With economic growth of 8 percent and higher incomes being earned, Vietnam’s retail market holds great promise for both domestic and foreign retailers.“Vietnam’s retail market is no longer the exclusive playground of domestic retailers and it will be an attractive market for foreign retailers, especially multinational groups,” said Phan The Rue, newly appointed Chairman of the Association of Vietnam Retailers (AVR)
Figures from the World Bank show that Vietnam’s global retail index in 2007 was 74 out of 100 points, putting it fourth after India, Russia and China. Total national retail revenue in the 1995-2002 period increased by 8-10 percent annually and from 2003-2007 by 18-22 percent each year.
Potential and Competition
According to Mr Pascal Billaud, General Director of Big C, unlike markets like Thailand and Malaysia, Vietnam’s retail market is still young and growing rapidly. “Modern distribution in Vietnam accounts for 15 percent and the potential for the develoopment of retail sector is huge.” he said. “However, shortcomings in logistics, information management and human resources require improvement.”
A number of major foreign retailers, including Metro Cash&Carry from Germany, Big C from France, Parkson from Malaysia, ZenPlaza from Japan and, most recently, Dairy Farm from Singapore, have already entered Vietnam’s retail market. It is predicted that the apprearance of these foreign retailers in Vietnam will kick off a new round of competition in the retail market.
“The apperance of the Wellcome super market is proof of the great potential of Vietnam’s retail market”, said Mr Billaud. “Competition will help the market become more active and dynamic and supermarket chains must be modernised in management and business exploitation in order to up with changing markets.”
After ten years in Vietnam, Big C supermarkets, under the management of the French based Casino Group, have six outlets in Bien Hoa, Ho Chi Minh city, Hanoi and Hai Phong. “In November the seventh Big C will open, in Danang city.” Mr Billaud revealed.
Mr Pham Dinh Doan, Chairman of the PhuThai Group, said that Dairy Farm and Big C are world renowned retail groups and their appearance in Vietnam greatly changes the face of Vietnam’s retail market. However, “more foreign retailers flocking to Vietnam’s market could create many difficulties for domestic retailers, and if they cannot compete then the whole distribution system will fall into the hands of their foreign rivals,” he said.
Mr Benjamin Eng, General Director of Giant South Asia VietNam – a subsidiary of Dairy Farm – told local media that “as a player in Vietnam’s market we also aim to create jobs and transfer international knowledge and expertise in supermarket management through continuous training. We are confident that these efforts will not only strengthen our business in Vietnam but also help to enhance local professional standards in Vietnam’s rapidly growing retail industry.” Giant South Asia Vietnam obtained a licence to enter Vietnam’s retail industry in July 2006 and has total investment capital of $5 million. “The company will open two more stores, in Kien Giang and Can Tho provinces, after the Wellcome supermarket in Ho Chi Minh City,” said Mr Eng.
Locals shake hands
Not only large foreign retailers are eyeing Vietnam’s retail market; domestic retailers also recognise its potential. Many domestic companies are racing to set up their own retail channels.
This year Vietnam’s retail market has seen cooperation between the four leading retail companies: the Saigon Trade Corporation (SATRA), the Hanoi Trade Corporation (Hapro), the Ho Chi Minh Co-operative Association (Saigon Co-op) and the Phu Thai Group, to form the Vietnam Distribution Association (VDA), which has a total of more than 100,000 retail outlets nationwide.
The FPT Group, a giant in the field of information technology in Vietnam, has set up FPT Retail, specialising in selling computers and telecommunications goods. Making the most of the advantages in areas such as finance and computers-based management systems of its parent company, FPT Retail is developing the [IN] brand name and aims to become the biggest high-tech retailer in the country. After nine months FPT Retail has ninw stores in Hanoi, Ho Chi Minh City, Can Tho, Hai Phong, and elsewhere. “By 2009 there will be at least 100 stores in some 40 cities and provinces throughout the country,” according to Mr Le Hoang Hai, Genenral Director of FPT Retail.
In the context of the domestic market shortly opening up further to foreign retailers in 2009, nearly 100 domestic retailers worked closely to establish the Association of Vietnamese Retailers. “Vietnamese enterprises need to be aware of the importance and the strength of co-operation in order to protect their own legitimate rights and voice their opinions with state agencies to create a fair and healthy business environment for domestic retailers,” said Mr Rue. He added that the establishment of the AVR will meet the needs of the retailer community in coping with powerful foreign retailers in Vietnam.
Mr Nguyen Dinh Truong, General Director of the Viettien Garment Company, said that “the establishment of AVR is a major event for Vietnamese retailers. Retailers, manufacturers and distributors are co-operating and joining AVR in order to enhance its strength in competing with foreign retailers, and I hope that joining AVR will help enterprises and manufacturers to improve their management and distribution skills and knowledge during WTO integration.”
Viettien has just won a retail Asia Pacific Top 500 award from Retail Asia Magazine and has around 1,000 outlets nationwide. “Joining AVR is expected to help our products enter supermarket networks nationwide,” said Mr Truong.
Helping domestic retailers
Former Minister of Trade Truong Dinh Tuyen has said that “Vietnam’s retail system is very poor and outdated, so domestic retailers must be more active and dynamic. Training human resources, boosting investment and building modern retail infrastructure are needed and retailers should co-opeate with each other to develop the retail market and compete with foreign rivals.” He believes that the government should allow more foreign retailers to join the local market, but suggests that limits placed on foreign retailers opening supermarket chins would be a good solution for the domestic retail market. “Foreign retailers would be forced to seek permission from the government to open a second supermarket and fierce competition could be solved by limitting the mass establishment of supermarket chains by foreign retailers,” He said.
According to Mr Nguyen Anh Diep, Managing Director of the Rosa Company, integration and competition are pressing matters for many enterprises. The establishment of the AVR, he said, is suitable with the situation of the retail market in Vietnam as local retailers are inexperienced. “I think that the government has created favourable conditions for Vietnamese retailers to develop, via policies and trtail network planning,” he said. “If we have a good retail network, competition will not be too fierce. Competition is increasing, but it’s too early for Vietnamese enterprises to grow and develop.”
Vietnam’s economy opened up well after most other countries and rapid international integration is creating many challenges for Vietnamese retailers. “Co-operation among domestic retailers should be given due regard and they also need support from the government in land, policies and funding in order to become stronger,” Mr Doan suggested.
Mr Nguyen Ngoc Hoa, General Director of Saigon Coop Mart, said that Vietnam should have a law on retail to adjust relations between domestic and foreign retailers, “Sooner or later Vietnam will have such a law,” he believes. “As a retailer joining the AVR, we will actively contribute ideas to state agencies during the policy making process.”
27/09/2011 10:46:28 AM