Lotte and Emart Expanding Territories in Vietnam, Taking Different Paths

Emart's 'Franchise'
Lotte Mart's 'Direct Entry' to Target Vietnam Retail Market

Emart and Lotte Mart are expanding their influence in the Vietnamese market with different strategies. While Lotte Mart has aggressively expanded its stores through direct entry, Emart is taking a more conservative approach by leveraging the capabilities of local companies to expand its stores.

According to the distribution industry on the 9th, Emart plans to open its third store in Vietnam, the Phan Vui Ik branch, within this year. This will be the third store opened about a year after the first store, Gobap branch, opened in 2015 and the Sala branch opened in November 2022. Although November is the target, a specific date has not been set.

The Phan Vui Ik branch is located in Ho Chi Minh City, the economic capital of Vietnam, just like the first and second stores. Emart’s strategy is to introduce Korean products including No Brand, considering Vietnamese consumers who have a strong interest in Korea, and to showcase a store that strengthens its strength in fresh food. Emart plans to open seven stores in Vietnam by 2025.

The local partner is the ‘Taco’ Group. The Taco Group only borrows the ‘Emart’ brand and pays royalties. Emart did not initially choose this franchise method. When the first store, Gobap branch, opened in 2015, it was a direct entry method. However, in October 2021, Emart suddenly transferred 100% of its Vietnamese corporation shares to the Taco Group and withdrew from direct business operations. Although it secured land for the second store after opening the first store, it struggled with opening the store and handed over the business rights to the local company.

An official from the distribution industry explained, “Foreign capital often faces crises when entering Vietnam, and Emart chose to withdraw from the business,” adding, “Considering the size of the Vietnamese market, direct entry would be helpful in terms of profit, but it also takes quite a long time to adapt to local circumstances.” Instead, Emart secured stability and efficiency. By not being involved in land purchase and permits, it saved costs and time. Also, during the share sale process, it explicitly stipulated the inclusion of No Brand in the stores, which is evaluated as a practical benefit.

Lotte Mart chose a ‘direct approach’ to target the Vietnamese market. After dedicating 15 years since 2008, it has opened a total of 15 stores so far. Around the 20th, it plans to open a store in Lotte Mall West Lake Hanoi. This store is part of the largest complex shopping mall in Vietnam, which includes not only Lotte Mart but also a hotel, aquarium, and cinema.

Lotte Group had the advantage of entering Vietnam as an opportunity land since the 1990s. However, Lotte Mart rapidly expanded its stores aggressively regardless of regions such as Ho Chi Minh and Da Nang after opening its first store, Nam Saigon branch, in 2008 with quick decision-making, quickly establishing its position in the distribution market. Even after COVID-19, it opened new stores, including the Vinh branch in July 2022. Last year, it expanded its overseas business division to a headquarters-level overseas division, strengthening its internal capabilities. Thanks to the success of direct entry, it was able to enjoy greater profits. According to the semi-annual report for the first half of the year, Lotte Mart’s sales through its Vietnamese corporation reached 180 billion KRW.

However, it was not always smooth. Like Emart, Lotte Mart also faced a period of two years when it could not open its third store, Dong Nai branch, due to local circumstances. Due to schedule delays, the fourth store, Da Nang branch, opened just 20 days after the third store. The company explained that by increasing interaction with local stakeholders and making efforts to understand Vietnamese sentiments and culture, it was able to overcome the high barriers that foreign companies face.