, its working capital gets eroded.

“A retail company can rely on its debts with providers in the short term, but in the longer term, it needs to find a way to be profitable. If not, growing losses will eventually bankrupt it,” Anh said.

Vietnam’s revenue from selling goods last year rose by 11.7 percent from 2017 to $142 billion, up 12.4 percent from 2017.