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Modern distributors still cannot reach out to rural areas
Modern Vietnamese businesses are still struggling to reach out to massive rural markets.
To date efforts may have been centered on the city but 70% of Vietnam’s consumers are in the countryside.
“Saigon Co-op Mart has been expanding its network of supermarkets. But we still cannot meet the demands of consumers in rural areas,” Chairman of Saigon Co-op Mart chain Nguyen Ngoc Hoa admitted.
In Vietnam, consumer goods have been distributed through traditional channels like markets, shops and small merchants. This method of distribution has created conditions for counterfeit and low quality goods to be put into circulation.
In fact, Vietnamese businesses have been trying to build up modern distribution chains over the last ten years - but they are still failing to reach out to rural areas.
Rural areas, according to the Business Studies and Assistance Centre (BSA), house 70 percent of the population but makes up only 14-25 percent of total retail revenue.
However, it is not so easy for domestic enterprises to form a network large enough to cover all corners of the domestic market. Luong Van Vinh, general director of My Hao Cosmetics Company said that although the company has been aware of the importance of the retail network, it still cannot develop the network as it wants.
Vinh said it will be very costly to develop the retail network.
“I suggest that producers should cooperate with each other in distribution which can help us reduce costs,” Vinh said.
Meanwhile, according to Nguyen Ngoc Hoa from Saigon Co-op, most distribution units in Vietnam are joint stock companies. Leaders of joint stock companies have always been under pressure of having to earn money for the company. Shareholders will not accept the managers who take loss for two consecutive years.
Meanwhile, Hoa said, foreign distribution companies have advantages over domestic ones, because they are not put under pressure to achieve profits in the first years of operation.
Under government tax regulations, businesses can only spend a maximum of 10 percent of total expenses on advertising. The figure is expected to increase to 15 percent in the near future. However, Hoa says the limited sums of money businesses can pay for advertisement have hindered their efforts to grow their brand and reach.
vietnamnet, vneconomy
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