Mounting pressure on competitive retail market

NDO – Considered one of the world’s 30 most attractive retail markets, the Vietnamese retail market has constantly drawn foreign investors in recent times. Alongside their superiority in terms of finance and supply sources, foreign retailers have applied diverse business strategies, together with modern and professional administration methods. In that context, it is a must for Vietnamese enterprises to deploy reasonable development measures and strategies in order to avoid losing on home territory.

Pressure from foreign opponents

The recent launching of the first 7-Eleven store, the US-based world largest convenience store chain, in Ho Chi Minh City has drawn attention from many consumers. In addition to essential products, 7-Eleven Vietnam is introducing branded products to Vietnamese consumers. The store also offers office lunches with more than 20 versatile dishes, changing every day, in line with the local culinary culture. Particularly, 7-Eleven provides essential facilities for consumers such as clean eating areas, Wi-Fi coverage, ATM services, card payment and the 7 Rewards mobile application to browse and shop online. In the near future, 7-Eleven plans to open four additional stores, towards realising the target of 100 stores in three years and 1,000 stores after 10 years of operating on the Vietnamese market.

The appearance of the 7-Eleven convenience store chain in Vietnam signifies new, tenser and fiercer competition in wresting market shares on the retail market. As shown in statistics, the Vinmart+ convenience store chain, invested by Vingroup, is currently prevailing with about 900 stores across the country, followed by Circle K with 242 stores, B’s Mart with 166 stores and Family Mart with nearly 150 stores. Although the retail market is a “lucrative pie” with a lot of potential, Vietnamese businesses are facing numerous difficulties caused by limitations in resources, business skills and administration systems. Meanwhile, with planned strategies and drastic investment in various forms, foreign investors have rapidly prevailed in this market with a market share of 53%.

According to Vu Vinh Phu, a retail expert, overseas retail groups are strong in terms of capital, business technology, corporation administration as well as global procurement and the distribution chain, which can help them overwhelm domestic businesses. Meanwhile, Vietnamese firms are facing extreme difficulties concerning capital and production conditions, with small and sporadic distribution systems. 7-Eleven is not only a tough opponent for domestic companies but also a factor igniting fiercer competition on the Vietnamese retail market. They are penetrating into a potential market by providing round-the-clock fast food and convenient goods for daily use. It is still unknown whether the system will operate effectively and win sentiments from customers or not, but fast meals bearing famous world brand names along with suitable prices for office workers’ income and round-the-clock services are advantages of 7-Eleven.

Promoting links to develop new retail forms

Deputy General Director of the Hanoi Trade Corporation (Hapro), Nguyen Tien Vuong, affirmed that in order to be able to compete against foreign goods and hold sustainable footholds, domestic businesses need to enhance the quality of commodities, reduce prices, develop retail products with high-quality supply services, and make use of opportunities to grasp the market. Vietnamese firms should focus on the core issues, including overcoming challenges posed by shifting from traditional procurement models into modern forms; investing in retail store and supermarket chains; boosting links to develop new retail forms; developing trademarks and participating strongly in sales models via e-commerce and online sales on television and phones. They also need to promptly set up and develop the system of outlets in localities, connect with providers and become distributors for many manufacturers, aiming to create goods channels to best serve the domestic market and exports.

At present, Hapro is developing a system of convenience stores and supermarkets clinging to residential areas, while continually developing the Hapro brand in new residential areas and suburban areas and focusing on developing the rural market, considering this as the corporation’s strategic market in the time ahead.

According to a representative from the Ho Chi Minh City Union of Trading Cooperatives (Saigon Co.op), in the context of fierce competition, it is inevitable that businesses must find their own ways to survive. Saigon Co.op is determined to continue expanding the system of Co.opmart and Co.opFood supermarkets, which are of medium scale and are aimed at the majority of customers, while fostering joint venture with partners to implement large-scale models, such as Co.op Xtra hypermarket and Vivo City complex. In this joint venture, Saigon Co.op defines the principle of its monopoly over the retail section in supermarkets and hypermarkets.

The building of retail strategies and the planning of the retail and supermarket network in Vietnam over the past time have been mainly spontaneous, leading to an imbalance between supply and demand nationwide as well as in key locations. Therefore, it is imperative that the State along with functional agencies plan specific policies to develop the retail network in accordance with the current situation, and to issue favourable financial and credit policies as well as investment encouragement policies, both at home and abroad, aiming to help Vietnamese businesses to develop large-scale systems and Vietnamese supermarket chains.

Vietnam is a potential retail market but is yet to be fully tapped into. Retail systems are still absent in a vast rural region nationwide, particularly in communes and townlets. Therefore, the exploitation of this market will surely create a breakthrough for Vietnamese retailers.

PHAN THE RUE

Former Deputy Trade Minister



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