Domestic retailers tend to join hands with foreign

Domestic retailers understand well that they need to join forces to develop. However, to date, every man is still for himself.

Family Mart has obtained an agreement to set up a joint venture with Vietnamese Phu Thai Group to develop the Family Mart chain in Vietnam. According to Pham Dinh Doan, Chair of the Phu Thai Company, in 2011, the number of shops bearing Family Mart brand would increase to 20 from the current 4. This is a necessary preparatory step in the plan to open a chain of 300 shops that bear the brand in the next three or five years.

The information has confirmed the strategy on cooperating with foreign joint ventures to learn foreign management skills followed by Phu Thai that Doan mentioned in the meeting with the Ministry of Industry and Trade.

Doan has reassured the public and management agencies that Phu Thai will hold the controlling stakes in the joint venture; therefore, it will not be swallowed by foreigners as worried.

It is a growing tendency that domestic retailers join forces with foreign groups to develop business. Dr Dinh Thi My Loan, Deputy Chair and Secretary General of the Vietnam Retailers’ Association, said that the establishment of joint ventures in the retail sector is foreseeable.

“It is understandable why domestic retailers want to team up with foreign investors. It is their right to do that,” she said.

However, Loan said that government agencies should take actions to minimize the impacts of the participation of foreign retailers on the home market, by following the ENT rule (economic needs test) when granting licenses. Under the WTO commitments, Vietnam has the right to refuse to grant license to the retailers who open the second and subsequent retail points, if it believes that they are not necessary.

Nguyen Ngoc Hoa, Chair of the Saigon Co-op Mart, has admitted that domestic retailers feel the hard pressure created by the presence of foreign retailers in Vietnam, which has forced them join forces to foreign groups.

However, Vu Vinh Phu, Chair of the Hanoi Supermarket Association, said that foreigners can see the great potentials of the Vietnamese market very clearly. It seems that domestic enterprises prove to be too weak in dealing with the attempt by foreign groups to swallow domestic enterprises.

Phu has expressed his worry about the lack of cooperation of domestic retailers, saying that every man is for himself, while they do not join forces to take full advantage of their knowledge about the home market.

“There are only 30 active members of the retailers’ association. Many just simply register to join the Hanoi Supermarket Association, but they never attend the association’s meetings, or pay membership fee,” Phu said. “Enterprises just try to seek the way for themselves”.

Phu said that every Vietnamese supermarket directly contacts vegetable oil manufacturers to place orders; therefore, they always have to accept high prices because the orders are not big enough. Meanwhile, if they cooperate with each other, they can enjoy lower prices which can bring higher profits.

Dau tu has cited its sources as saying that it is highly possible that a famous domestic retailer would narrow its network of retail points due to the big difficulties.

The information has been confirmed by the Hanoi Supermarket Association. “A lot of domestic enterprises still keep the old way of doing business. They put difficulties for suppliers, while do not have clear business policies. Therefore, they have been weakening themselves,” Phu said.

Loan from the Retailers’ Association has advised retailers to pay attention to the rural areas, where foreign retailers have not reached out to, saying that rural areas prove to be the potential markets.

Tags: vietnam retail industry, Vietnam retail market, Vietnam shopping malls