Vietnam Supermarket System: Opportunities and Challenges for the Poor

According to the statistics from the Central Institute for Economic Management, there were hardly any supermarkets in Vietnam in the 1990s. By June 2004, the number of supermarkets in the capital of Hanoi was 55 and by 2005 the number in the country’s largest commercial hub, Ho Chi Minh City, was 71. The expansion of the supermarket system generates added value to the food distribution sector.

 

As for poor farmers, the supermarket brings in certain benefits. According to CIEM’s research, farmers, especially those in farmers’ associations, earned more money from selling their products to high-quality distribution channels. For example, farmers in Hanoi’s outlying district of Soc Son gained revenues that were 23 per cent higher when they sold their products to Bao Ha Co., which supplied supermarkets in the city. Stable purchase prices and volumes are further benefits from supermarkets.

 

One of the high challenges is that the poor will be excluded from potential benefits generated by supermarkets. In fact, the supermarket is an innovative and value-added generating model. But with initiatives to reduce workforce and investment (do-it-yourself model, wholesales distribution and cash register installation), the supermarket has certain negative impacts on the life of the poor.

 

The participation of the poor in this distribution model is limited. A CIEM specialist quoted survey results as saying, in the role of consumers, more than 60 per cent of poor Hanoians never went to the supermarket while 2.7 per cent were regular supermarket customers (several times a month or several times a week).

 

Price, time and distance were core reasons for their refusal to shop at supermarkets. Goods on the supermarket shelves and goods on booths of street vendors provide two opposite sides of a coin. Goods on the supermarket have higher prices and better quality but require more time to choose from while goods sold along the street are cheaper and very convenient but the quality is unreliable.

 

In the role of merchants, with the same usage area or sales volume, supermarkets generated fewer jobs than markets and street peddling. Supermarkets only generated 6 per cent of direct jobs or 11 per cent, if indirect jobs included, in the retail industry. Besides, the poor need only VND400,000 (US$25) to rent space in a temporary market or to equip a peddling wheeler while they need up to VND12 million (US$750) to rent space in an official market. Moreover, with limited education levels, they are unqualified for supermarket staff positions.

 

In the role of farmers, the poor cannot work with supermarkets because they hardly meet requirements set by supermarkets, such as, food safety standards and supply volumes. Supermarkets require suppliers to show quality certificates for their products. A large majority of fruit and vegetables supplied to supermarkets in Hanoi now come from safety vegetable cooperatives (in suburb Van Noi, Van Tri and Duyen Ha communes) or semi-public companies (Fruit and Vegetable Technique Centre or Bao Ha Company). Safety vegetable cooperatives are made up of teams of voluntary farmers, who have close relations and contacts. These farmers normally have high financial potentials and large cultivation areas.

 

At present, supermarkets cannot be regarded as a distribution chain that is valuable and friendly with the poor. However, supermarkets also generate chances for farmers, who have small cultivation scales, to raise incomes. They should team up and secure quality for their final products. Therefore, all farmers, merchants and consumers should have synchronous and stable solutions to narrow the gap between the poor and the supermarket.

 

Followings are ideas of insiders about this issue and solutions to bridge the poor with supermarkets:

 

Taking responsibilities for the domestic market policy, we need to resolve issues related to street peddling and temporary markets to secure urban beauty on the one hand, and guarantee stable jobs for the affected poor people on the other. The selection of several locations as trading areas for peddlers is feasible. For example, Hang Luoc Street for florists with other streets for other commodities. This initiative can be piloted in some areas before applying it to other ones. We are also considering the set-up of peddlers’ associations

 

Presently, consumers are unable to sort out safe and unsafe vegetables on the market so that we hope that our vegetables can have certificates or trademarks to help consumers classify. Besides, our marketing activities are also weak. If we are trained in marketing and provided market information about our products, our businesses will be much better. We hope the State will support us with seeds and cultivation techniques, and create conditions for farmers to contact market specialists via conferences and trade fairs.

 

As a potential supplier for supermarkets, the poor should group up. The responsibility of a group is to survey characteristics and other services of their products to raise satisfaction of supermarkets. The production of safe items is not enough and many Vietnamese farmers can do this if they are technically supported. Farmers must be provided with related services: packaging, processing, delivery, variety and order. A combination of product and service is necessary. The purpose of a poor farmer association is to create values via renovation and competition.

 

In our calculation, 13 street vendors are needed to sell one tonne of vegetables while a supermarket needs only four staff. This is legitimate reason for the protection of market and street peddling activities. However, street vendors and market shopkeepers must commit to fulfil all requirements related to safety food quality and to avoid flocking to bustling streets. The establishment of an association for street vendors to discuss operational conditions with the authorities is a crucial preparation.