While its core retail section of mobile phones is getting saturated this year, the FPT Digital Joint Stock Company (FPT Retail, stock code: FRT) seeks to boost growth through the new section of electric appliances and plans to rapidly expand size of the pharmacy store chain.
“Electric appliances is one of the sections we are negotiating and about to test,” Ms. Nguyen Bach Diep, Chairwoman of BOD and CEO of FPT Retail informed Forbes Vietnam beside the 2019 AGM held in the morning of March 27. The Company plans to test selling electric appliances inside FPT Shops, said Ms. Diep.
There are 3 projects being in test. Informing shareholders on the new direction of FPT Retail, Ms. Diep said the Company would evaluate and cut sale area of product groups in saturation phase while increasing space for the new section, the investment plan of which would be made public when highly successful test results are reached.
With the mobile phone market heading into gradual saturation, seeking new markets is what large retail chains like Mobile World and FPT Retail are doing. Mobile World has expanded into the food section with its Green Stores and the recently announced wristwatch retail section. Meanwhile FPT Retail expanded its pharmaceutical retail section.
According to the market research agent GfK Vietnam, the mobile phone market grows only by 1% in 2018 compared to 9% in 2017. The electric appliances section, however, has a higher growth rate, specifically 23.5% in electronics, 12.5% in electronic refrigeration and 3.7% in household electronics.
FPT Long Chau expects loss of 20bn VND in 2019 and gains profit from 2021 onwards. Source: FPT Retail (unit: bn VND)
In 2019, FPT Retail will boost development of the pharmaceutical retail chain under brandname FPT Long Chau after acquiring the Long Chau pharmacy store chain well-known in Ho Chi Minh City 2 years ago. From a modest start of 4 stores, now the chain has 22 stores located mainly in Ho Chi Minh City. The chain scored a turnover of 384bn VND in 2018, up by 91% compared to 2017.
According to Ms. Nguyen Bach Diep, for the period from 2019 to 2022, pharmaceutical retail is the key and potential section driving FPT Retail’s growth. The Company will increase the number of stores to 70 with the target turnover of 500 bn, while expecting a loss of 20bn for this section.
“If results are successful, we will continue to open 100-200 new stores each year,” said Ms. Diep. “Our first goal is increasing coverage nationwide while controlling logistics and investing into the staff.”
Ms. Diep emphasized the currently gigantic potentials of the pharmaceutical retail section with a spending size of about 4.5bn USD, equivalent to that of the mobile phone market. FPT Retail expects to gain a market share of 30% of the pharmaceutical retail section in the coming 3-4 years and the section will contribute about 40% into FPT Retail’s expected total turnover of 10,000bn VND.
The leader of FPT Retail shared that western medicines contributed 58% in turnover for the year 2018. However, functional food is the section with the best profit margin contributing 49% in FRT’s profit, followed by medicines and medical equipment.
According to the plan for developing the pharmacy store chain, FPT Retail aims to stop planned loss in 2020 and begin to profit from 2021 onwards. However, Ms. Diep has not been able to pinpoint the breakeven as this depends on each store model being tested by the Company.
The Company divides the pharmacy store chain into 3 types A, B and C corresponding to different turnover and investment sizes. Ms. Diep said a type A store gained at least 1.2bn in monthly turnover, type B store and type C store 1.2bn and under 1.2bn respectively. For the first phase, the Company focuses on developing type A stores.
Despite contributing only 30% in turnover, the functional food section adds half of FPT Long Chau’s gross profit. Source: FPT Retail
The store with highest turnover currently gained 9bn/month, said Ms. Diep to Forbes Vietnam. Most of the new stores will be opened this year with the lowest turnover of about 700mn/month. According to Ms. Diep, one of the reasons why FPT Long Chau stores attract customers well and fill numerous medicinal prescriptions is the availability of more than 6,000 various products.
At the end of 2018, FPT Retail gained a total turnover of 15,298bn, up by 17% and profit after tax of 348bn, up by 20% compared to 2017. Despite the saturation of the mobile phone market, the turnover of this section alone increased by 24% thanks largely to new shops continuously being opened. FPT Retail still has to seek new paths for growth, as according to plans, the mobile phone retail chain with current 533 shops will stop expanding after 2019.
The retailer is also turning to other sections like F.Friends – a selling program which helps FPT Retail reach employees of factories and enterprises. In 2018, this program had more than a million members, most of whom are workers from 2,500 factories in cooperation with FPT Retail. The Company plans to turn the focus to office staff workers in enterprises.
Moreover, FPT Retail wants to develop the phone accessories retail section this year, which is expected to bring in 1,000bn in turnover and almost 500bn in gross profit.
According Truong Bui – Pham Nhi, Forbes Viet Nam