Features

With Vietnam’s anticipated acceptance into the World Trade Organization by the end of this year, especially after reaching an in-principle bilateral agreement with the US recently, giant multinational retailers are rushing to cash in on the local market, posing great challenges to Vietnamese retailers, who are financially weak and do not have much experience and professional expertise in the business. How will they fare? Nguyen Hong reports.

Singaporean giant South Asia Investment Pte Ltd could be seen one of the most sharpest and fastest foreign players in the race to enter the Vietnamese retail industry, which still holds big potential for foreign investors.
The company, a member of leading Singapore retailer Dairy Farm International Holdings Ltd, has devised an ambitious plan to open a chain of supermarkets and shops in Ho Chi Minh City.
Under the plan, its affiliate in Vietnam, Giant South Asia Vietnam Ltd, would set up its head office at 230 Nguyen Trai Street in District 1, where the local supermarket chain Citimart is already operating.
The company also wants to take over and upgrade all Citimart supermarkets in Ho Chi Minh City on Le Duan, Le Van Sy, Nguyen Thi Minh Khai and Le Thanh Ton streets. The Vietnamese government has given the green light to the company and the license is to be awarded soon.
With some 2,600 stores and supermarkets throughout Asia, Dairy Farm has a competitive edge over rivals from Europe, as it has experience in supermarkets management and retailing in the region.
South Korea’s leading retailer, Lotte Mart, a branch of the Lotte Group, which has already made investments in Vietnam through the fast-food chain, Lotteria, plans to establish a subsidiary in Vietnam to operate wholesale and retail super-stores, also in Ho Chi Minh City.
Lotte Mart chief Lee Chul Woo discussed the plan with municipal authorities during a recent visit to the city to study its business environment and seek opportunities for investment. Local officials said the city was willing to provide full support.
China’s Shenghui Group is another case in point. In a recent meeting with Mayor Le Thanh Hai, the group’s president, Qiu Min, said he wanted to build a $300 million shopping mall in the city’s Saigon South area. Peter Ty Tran, the group’s representative in Vietnam, said that Shenghui wanted to retain sole ownership of the project if it should proceed. “We will meet with city officials to see whether a plot of 17 to 20ha of land in Saigon South is available for the project,” Tran said.
The UK’s Tesco, the world’s sixth-largest retail group with annual turnover of $40 billion, has also come to Vietnam, and Wal-Mart and Carrefour have also put Vietnam in their list of markets for expansion.
Meanwhile, international retailers operating in Vietnam are preparing to expand. Germany’s Metro Cash & Carry has broken ground for a supermarket in Haiphong and another in Danang, its fifth and sixth in Vietnam.
To strengthen its competitiveness, Metro intends to take measures to stabilise and improve the quality of products provided by suppliers. The company plans to develop eight stores in Vietnam with a total investment of $120 million.
The French supermarket chain Big C, which has supermarkets in Ho Chi Minh City, Hanoi and Dong Nai, also plans to open new stores in Can Tho, Danang, Hanoi, Haiphong and Ho Chi Minh City, also at $120m in operations.
In June last year, Malaysia’s leading shopping mall operator, Parkson Corporation, a subsidiary of Lion Diversified Holdings Bhd, opened its first department store in Ho Chi Minh City, with 150 stalls selling more than 500 well-known local and international brands.
With 36 stores in Malaysia and 40 others in China and average annual sales of $1.32bn, Parkson plans 10 stores in major cities like Hanoi, Ho Chi Minh City, Danang, Can Tho, Hue and Vung Tau with total capital of $70 million.
The appearance of big international retailers is result of the Vietnamese government’s policies to open up the retailing market, yet it also poses a great challenge to Vietnamese retailers, who are financially weak and do not have much experience and professional expertise in business.
So domestic players are bracing for the invasion by positioning themselves in different niches.
Saigon Co-op, the owner of the Co-opMart chain, is forming an alliance between its chain and the trading system of the Saigon Trading Corporation (Satra) to strengthen their position on the market.
“We have been able to develop only 14 supermarkets since 1996, while foreign groups can open tens of supermarkets a year. With an alliance, we can concentrate human resources and financial capacity and apply modern management technology to increase our scale and strength,” said Nguyen Ngoc Hoa, Saigon Co-op’s general director.
