Although it is absolutely hard to have a full assessment of WTO entry impacts, Vietnamese retailers feel more confident after five years. The WTO accession has generated good impacts, as the retail growth rate is higher than GDP growth. However, this process also poses challenges to Vietnam, with an expanding presence of foreign retailers in both scale and market share.
Small scale
Ms Dinh Thi My Loan, Standing Vice Chairwoman of Vietnam Retailers Association, said that since Vietnam entered the World Trade Organisation (WTO) five years ago, its retail market has revealed a lot of shortcomings like small market size, weak purchasing and dominant traditional markets. Traditional markets now still generate nearly 80 percent of retail revenue, while modern retail systems are making up over 20 percent (Hanoi and Ho Chi Minh City account for 13 percent and 42 percent, respectively).
Worse still, the Vietnamese retail industry lacks retail market development strategies at three levels: State, industry and business. The professionalism of Vietnamese retailers, especially in business administration and human resources quality, is not high. This is reflected by high product prices and unprofessional service. In addition, relevant authorities lack measures to encourage all economic sectors to join forces to develop the retail market.
However, the domestic retail market has also achieved remarkable progress in recent years. Its contribution to the country’s GDP is expanding. In 2005, the rate was 13.32 percent in 2005 and 14.43 percent in 2010. At the same time, the retail workforce ranked third in the country, just behind agricultural sector and manufacturing - processing, with over 5.5 million people out of more than 49 million working people in the country.
Ms Loan said the Vietnamese retail market passed through difficulties and challenges caused by global economic downturn in 2009-2011 to keep its growth positive, while many markets in the world shrank. Revenues of retail and services in Vietnam exceeded VND2,000 trillion (US$90 billion) in 2011, up 24.2 percent over 2010. Excluding price rises, net growth was 4.7 percent. In particular, with over 79 percent of revenues, retailing always overwhelms other service sectors like lodging and food catering (11 percent) and travel services (nearly 10 percent), according to 2010 figures.
The field remains wide enough
Despite significant growth, the proportion is insignificant in relation to growth of merchandise trade, according to Mr Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management (CIEM). In particular, trade in services increased greatly but the growth rate of merchandise trade is more, leading to a retreat of trade in services in relation to merchandise trade, from 12.4 percent in 2006 to 11.4 percent in 2011. At present, Vietnam has large service deficit.
Meanwhile, according to the Vietnam trade development master plan in the 2011 - 2020 period, and vision towards 2030, net growth of retail and service turnover is 19 - 20 percent a year from 2011 to 2015 and 20 - 21 percent a year from 2016 to 2020. In developed countries, a locality with 100,000 residents has big trade centre; with 10,000 people, there is a supermarket; and with 1,000 people, there is 1 – 3 convenience stores.
From the above statistics, the market still has much room for domestic and foreign investors. Therefore, according to Ms Loan, the business community needs to understand that modern profitable retail development is the only way to approach a competitive retail and distribution market. To achieve this goal, retailers need to overcome major challenges, shifting the distribution and retail sector from scale, concept, structure, system and traditional business practices to a highly effective, productive, modern and consumer-oriented sector.
But, Ms Loan admitted that it is not easy to modernise the retail sector because Vietnamese businesses need to consult the experience of international retailers and associations in the world as in Japan, South Korea, Singapore and Thailand, to have suitable policies and strategies.
Huong Giang
Vietnamese
