Fierce competition in the retail industry

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Vietnam retail market is developing quite strongly when the total retail sales of goods and social service revenue increase rapidly. Photo: S.T...

Great opportunity

According to Nielsel Market Research Company; In Asia, the retail market in Vietnam is one of the high growth markets. Vietnam has many favorable conditions such as increasing per capita income, growing macro economy and the signing of new free trade agreements (FTAs). These favorable conditions will bring certain bright points to the economy in general and the retail market in particular.

A report from the Domestic Market Department (Ministry of Industry and Trade) also stated: The market will be more dynamic and diversified because some product imports will increase due to eliminating tax barriers. Typically, the ASEAN Economic Community (AEC) is a great opportunity for Vietnam's retail industry to attract capital flows from ASEAN, because from 2018, the import tax rates of most commodities fell sharply. Joining new generation FTAs, especially CPTPP, is an opportunity for Vietnam to join the supply chains of many global corporations, especially the supply chain of electronics and high technology; thereby restructuring the import-export market in a more balanced way, not relying solely on Chinese and East Asia markets.

The Vietnam retail market has recently developed strongly with an increase in domestic capital and foreign direct investment (FDI). Major foreign retail corporations such as Lotte, Central Group, Aeon, Circle K, K Mart, Auchan, and Family Mart ... continuously invest in the expanding retail market in Vietnam. Foreign companies which currently have the largest segments in Vietnam's retail market include Central Group from Thailand with the acquisition of BigC supermarkets and Nguyen Kim electronics supermarket. In addition, Central Group also opened Robin’s shopping center and Supersports stores in Vietnam. Another name, although coming later, was Aeon (Japan) with the investment of 3 Aeon Mall shopping center complexes and developing convenience store chains through the acquisition of Citimart brand. Lotte Group from Korea is also present in the supermarket segment with Lotte Mart system and online shopping channel lottedatviet.vn. The leading French retail group, Auchan, also recently participated more strongly in Vietnam's retail market by introducing the Simply Mart retail chain, they plan to have 20 supermarkets in the northern region by 2020. This shows that the potential of Vietnam's retail market is huge but the race to gain market share in this area is also increasingly fierce.

The major challenges

Ms. Le Viet Nga - Deputy Director of Domestic Market Department said: Currently, Vietnam retail market has 8 major segments with the participation of major retailers including: Hypermarket / distribution trade centers, shopping centers, complex shopping centers, supermarkets, mini supermarkets / convenience stores / specialized stores, electronics supermarkets, online retail and television sales. It is worth noting: "The increasing penetration and expansion of foreign distributors has put great pressure on and concerns for domestic retailers," Ms Nga said.

Many experts believe, in the context of integration, the biggest challenge is the competitive pressure on domestic retailers. Vietnam's retail businesses (especially small and medium retailers currently account for more than 90% of retailers) having to compete directly with leading foreign retailers in the Vietnamese market. Domestic retailers lack capital, people, equipment and information to be able to compete fairly with foreign investors from multinational corporations (MNC) and transnational corporations (TNC). On the other hand, foreign enterprises with advantages in capital resources, management experience and operational systems, only lack a retail infrastructure system and distribution channel to bring diverse products to Vietnamese consumers. Therefore, the fastest way for these enterprises to penetrate into Vietnam market is through mergers and acquisitions (M&A).

A shortage of professional managers and executives at traditional business establishments affects the attractiveness of Vietnam's retail market. In addition, there are still concerns about the phenomenon of loss reporting for price transfer and tax evasion, requiring auditing and inspection to clarify the case of retail companies reporting losses...

Need for an equal competitive environment

From the perspective of enterprises, representatives of Hanoi Trading Corporation (Hapro) raise their views: Competition between businesses and sales channels brings benefits to consumers. Customers will be served better and have more choices. However, the State needs to create a fair and transparent competitive environment in the retail race, between domestic, foreign, traditional and modern retail channels. The state should develop policies to support domestic enterprises to develop brands, support human resource training, provide market information, trade promotion and at the same time, enterprises should have access to business premises with favorable position and reasonable overheads. Vietnamese enterprises also need to strengthen the connection from production to distribution to support each other to develop the market; strengthen communication to consumers to support goods and products produced and consumed by domestic enterprises.

Regarding the development of Vietnam's retail industry, MSc. Vu Thi Hong Phuong - University of Commerce stated: The introduction of preferential policies is necessary to attract foreign investment, but domestic enterprises should be prioritized (if not violating international commitments), the first priority for cases creating high added value, both bringing benefits to the country and ensuring the interests of domestic enterprises. Regarding specific issues, according to Ms. Phuong: "Currently, foreign retailers have advantages in proposing ground positions so it is necessary to create favorable or fair conditions between domestic and foreign enterprises in order to protect and develop domestic retail businesses. Vietnam needs to make full use of its economic needs test (when possible) through completing the legal framework and clearly defining the criteria to open a competing retail outlet to avoid markets being taken over by foreign enterprises."

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In addition, some experts recognized: The State should strengthen support for domestic retail businesses on macro policies, relating to the weaker aspects of businesses to close the gap with foreign enterprises.