Strong growth in the gross domestic product (GDP), changes in the regulatory structure favouring foreign investors and increasing consumer demand, among others, have helped Vietnam emerge as an attractive destination for the retail sector, the study said.
"The critical factors that have powered Vietnam to the top of the index this year are rapidly growing per capita income of the Vietnamese consumer and drastic opening up of regulations for the new entry," said Saurine M Doshi, partner, AT Kearney India.
India, Russia and China, the top-three countries in the last year's GRDI, fell to the second, third and fourth spots, respectively, in the 2008 GRDI. While these countries remain important retail investment destinations, high real estate costs in large cities and growing competition have decreased their attractiveness relative to prior years and forced retailers to look for opportunities in tier-II and -III cities, it added.
"India continues to be a dominant force in AT Kearney's annual GRDI report. While India has slipped to number two this year, it continues to be a "hot" destination for global retailers. However, the growing challenges with doing retail business in India have caused the slippage in the rankings. Challenges include sky-rocketing real estate costs, a lack of good commercial real estate and the complexity around regulations, especially for foreign retailers," said Hemant Kalbag, principal, consumer industries and retail practice, AT Kearney India.
While Vietnam's $20 billion retail market pales in comparison to India's or China's, the absence of competition and 8 per cent GDP growth make it an attractive expansion opportunity for global retailers. Vietnamese consumers are among the youngest in Asia, with 79 million below the age of 65.
Their consumer spending has increased by more than 75 per cent between 2000 and 2007. The country is increasingly urbanised and concentrated with more than 1 million people a year migrating to the two large cities of Ho Chi Minh and Hanoi.
