Vietnam losing small retailers to free trade

Director Vo Van Quyen of the Ministry of Industry and Trade (MoIT) Domestic Market Department said the retail sector in Vietnam has experienced an average annual growth rate of nearly 16% over the past four years.

“However, all of the growth has come from foreign retailers entering the market,” Quyen said and the domestic economy has actually experienced “a drop in the number of retail establishments”.

As of the end of 2014, foreign companies had invested in 80 supercentres, 50 specialised small shops and 250 convenience stores in Vietnam Quyen said, adding that 10 retailers from Europe and Asia dominated the nationwide retail market.

Quyen said the foreign retailers are having a profound effect on the economy due to their superior business experience and managerial skills and ‘they are better equipped financially to expand their infrastructure in Vietnam compared to their domestic counterparts”.

Director General Phan Chi Dung of the Light Industrial Department in turn said the competitiveness of domestic companies is limited due to lack of access to credit, small production scale and lack of management experience.

Most importantly, they simply are not professional in their approach to retailing and lack the skills to lay out detailed business and marketing plans he said, adding that few have taken the time to specifically identify a unique selling proposition that distinguishes them from their competitors.

Another important part of the business plan Dung said is distribution, or in other words, discerning precisely how customers will buy from the company. For example, will customers purchase directly from the retail store on will they go online and purchase at the company’s website?

Or will they buy from other distributors or other retailers? And so on and so forth.

To create improved conditions for domestic retailers to develop their distribution system in the future, Quyen said the government should review and complete regulation-related distribution activities to protect rights and interests of Vietnam under international trade agreements.

Quyen stressed the government should also provide support for domestic companies to improve the quality of their work forces and advertising, apply information technology and approach credit.

“Retailers should form chain affiliations to increase their ability to more cost-effectively purchase through bulk buying, and benefit by advertising together, which also helps with developing brand recognition.”

For his part, Central Institute for Economic Management (CIEM) Deputy Head Vo Tri Thanh said local retailers should seize the opportunities to expand their selling markets brought about by integration.

They should accept competition and change from competing on price to competing in terms of quality of product Thanh said and “they need to understand that higher quality can only be obtained at a higher cost and in turn sales price”.

“Retailers who only focus on selling at a lower price are doomed to failure,” Thanh underscored.

Last but not least, Deputy Head Trinh Minh Anh of the National Committee on International Economic Cooperation's administration office suggested domestic retailers pay close attention to changes in the market and keep abreast of the short, medium and long term trends.