|A client browses electronics at a shop on Hai Ba Trung Street. Domestic retailers of electrical appliances are concerned about the difficulties they will face after the market is opened to foreign retailers starting next year. — VNS Photo Truong Vi|
HA NOI — Domestic retailers of electrical appliances are concerned about the difficulties they will face after the market is opened to foreign retailers in the next few months.
World Trade Organisation commitments allow foreign retailers to set up wholly foreign invested distribution channels and stores in Viet Nam as of January 1, 2009.
Foreign retail giants have expressed interest in the sector and mapped out plans to enter the market, according to insiders from the domestic retail sector.
Japan’s leading retailer, Best Denky, has joined with local retailer Ben Thanh Trading and Marketing Company to set up two electrical superstores in Ha Noi and Can Tho.
Other giants including South Korea’s GS Retail and Best Buy from the US are preparing to open superstore chains nationwide.
Growth in electronics consumption is expected to rise rapidly in the future, as more and more Vietnamese can afford high-end electronics. According to GS Retail, the sector reported turnover of US$3 billion last year and the growth rate in 2008-2010 will reach 30-40 per cent year-on-year.
Foreign retailers will face difficulties expanding in Viet Nam as they must get a business licence for each separate store, however, industry insiders warned that only roughly 20 per cent of domestic small-sized retailers would likely survive when the market is fully opened.
Major retailers such as Nguyen Kim, Pico and Cho Lon would also face strong competition and likely lose market share, they said.
Ngo Thanh Dat, marketing director of Pico Joint Stock Company, one of the country’s largest electronics retailers, said that foreign retailers strengths in financing and experience would be their greatest challenge.
Dat said foreign retailers could easily afford the best locations to open large stores, often with floor space of over 10,000sq.m. They also provide more competitive pricing as global retailers enjoy better discounts from producers.
He cited Pico as an example, saying that with turnover reaching roughly VND200 to 400 billion ($12 million – $24 million) yearly, Samsung Electronics provided a VND2 billion loan to Pico allowing them to quickly develop.
To be able to survive, Dat recommended domestic retailers work together to counter the larger foreign competitors. It is also necessary to speed up of human resources training, Dat said.
Sai Gon Nguyen Kim has plans to open stores in nine cities next year, and hopes to be present in all cities and provinces by 2015. The group has so far opened two retail centres in HCM City and Ha Noi.
Pico and Cho Lon also plan to open a chain of retail centres nationwide. —