Vietnam’s $125bn retail market dominated by foreign firms: official

Vietnam’s $125bn retail market dominated by foreign firms: official

International retailers have outplayed Vietnamese businesses in the latter’s retail market, which is worth US$125 billion a year, an official from the Domestic Market Department said Friday.

A number of foreign retailers are expanding operations in Vietnam, while other leading global retail firms are also studying investment chances in the country, Tran Nguyen Nam, head of the department under the Ministry of Industry and Trade, told a conference in Hanoi.

France’s Big C, South Korean chain E-Mart, and AEON from Japan have established footholds in Vietnam and are poised to open more stores, while major U.S. retailer Wal-Mart, and French retail group Auchan, are both seeking investment opportunities, Nam elaborated.

AEON inaugurated its maiden Vietnam shopping mall in January, and is slated to open a store in Hanoi next year.

In the meantime, it is not easy for Vietnamese retailers to expand their presence in their home market, according to Pham Dinh Doan, chairman of Phu Thai Group, a Hanoi-based retailer.

It’s money that matters, he said.

“It costs Vietnamese businesses at least $100,000 to open a convenience store that is open 24/7,” Doan elaborated.

“And you need to open around 300 stores to generate profits from the chain.”

Doan said many Vietnamese retail chains are suffering losses.

“It can be a double whammy, as they may incur losses from operations and bank loans, which could eventually lead to bankruptcy,” he warned.

Vietnamese retail firms could opt to work with foreign partners to set up joint ventures as an escape route, Doan added.

“But they must do so quickly before it’s too late,” he said, referring to the coming reality when the Vietnamese retail market will be fully open to international players under free-trade agreements.

“The quarterly profit of Wal-Mart could be as much as $1 billion. Vietnamese retailers will face fierce competition even if Wal-Mart only earmarks $500 million to invest in Vietnam,” Doan said.

But Nguyen Tien Vuong, deputy general director of the Hanoi Trade Corporation (Hapro), does not think cooperating in a joint venture with foreign firms is a good choice.

“Many foreign investors have asked us to cooperate with them, but under the condition that they must own a 51 percent stake in the joint venture,” Vuong said.

This means the joint venture will operate under the brand name of the foreign majority shareholder.

“We don’t want to see our brand name turned into a foreign one overnight,” he said.

Although they have lost market dominance to foreign players, Vietnamese retailers said what they need is not protective measures from the government, but more transparent and fair policies.

“Metro has been operating in Vietnam for a dozen years but has refused to pay taxes,” Dinh Thi My Loan, chairwoman of the Vietnam Retailers Association, said.

Metro has also been allowed to open stores near the city’s downtown, while it is stipulated that wholesale stores must be located at least 10km from the city centre, Loan added.

Such major retailers with preferential treatment are giant competitors to local businesses, Loan said.

“Vietnamese retailers do not need to be protected, but they want more fairness and transparency,” she concluded.

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