Retail Market - A Difficult Problem for Local Distributors

Vietnam is world’s third most attractive retail market, according to a survey conducted by AT Kearney, a US-based world leading consultancy firm. Vietnam is now just behind India and Russia in terms of the attraction of world retailers with the presence of giant chains such as Metro and Big C, and WalMart and Carrefour soon to make their presence felt.

 

According to the Ministry of Trade, per capita goods circulation increased to VND 5.7 million in 2005 from VND 2.8 million five years earlier. With half the population of 84 million people aged under 30 years old and developing a taste for shopping, the Vietnamese retail market has become more attractive to distributors. Also according to AT Kearney, while the Chinese market has reached its saturation point, on many aspects, Vietnam is described as a ‘little India, especially for its fragmented retail market, which is 90 per cent dominated by family-owned stores.  

 

At present, there are around 900,000 traditional retail shops in Vietnam, which play an important role in the retail sector as it has made a significant contribution to Vietnam’s GDP and generated jobs for five million people. Trade centres and supermarkets are available in major cities only and contribute a little to the country’s total retail sales. Moreover, the development of the countries with situation similar to Vietnam shows the co-existence of small retail shops and trade centres or supermarkets.

 

With the increased attraction of world established distributors, the Vietnamese market may be flooded with foreign-made products. At present, the stock of Vietnamese products has reached an alarming level. Also, Vietnamese goods cannot compete against goods imported from foreign countries in terms of price and quality. Even though some local distributors have been available in the Vietnamese retail market such as 24-Seven, Phu Thai and Saigon Co.op, the enterprises are still building and piloting their operational models.

 

Enterprises are aware of the importance of distribution to bringing products to consumers, but they face challenges in terms of financial capability and goods supply for circulation. Due to capital shortage and inability to control capital circle, enterprises could not develop their distribution network.

 

In fact, Vietnamese distributors are still modest in comparison with their foreign rivals. The biggest Vietnamese supermarket chain, Saigon Co-op mart, has only 14 supermarkets nationwide while foreign-owned chains have up to hundreds of supermarkets in many different countries and territories. Let alone much poorer management and operation of the distribution network of Vietnamese than their foreign rivals.

 

The experience of Malaysia is that foreign-owned supermarkets are only allowed in some urban areas while the Philippines has allowed wholesales investors only. Also, many countries stipulate that supermarkets have to be built in suburban areas. Apart from learning experience from other countries, Vietnam should provide support on tax, opening hours and investment, as well as access to credit sources to expand business activities of Vietnamese distributors.