Experts have noted that it is time Vietnamese retail firms “grow up” and adopt modern retail practices.
Among the recommendations are that retailers promote local production through distribution and compete with foreign rivals during the current mergers and acquisitions (M&A) boom.
The recent penetration of foreign retailers from Thailand, Japan and France, fuelled by the participation of Vietnam in a series of new-generation free-trade deals, hastened the race for capturing a share of the Vietnamese retail market, which is recognised as having large untapped potential with strong purchasing power from a 90-million-strong population.
However, local retailers seem to have become underdogs in the race and some are crying for help.
The Ho Chi Minh City Association of Businesses recently sent a document to the prime minister about risks caused by the domination of foreign retailers in local retail markets, while calling for support for a more favourable business environment.
The association said modern retail in Vietnam accounted for a mere 25 per cent of total retail sales and was falling, while facing increasingly harsh competition from foreign retailers such as Big C with 32 supermarkets, Metro with 19, Lotte Mart with 11 and Aeon with three.
France's fourth-largest retailer, Auchan, is planning to expand its supermarket chain in Ho Chi Minh City.
A series of M&As - including Aeon buying stakes in Fivimart and Citimart, and Thai groups acquiring Big C and Metro - will also result in more difficulties for local retailers to compete, the association said.
The domination of foreign retailers negatively affects local production because of the influx of foreign products, such as from Thailand and Japan, which are more competitive in quality and price, while the government's "Vietnamese prioritise Vietnamese goods" programme is proving to be less effective than hoped for, it said.
According to Pham Ngoc Hung, the association's deputy chairman, many domestic retailers say they face difficulties selling their products to foreign-invested supermarkets.
Since the full opening of Vietnamese retail markets to foreign retailers on January 1, 2015, under international integration commitments, there has been a shortage of policies to protect local retailers, the association said.
The association proposed the creation of regulations to prevent uncontrolled openings of new foreign retail outlets and the assurance that these outlets will be monitored to guarantee that they comply with existing regulations on distribution and competition.
Also, the Vietnam Competition Authority recently asked for details about the Metro supermarket acquisition by Thailand-based TCC Holding Company, in accordance with Vietnam's established laws on competition.
'No need for alarm'
The director of the Ministry of Industry and Trade's Domestic Market Department, Vo Van Quyen, was quoted by Tien Phong (Vanguard) newspaper as saying the opening of stores by foreign retailers was not alarming.
For local retailers, this presents an opportunity to improve their competitiveness and prevent shutdowns or bankruptcies as a result of failures to compete. For consumers, foreign retailers bring high-quality products to Vietnam and contribute to improving the quality of made-in-Vietnam products through upgrading the quality of merchandise found on shelves, Quyen said.
Dinh Thi My Loan, chairwoman of the Vietnam Association of Retailers, urged retailers to modernise their operating models and cooperate with one another so they might begin operating by using modern retail techniques and trends, such as developing convenience stores and minimarts.
The government could provide support, but could not perform the jobs of retail firms. Retail companies must find their way and "grow up" to continue functioning during these difficult times, she said.
It is also important that local retailers join with producers to build supply chains for quality Vietnamese products, in a bid to gain the trust of consumers and build their brand names, she said.
According to Vu Vinh Phu, chairman of the Hanoi Supermarkets Association, local retailers must cooperate with one another and compete by improving the quality of products, prices and customer care.
Source: http://www.nationmultimedia.com/
Keyword : Retailers in Vietnam, must embrace, modern practices, say experts.
