“The “New Commerce” Model: Unveiling the Billion-Dollar Company Blueprint in India and its Relevance for Vietnamese Retailers”

The concept of New Retail has taken the international market by storm, and it quickly spread to Vietnam with the belief that it would create a leap in the retail industry. Many businesses have declared their transition to the New Retail model.

While there are multiple interpretations of New Retail, the fundamental principle revolves around placing the customer at the center (customer centric) rather than the product. Retailers need to understand their customers better, create enhanced experiences, and provide products and services that best meet their needs, along with offering the most convenient shopping methods. Data and technology are the key enablers for businesses to achieve this.

In the retail market of India, the most populous country in the world, the industry giants have taken New Retail a notch higher by introducing the concept of “New Commerce.” This evolved model is built on a new commerce platform to serve 1.5 billion Indians by establishing an offline & online sales system across MT (supermarket and minimart) and GT channels, along with E-commerce (JioMart, Reliance’s e-commerce platform).

Despite strong declarations, there haven’t been many retailers in Vietnam successfully adopting these new models. Among them, WinCommerce (WCM) has been implementing the “New Commerce” model, proven successful in India’s billion-strong retail market. As the company with the largest number of sales points, situated within the consumption-retail-finance-technology ecosystem, WinCommerce has been operating profitably and sustainably.

Achieving Positive Profitability

Masan Group, through WinCommerce, has announced positive after-tax profits for June. Masan has upgraded and improved its WiN stores (targeting urban consumers) and WinMart+ Rural (serving consumers in rural areas). These two store models have outperformed the traditional model.

Since last year, WCM has been more cautious about opening new stores, focusing instead on enhancing existing ones and transforming them into WiN models. This strategy is one of the reasons for WCM’s profitability, as the operational efficiency of the stores has improved significantly.

As of the second quarter, WCM had 3,673 stores, with a net addition of 40 new stores. Thanks to an increase in customer footfall, LFL (Like for Like) revenue, which compares revenue on a like-for-like basis across existing stores, rose by 9.7% year-on-year. In the second quarter, WCM recorded VND 7,844 billion in revenue.

WCM’s achievements come at a time when Vietnam’s retail industry is still facing challenges from 2023, as consumers tightened their spending. Official data for the first seven months of 2024 shows that total retail sales of goods and services were estimated at VND 3,625.7 trillion, up 8.7% from the previous year, and an increase of 5.2% when excluding price factors. These figures are lower than the growth rates of 2023 compared to 2022.

Given this situation, Vietnam’s Ministry of Industry and Trade recently held a meeting to discuss a program to stimulate domestic consumption and promote domestic trade. The Ministry will promptly assess the market situation, forecast trends, and propose solutions to stimulate consumption and boost the growth of total retail sales and service revenue.

Despite the challenging backdrop, WCM’s achievement of net positive profitability in June has bolstered Masan’s leadership confidence in their chosen path toward sustainable profitability. According to a Euromonitor report from last year, experts believe that if Vietnam’s modern retail market develops similarly to Indonesia, it could more than triple in size over the next decade, reaching a scale of nearly $20 billion.

Similarities Between WCM and India’s Reliance Retail

Reliance Retail, India’s largest retailer, ranks 53rd among the world’s top retailers and is listed as one of the fastest-growing retailers globally in Deloitte’s 2023 report.

Similar to WCM, Reliance Retail is a quintessential “New Commerce” conglomerate, offering a diverse range of products, including food, FMCG, fashion, and electronics, with a distinct advantage in quality and pricing. They achieve this by deeply engaging in the value chain, from production and supply to sales, data ecosystem, and analytics. With a vast distribution network of nearly 19,000 stores across India, Reliance Retail gains profound insights into customer preferences and market trends.

In the first quarter, Reliance Retail reported an 8.1% year-on-year growth in revenue and a 10.5% increase in EBITDA. The company’s leadership attributed this growth to their customer-centric approach, enhancing experiences through product, process, and technology platform innovations. Notably, the Digital Commerce and New Commerce segments continued to expand, contributing 18% to Reliance Retail’s revenue.

According to experts, in the modern retail market with multiple competitors, retailers cannot rely solely on price, promotions, and advertising campaigns, as these are easily replicable. Success belongs to businesses with scale advantages and the ability to optimize operations by integrating production, distribution, and internal logistics capabilities. While the Vietnamese market is smaller than India’s, the success of Reliance Retail and its similarities with WCM present a clear vision for the future of Vietnam’s retail giant.