Developing the retail sector – an uphill task

Vietnamese businesses face numerous challenges in many areas including a lack of capital and human resources, poor-quality goods, inadequate infrastructure facilities and dilapidated business premises.

There have been no big changes in Vietnam’s retail market although it has been completely opened up to foreign businesses for nearly two years. This is attributed to the recent global economic crisis. However, it is very difficult for domestic businesses to make a breakthrough if they can not define their position in the market.

Long queues of customers waiting at the counters of foreign-invested supermarkets like Big-C and Metro, which are not world leading retailers, have long been a dream for Vietnamese retail businesses.

“I prefer shopping at Metro because of the variety of goods, reasonable prices, and pleasant shop assistants,” said Le Nhu Anh, a customer.

These have put a lot of pressure on domestics businesses and they need a comprehensive solution to reduce prices.

According to the managers of some foreign-invested supermarkets, the cost of renting business premises accounts for 60 percent of investment capital, much higher than in countries with a developed retail sector like Thailand.

It is very difficult for domestic businesses to rent businesses premises as the costs are too expensive, said Nguyen Tien Dung, Director of the Saigon Co.op Mart, adding that there is no proper planning for retail premises.

The rising cost of renting business premises in major cities like Hanoi and Ho Chi Minh City is put down to the increasing number of retail businesses there. In the meanwhile, few businesses are interested in expanding their operations in rural areas, where the costs are much lower.

Professional and good-mannered staff is another problem for Vietnamese businesses.

Duong Thanh Thuy, Director of the Miss Aodai chain of shops, said that foreign businesses always attach a great deal of importance to training professional and mannerly staff.

For lack of capital and facilities, many domestic retailers prefer to do business in foreign-owned shopping centres.

Nguyen Thi Nga, from the Trung Thanh food processing company, said that Vietnamese businesses are not usually offered good sites in shopping centres because of their low commission.

The Foreign Investment Agency under the Ministry of Planning and Investment said that the number of foreign distributors and retailers registering in Vietnam is increasing, mostly from France, Japan, the Republic of Korea, Thailand, and China.

It is essential for domestic retail businesses to become aware of the challenges and work together to overcome these problems, said Vu Vinh Phu, chairman of the Association of Supermarkets in Ha Noi.

According to a global study of retailers by AT Kearney, Vietnam ranks 14 out of the 30 most attractive newly-emerging economies, its lowest position in seven years.

Now it is high time domestic retailers drew up a more comprehensive strategy to secure a foothold in the private sector. – VOV

Tags: vietnam retail industry, Vietnam retail market