Poor infrastructure handicaps retail sales

Viet Nam should focus on developing its logistics infrastructure and distribution system to keep pace with the rapid growth of its retail sector, a conference heard in HCM City yesterday.

Organised by the Viet Nam Supply Chain Community, the conference “Viet Nam Retail – Logistics – Distribution” attracted nearly 200 CEOs and managers.

Logistics infrastructure, including storage and support facilities, transport infrastructure and manpower competencies, helps reduce costs and make solutions more competitive, Gopal Ramasubramaniam, transportation and logistics director of Frost and Sullivan, Asia Pacific, said.

They are all very important to a country in terms of attracting foreign direct investment and determining global competitiveness.

Logistics infrastructure is also important to a company for deciding where to locate an investment, build a factory, or establish an outlet.

The country has 37 airports, including six international, and five proposed international ones, that can handle 0.005 per cent of total freight.

“Air infrastructure needs significant capacity expansion to attract higher freight volumes.”

Fourteen major seaports, which handled nearly 0.2 per cent of the total freight last year, are plagued by ageing infrastructure and also need capacity expansion.

Roads handled 77.8 per cent of the freight, but the existing road infrastructure fails to fully meet the demand in rural areas due to poor access. Development of road infrastructure, especially in rural areas, will help tap the huge rural demand.

“Storage and warehousing infrastructure largely remain basic, with manual operations and, in many cases, lack of proper support facilities. The country needs to build advanced warehouses with specific focus on climate-controlled storage facilities, he said.

Retail growth

Viet Nam’s retail industry is set for double digit growth in 2011-13, with retail sales expected to surpass VND2.4 trillion (US$126.1 million) by 2013, Jeffrey Bahar, managing director, Southeast Asia, Spire Research and Consulting Company, said.

It is expected that by 2010 the modern distribution system will account for 30-40 per cent of the marketplace and 60 per cent by 2020.

Many foreign retailers and distributors have also announced plans to expand distribution networks to cities and provinces throughout the country, he said.

Despite the potential of the retail market, the country’s relatively poor infrastructure, especially the highway system, is one of the key hurdles for distributors in delivering goods on time and safeguarding quality during transportation, he added.

Tran Tinh Minh Triet, a retail consultant, said finding the right locations to open outlets and managerial experience are also problems faced by local retailers. — VNS

Tags: Vietnam Infrastructure, Vietnam Retail Sales