Commercial centre is considered the trend of modern retail and it has developed rapidly in Vietnam. However, through the recent confusion cases between lessees and owners, doing business in commercial centre seems to be not easy for many businesses.
To date, the case between lessees and management board of Kumho Asiana Plaza (district 1, Hochiminh city) has not yet found a reasonable solution. Currently, the plaza has only about five stores still operating and they are insisted in having a reasonable settlement from the management board of the plaza. Those stores are still paying monthly rents and management costs, although they could not sell a product, since the plaza is always in a quiet state.
Closing because of being unmarketable
Previously, since being unable to find customers, the management board of Kumho Asiana Plaza has recently released a notice mentioning that the retailers can terminate their leasing contracts before the due date; however the deposit (of two-month rent) would not be refunded. Responding to the discontent of the businesses is the silence from the management board.
Many businesses renting places here said the poor management company was the main reason why such a commercial centre locating in a very favourable condition is in quiet situation, promotion programmes could not attract customers.
Difficult but trying hard to rent a space
Thanh, owner of a high-class fashion footwear chain said the terms given by the management board to lessees are relatively strict, such as the requirements on brand recognition profile, selling price list, financial capacity, etc. Most businesses had to bear the large fees to enter the plaza; instead, they expected to have effective brand positioning, good images and that the sales would certainly be better, said Thanh.
Regarding the closure of Saigon Paragon Shopping Centre (district 7, Hochiminh city) in early October, the investor also admitted that it was due to a failure in management.
According to Le Hoai Anh, director general of Kim Cuong Corporation, the management agency of the above shopping centre, they have no experience in managing a commercial centre, so soon after the centre went into operation, many problems arose, leading the business worse than expected.
According to various lessees, no one expects the closure of a commcercial centre, but investor often neglects a series of related issues such as deposit refunds and compensation, compensation for loss of technical costs (stalls), revenue loss, etc.
Unattractive to customers
While Hochiminh city is facing the risk of oversupply for retail premises in the next few years, real estate consultancy units remain optimistic with the race to build shopping centres. According to statistics of Hochiminh city Department Industry and Trade, currently, the city has about 102 supermarkets and 28 commcercial centres. It is estimated that by 2013, the city will have 740,000 square metres of retail premises, double the current space, since real estate developers are racing to carry out new projects.
Although the number of commercial centres increases sharply, according to many companies, doing business in retail sector is not simple at all.
The development of retail market depends heavily on the development of the middle and upper classes, and the demand for luxury shopping. Many shopping centres have fallen into difficulties because they sell only luxury commodities. People often come there for relaxing and walking at the weekends rather than doing shopping, said B.M.T, director of a toys trading company.
According to Tham Tuck Choy, director of Parkson Vietnam supermarket chain, the sales of the chain grows averagely 30 percent annually, but compared to the initial plan, it has not met the target.
Customers at the centres currently include visitors (5percent), foreign experts working in Vietnam (10 percent), the rest are local people. The purchasing power of each group of customers is increasing but not steadily, evaluated Choy.
According to information from the commercial centres, the leasing fees of retail premises in the heart of district 1, Hochiminh city are ranging from $70 to $180 per square metre, including value added tax and service fee. Retailers often have to share profit with leasers, popularly at 22-25 percent ratio, so the lessees only have from 75 to 78 percent of sales. In some sectors such as cosmetics, jewellery, this ratio is higher.
Compared to other countries having faster growing retail sectors such as Thailand, Malaysia, where this rate is only 15 to 18 percent, it is obviously very difficult to make profits from doing business in commercial centres.
Although the retail market is estimated to be promising, in fact, Hochiminhcity still has a number of commercial centres, especially in surburban areas are in inefficient and unprofitable operations. These outlets are usually quiet, with many empty spaces, some stores have even been temporarily closed since they found no buyers. Some owners of the malls are considering selling their assets to other investors.
