Parksons Department Store Model Over In Vietnam

Parkson has reported unsatisfactory business results in Vietnam

In 2015, at the ceremony to commemorate the 10th anniversary of its operation in Vietnam, Parkson was introduced as one of the largest retail chains with nine department stores. 

After 13 years of applying the department store business model, Parkson now has only six stores. It reported a loss of VND24 billion in the first half of the 2017-2018 fiscal year.

Parkson has announced the shutting down of Parkson Flemington in HCM City. Three other Parkson shopping malls have closed. The last center in Hanoi was closed in 2016.

Pham Thai Binh from Savills HCMC said that Parkson experienced golden days in Vietnam from 2005 to 2010. 

The department store model followed by Parkson gained great achievements, with introduction of many foreign brands.

However, since 2011, the business model has become less popular than shopping malls which have multi-functional areas integrating distribution and entertainment services.

Analysts say that customers’ consumption behaviors, habits and tastes vary in different areas, which has affected the operation of department stores.

Department stores range about 20,000 square metres, mainly focusing on comestics and fashion products. Therefore,  it difficult to optimise benefits and accommodate areas for restaurants or amusement areas.

According to Binh, the limited area of department stores (less than 20,000 square meters in most cases), is also a weak point of the department store model.

Meanwhile, one-stop shopping at shopping malls have big advantages as they not only provides goods but also satisfy entertainment demands of adults and children.

“There is a growing shift from department stores to shopping malls, not only in Vietnam, but in Asia and the world as well,” he said.

In Vietnam, Parkson has been taking losses for the last six quarters. In the 2016-2017 fiscal year, it had a loss of VND67 billion.

Hanoi and HCMC are the two most developed urban areas with total retail premises area of 2.5 million square meters. 

However, the retail premises density in the two cities is low, under 0.2 square meters per head, compared to Bangkok (0.89 square meters) and Singapore (0.75 square meters).

Parkson is also having difficulties in other markets. However, it is optimistic about the time to come, especially on the sales season in China in the third quarter of the fiscal year, when there will be many new-year festivals in the country.

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