Supermarkets Are not the Only Distribution Channel

Mrs Nguyen, owners of a cosmetic company said, “I have applied six times to Big C Supermarket to sell our products there, but to date, I have not received approval from the supermarket although I have enough required paper. I myself believe that our products are competitive in prices, quality and both design compared with other products sold at the supermarket”.

Director of a candy company whose products have just been okayed for being sold in the supermarket said, “It is difficult for the company to pass the supermarket’s requirements, including the limited number of products. I am worried that we cannot sell many products at the supermarket as they are imposed a high tax. As a result, prices of our products will be thousands of VND higher than rivals’ products”.

 

Supermarkets’ retail prices are often 25 – 30 % higher than the suppliers’ prices. Only companies which earn high profit want to have products sold at supermarkets. Nguyen added: “Supermarkets B. or M. asked businesses to pay VND5 million for each code of goods. Therefore, enterprises have to pay several tens of millions of VND for bringing their products for the sales at supermarkets. If the products do not sell well, they will be removed from the list of supermarket’s goods. Thus, companies will lose the fees for the sales and they have to continue paying VND5 million for each code of goods”.

 

Nguyen Thi Hai, Director of Hanoi Supermarket, said consumer staples like sugar, milk and monosodium glutamate sell well at supermarkets. However, shoppers were not there for “high-end” clothes, she said. New food products find it difficult to enter supermarkets which often get goods from big and popular firms. Consumers are also careful with trying the new food.

 

According to Ms Hai’s analyses, New Technology Company can not consider the supermarket as a distribution channel for its seasonal products such as mid-autumn lanterns. In addition, it is difficult to find a suitable place in the supermarket in the city to show products.

 

Officials, staffs and students are now the main customers of supermarkets, Hai said, explaining that they come there because they are bored with bargaining and poor quality goods. So, the suppliers must consider goods meeting these groups’ demand.

 

YF (Youth Fashion) is one famous youth fashion brand of Da Gia Company. Da Gia Youth Fashion is now present at many retail shops as well as markets. At Ben Thanh Market, all YF clothes are labeled with price by the producer and shop owners sell YF clothes in accordance with the price. Van, a small trader at Ben Thanh Market, explained: “With special designs and colour, YF clothes are very different with others. YF clothes are labeled with united prices”.

 

Mr Dao Van Dung, owner of Da Gia Company said: “The Company finds hard to sell its clothes in supermarkets due to cumbersome procedures. To gain a foothold in a supermarket, a company has to apply many times, wait for permission, and take goods on consignment. A small company like Da Gia can not afford to do this. Thus, I have taken my products to markets and children clothing shops”. Dung added, YF’s distribution network is well-organised. Most customers make payment after buying goods.

 

The Asian shoe distributor also said that selling goods through supermarkets, providers would face risks on stock-in-trade and faulty goods. While selling goods in the markets, Asian shoe distributors would negotiate with traders to share these risks. Modern distribution networks including supermarkets, convenience stores and trade centres currently account for nearly 25 % of total retail market share, said Le Van Loc, deputy director of Nutifood Company, adding that the remaining 75 % of modern distribution networks is in markets, groceries and open-air stalls. According to the latest statistics of the Ministry of Industry and Trade, although the number of convenience stores, supermarkets and trade centres has risen over the past years, there are only over 1,000 stores and around 250 supermarkets and trade centres across the country. The figure is rather small compared to over 9,000 markets and around 25,000 retail stations.

 

Revenue gained from selling goods in supermarket distribution networks still account for a small rate in their gross revenues even though these supermarkets having good positions. For example, soft drink products of Tan Hiep Phat Soft Drink Group only account for 2.5 % of the total market share, cosmetic products of My Hao Company around 3 % and aluminum of Kim Hang Company about 5 %, according to reports of these companies. (Saigon Marketing)