Vietnamese Commodities Need Reliable Distributors

Vietnamese Commodities Need Reliable Distributors  

Most Vietnamese producers sell their products through go-betweens. However, only large enterprises have reliable distributors, while small ones sell their commodities through agents and retail shops. In Vietnam, distributors operate only in domestic markets, a weakness restricting market expansion at home and abroad.

Intermediary role

The supply of commodities to retail shops via distributors is most common among producers, especially in consumer goods. The reason is that producers cannot both produce and distribute their products and cannot possibly develop their own network to bring commodities to consumers. According to the enterprises, the sales through many distributors cause additional costs. However, the costs would be even higher if the enterprises run their own distribution. They must hire shopkeepers, buy shops and transport trucks and cannot compete with professional traders. Producers cannot supervise the distribution, care for customers and develop marketing.

Presently, producers do not rely only on agents but also other channels such as markets, supermarkets or foreign retail groups operating in Vietnam. Some producers run their own shops to sell products directly to customers. However, such strategic goods as steel, petroleum, fertiliser and cement must go through the network of distributors. For instance, Southern Steel Company distributes products through 135 Grade 1 agents, and then the distribution continues to Grades 2 and 3 and finally retail shops. Most of other steel companies follow the same path. Some people believe that such distribution caused the shortage and high prices of steel in mid-2004. Sales manager of the Southern Steel Company said that to avoid speculation, it should not be limited to only one or two distributors and the producers must inspect and control the distribution network to prevent unreasonable price hikes.

Incentives for distributors

In reality, major enterprises with famous trademarks can easily find strong distributors and can expand their markets. However, the enterprises must also have several distributors to expand retail sales and to continue the operation in case of failure in markets and distributors. The distributors must satisfy certain criteria on expertise in concerned industry, distribution and organisational skills. The producers must control the market prices by inspection and periodical reports. Large enterprises with products dominating the market can have sole distributors. But small producers can only use existing channels of the market or distributors in case of large volumes of competitive commodities.

Ms. Tran Thi Ngoc Thanh, Sales Manager of The Hoa Textile & Garment Company said that there must be some incentives for distributors such as stable quality, unified prices and attractive commissions. At the same time, promotion programmes and advertisements must be enhanced to support distributors, agents and retail shops.

Distributors in world market

So far, Vietnam has only distributors for the domestic market and a lack of international distributors (except in case of Metro group). The enterprises themselves have to go abroad in search of markets and importers and do their own exports. It is a waste of time and money. If Vietnam develops international distributors, it will be a great support to businesses as they can focus on production without sharing time for market survey, negotiating contracts and export activities.

At a seminar organised in Ho Chi Minh City, Mr. Nguyen Van Sang, Deputy Head, Department of Domestic Trade (Trade Ministry) said that the State should encourage the development of modern distribution system by the planning and structuring of the economic infrastructure. Thereby a detailed map on distribution networks can be established ensuring harmonious development and healthy competition.

By August 2004, Vietnam had some 160 units (140 supermarkets and 30 commercial centres) operating in 25 provinces and cities and some 600 free-choice shops. 20 supermarkets and 35 commercial centres are under construction.

• Hoa Binh