Thursday, July 15, 2010

Vietnam an attractive market for retailers

Jul 2nd, 2010

Vietnam is the most attractive retail market in the world, according to the 2008 Global Retail Development Index conducted by international consulting firm A.T. Kearney. Retail sector is also listed as the industry with the highest growth rate (12 percent) in 2009. Turnover in retail market is even predicted to reach $85 billion in 2012.

According to statistics, the distribution system of the consumer’s goods includes nearly 9,000 markets nationwide. The modern retail system includes 70 commercial centres and shopping malls, over 400 supermarkets of all kinds and hundreds of convenient stores.

The number of domestic modern retail stores such as Hapro Mart, Saigon Co.op, Fivimart, Citymart, G7 Mart, etc. goes up more and more quickly, locating mainly in Hanoi and Hochiminh city, accounting for approximately 20 to 30 percent market shares in the modern retail system.

In spite of some remarkable growths, the market shares of the retail segment of Vietnam are still lower than that of many regional countries (such as China 51 percent, Thailand 34 percent, Singapore 90 percent, Malaysia 60 percent, etc.). The increasing number of foreign retailers in Vietnam is creating fierce competition to the domestic retailers.
There are currently five big foreign retailers operating in Vietnam, including wholesaler-Metro, general retailer-BigC, industrial commodities specialised-Parkson, both supermarkets and retail stores operator-Lotte, own brand name products seller-Luis Vuiton.

Those firms have entered into Vietnam’s main cities such as Hanoi, HCM City, Da Nang, Hai Phong, etc. through opening large scale supermarkets thus attracting customers in both wholesale and retail segments.

Is it possible to compete with foreign investors?

When joining WTO, Vietnam has committed to open the distribution sector from 1 January 2009. The domestic market then experienced the participations of foreign distributors, and the competition therefore has become severe.

The preparation of the local retail firms has not been thorough. Most domestic firms still use out-of-date business methods; the management capacity could not catch up with the modern trends and also being less sensitive to information.

In contrast, when entering into Vietnam market, foreign retailers have at hand the advantages that domestic retailers would find really difficult to compete, such as large amount of capital; abundant and diversified sources of commodities; management, marketing and advertising skills; business strategy; and advantages in cost and selling price control.

With the arrival of foreign retailers, market shares of domestic retail system will be shrunk. According to Dr Nguyen Van Minh (University of Commerce), with such speed of growth of foreign retailers, if the domestic retailers do not unite and initiate an appropriate competitive strategy, the distribution system in the cities will fall into hands of foreign corporations.


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