Logistics infrastructure insufficient for retail sector

Vietnam’s retail industry is forecast to post stronger growth but it is facing challenges as inadequate infrastructure is obstructing the flow of goods from retail sites to the customer.

According to a Spire Research and Consulting’s report presented at the Vietnam retail, logistics and distribution summit on Wednesday, good expectation is put on Vietnam’s retail industry.

The report says the industry is set for double-digit growth. The modern distribution system is seen making up 40% or 60% of the marketplace by 2010 and 2020 respectively.

Many foreign retailers and distributors have also unveiled plans to expand operations or enter Vietnam, including Carrefour and Wal-Mart. A convenience stores system is expected to develop strongly.

Sectors such as food, beverage and fashion may achieve the highest annual growth in the retail industry.

Mega Lifesciences Pty Ltd, a Thai medicine and functional food distributor, came to Vietnam since the early 1900s and saw 15% annual growth. The company, however, found challenges in Vietnam’s improved but insufficient infrastructure. Band-aid solutions are made to guarantee its business going well.

“We saw many improvements in Vietnam’s roads, but customers always ask for quicker and quicker deliveries,” the company’s planning and logistics manager Ngo Thanh Loi told reporters on the sidelines of the summit organized by Supply Chain Community, a Vietnam non-profit organization.

The company resorts to motorbikes as a means to distribute goods on congested roads in HCMC and Hanoi. The company now uses 50 motorbikes beside pickup trucks to make deliveries when the latter cannot do and return in a day. The solution has made its cost rise and workforce doubled to meet the demand.

“We have no calculations right now, but I think stable fuel price and good infrastructure will help us save up 20% of costs,” said Loi.

According to Frost & Sullivan GIC Malaysia Sdn Bhd’s Asia Pacific director Gopal R, logistics infrastructure is being improved but not enough to support the retail sector while nearly 50% of goods are now consumed via retail channels.

Tags: vietnam logistics, Vietnam retail market