Vietnam Retailers: Facing Hard Competition with Foreigners

It is usually thought that the Vietnamese retail market is very attractive market to foreign corporations because of its potentialities. However, there is another reason: Vietnamese companies are very weak in capital. This incurable weakness has become a target for foreigners to attack. With abundant financial resources, foreigners can easily negotiate with suppliers about prices and discounts and of course domestic players are at a disadvantage in this business. Some Vietnamese retailers make light of branding and layout while foreign rivals do these very systematically and professionally. Foreign companies not only build large commercial centres but also invest in medium and micro shops.

 

Moreover, more and more foreign investors chose to join hands with local retailers instead of setting up their own businesses in Vietnam. Domestic companies will be responsible for paperwork, land, space and other intermediaries while foreign partners provide capital. Domestic retailers meet a lot of difficulties in competition with this kind of business.

 

In my opinion, the Ministry of Industry and Trade and relevant authorities should have regulations to define supermarket planning, particularly the number of supermarkets, the size of supermarkets and the distance between supermarkets in an area, to ensure fairer competition on retail market.

Business location is the most important for retailers but I see that local authorities seem to give priority to foreigners. They roll out red carpets and offer best places for foreign companies while weighing up and down proposals from local retailers. I think there should be a change in attitude.

 

The Government should facilitate domestic companies to develop by giving priority to land access and soft rentals. Meanwhile, Vietnamese companies lack infrastructural facilities for retailing like shops and warehouses because of capital shortages.

 

It is very difficult to apply for a land plot to build commercial centres. Many companies have to accept sublease from private companies. In the meantime, this work for foreign investors is much easier.

 

I recommend encouraging foreign-Vietnamese retailing joint ventures with dominance belonging to the Vietnamese side.

 

At present, retailers with foreign elements are dominating the market. They decide both buying and selling prices and force domestic companies to follow. Therefore, domestic companies should join hands to power up. For example, a chain stops supplying goods to a foreign enterprise and the market is not affected. But, if a series of chains do the same, foreigners will have to reconsider their business policies. Vietnamese retailers should strengthen their positions on the market, promote production and maintain the market.

 

Currently, Vinatex is cooperating with Fivimart, Hapro, Intimex and other retailers to sell fashion products. Besides, the Government should consider preferential policies for retailers to extend their business to rural and mountainous areas.

The Ministry of Industry and Trade will assign its subordinates to compile regulations on developing distribution and retail systems; consider allowing Vietnamese - foreign joint ventures on the condition that the Vietnamese side will hold more than 51 percent of stake; consider logistics development system policies; and proliferate “Vietnamese people use Vietnamese products” campaigns. The ministry will pay attention to training trade management personnel.

 

The ministry will coordinate with the Ministry of Natural Resources and Environment to build up land funds for distributors and retailers, work with the Supreme People's Court in settling trade cases and strictly punishing contract breaching and market manipulation; and assign market authorities to prevent smuggling, counterfeit goods and trade fraud.