Vietnamese retailing industry needs “big guys”

Building up a retail network which can bring facilities to consumers and developing the retail companies powerful enough to lead the market, are the two issues being discussed thoroughly when compiling a strategy to develop retail trade services in Vietnam.

The “tomato flow”

A survey conducted by Cadilhon, a market survey firm, on the flow of tomatoes after harvesting, can show an overall picture of Vietnam’s retail market. After tomatoes are harvested by farmers, they are carried to distributors. The tomatoes consumed by Metro supermarket bring 1.4 percent of the total sales, while 16 other supermarkets bring 0.6 percent of total sales. The other 98 percent of tomatoes are consumed by wholesalers mostly through the vending network and 1600 stable retailers.

The figures cited by Cadilhon show that the traditional sale channel still play a very important role in distributing everyday consumer products, such as food or household articles.

However, analysts have pointed out that in recent years, modern retail channels have been expanding rapidly with the development of some leading brands like Metro, Big C, Saigon Co-op supermarket chains. Not only foreign retailers can come to Vietnam to set up distribution points but foreign manufacturers can also set up trade centers through domestic partners.

However, domestic retailers still hold dim role in Vietnamese market, which still lacks “big guys” who can lead the market. The survey on the “tomato flow” can show that. Meanwhile, in other regional countries, the biggest retailers are domestic ones. In Indonesia or China, for example, four domestic retailers now have the biggest sales, even though the giant Wal-Mart is now present in China, or Carrefour has arrived in Indonesia.

Prioritizing to develop “big guys” or giving opportunities to all?

As a marketing expert, Ngo Trong Thanh, Managing Director of Mancom, has suggested drawing up a government’s action plan in order to develop retail trade in Vietnam in 2011-2020. Thanh said that it is necessary to define the fields that need to be prioritized to develop and encourage big companies to undertake the role of pioneering and leading the market.

“The success story of Phu Thai as a big distributor, or the story of Saigon Co-op with a large supermarket chain can show the efficiency of retailers in big scale,” Thanh said.

He went on to say that it is necessary to encourage big companies to establish convenience store systems, join food shop chains, or farm produce trade centers.

However, Le Viet Nga, Deputy Director of the Domestic Market Department under the Ministry of Industry and Trade, which is compiling the program on developing retail industry, stressed that it is necessary to create equal opportunities to all enterprises. She said that this is the main principle of the legal document the ministry is compiling.

“Will the prioritization given to big enterprises come contrary to WTO rules and create unfair business environment?” she questioned.

In reply, Thanh said the question needs to be answered by policy makers. However, as a marketing expert, Thanh said that “supporting retail companies” does not mean offering preferences or giving money.

The support can be in different modes. “Assisting enterprises to build up reasonable management tools and helping train the workforce could be the effective support,” he said.

“If all domestic retailers are nearly the same like small eggs, they will be easily crushed when foreign retailers expand their business. The practice of the retail industry development in other countries has shown this,” he added.-SGTT

Tags: vietnam retail industry, Vietnam retail market