The Hanoitimes - Vietnam’s retail market is considered one
of the most profitable investment areas for foreign distributors, as it is
predicted to grow at 23-25 percent annually from 2011 to 2015.
However, the ratio of Made-in-Vietnam products
to imports remains modest given the great potential of a market of nearly 90
million consumers. Vietnamese products lose out to imports, especially
contraband goods, on the home market.
Inefficient
distribution network
An uneven distribution system is one main
issue hindering the development of the retail market, says Dr Pham Tat Thang, a
senior market researcher of the Ministry of Industry and Trade.
Statistics show that in 2010 Vietnam had more
than 450 supermarkets, 80 trade centres, over 2,000 convenience stores and
approximately 8,600 traditional markets. only 15-20 percent of retail sales
came from the modern trading system, while 40 percent was generated from
traditional markets and the remainder from private street traders.
Several companies with popular brand names
such as Garment 10, Viet Tien Garment, Nha Be Garment, Trung Nguyen Coffee,
Vinamilk and Kinh Do Cookies have developed distribution networks across the
country. Yet, they are just a drop in the ocean for a large, potentially
lucrative market like Vietnam.
The fact is that Vietnamese products make up a
large proportion of goods in leading supermarkets such as Big C, Hapro, and
Saigon Co.op. However, they have yet penetrated traditional wholesale markets
including Dong Xuan in Hanoi, Rong in Nam Dinh city, Dong Ba in Hue city, Han
in Danang city, and Ben Thanh in HCM City. These markets are regarded as ideal
for low-cost Chinese goods which are then distributed to smaller markets and
private traders across the country.
Dr Thang says it is time to apply a
comprehensive vision of the goods distribution network to supply
Made-in-Vietnam products to the wider consumer community.
During WTO negotiations, Vietnam tried to
claim several rights protecting the interests of small traders. one of those
rights was the Economic Needs Test (ENT), with which foreign distributors have
found it difficult to enter the Vietnamese market en mass. In its White Book,
the European Chamber of Commerce (Eurocham) in Vietnam even described ENT as a
key market accessibility obstacle for investors.
In the near future, ENT and other technical
barriers will be removed and domestic distributors will face fierce competition
from abroad. one feasible solution, according to Dr Thang, is to make the most
of the nation’s 22.8 million internet users and more than 120 million phone
subscribers to develop sales channels for Vietnamese products.
Mounting
pressure
Dr Thang points to the fact that contraband
goods imported from China are cornering Vietnam’s retail market. He quotes
world economic experts as saying no country in the world can compete with
Chinese goods in terms of price, and Vietnam is no exception.
It is worth remembering that several decades
ago many Chinese goods such as Wanli beer, china, vacuum flasks, electric fans
and clothes flooded the Vietnamese market. After Vietnam restructured domestic
production, improved product quality and ensured food safety and hygiene,
Vietnamese products gradually won consumer trust and regained the lion’s share
of the market. To date, no bottles of Wanli beer are sold in Vietnam. Hanoi and
Saigon beer, Ming Long and Hai Duong china, Rang Dong vacuum flasks, Dien Co electric
fans, and Viet Tien, Garment 10 and An Phuoc clothing are now favourites with
local consumers.
It is obvious that local consumers do not turn
a blind eye to Vietnamese products if manufacturers respect and seek to cater
to their diverse tastes. Businesses are advised not to look for support from
the State but to unite and quickly adapt to market demand. In addition,
consumers are required to be clever to protect themselves against products of
unknown origin. only when local businesses and consumers are aware of this,
will Vietnamese products truly gain a firm foothold on the domestic market.
VOV
Business & Investment Opportunities
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