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Pushing into rural markets
Domestic companies have yet to tap the rural market and its great consumer potential, according to the Ministry of Industry and Trade.
Up to 76.5 per cent of the country’s population, which contributes 26.5 per cent of the national GDP, lives in rural areas.
Rural families’ incomes have increased significantly, with monthly income averaging VND1.5 million (US$90).
They have been buying more food as well as more expensive items like mobile phones, refrigerators, televisions and internet services.
Little competition
Since most foreign companies have made little effort to penetrate rural markets, local businesses face little competition in wooing customers to quality products.
Nguyen Thi Hong Huong, general director of Vinatex Fashion Trading Company (Vinatexmart), said: "Even in the current economic situation, the purchasing power in rural areas seems stable while cities have been badly affected."
"Vinatex, for instance, had a daily turnover of VND70 million ($3,900) during a trade fair held recently in southern Long An Province, much higher than at a similar event in a big city," Huong said.
In spite of having such advantages, the rural market is still ignored by domestic companies, who have focuses on producing exports and selling products in urban areas.
The trade ministry has urged the local business community to pay attention to the rural areas to ensure sustainable development and improve farmers’ living standards.
But most companies have not heeded the warning until now.
The current recession has left many domestic companies short of orders from countries that import Vietnamese goods.As a result, many Vietnamese enterprises have begun shifting their business to the domestic market.
To support companies, the trade ministry has launched a series of sales promotions, exhibitions and fairs, all of which were aimed to promote the purchase of locally made products.
The ministry has also to distribute coupons worth VND100,000 and 500,000 each to poor families to encourage consumption.
Hoang Tho Xuan, director of the Domestic Trade Policy Department, said businesses that supply essential goods appropriate to the rural population had been given incentives to sell their products.
"The ministry’s activities have helped minimise the volume of fake and low-quality goods, as well as unsafe food in the rural market," Xuan said.
In spite of being given such active support from the ministry, many domestic companies don’t know how to penetrate the rural market, according to former trade minister Truong Dinh Tuyen.
They had not realised its importance and not prepared long-term business and production strategies, Tuyen said.
To dominate a market, companies must find ways to encourage local consumers to use their products.
Companies needed to set up a stable distribution system with a large sales network in addition to ensuring product quality.
Xuan said that companies must link local retail shops with their regular distribution systems.
Little expansion
Many experts claim that no Vietnamese enterprises have to date really dominated the rural market. Enterprises must also conduct research of the rural market so that they can discover consumer habits, they said.
In addition, companies can increase their market share by using retail agents and groceries in localities, thereby cutting distribution time and costs for hiring agents.
Vissan General Director Bui Huy Duc said Vietnamese farmers’ consumer habits had changed.
In the past, they were interested in buying cheap goods but now pay more attention to quality as well as trade names.
If companies continue to sell poor quality products, they will not be able to gain a firm foothold in the rural market, according to Duc.
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