Vietnam is set to deliver the highest retail growth rate in the continent between now and 2015 as global retailers take advantage of low barriers to entry, soaring tourism and a burgeoning middle class.
But an immature supply chain is stunting growth outside the two main cities and hindering local manufacturers and brands’ ability to compete with foreign products, argues an analyst.
Figures published by online newspaper VOV this week predict an annual retail growth rate of between 23 and 25 per cent from 2011 to 2015 and describes the market as “one of the most profitable investment areas for foreign distributors”.
With most of the focus of Asian retail growth being focused on China and the dysfunctional Indian market, Vietnam has languished in the shadows, overlooked as a nation with strong retail potential due to its comparatively low population of 90 million and low mean income level. But its main cities Ho Chi Minh, and the capital Hanoi are thriving commercial hubs; modern cities with functioning infrastructure and mean income levels substantially higher than in rural areas.
Regional and global retailers are recognising the opportunities afforded by a retail sector still dominated by traditional, family-owned retail businesses – the Ministry of Industry and Trade estimates organised retailing still accounts for just 15 to 20 per cent of the nation’s total retail sales. About 40 per cent comes from traditional markets and the balance from private street traders.
The ministry’s senior market researcher Dr Pham Tat Thang told VOV that in 2010 Vietnam had only 450 supermarkets, 80 trade centres and 2000 convenience stores. By contrast it boasted 8600 traditional markets.
He argues an uneven distribution system is hindering the development of the retail market.
Logistics is a challenge to a nation which is geographically long and thin – it takes more than two hours to fly between Hanoi in the north and Ho Chi Minh in the south and the road network is notoriously dangerous. Coastal shipping thrives, but is slow and unsuited to perishables.
The immaturity of the supply chain is counting against locally made products holding their fair share of shelf space in organised retail chains such as Big C, Makro and Parkson, mostly foreign owned.
Thang told VOV it is time to apply a comprehensive vision of the goods distribution network to supply Made-in-Vietnam products to the wider consumer community.
“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,” reported VOV.
“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.”
Thang says local consumers don’t turn a blind eye to Vietnamese products if manufacturers seek to cater to their tastes.
But if businesses want to hold their own against foreign companies, they need not look to the state for support, rather work together and adapt to market demand, VOV concluded.