The alliance between the two local giants has been hailed as a good solution, as Satra has 35 subsidiaries that play a leading role in the food processing and trading sectors in Ho Chi Minh City, such as Vissan, Can Tre, Cofidec and APT. The state-owned trading group has ample and stable suppliers in addition to a good system of food transport and storage. It also has large spaces that can be turned into good commercial outlets.
Saigon Co-op, meanwhile, has good outlets and a strong customer base. It has submitted to the city government a plan to set up a two-member limited liability company to develop and operate a retail store chain called Satra Co-op Mart. The planned company would have initial capital of VND100 billion with the two partners holding an equal stake.
For its own part, Saigon Co-op is trying to improve its competitiveness and has invested $1.5 million to develop a supermarket management software system and expanded warehouses, and has built a large distribution centre in an effort to reduce costs.
Hoa said the chain has plans to co-operate with Satra to build supermarkets nationwide to make local consumers familiar with its brands. It will expand the warehousing system and apply international standards in management. Staff has been sent overseas to learn modern sales and management methods.
Nguyen Thi Nghia, president of the management board of the Saigon Co-op, said for the domestic retail sector, advantages and disadvantages balance. She feels Saigon Co-op is well prepared for opening the retail sector with Vietnam’s entry into the WTO and is ready to face the influx of international enterprises with deep pockets.
“Competition would be stiff, but opening the local market will generate more opportunities for local businesses and also help them improve capacity by forcing them to survive,” Nghia said.
Intimex, a strong operator under the Ministry of Trade, has devised a 10-year development strategy, setting an ambitious goal of 30 per cent business growth annually.
The company plans to develop three levels of supermarkets and commercial centres. Convenience stores will sell necessities in small neighbourhoods; supermarkets will cater to the majority of consumers, providing them with everyday necessities at an average price; and commercial centres will serve high-income earners and tourists. The company will also develop a large warehousing and distribution centre.
The G7 Trade and Service Co Ltd, a subsidiary of Trung Nguyen Coffee, plans to develop a new domestic distribution system and retail chain worth $395m. The G7 Mart aims to connect wholesale suppliers to the retail market and enhance the competitiveness of the domestic distribution system.
Dang Le Nguyen Vu, chairman of G7’s management board, said G7 Mart aims to become Vietnam’s No 1 distribution system as a counterbalance to foreign distributors and to assist Vietnamese trademark development. The group will initially focus on such products as processed foodstuffs, alcoholic beverages, cosmetics and consumer products. The company plans to open 5,500 stores throughout the country in the first phase and expects to have 10,000 stores, 18 warehouses, and seven trade centres over five years.
Vu, also general director of Trung Nguyen Coffee, stresses that the vital factor for the survival of the domestic distribution system in the alliance between producers, traders, storeowners and vendors at markets. They should co-operate to form a distribution system strong enough to compete with foreign rivals.
In this respect, the Ho Chi Minh City Business Association and the Ho Chi Minh City Department of Trade have decided to form an association of supermarket operators to help them share information and experience to compete with international giants. However, the climate is not yet right, as it involves many issues such as consensus and mutual trust, differences in corporate culture and management restructuring.
The Ministry of Trade, aware of new challenges facing the country when it enters the WTO, has devised a roadmap to build 20 large distributors whose cores would be State corporations in steel, cement, food and trading.
According to Vice Minister of Trade Phan The Rue, these conglomerate-type distributors should be able to compete with foreign rivals when Vietnam opens its doors to international competition. “These distributors need to collaborate with major trading groups in the country as well as with intermediary trading companies and retailers,” he said.
To reorganise the local distribution system, he also said the ministry last year brought out criteria to classify supermarkets and trade centres for better management, while asking provincial trade sectors to develop the retail industry by building more trade centres and supermarkets.
In addition, the ministry has been co-operating with key State corporations to build wholesale markets for specific commodities.




No. 763/May 29-Jun 4, 2006