Struggling supermarkets face fierce foreign rivalry

Struggling supermarkets face fierce foreign rivalry

The number of foreign retail outlets is on the rise in Viet Nam even as domestic retailers struggled to survive during the current economic downturn, said Ha Noi Supermarkets Association chairman Vu Vinh Phu.

According to the association, Metro Cash & Carry has opened 10 new outlets, while Big C has opened 13 new stores and Parkson has opened seven new outlets.

"Domestic retailers are facing difficulties and a number of enterprises have gone bankrupt," Phu said, predicting that bankruptcies would continue to increase throughout the rest of this year.

Retailers accounted for 20 per cent of 12,000 dissolved businesses in the first half, he noted, and major supermarket chains like FiviMart and Intimex reduced their number of outlets as earnings declined by 5-10 per cent from the same period last year.

Declining consumer purchasing power was the primary cause for the decreasing turnover, he said.

"About 70 per cent of shoppers come to supermarkets for food and food products, the prices of which have been seriously affected by rising fuel and energy costs," Phu said. "Inventories in the city's supermarkets have risen to over 20 per cent."

Domestic retailers would be increasingly hard-pressed to compete with foreign rivals like Metro or Big C which have significant advantages in capital, he said. Foreign retailers could also cover losses against profits in other countries due to their wide networks.

The deputy head of the Ministry of Planning and Investment's Central Institute for Economic Management, Vo Tri Thanh, agreed, saying that domestic retailers had been warned of possible challenges when Viet Nam joined the WTO in 2007. Under WTO commitments, the country had to begin opening the market to foreign retailers starting in 2009.

Localities have also offered favourable investment conditions for foreign retailers with the consequence that domestic companies may lose their own market, Thanh said.

The nation now has 638 supermarkets and 117 shopping centres, according to the Ministry of Industry and Trade. The number of supermarkets has increased 20 per cent in the five years since WTO membership, while the number of shopping centres has risen 72 per cent.

Viet Nam Retailers Association chairman Dinh Thi My Loan urged domestic retailers to find their own ways to develop and overcome shortcomings. Loan also recommended that the Government issue policies to encourage the establishment of major domestic distribution systems. A representative from Ha Noi Trade Corporation (Hapro) said the opening of the market has been a vital trend but that Vietnamese businesses needed to develop

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