Rural retail market likely to thrive in 2011

Retail markets in major provinces and cities like Hanoi, Ho Chi Minh City, Hai Phong and Da Nang will reach the saturation point in 2010, according to economic experts. At that time, foreign retailers will find out niches in rural markets where 75 percent of the Vietnamese population are living.

New markets stir up

According to statistics, Vietnam has more than 9,000 markets and nearly 50,000, stores where sold 90 percent of total goods consumed. Experts anticipated that the demand in rural areas would triple that in urban areas.

Although domestic retailers have many advantages, they hardly find an effective way to penetrate potential rural markets. Mr Vu Kim Hanh, Director of the Vietnam High Quality Goods Enterprise Association, said, the current retailing network of Vietnam can meet only 47 percent of rural market where more than 75 percent of the Vietnamese population are living. However, domestic retailers seem to disregard this potential market. According to rural people, only 10-15 companies have brought consumer goods to rural areas but most of them are foreign firms with production facilities in Vietnam or multinational firms. The rest of the market is mainly made up by Chinese low-quality commodities or Vietnamese local products.

Many domestic retailers have responded to programmes to bring consumer goods to rural areas or to encourage Vietnamese people to use Vietnamese goods by launching many creative promotion activities like organising shopping days or weeks, offering discount sales with consumer advice, providing medical check-ups for rural people, presenting gifts to studious students, training salespeople, etc. However, none of them have been considered introducing comprehensive strategies and solutions for rural market penetration or expansion.

The Ministry of Industry and Trade has organised more than 40 market days this year to sell Vietnamese goods in rural areas. But, according to many experts, many participants did not target at selling more in rural areas in the future.

Riding out difficulties

Ms Dinh Thi My Loan, Vice Chairwoman and General Secretary of the Association of Vietnam Retailers (AVR), said, although retailing is an important distribution channel, it serves only 22 percent in Vietnam, compared with 34 percent in Thailand and 51 percent in China. Many foreign retailers and wholesalers are eyeing Vietnam with a young population of about 86 million.

Dr Nguyen Quang A said the integration and development of modern retail market is considered an inevitable trend in the market economy though, the opening of retail market will put more pressure on domestic manufacturers, especially distributors. First of all, foreign retailers with powerful financial capacity will encroach upon the Vietnamese market. Worse, this may happen to the wholesaling sector, thus affecting the balance of production networks of the economy. Hence, according to Mr A, from now, if Vietnam wants to keep good conditions to develop the rural market in the future, policymakers should focus on improving the competitiveness of domestic firms in addition to strengthening the consumer confidence in products and services retailed by Vietnamese firms.

The Ministry of Industry and Trade pointed out that the rural market was still flooded with counterfeited and substandard goods and trade frauds were rampant. Market members make light of business registration, tax declaration, bookkeeping, financial statement, branding, hygiene and safety. To develop rural trade, according to many economic experts, the Government needs to apply consistent and comprehensive solutions and strategies. Remarkably, when the economy economic has signs of recovery and the rural market is largely untapped, the focus on this market will help boost domestic consumption, thus contributing to the sustainable development of the country. – VCCI

Tags: Vietnam retail market