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Local retailers overtake foreign chains, experts say

In Uncategorized on December 24, 2010 at 4:28 am

The number of wholly-foreign owned retailers in Vietnam remains limited after the Southeast country opened the distribution and retail market under its World Trade Organization commitments in January 2008.

(Photo:Minh Tri)

Despite weaker financial potential, technology and management skills, local retailers are now still outnumbering foreign chains in supermarket segment, analysts said.

Vietnam’s biggest supermarket chain Saigon Co.op opened 50 supermarket nationwide, an increase of 22 in the last two years. Its revenue growth rate is up to 35-40 percent per year.

Following is Maximark opening five outlets in Ho Chi Minh City and Nha Trang with an average area of 10,000 square meters at least.

“We [local retailers] are now confident that our supermarket system can compete with foreign chains,” said Nguyen Thi Phuong Thao, director of the HCMC-based Maximark Cong Hoa.

Analysts said some local retailers teamed up with foreign counterparts, including G7 Trading and Service JSC and Japan’s Ministop.

Local retailers completely overtook foreign players in home appliance segment. Four leading retailers including Saigon Co.op, Hapro, Satra and Phu Thai Group cooperated with in each others to set up Vietnam Distribution Associate Network Development and Investment JSC, marking a milestone in the development of Vietnam’s retail sector.

“Local retailers’ biggest weakness is technological infrastructure, human resource and trading skill. But we have good knowledge of consumer culture, as well as getting the government’s preferential policies,” said Phan The Rue, chairman of the Vietnam Retailers Association.

Though the share of modern retail sales in Vietnam is less than 20 percent now, experts expect it to grow rapidly. Statistics showed 50 percent of households in big cities preferred to shop at traditional markets.

Analysts said traditional retail outlets still have an edge over supermarkets as their distribution network is wider. Some traditional markets including HCMC’s Ben Thanh, Hue’s Dong Ba and Hanoi’s Dong Xuan are popular and located at downtown area.

A food supplier in HCMC said his firm’s sales from tradition markets make out of nearly 50 percent of the monthly figure.

“Vietnam’s retail market remains a combination of traditional markets and shopping centers. However, consumers will be gradually familiar with supermarkets’ convenience and modernity, and then they will switch their shopping habits,” said Richard Leech, executive director of CBRE Vietnam.

Experts said consumers have to deal with many issues when shopping at traditional markets, including fake products and inconvenient shopping environment.
Vietnam’s sales of retail sector are estimated to reach more than VND1.44 trillion (US$72 billion) this year, an increase of 20 percent year-on-year. The U.S.’s market research firm RNCOS expects Vietnam’s retail market will likely to reach US$85 billion in 2012.

The Southeast country fell to the 14th position this year after being ranked at sixth among the 30 best emerging markets for retailers in 2009 by global management consulting firm A.T. Kearney.

Source: SGGP

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