Big supermarkets set for “rescuing purchasing power”

The low growth rate of the total retail sales of consumer goods and services has caused big worries to retailers, who have been hurrying to apply necessary measures to stimulate the demand.

According to the General Statistics Office (GSO), the total retail sales of consumer goods and services in the first five months of 2011 reached 762,716 billion dong, increasing by 22.5 percent over the same period of the last year. However, if not counting on the goods price increases, the actual growth rate would be 6.4 percent only, much lower than the growth rates of 15-16 percent seen in the same periods of the previous years.

Especially, the long holiday fell in May which was believed to help increase the purchasing power. However, in fact, the retail sales increased only by 0.68 percent in the month in comparison with April, the lowest growth rate since the beginning of the year.

According to the Ministry of Industry and Trade, the consumer price index CPI in the first five months of the year exceeded the 12 percent threshold, which has forced consumers to cut down spending.

Supermarkets running a race with traditional markets…

Dinh Thi My Loan, Secretary General of the Vietnam Retailers’ Association, said the association is very concerned about the current “price storm”. All consumers tend to cut down spending, especially the ones with low and medium incomes.

Meanwhile, retail enterprises, mostly small and medium in scale, not only have to struggle with the input cost escalations and bear the pressure from the decreasing purchasing power, but also meet big difficulties in accessing capital, when the government tries to tighten the monetary policies to curb inflation.

When asked about the sales of the supermarket chain, Nguyen Thanh Nhan, Deputy General Director of Saigon Co-op, which is running 50 supermarkets nationwide, declined to give exact figures, and only said that the sales remain stable. However, he has noted that there have been big changes in the structure of goods sold.

The sales of food products in the first four months of 2011 at Co-op Mart chain increased by 40 percent in comparison with the same period of the last year, accounting for 57 percent of the total sales.

“The very high proportion shows that consumers have changed their consumption habits. They focus on purchasing essential goods in the context of the price storm,” he said.
Previously, housewives did not go to supermarkets to buy fresh food and seafood, poultry and animal meat, because they thought that the products here were less fresh and competitive than that at traditional markets. However, they have changed their mind. The space reserved for vegetables, seafood, meat and fruits have been enlarged at the supermarkets with many different kinds of products on the shelves.

The competitiveness of supermarkets is that they can keep prices stable, while the prices at traditional markets change every day. Supermarkets can negotiate with suppliers and sign long term supply contracts, which allow to keep the prices stable.

In early May 2011, some big supermarkets refused to take on many product items when the suppliers demanded the price increases of 10-15 percent. The retailers said that the proposed price increases were too high and unreasonable.

… and practicing thrift

Not only trying to keep the prices stable, retailers have also been applying many other measures to stimulate the demand. Especially, according to Loan from the retailers’ association, they have been upgrading the customer care service in order to establish long term relations with buyers, and they have been developing the products which bear retailers’ brands.

In general, the products with the retailers’ brands are always cheaper by 10-50 percent than the products of the same kinds made by other manufacturers. Explaining the low sale prices, retailers say they do not have to pay for advertisement and branding campaigns.

A representative of a retail chain comprising of 14 supermarkets in Vietnam said that the chain has put energy-saving lamps into use to replace normal lamps. The simple thing has helped the chain save nearly one million dollars a year, or 20 billion dong.

Citing an example that a supermarket in Japan has decided to stop the operation of the lift system, and customers have to go on foot, Economist Le Dang Doanh said that saving every lamp, every drop of water is a good method to survive the difficulties. – Vietnamnet

Tags: vietnam retail industry, Vietnam retail market, Vietnam supermarkets