Vietnam’s biggest conglomerate, Vingroup, has recently launched a mobile app for mom and pop retail stores, helping to digitize a traditional business that has been upended by modern convenience stores such as 7-Eleven.
Vingroup announced Monday that its VinShop app is used by 20,000 small shops in Hanoi and Ho Chi Minh City. Those stores, called tap hoa, are typically family run and sell sundries. Shopkeepers use the app to order hundreds of items from suppliers, eliminating the need to contact them individually. They also use it to connect to another Vingroup app, VinID, used by 10 million retail shoppers to make payments.
VinShop began building its retail network in July, aiming to connect manufacturers and shops through the app, which includes purchase and distribution functions. “VinShop’s revenue will be based on a targeted advertising platform, financial services offerings, and market development for suppliers,” Truong Quynh Phuong, business director at Vingroup’s logistics arm, One Mount Group, told Nikkei Asia on Wednesday.
Tiny brick-and-mortar shops have long underpinned Vietnam’s “sachet economy,” an allusion to the common practice of selling single-use packets of many daily consumables, such as shampoo and coffee.
Small shops face growing competition from 7-Eleven, Ministop, B’s Mart, and even Vinmart+, the chain of convenience stores launched by Vingroup now run by local consumer goods giant Masan following a merger in December. Sales at the major chains reached USD 170 million in 2019, about four times as much money as traditional shops took in, according to a July report from Deloitte, a consultancy.
The VinShop app is the latest addition to the suite of Vingroup brands, from VinFast cars to VinSmart phones, as the company founded by Vietnam’s richest man, Pham Nhat Vuong, turns its focus to technology and manufacturing.
Vingroup says its app will raise the income of small shops, which it calls grocery stores, by USD 432 a month on average by making their operations more efficient and cutting costs.
“This solution is expected to improve the efficiency of the entire supply chain, [and] help overcome the current weaknesses in the distribution of products from manufacturers to grocery stores,” the company says.
National and international convenience store chains have become hangouts for young Vietnamese, who gather to sip juice and slurp instant noodles. Traditional shops, by contrast tend to be windowless rooms that are often attached to owners’ homes, and piled high with things like chips, bottled water, and laundry detergent.
“For many rural consumers and lower-income urban consumer segments, who need to budget daily for food and make purchases in small quantities, traditional grocery retailers, such as local markets and mom and pop shops, are a convenient and affordable alternative to modern trade outlets,” according to the Deloitte report.
Consumption has dropped across the board during the novel coronavirus pandemic, which has left Vietnamese reluctant to go out, said Infocus Mekong Research. In its July survey of shoppers, 36% said they would visit convenience stores less often, even after the pandemic ends, versus 22% who said they would shop more often.
Similar efforts to modernize traditional shops through technology are taking off elsewhere in Southeast Asia. In Indonesia, startups BukuWarung and BukuKas have raised millions of dollars for similar smartphone apps.