According to experts, modern retail space business is a common trend of development. In Vietnam, this business is relatively new, so businesses need to measure the potential risks when signing up contracts with the management company.
To date, the case between lessees and management board of Kumho Asiana Plaza (district 1, Hochiminh city) has not yet found a reasonable solution. Currently, the plaza has only about five stores still operating and they are insisted in having a reasonable settlement from the management board of the plaza. Those stores are still paying monthly rents and management costs, although they could not sell a product, since the plaza is always in a quiet state.
Closing because of being unmarketable
Previously, since being unable to find customers, the management board of Kumho Asiana Plaza has recently released a notice mentioning that the retailers can terminate their leasing contracts before the due date; however the deposit (of two-month rent) would not be refunded. Responding to the discontent of the businesses is the silence from the management board.
Many businesses renting places here said the poor management company was the main reason why such a commercial centre locating in a very favourable condition is in quiet situation, promotion programmes could not attract customers.
Difficult but trying hard to rent a space
Thanh, owner of a high-class fashion footwear chain said the terms given by the management board to lessees are relatively strict, such as the requirements on brand recognition profile, selling price list, financial capacity, etc. Most businesses had to bear the large fees to enter the plaza; instead, they expected to have effective brand positioning, good images and that the sales would certainly be better, said Thanh.
Regarding the closure of Saigon Paragon Shopping Centre (district 7, Hochiminh city) in early October, the investor also admitted that it was due to a failure in management.
According to Le Hoai Anh, director general of Kim Cuong Corporation, the management agency of the above shopping centre, they have no experience in managing a commercial centre, so soon after the centre went into operation, many problems arose, leading the business worse than expected.
According to various lessees, no one expects the closure of a commcercial centre, but investor often neglects a series of related issues such as deposit refunds and compensation, compensation for loss of technical costs (stalls), revenue loss, etc.
Unattractive to customers
While Hochiminh city is facing the risk of oversupply for retail premises in the next few years, real estate consultancy units remain optimistic with the race to build shopping centres. According to statistics of Hochiminh city Department Industry and Trade, currently, the city has about 102 supermarkets and 28 commcercial centres. It is estimated that by 2013, the city will have 740,000 square metres of retail premises, double the current space, since real estate developers are racing to carry out new projects.
Although the number of commercial centres increases sharply, according to many companies, doing business in retail sector is not simple at all.
The development of retail market depends heavily on the development of the middle and upper classes, and the demand for luxury shopping. Many shopping centres have fallen into difficulties because they sell only luxury commodities. People often come there for relaxing and walking at the weekends rather than doing shopping, said B.M.T, director of a toys trading company.
According to Tham Tuck Choy, director of Parkson Vietnam supermarket chain, the sales of the chain grows averagely 30 percent annually, but compared to the initial plan, it has not met the target.
Customers at the centres currently include visitors (5percent), foreign experts working in Vietnam (10 percent), the rest are local people. The purchasing power of each group of customers is increasing but not steadily, evaluated Choy.
According to information from the commercial centres, the leasing fees of retail premises in the heart of district 1, Hochiminh city are ranging from $70 to $180 per square metre, including value added tax and service fee. Retailers often have to share profit with leasers, popularly at 22-25 percent ratio, so the lessees only have from 75 to 78 percent of sales. In some sectors such as cosmetics, jewellery, this ratio is higher.
Compared to other countries having faster growing retail sectors such as Thailand, Malaysia, where this rate is only 15 to 18 percent, it is obviously very difficult to make profits from doing business in commercial centres.
Although the retail market is estimated to be promising, in fact, Hochiminhcity still has a number of commercial centres, especially in surburban areas are in inefficient and unprofitable operations. These outlets are usually quiet, with many empty spaces, some stores have even been temporarily closed since they found no buyers. Some owners of the malls are considering selling their assets to other investors.
According to experts, modern retail space business is a common trend of development. In Vietnam, this business is relatively new, so businesses need to measure the potential risks when signing up contracts with the management company.
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