More Investors Focus on Developing Distribution Channels

More Investors Focus on Developing Distribution Channels

According to a survey, the development of supermarkets and commercial centres is at the rate of 15-20 per cent a year, 10 per cent more than that of other retail sales. By the end of 2004, Vietnam had 170 supermarkets and commercial centres and 600 automatic shops. However, the size remains small and scattered. The turnover of the biggest supermarket was only VND200 billion a year, much smaller than supermarkets in foreign countries. Due to shortage of capital and vision, most supermarkets could not develop partnerships with source producers and suppliers. Through intermediaries, the competition has been weakened in spite of promotion and marketing programmes.

The invasion of international groups such as Metro, Bourbon, Parkson, and Dairy Farm makes the competition between local and foreign companies more critical. Could Vietnamese businesses survive under the new conditions? Mr Pham Dinh Doan, Director of Phu Thai Co. Ltd, said that Vietnamese businesses are under a lot of pressure.  Though investing as a wholesale supplier, Metro is selling in retail. Member cards are distributed widely and shopping is not limited in volume or categories. As a result, both local producers and traders are under-cut.

Mr Nguyen Ngoc Hoa, Director General of Saigon Co-op, also pointed out the weaknesses of the distribution network in Vietnam. It lacks almost everything: professional skill, capital, human resources, infrastructure and re-investment for expansion. Consequently, it cannot develop partnership with other enterprises. In reality, Vietnamese businesses are in an unequal competition with world ranking groups that are ready to accept temporary losses to conquer the market.

It’s time for Vietnamese businesses to jointly develop the whole network: purchasing products, processing for added value, transport, distribution and marketing. Mr Hoang Tho Xuan, Head of Monetary Policy Department, said that the State should help local businesses develop product strategies, market share,  trade promotion, human resources, support them with tax reduction on the import of equipment and technology, and facilitate access to credit and shares.

A strong local distribution network will increase the competitiveness of Vietnamese businesses, especially when the Vietnamese market is open to international integration. On the other hand, the competition will also compel Vietnamese businesses to make greater efforts and grow stronger.

• Thi Van