FIE’s products encroach on traditional markets
FIE’s products encroach on traditional markets
Foreign invested enterprises (FIEs) have been “flattering” petty merchants by offering attractive preferences in an effort to encroach on the traditional markets, considered as the “territory” of domestic products.
Analysts have warned that Vietnamese products which have been put at a disadvantage at supermarkets, the modern distribution model, may lose traditional markets as well.
FIEs have spent big money to run the preferential programs applied to petty merchants in an effort to increase their products’ presence at traditional markets. They have offered bonuses on the sales, propping up product display expenses, giving free shelves and offered high discounts.
Vietnamese products dislodged from market
Luong Van Vinh, General Director of My Hao Cosmetics Company, admitted that it is very difficult to increase the sales through the modern distribution channel. Vietnamese products not only have to compete with the products bearing multi-national brands, but the products bearing supermarkets’ private brands as well.
“Unable to compete with the big guys, a lot of Vietnamese manufacturers have to do the outsourcing for foreign enterprises to exist. However, doing the outsourcing means sending oneself off the game. You will lose your brand and market,” Vinh said.
Vietnamese products not only have been not inferior to foreign brands at supermarkets, but they also have to struggle hard to stand firmly at the traditional markets.
Manufacturers nowadays tend to develop the distribution networks with the shops located at every corner of residential quarters, the wholesale traditional markets, which was the main sale channel for the majority of Vietnamese enterprises, has lost its role as the intermediary that distributes goods.
Previously, the Binh Tay wholesale market distributed 80-90 percent of cosmetics and washing liquid products, while the proportion has dropped to 20 percent.
As such, small enterprises and household run workshops, which are not big enough to develop the distribution networks of their own, would meet difficulties in selling their products.
Dang Ngoc Tran, a petty merchant selling cosmetics at Phu Lam Market in district 6, said FIEs usually offer bonuses to encourage merchants to advertise and sell their goods.
Tran went on to say that FIEs have applied different measures to boost sales and bring benefits to both merchants and manufacturers. Meanwhile, no domestic manufacturer has applied these methods.
Vietnamese businesses will die without traditional markets
The director of a plastics company in HCM City said the sales growth has been very slow at supermarkets, since his products have to compete with the imports from Thailand and China.
As for traditional markets, the company has to spend money to encourage petty merchants to sell his products. The expenses are believed to be higher from 2015, when more imports enter the Vietnamese market, thus creating a stiffer competition.
Vinh of My Hao fears that if losing traditional markets into the hands of FIEs, domestic manufacturers would “die.”
According to Trinh Thanh Nhon, General Director of ICC, also a cosmetics company, in the past, Vietnamese enterprises focused on making low cost products with reasonable prices, while considering traditional markets as the main distribution channel.
However, consumers’ taste has changed, while they have become more demanding. Therefore, manufacturers also need to change their business strategies.
vietnamnet
