(02-07-2008)
Customers at the Cho Sat Supermarket in Hai Phong City. Local supermarkets in Hai Phong are losing business to foreign chains. — VNA/VNS Photo Nguyen Thu
HAI PHONG — Local supermarkets in Hai Phong are losing business to foreign chains, according to the Hai Phong Trading Import and Export Company (Tradimex).
Two prominent local supermarkets, Cho Sat and Cat Bi, have been forced to close down or rent their premises out to other companies recently; while Anh Duong, one of Hai Phong’s busiest supermarkets, has been reduced to one third its former size.
A spokesperson for Anh Duong claims that average daily profits have decreased from VND300-400 million (US$18,750-25,000) to VND20 million ($1,250) on a good day.
Hai Phong’s first local supermarket, Intimex Minh Khai, is faring better than others, but it faces similar challenges. "Intimex Minh Khai lost two thirds of its market share due to the appearance of large scale supermarkets and trading centres such as Metro, Parkson, and Big C," said Pham Bich Hoa, director of Minh Khai Trade Joint stock Company.
"One of the main reasons Hai Phong’s local supermarkets are losing revenue is their lack of long-term business plans and strategies," said Do Cuong Thanh, deputy director of the Industry and Trade Department of Hai Phong.
"They developed spontaneously without regard for location and other factors."
The largest problems local supermarkets face when compared to the foreign chains, are their small sizes, limited range of products, poor after-sale services, and unsophisticated advertising and promotion campaigns.
Local supermarkets have an average area of 1,000sq.m, the largest being Intimex Lach Tray with an area of 2,400 sq.m and about 15,000-20,000 items for sale. Foreign ones are up to twice this in size and usually have at least 50,000 items for sale.
To make matters worse, local supermarket prices tend to be higher.While foreign supermarket chains have had years of experience with special offers, discounts and sales, local supermarkets tend to ignore these psychological tactics to motivate consumer spending.
The weaknesses of Hai Phong’s supermarkets is a common situation to retail business nation-wide.
Vu Vinh Phu, Chairman of the Ha Noi Association of Supermarkets believes most local enterprises have yet to come up with effective domestic distribution systems.
Of the 40 plus supermarkets in Ha Noi, the vast majority are too small to compete with foreign chains, he says.
He and others remain optimistic however, claiming that during the long complicated process the foreign chains will have to go through - granting licences, finding locations, building supplier networks and exploiting market demand - local businesses have a small window of opportunity to up their game. In recent years, Ha Noi Trading Group with Hapro, Nhat Nam Joint Stock Company with Fivimart , and Import-Export Company with Intimex, have all been pumping cash into expanding their business, training staff, signing joint ventures and offering customers plenty more choices.
Hapro has set up over 30 supermarkets and shops in Ha Noi and nearby areas in just a year of operation, while Nhat Nam Joint Stock Company has taken advantage of its brand name to expand their chain of supermarkets to 12.
Phu also advocates placing limits on foreign invested supermarkets such as size and location in order to level the playing field.
Viet Nam’s global retail development index ranked first in 2008 but becoming the most attractive retail market inevitably shows the weaknesses of the competitive ability of Viet Nam’s retail business.
"To protect all domestic retail business against the foreign investors required by WTO membership, the government needs to negotiate an agreement that with approval of Viet Nam’s Government, wholly foreign owned companies can open up a second retail branch," said Phan The Rue, chairman of the Viet Nam Association of Retail Business.
Truong Dinh Tuyen, former Minister of Trade also affirmed that "to survive and develop, it is necessary for domestic retail businesses to build a standard system of quality of goods and services."
As Viet Nam’s retail market opens up in accordance with WTO membership requirements, local businesses will increasingly face foreign competition and will have to adapt to a global economy in order to survive. — VNS
