According to research conducted by the Association of Vietnam Retailers (AVR), competitiveness of current domestic retailers is rated only 47.6 percent; foreign retailers 48.6 percent; the rest comes from traditional markets and household stores. This situation shows that the domestic market is being dominated by foreign retailers and distributors.
Vietnamese enterprises still face disadvantages.
More than five years after joining the WTO, Vietnam's retail sector has still not managed to take advantage of its own strengths and the opportunities that WTO brought about in order to dominate the market. As a result, domestic distribution channels have fallen into the hands of foreign retailers. Foreign retailers and distributors massively expanded their scale and scope of operations in Vietnam, including Big C (16 facilities), Metro Cash & Carry (17 facilities), Parkson (4 facilities), Lotte (4 facilities), etc. Distributing and retailing is the bridge between production and consumption, promoting the development of domestic industry, but the mentioned reality is posing a danger for the economy.
According to Dr Dinh Thi My Loan, General Secretary of AVR, there is still irremediable "diseases" in Vietnam’s distributing and retailing industry. The two biggest weaknesses of Vietnam’s retailers and distributors are poor financial ability and management practices. Foreign distributors and retailers have sufficient capital, technology and experience, and are willing to accept losses at the beginning in order to develop market dominance later. Due to low competitiveness and high intermediate distribution costs, the price offered by Vietnamese retailers is generally higher than that of foreign enterprises.
Other problems that make it difficult for domestic retail and distribution enterprises to occupy the market are unfair competition, poor infrastructure, outdated technology and the lack of human resources. The low level of application of information technology is accompanied by short-term vision, limited awareness of competitiveness and development, and poor adaptability among traditional retail businesses. Vietnamese retailing and distributing businesses have yet to apply their homecourt advantage and develop convenience stores (chain stores with brand). In Vietnam there are only about 4,000 to 5,000 convenience stores, while this number is 7,000 to 8,000, 16,000 to 17,000, 25,000 to 26,000 in Thailand, Indonesia and Japan, respectively.
Distribution and retail contributes much to the country's growth (12 to 13 percent in the annual GDP) but has not been a focus for development. The policy and legal frameworks for this sector have not been finalised. The connection between distribution and retail planning and other planning is weak. There is no separate law for distribution and retail.
General policy of the State has not respected the distributing and retailing industry as it does other industries. According to the Investment Law (2005), most projects of the field of distributing and retailing are not on the list of the projects for investment promotion. Domestic distributing and retailing enterprises have been facing many difficulties in land lease issues. Decree 69/2009/ND-CP of the Land Law stipulates that, excluding the distributing and retailing projects investing in rural areas favoured by Decree 61/2010/ND-CP, other investors have to deal, transfer, and compensate for land acquisition projects.
Currently, almost all sectors have been given the sector development strategy by the State. Nevertheless, the sector of distributing and retailing still has no overall development strategy. The strategies of the 2009 Urban Planning Act are not detailed, and do not show clear infrastructure planning for distributing and retailing. About the internal operation of law of current international commitments, Vietnam has not seriously made the list of "long-term excluding goods" for FDI retail businesses, and not clearly distinguished the boundary between wholesale and retail, which makes domestic companies more vulnerable than foreign retailers.
What is the direction for the future?
According to forecasts, from now to 2014, retail sales revenue in Vietnam will probably increase by 23 percent a year. The distributing and retailing market has a lot of opportunities as consumers tend to switch to shopping at supermarkets and convenience stores. Therefore, it is essential to improve competitiveness, maintain, increase the market share of domestic distributing and retailing firms, and develop and modernize this market. It is also crucial to have protection measures for Vietnam’s distributors and retailers in accordance with WTO commitments, build a healthy competitive environment, and prevent acts of price transferring and selling items at cut prices. Besides, it is necessary to improve policy and law on opening markets, and delivery services. Particularly, it is important to build an overall strategy to develop the sector of distributing and retailing.
The state should encourage investment in and socialisation of markets and traditional retail commercial centres. The mechanism of land allocation and land lease for domestic retail enterprises (under the annual payment or instalment) should be clear to create favourable conditions for domestic distribution companies to access convenient sites to suit each type of distribution. On the other hand, there should be preferential policies on tax for traditional retail, training and infrastructure. Conditions should be created for businesses to access loans. There also should be preferential loan mechanisms to invest in trade infrastructure, especially in capital, to stabilise the market and consumption of agricultural products of farmers.
Many people also said that Vietnamese enterprises need to strengthen the link between manufacturers and distributors to support brand development and protection, assist the government in operating the macro market and price, promote competitive advantages, focus on the development of small-scale distributing systems and follow residential areas.
Huong Ly
Vietnamese
