Vietnam retail market: Lost cow but still don't worry about building a barn!

TTO - After only a short time of full opening, more than 50% of Vietnam's retail market share has fallen into the hands of foreign investors. Domestic retailers are struggling...

Thai rice is sold at Metro An Phu supermarket, District 2, Ho Chi Minh City - Photo: Quang Dinh

After only a short time of full opening, more than 50% of Vietnam's retail market share has fallen into the hands of foreign investors, while management agencies still have no solution to protect the domestic retail industry and domestic retailers themselves are struggling to find ways to survive.

Many experts expressed concern that not only the Vietnamese retail market would fall into the hands of foreign investors, but domestic production would also face difficulties because the products made would have very little chance of appearing on the shelves of retail systems, and at the same time questioned the management and supervision of authorities.

Many irregularities in management

In documents sent to the Prime Minister, the Ho Chi Minh City Business Association (HUBA) said that Vietnamese retail businesses are facing difficulties partly due to shortcomings in management and licensing by Vietnamese authorities.

Accordingly, in a document, Mr. Huynh Van Minh - Chairman of HUBA - said that since January 2015, along with the complete opening of the retail market according to WTO commitments, foreign retail giants have continuously expanded their scale in the Vietnamese market with a series of stores and shopping centers competing to spring up, along with the acquisition of retail systems in Vietnam.

For example, according to WTO commitments, before foreign enterprises open retail establishments, they must determine the necessary economic needs of that location, and only if they meet the requirements will they be granted a license (ENT regulations). Along with this trend, the number of Vietnamese manufacturers' goods on the shelves at retail outlets is decreasing, and the opportunity for Vietnamese enterprises to sell their goods is also decreasing. Meanwhile, the management activities of state agencies are quite unusual.

However, to date, there is still no “ENT framework” at the national level and each province and city has its own guidelines for applying ENT, leaving domestic retailers with almost no protection as in the spirit of the WTO negotiating team.

Even foreign investors hide behind domestic shopping malls to open networks without any barriers from state agencies.

In particular, according to Circular 34/2013 of the Ministry of Industry and Trade, foreign retailers are not allowed to distribute items such as rice, sugar cane, cigarettes, cigars... But in reality, a series of foreign supermarkets such as Lotte, Big C, Circle K, Metro... are openly selling these items without being warned or punished.

This, according to Mr. Minh, has "caused skepticism"... A survey by Tuoi Tre on May 2 also showed that Lotte and Big C supermarkets in Hanoi are selling a series of items such as rice, sugar... normally.

Mr. Vu Vinh Phu, Chairman of the Hanoi Supermarket Association, said that he had proposed that the Ministry of Industry and Trade plan to have hypermarkets 30km apart, “but they didn’t listen,” causing many Vietnamese retailers to suffer. Citing the case in Hai Phong, Mr. Phu said that after only six months since a foreign hypermarket was licensed in the city center, the nearby domestic supermarket had seen a 30% drop in revenue. Similarly, on Thai Thinh Street (Hanoi), according to Mr. Phu, there are three licensed supermarkets within a radius of about 700m.

Loss of retail means loss of production

According to HUBA, the management and licensing of retail investment needs to be more strictly regulated to avoid foreign investors opening sales points right next to and competing fiercely with domestic retailers.

In the immediate future, HUBA proposes to stop granting licenses to foreign investors to open new points of sale, and to organize inspections and checks on the public display of prohibited goods for foreign businesses to distribute...

In addition, according to HUBA, when land is allocated, foreign investors must commit to operating for at least 2/3 of the leased land period. If there is no longer a need, priority must be given to transferring to Vietnamese retailers.

Speaking to Tuoi Tre, an industry and trade expert said that the “retail war” in Vietnam has begun. And if the retail industry is controlled, it will control an important part of production capacity.

Therefore, Vietnamese authorities should be more cautious in granting licenses to foreign retailers. On the contrary, in recent times, many localities have often chosen “golden” land, the most beautiful land locations, to grant to foreign commercial centers such as Big C, Metro... to beautify the “face” of the locality.

"Foreign enterprises are strong in finance and experience, and are given such priority, so domestic retail enterprises... are helpless, and Vietnam's manufacturing industry will certainly be affected," he admitted.

To prevent foreign retail businesses from establishing subsidiaries and then operating under the guise of Vietnamese businesses, this expert believes that management is not difficult. It is only necessary to review the preparation stage for granting investment licenses and not grant large areas of land to businesses without retail experience to stop this immediately.

With the concern that "losing retail means losing production", Mr. Phu suggested that the domestic retail industry itself must look back at itself, must increase cooperation with each other instead of each doing it alone, and must increase cooperation with domestic manufacturers.

"We cannot just rush things, supermarkets set a series of fees such as shelf-top fees, birthday bonuses, and require too high discounts... We have to do business systematically, otherwise with weak corporate governance, bad service attitude but high prices, Vietnamese retail will harm itself" - Mr. Phu warned.

According to Tuoi Tre