The development of a retail distribution network in Vietnam has become a burning issue after the conclusion of the Vietnam-US round of bilateral negotiations on Vietnam’s entry to the WTO.

According to a recent survey conducted by the Investment and Trade Promotion Centre (ITPC) in HCM City, research accounts for 30 percent, production, 30 percent, and distribution up to 40 percent of the product value forming process.

Reality shows that many distributors, especially global distributors, are playing an important role in deciding producers’ activities and making orders for products.

Promoting joint action

Researchers have warned of a wave of new retail activities after Vietnam joins the World Trade Organisation (WTO), a situation seen during the opening of distribution networks in China. At this time it was said that if the world’s second largest retail distributor Carrefour opened a big supermarket, three large Chinese distributors would go bankrupt. A similar risk is likely to occur in Vietnam.

A member of the Government’s Research Board, Pham Chi Lan warned that it is high time for businesses to join action.

Marketing Manager of Phu Thai Company Dao Xuan Khuong said that in order to cope with large foreign retail distributors, it is imperative for businesses to reinforce and make their retail distribution networks more professional. In addition, Vietnamese retailers must rapidly become professional distributors.

Deputy General Director of Sai Gon Coop Mart Nguyen Thi Tranh said for further development, Coop Mart needs to promote links to avoid a lack of capital and business premises. According to Ms Tranh, now is the time for domestic producers and distributors to join hands to sharpen their competitive edge against foreign producers. This year, Coop Mart will set up a distribution centre in the Mekong River Delta.

Professionalising distribution system

To help the trade sector develop and adapt to the international market after the country officially joins AFTA and WTO, it is necessary to carry out a project to support the development of the retail system in Vietnam in 2006-2007. Since April 2006, ITPC and the High Quality Vietnamese Product Businesses Club (HQVPBC) have been implementing the project. Project manager Le Tri Thong said it will help Vietnamese enterprises improve their distribution capacity, develop human resources in the retail and distribution sector, link producers and distributors, and seek market opportunities.
“In June 2006, we will organise a training course for enterprises,” Mr Thong said.

Vu Kim Hanh, ITPC director said three years ago, ITPC and HQVPBC began helping enterprises build and promote trademarks. Currently, they are carrying out a programme to help enterprises improve their retail and distribution systems. This is the second step to help enterprises not only obtain trademarks but also organise selling systems.

Ms Hanh said the Vietnamese retail and distribution system is backward and lacks close coordination. The Vietnamese modern retail and distribution system only meets around 10 percent of customers’ demands. The country has around 9,000 markets, 75 percent of which are in rural areas. Many markets are degraded and retailers are facing a number of difficulties due to fierce competition with supermarkets. Meanwhile, many producers have not built distribution networks, instead depending on distributors and supermarkets. Therefore, a national retail system should be developed. In addition to current distribution networks, domestic producers should build their own shops and distribution networks to reduce product prices and avoid pressure from foreign distributors after the country joins the WTO.