I’ve never considered the retail business an easy one. Margins are thin, typically below 5% at scale, except in certain luxury segments. Most retailers build their core competitive edge through scale, squeezing every bit of efficiency they can. Still, taking a smaller slice of a big pie is often better than taking a big slice of a small one. That mindset, combined with the low barriers to entry, probably explains why everyone wants a piece of retail. Why? Because it serves end consumers and their everyday needs, from food and beverages to medicines, cosmetics, shoes, and clothes, making the total addressable market massive.
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The defining feature of this industry is that products are rarely differentiated, which means customers face almost no switching costs. They can easily move from one store to another or buy online within seconds. With the rise of the internet and e-commerce, comparing prices and products has become effortless. Meanwhile, consumer behavior is constantly shifting, and the influx of multinational players into Vietnam has made the space even more cutthroat as information asymmetry disappears.
When I assess a retail chain, these are the areas I focus on:
Product selection strategy
This, to me, is the make-or-break factor. A retailer whose shelves are filled with private labels or exclusive-distribution brands stands out more than one selling the same mass-market goods available everywhere. The range and relevance of products to local tastes matter just as much.
Take the case of Long Châu and Pharmacity. It’s not by chance that Long Châu is performing better. Long Châu keeps a tight focus on pharmaceuticals and related medical services, it doesn’t try to turn its stores into mini-supermarkets. They optimize their SKUs around prescription and OTC drugs and even offer services like vaccinations in some outlets. This clear positioning avoids overlap with FMCG channels and brings steadier product margins, easier inventory management, and faster turnover. Pharmacity, on the other hand, mixed drugs with FMCG items like cosmetics and functional foods, hoping to drive foot traffic and boost average ticket size. But the result was a bloated SKU count, thinner margins, more complex inventory management, and higher operating costs. When they scaled too quickly, the weaknesses of that model became visible. Long Châu continued expanding profitably. Pharmacity had to pause growth and restructure.
Store concept and location
Location, size, layout, and presentation all matter. Rental costs typically account for 10–20% of revenue, depending on store efficiency. Well-run chains can bring that below 10%, even 5%. Retailers in shopping malls sometimes negotiate revenue-sharing models to hedge and share risks with landlords.
Inventory management
This comes down to understanding consumer behavior, preferences, and income, and matching supply with demand. The key metrics here are gross profit margin and cash conversion cycle, especially inventory turnover. That’s why many retailers invest heavily in digital systems spanning procurement, inventory, and sales. They rely on consumer data (via loyalty programs or market data purchases) to fine-tune buying decisions.
Channel diversification and expansion efficiency
Most retailers operate through three main channels: brick-and-mortar stores, online sales (via their own sites or third-party platforms), and wholesale. Physical stores remain vital for brand visibility and customer trust, people want to see and try products. However, modern retailers are moving toward omni-channel strategies that blend online and offline to enhance convenience and experience.
The pace and balance of online vs offline growth
I look at how their digital transition is progressing, fast or slow, and whether they truly understand consumer behavior. The shift to online stems from two forces: (i) rapidly changing shopping habits and (ii) the weakness of a retail model burdened with fixed costs (staff, rent, logistics, HQ). When consumer demand softens and inflation or taxes rise, margins can swing sharply unless the business adapts fast. Moving online can cut fixed costs and shift focus to variable costs that scale with sales, but customer acquisition and retention costs rise in return. Personally, I prefer online-heavy businesses: lower operating leverage, faster scalability, and potentially explosive short-term returns, if they find the right formula. The challenge is sustaining it over time.
Financial performance
The key indicators I track include same-store sales growth (SSSG or LFL), e-commerce contribution, GPM, store-level EBITDA, net margin, ROIC, cash conversion cycle, and above all, cash flow from operations and the debt profile.
I tend to value chains that focus on quality over quantity. That mindset allows them to concentrate financial and human resources, and leadership attention, on stores and SKUs that truly matter, enhancing customer experience and maximizing profit per square meter before scaling up. Chasing market share without a proven success formula usually ends in a predictable story: over-expansion, financial stress, and eventually, a turnaround.
Still, not every retail chain makes it, and even successful ones rarely sustain performance for long. When markets mature or substitutes emerge, many inevitably decline. The warning signs of a necessary turnaround are clear: expansion no longer yields proportional profits, SSSG declines, new stores take longer to break even, margins erode, and operating cash flow turns negative. The common trap is growth for growth’s sake, opening new outlets just to grab market share while ignoring unit economics. This leads to a bloated organization, rising fixed costs, and a weakening cash position. With heavy fixed expenses to service, any inefficiency in expansion becomes painfully visible.
In restructuring or turnaround situations, speed of recognition is everything. Stabilizing cash flow, by reshaping the product mix, closing unprofitable stores, cutting costs, raising fresh capital, or even reinventing the business model, is crucial. Success requires humility: listening to the market, admitting mistakes, correcting course, and relentlessly searching for the formula that works in this brutally competitive game.
