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Retailers lose competitive edge
Vietnamese firms are losing out to their foreign counterparts in the race for expanding their share of the lucrative retail market that is growing at 25 percent annually, industry insiders say.
HCM City has this year witnessed rapid expansion by foreign invested retailers.
Big C, a subsidiary of French Casino Group, has opened five new outlets in the city, bringing the total number in Viet Nam to 14.
Germany's Metro Cash & Carry has just inaugurated it's thirteen retail centre in southern Vung Tau City while Lotte Mart, owned by South Korean-based Lotte Group, has opened a new supermarket in District 11's EverRich Building in HCM City.
Many foreign retailers have announced their intention to put new projects into operation next year.
The expansion strategy has paid off for foreign retailers who have increased their combined share of the domestic retail market to 40 per cent from 10 per cent in 2008.
Nguyen Ngoc Hoa, Chairman of the Saigon Co.op, one of the country's leading domestic retailers, admitted that foreign retailers had developed strongly in recent years.
He said in the past foreign retailers wanted to locate their shops in big areas, often in the city's outskirts areas, but in recent years, they have shown their willingness to put up shop in inner city, renting smaller areas to develop their business.
The director of a Vietnamese retail company in the city said the fiercer competition has disadvantaged domestic companies.
Vietnamese retail enterprises could not match foreign firms in many aspects including financial wherewithal and the ability to absorb losses for longer periods, he said.
With their considerable financial strengths, foreign retailers were ready to pay higher rentals than market rates to open retail outlets in prime locations, he said.
And because they had the ability to absorb losses for 9 to 10 years, they often sold their commodities at lower than cost prices to attract customers in the initial years of operation, he added.
Domestic companies was not able to do this because they did not have the capacity to absorb losses for more than three to five years, he said.
An official of the Ministry of Industry and Trade said that according to current regulations, Viet Nam could apply the Economic Needs Test (ENT) before allowing foreign retailers to open their second and subsequent retail outlets. The test would take into account factors like the number of stores in area, market stability and population density.
Stores numbers are calculated based on the number of stores of the same scale and area of operation, while market stability is evaluated based on a formula showing the influence of new retail stores on others with similar products within the same geographical areas.
However, foreign firms were able to get around these strict regulations by setting up joint ventures or transferring their franchise to domestic companies in order to expand their business in the country.
To respond effectively to foreign competition, domestic companies needed to find their own ways to better themselves to maintain a firm foothold on home ground, Hoa said.
He suggested domestic retailers strengthen co-operation among themselves and find domestic partners to improve their financial potential and cut costs.
vietnamnews
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