Two surveys conducted by the Enterprise and Consumer Research Centre 2004-2006 show that distribution systems play the second most important role after quality, above prices, good products, trademark and marketing impression.
According to the Pacific Economic Co-operation Council (PECC), “the retail sale system in Asia-Pacific is seeing a revolutionary boom.” In 1990, supermarkets hardly existed in China and Vietnam. In early the 2000s, supermarkets accounted for between 10 and 20 per cent of the retail market and are mainly held by local firms. After WTO accession and the implementation of international commitments on opening market for distribution services, the distribution market in Vietnam will experience great impacts.
Remarks from Vietnamese consumers
The results of the surveys show that distribution systems produce important impacts on consumer’s options. The effectiveness of distribution systems are impacted by the following factors:
Region: The survey results show that consumers in the north, the Central Highlands and the Mekong delta pay more attention to distribution factors than the average level of the whole country. In particular, for instant consumer goods, such as food and drinks, consumers in the north and the Mekong delta have more focus than consumers in other places and the average level of the whole country. With a population of 47 million, accounting for 57 per cent of the entire country’s population, and the remarks of consumers, the two regions are major markets for enterprises to invest in distribution systems.
Age: Young people like visiting many shops before making any decision to buy goods, in particular fashionable ones, such as garments, motorbikes and jewellery. The younger consumers are, the more they like modern distribution channels. Two modern channels are favourite choices of young consumers are professional shops and supermarkets. In the meantime agents and markets, traditional distribution channels, attract mainly elderly consumers.
Similarly, high-income earners prefer modern distribution channels.
Competition between modern and traditional distribution channels: The order for shopping places of consumers is as follows: professional shops, agents, supermarkets, groceries, and market. The first three distribution channels account for 78.53 per cent of consumers’ options. Traditional distribution channels are favourite choices for food and necessities, drinks and stationery items. However, in Southeast Asia, consumers like choosing supermarkets for buying these items. Among these major distribution channels, part from professional shops and specialised agents, such as construction material, fashion and motorbike shops, markets and groceries have to compete against supermarkets. Processed food and necessities are main goods items of supermarket chains.
Remarks from enterprises
With indirect survey methods, corresponding and interviewing outstanding enterprises of specific groups of goods, 108 enterprises (31 of which have strong trademarks in 2006), including 26 State-owned enterprises, 44 joint ventures and joint stock companies, 38 limited companies and private enterprises have concrete remarks about the factors producing effects to enterprises’ option of distribution channels, as follows:
Distribution channel: Among nine major distribution channels, large-sized distributors/wholesale centres are the most popular distribution channels, accounting for 38.2 per cent, doubling the second largest distribution channel, agents, which account for 19.2 per cent. The figure is similar to the number of enterprises having strong trademarks. Modern distribution channels, such as professional shops and supermarkets account for a low percentage, 6.7 per cent and 5.6 per cent, respectively. The figure for online sale is just 0.2 per cent. From the third distribution channel, enterprises’ shops, there is a difference between enterprises having strong trademarks and enterprises of high quality goods. While enterprises of strong trademarks have their advantage of capital and scale to organise their own shops, other enterprises prefer the remaining channels. This further explains why it is difficult for control debts and their discounts are often higher than enterprises of strong trademarks, thus controlling distribution partners.
Average discount on retail prices for distribution channels: Regarding discounts, the average level for distribution channels is less than 10 per cent. In particular, the online sale discount reaches 22.35 per cent but the distribution channel is unpopular. Large-sized distributors and retail agents have high discounts because huge investment should be made in human resources, promotion and marketing activities for these channels. Notably, supermarkets rank fourth in terms of discount, but the number of enterprises using the distribution channel ranks sixth only. This proves difficulties in bringing goods to supermarkets because apart from official discounts, enterprises have to pay unofficial fees.
Difficulties of present distribution activities: The three biggest difficulties of enterprises during distribution include the control of debts, discount and goods delivery, accounting for 62 per cent. Warehouses have not been considered as important factors, especially for enterprises of strong trademarks yet. This accounts for only 1.5 per cent while the application of information technology for distribution management accounts for 13.6 per cent. On the contrary, the difficulty in warehouse of other enterprises accounts for 9.8 per cent while the application of information technology, 8.7 per cent.
Economic effectiveness of distribution channels: Enterprises of strong trademarks are active in marketing for such distribution channels as retail agents, enterprises’ shops and supermarkets because these channels have high economic effectiveness.
Pham Chi Lan, a member of the Prime Minister’s Research Commission, said that the appearance of modern distribution systems, including supermarkets, specialised shops, and online shops did not mean a removal of traditional retail channels. Some countries and territories, such as Japan, the Republic of Korea and Hong Kong combine traditional and modern distribution systems effectively.
In terms of economic structure, population and living standard in Vietnam, in the next five or ten years, Vietnamese will be able to develop both traditional and modern distribution channels. The issue is to create a link up among production and service enterprises, organisations holding and allocating resources, regions to create strong competitiveness for enterprises, Lan said.
Huong Ly
Vietnamese
