Store brands can be double-edged sword

Although customers benefit from the lower prices of brands developed by supermarkets, manufacturers of similar products could suffer because of the competition, experts have said.

To fully tap their distribution advantages and attract consumers, many supermarkets, including Metro, Sai Gon Co.op and BigC, have developed their own brands, mainly for food and cosmetics.

Experts forecast that, in the next three years, one out of every four products at supermarkets will be their own brand.

The products bearing supermarket brands are usually 10 to 30 per cent cheaper than similar goods.

Analysts said that lower prices do not necessarily mean that the products have lower quality. They are cheaper because the distributors do not have to pay for certain costs. such as advertising and costly packaging, along the supply chain.

Distributors usually place their own brand products in important positions in the store, where customers can easily see them when they enter a store.

According to the Business Study and Assistance Center, there are about 51 domestic enterprises out-sourcing products for supermarkets.

Speaking at a meeting organised by the Viet Nam High Quality Goods Association last week, Bui Duc Hue, sales director of Sai Gon Paper Corporation, said these products would not hurt those manufacturers who understand their customers.

Because supermarkets’ own brands are distributed through modern distribution channels, which are not common in traditional markets, he said manufacturers should expand their distribution to rural and remote areas.

For manufacturers with limited capital, being an outsourcer for supermarkets offered a good opportunity to increase production capacity, he added.

However, Nguyen Duy Thuan, director of BDS Consulting Company, said it was a double-edged sword for producers because their products must directly compete with products bearing supermarket brands.

For example, Sai Gon Paper produces paper for the supermarket’s own brand name but also sells its Sai Gon Paper-branded product in the same supermarket.

A representative of Chi Thanh Plastic Company said manufacturers should be careful and not ignore the quality of their own products if they take on outsourcing contracts for supermarkets and other companies.

Otherwise, they could lose their own brands and may have to become professional contractors for supermarkets, he said.

Many participants agreed that distributors’ own brands were a threat to manufacturers, especially to small companies with lesser-known domestic brands.

However, because the trend for stores and distributors to develop their own brands is expected to become more commonplace, producers must take the initiative and develop measures to cope with it. — VNS

Tags: vietnam retail industry, Vietnam retail market