Vietnamese retailers urged to boost innovation in international integration

Wednesday, 2018-05-09 11:08:29
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Customers shopping at a Vinmart supermarket. (Photo: NDO/Quoc Hop)
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NDO – Integration with the international market has brought greater numbers of foreign retailers to Vietnam, creating a more competitive ground in its retail market. In that context, domestic retailers should be more active in improving competitiveness when dealing with the new reality, suggested Dinh Thi My Loan, President of Association of Vietnam Retailers (AVR).

Loan has granted Nhan Dan Online an interview regarding the opportunities and challenges facing Vietnamese retailers in the context of a rapidly growing domestic retail market.

Q: What should domestic retailers do to improve their competitiveness and improve their market share in the domestic retail market?

A: Domestic retailers are almost all small scale with limited financial resources. Over the past ten years of development, the retail market has made remarkable progress but the sector has still faced problems related to the quality of human resources, logistics, and the high costs of warehouse systems, transportation, and commodity prices that negatively affect competitiveness. The level of application of science and technology, especially in fields related to the internet by Vietnamese retailers, is still low, while this is a strength of foreign retailers. For that reason, digital transformation is an urgent requirement for domestic retailers.

In this context, the most impressive thing, or in other words, the most successful thing that domestic retailers have achieved is a clear understanding of competition and integration. They accept competition with foreign retailers, not to be evasive as before. Currently, many domestic retailers who are members of the Vietnam Business Association have developed impressive strategies. For example, Saigon Co.op, Satra, VinMart, Vinmart +, and Fivimart systems have formed tactics that can adapt to changes in the market, accompanied with long-term vision and quality improvement. They are highly aware of their weaknesses and strengthen their efforts to change their thinking and strategies for international integration.

Q: What should the State do to support domestic retailers without violating WTO commitments and other free trade agreements?

The AVR’s stand is to not support protectionism, but domestic retailers still want the State to issue policies to support the retail industry. I affirm that such policies are abundant and do not run contrary to WTO commitments and the new generation FTAs.

The first thing is to improve the quality of human resources. The State should also provide supports related to information, market research, and brand building for Vietnamese retailers, while linking them with producers and consumers. AVR has also proposed a number of incentives to support domestic retailers, including increasing investment for the retail sector and encouraging credit loans for small and medium-sized retailers.

Dinh Thi My Loan, President of Association of Vietnam Retailers. (Photo: VTV)

Q: Recently, the Government has assigned the Ministry of Industry and Trade to coordinate measures in support of domestic retailers, including facilitating them in the land fund and retail space. To date, what kind of support have retail businesses been receiving?

A: In recent years retail companies have been offered support within the trade promotion programmes and the project on developing the domestic market associated with the "Vietnamese use made-in-Vietnam goods" campaign. However, there is still limited support in land and retail space. The land available for retailers is really a problem, as domestic retailers are faced with high costs to rent space for their businesses. AVR has proposed a policy for condominiums or shopping centres to reserve their room for domestic retailers to rent at reasonable prices.

Q: What solutions have the AVR developed to support Vietnamese retailers in conquering the domestic retail market?

A: AVR always encourages Vietnamese people to use Vietnamese products. For retailers, the ultimate goal is to bring the best goods and services to consumers. AVR regularly encourages its members to favour selling Vietnamese goods. For FDI enterprises in Vietnam as well as in many other countries, retailers do not only sell their original goods but always have to guarantee a considerable rate of local goods due to many reasons related to culture, consumption, and economic efficiency.

However, there is no binding force which compels FDI retailers to sell Vietnamese goods. Therefore, in addition to calling on them to prioritise Vietnamese products, AVR also encouraged foreign retailers to ensure a majority proportion of Vietnamese goods in their product structure. AVR has encouraged some FDI distributors - retailers such as Big C and Metro (now MM Mega Market) to make a commitment to the Ministry of Industry and Trade in ensuring a high rate of Vietnamese goods in their system. In the long run, if Vietnamese goods want to occupy a larger percentage of the retail system, their quality and competitiveness must improve, as Prime Minister Nguyen Xuan Phuc recently emphasised: “We should not just expect the Vietnamese to use Vietnamese goods, but Vietnamese goods have to win the trust of consumers.”

Q: The domestic retail market has seen the participation of the world's largest e-commerce giants, like Amazon and Alibaba. How can domestic online retailers compete with such giants in the “unbalanced” war?

A: The online retail wave into Vietnam is an irreversible trend. This is a problem that should be highlighted and domestic retail businesses must be well prepared and develop their own strategies to stand firm in the market. Most Vietnamese retailers have developed online retail channels, such as HTV Co.op TV channel by Saigon Co.op and other online retail channels by Hapro, Nguyen Kim, Kangaroo, Pico, HC and Adayroi from Vingroup. It can be said, the game is not balanced fairly, but domestic retailers have to find ways to move forward, as there is no way back. Compared to the giants, domestic retailers have their own strengths, such as a deeper understanding over the market and consumer tastes, as well as having the support from domestic consumers. They are smaller but it is an advantage because they have flexibility and adaptability.

Thank you very much!