Helping local retailers beat foreign competition

The Ministry of Industry and Trade (MoIT) has decided to support the development of domestic retailers in order to help them compete with foreign-owned businesses that have captured a major share of the retail market.

An MoIT report shows that in 2016, foreign-invested businesses accounted for a 70-percent share of the Vietnamese retail market with sales through convenience stores, about 17 percent of sales through shopping centers and supermarkets, 15 percent of sales through mini marts, and about 50 percent of sales through the internet, television and telephone.

According to Hanoi Supermarket Association President Vu Vinh Phu, a number of large supermarket chains in Vietnam have been acquired by foreign groups, creating heavy pressure on domestic retailers.

Vu Vinh Phu said greater attention should be paid to planning to increase the availability of land for lease to retailers so that they can build distribution networks. At the same time, favorable conditions should be created for retailers to access preferential loans. “Thai and South Korean retailers can use capital resources from their parent companies and seek zero-percent loans from local banks. Meanwhile, Vietnamese retail businesses have to borrow money with interest rates ranging from 8-10 percent. So, Vietnamese retailers are inferior to foreign rivals in terms of not only management capability and business experience, but also production cost,” he emphasized.

Currently, only two Vietnamese retailers, VinGroup and Saigon Co.opmart, are capable of competing with foreign rivals. In the opinion of Vu Vinh Phu, appropriate mechanisms should be created to promote linkages among domestic retailers in order to build their combined strength, which is crucial to their success in the competition with foreign rivals in the home market.

For their part, retail businesses need to make greater efforts to enhance their competitiveness. Vu Vinh Phu raised a question: Why are goods in supermarkets always more expensive than in traditional-style markets? Apart from high space hire and labor costs, another reason is that domestic retailers have yet to set up closed supply chains that involve all stages from production to sale.

“In 2016, VinGroup signed cooperation contracts with nearly 250 domestic businesses. Under the contracts, these businesses are not required to offer VinGroup any discounts for one year. They have pledged to supply VinGroup with high-quality products. Selling quality products at reasonable prices is the key to VinGroup’s firm market position,” affirmed Vu Vinh Phu.

Phuong Lan / VEN