Securing market shares to compete with foreign retail outlets

Since joining the World Trade Organisation (WTO) six years ago, Vietnam’s retail market has developed rapidly. Almost all the world’s leading retail trademarks namely Metro, Big C, and Lotte are available in Vietnam. Recently, the US’ Walmart group – one of the world’s leading retail groups announced that it will establish a new retail system in Vietnam. To cope with tough competition, domestic businesses need to make greater efforts to expand this system and increase market shares.

Being one of the vanguard businesses in the field of supermarket, Nhat Nam Joint Stock Company (Fivimart) has opened 15 stores in Hanoi and aims to have 30 supermarkets nationwide. However, it is not easy for domestic retailers to break in to the market place.

Vu Thi Hau, deputy general director of Fivimart said over the next five years, Fivimart will develop and set up more supermarkets to meet consumer demands. Fivimart will attach importance to developing branches in provinces and cities on the outskirts of Hanoi, targeting middle-income customers.

A shocking statistic is that foreign supermarkets often achieve higher turnover than local businesses, often 20-30 times more. Therefore, experts advise that local retail businesses should strengthen cooperation and devise effective strategies to compete with strong rivals, particularly in terms of finance and human resource.

Four big companies in Vietnam’s retail market namely Hapro, Satra, Phu Thai and Sai Gon Co-op have cooperated to build a big trademark to compete with well-known foreign brand names. However, the cooperation has not yet gained positive results.

Dinh Thi My Loan, President of the Association of Vietnamese Retailers reports that there are still shortcomings in support policies as well as shortages in capital and human resources.

The Association of Vietnamese Retailers expressed their wish to devise proper policies and regulations to support associations and industries.

According to the Ministry of Industry and Trade (MoIT), by the end of 2012, the Vietnamese market had approximately 700 supermarkets, of which foreign groups made up 40 percent. Out of 125 trade centres, foreign groups accounted for 25 per cent.

According to Vo Van Quyen, head of the Market Department under the MoIT, it cannot be said that foreign businesses have conquered local market shares. Aswell as the modern retail system of local businesses, traditional distribution channels through local markets nationwide have accounted for 75 percent. In addition, there are more than one million retail establishments nationwide.

However, 2015 is predicted to be a booming year for the retail sector. Many people worry that the strong development of foreign retail distribution groups in Vietnam means that local retail businesses’ market shares will be reduced. To help these businesses, the government should issue incentive policies.

Mr Quyen said that there should be support policies in the distribution field in the future. Apart from policies to create an equal competitive environment, there should also be policies to implement the roadmap under the WTO commitments as well as policies to support Vietnamese businesses, especially SMEs in production, circulation and distribution, Quyen added.

Although foreign businesses made up just 3.5% of total retail sales in Vietnam, they have had more advantages and consequently developed strongly. Experts say that local businesses should heighten their vigilance over foreign rivals, especially in the trend of opening the retail market.