The Successfulness of Distributors in Vietnam

The year 2006 marked a milestone in the development of Vietnamese distributing companies. Domestic distributors contributed 30 per cent of the total retail and social service in 2006, or VND580,710 billion, representing an on-year increase of 20.9 per cent.

 

In 2006, the member of distributing companies more than doubled that in the 2000-2004 period, from nearly 14,100 companies to nearly 28,600. Notably, the number of wholesalers and retailers rose nearly 170 per cent and roughly 50 per cent, respectively.

 

Especially, from now until the Lunar New Year (mid-January), Vietnam will have some additional 15 trading centres with an individual area of 10,000 square metres upward and around 30 convenience stores, which will be operated by renowned distributors.

 

For example, Co.op Mart and Vinatex Mart are planning to scale up businesses for many years to come to edge up their competitiveness. Co.op Mart, with an annual revenues of VND5,000 billion (US$312.5 million) desires to run 100 supermarkets in Vietnam in the next 10 years. The Vinatex Mart system now has built 37 fashion shops, 32 supermarkets, six trading centres and two fashion centres. At the same time, Vinatex, which operates the Vinatex Mart chain, is investing VND1,500 billion (US$93.75 million) to build distribution depots for northern, central and southern regions. In Hanoi, the Hapro Mart chain, which is run by the Hanoi-based Hapro, now comprises of three supermarkets, 16 convenience stores and 14 shops for specific commodities in both the downtown and outskirts areas. Supermarkets have extended to suburban areas of major cities as well as provinces. Thanh Hoa Province has opened five new supermarkets.

 

In food distribution, the two first V.Mart supermarkets of the country’s largest milk producer Vinamilk are the starter for the 200-V.Mart foodstuff supermarkets to be built soon. Vinamilk now has more than 180 distributors and 80,000 retail outlets nationwide. In 2006 alone, the number of sales units increased more than 30 per cent compared with 2005.

 

Not only expanding the domestic market, G7 Trading and Service Joint Stock Company and Trung Nguyen Coffee Company planned to list their shares on the Singapore stock market. According to several stock investors, this is an action to advertise the distribution network of the two.

 

Experts said the goods distribution service will be directly and immediately affected by the WTO entry of Vietnam. Under the WTO admission commitments, Vietnam will completely open its distribution market on January 1, 2009.

 

Many have worried that the distribution will be “swallowed up” by the wave of foreign retail giants, which will set up modern distribution systems in Vietnam. In fact, the Vietnamese market is fattening many world-leading giant distributors from Germany, Malaysia, Singapore, South Korea and other countries. Many other also wished to set up joint ventures with Vietnamese expanding distributors.

 

In reality, Vietnamese distributors are very self-confident of their capabilities to compete with foreign giant rivals. The most convincing evidence is the unification of Vietnamese distributors to build supermarket and convenience store networks to eat up more of the market share before the penetration of foreign companies. Many Vietnamese distributors said they will learn the models of competition and cooperation with foreign companies from successful distributors in China, South Korea and other countries. The first lesson is to expand the business network as soon as possible.

 

However, the professionalism of the Vietnamese distribution system still proved weak in 2006, that is, localised distribution network and lax mechanisms of purchase, check, packaging and sales. The trade promotion, marketing, marketing information forecast are ignored and unprofessional. Up to 60-70 per cent of businesses do not apply IT to management and business fields while only some 20 per cent of them have websites, but simple ones. Worse, the trademark popularisation for their companies and products is not paid due attention.

 

Although Vietnamese companies have made preparations for the integration, they are only able to open small-scaled shops. Their cooperation with domestic producers and farmers is still lax. To this end, foreign distributors are much better than domestic ones. Metro Cash & Carry in Vietnam have signed deals with 15,000 farmers and the Vietnamese agricultural commodities have been exported to other Metro supermarkets outside Vietnam, bringing in US$80 million in revenues.