Vietnam Post Industry: Potential Threat of Shrinking Market Share

On January 11, 2012, the Vietnamese delivery market officially opened fully to wholly foreign invested companies as it committed to the World Trade Organisation (WTO). Four big delivery companies have made presence in Vietnam, namely FedEx and UPS (USA), TNT (Netherlands) and DHL (Germany).

 

Although they are living on a fertile land, Vietnamese delivery companies are living with a nagging worry of losing market shares to foreigners and accumulative hardships.

 

The complete opening of Vietnamese delivery market as committed to the WTO has opened up a plenty of opportunities and challenges for Vietnamese enterprises. FedEx, UPS, TNT and DHL (Germany) are powerful and well-known transnational delivery corporations.

 

Despite delivery relations with 200 countries and territories in the world, many Vietnamese businesses still have to cooperate with these giants to reach those destinations. Since 2010, instead of cooperating with local post and delivery companies in the form of agents, these groups have expanded investment scales and participated more deeply into the Vietnamese market.

 

In a separate development, according to experts, in 2012, many foreign companies will seek to take over Vietnamese equitised post companies.

 

Competing with overwhelming foreign powers is domestic post and delivery companies with independent networks, limited capital, poor investment, unsafe vehicles, slow delivery services and very limited investment for human resources. Therefore, the loss of prestige inhibits them from building strong brands in the market.

 

Another high obstacle created by Vietnamese businesses is their readiness and willingness to cooperate with foreigners rather than domestic ones. Such priority sometimes blemishes legitimate interests of Vietnamese enterprises. Mr Luong Ngoc Hai, General Director of Viettel Post Company, cited the typical and latest example of this issue. When gasoline prices were repeatedly hiked, transport costs increased as a result. Although input costs went up, domestic companies watched out each other for months before they made the change to service prices. During that time, they had to take all measures to limit expenditures to minimise losses.

 

This is a must-go road for Vietnamese postal delivery companies. The formation of an industry association was put forth but, according to many companies, it would take lot of time and effort to discuss and consider pros and cons of memberships. Deputy Information and Communications Minister Nguyen Thanh Hung said that the establishment of such an association is a good opportunity for businesses to exchange and learn experience and create a stronger force in competition with foreign companies.

 

Mr Huynh Quoc Tuan, Director of Customs Legal Affairs, DHL - VNPT Express Delivery Co., Ltd, said: It will be very good for Vietnamese delivery companies to have their own association because it will stand out to protect the interests of its members. He said required conditions for memberships include the guarantee of service quality, good resolution of claims and satisfactory compensation for customers, and accelerating IT application to business activities and services.

 

The formation of an association requires high consensus and careful preparation. Deputy Minister Nguyen Thanh Hung warned in a recent conference on the establishment of postal delivery association in Vietnam that the association must have clear principles and purposes, have sanctions to deal with violations, apply floor prices to prevent dumping, build and announce KPI postal service standards, and set up a utility fund in support of expanding to remote areas. Then, the association will have strong voice on the market and before the government. And, it will become a strong backing for postal delivery enterprises.