How to tap the retail market’s potential effectively

Despite facing the day-to-day difficulties, Vietnamese retailers still have a number of advantages that foreign retailers find it difficult to grasp when penetrating the Vietnamese market. What are these advantages? What should be done to tap into them more effectively?

Since Vietnam engaged in negotiations for entry to the World Trade Organisation, retail sales were defined as one of the areas that would face the toughest competition. Experienced foreign retailers can easily penetrate the Vietnamese market if domestic businesses fail to make the best of the available conditions to raise their competitive capacity.

Dr Ngo Kim Thanh from the Hanoi University of Economics says Vietnamese businesses can make use of their advantages as they have a better understanding of the domestic market and the buying habits of the local people. Consequently, if a suitable distribution model is created, Vietnamese retailers can still compete with their big foreign rivals.

Having a thorough grasp of the domestic market is a major advantage for Vietnamese businesses. It is impossible for every locality to develop a common model, therefore, retail businesses should use their accumulated experiences to come up with appropriate solutions.

Bui Anh Tuan, the Secretary of the Party Committee in Tay Tien Commune, Thai Binh province said, “Vietnamese businesses are likely to secure a foothold in the rural market if more attention is given to customers’ needs. For communes like Tay Tien, it is difficult to develop a large-scale business model but the model for small shops and rural markets is the most effective,”

Since 2007, senior managers and commercial analysts have been keen to build a development model in line with the domestic retail network. Modern distribution models with supermarkets and shopping centres are the most suitable for urban areas while the rural market is seen as promising for domestic retailers.

According to the 2009 population and housing census, more than 70 percent of Vietnam’s population or 60 million live in rural areas. Domestic retailers and producers can benefit from supplying this enormous number of rural consumers.

However, which model can help Vietnamese businesses use all their strength and potential? The fact is that retail businesses have failed to study the market carefully. The fall of the mini G7 mart convenience shop chains run by the Trung Nguyen Coffee Company is a typical case in point.

Phan The Rue, Chairman of the Vietnam Retailers’ Association said that many domestic retailers have been successful in opening supermarkets in rural areas. However, it is essential to consider creating rural markets that meet rural consumers’ needs. For instance, building two-storey rural markets is not a smart choice. Therefore, levels of investment in the rural market are much lower than that in the urban market, which is a good advantage for small domestic businesses with the ability to penetrate small-scale markets. The crux of the matter is that businesses need to know how to tap their strengths effectively, Rue noted.

Truong Quang Hoai Nam, the Head of the Domestic Market Department under the Ministry of Industry and Trade said that Vietnamese businesses can fill a niche in the domestic market if they can understand local people’s business practices and make proper investments in right business areas.

Tran Thi Huong, the Director of the Industry and Trade Department in Ba Ria-Vung Tau province said that businesses need to take full advantage of the available and effective distribution models, to avoid scattering their investments which can put pressure on their capital sources.

“We have asked producers to provide distribution agents with new products at good prices. By doing so, businesses will find easier to develop modern models of distribution,” stressed Huong.

Along with the efforts from businesses, State management agencies need to support domestic retail businesses by applying measures in line with WTO rules to facilitate their operations. – VOV

Tags: vietnam retail industry, Vietnam retail market