Retail market challenges domestic businesses

08:34 | 11/04/2018 Trade

(VEN) - To boost Vietnam’s potential as a retail market for foreign investors, domestic retailers need to formulate appropriate investment strategies to enhance their competitiveness.

retail market challenges domestic businesses
Domestic retailers should bring into play their own advantages and concentrate on developing niche markets

Potential market

According to Dr. Dinh Thi My Loan, President of the Vietnam Retailers Association, total retail sales of goods and revenue from services grew steadily in the past 10 years. The total reached US$88 billion in 2010 and increased to US$146 billion in 2015 and US$158 billion in 2016. Domestic retailers have strived to withstand the competition with foreign rivals by expanding sales networks and promoting online retailing in order to enhance their competitiveness. Successful examples include Vinmart, Hapro and Co.opmart.

Pham Dinh Doan, Chairman of the Phu Thai Group, said retail trade is expected to grow 11.9 percent annually in the 2016-2020 period and reach US$179 billion by 2020, with modern retail sales to account for more than 45 percent. Vietnam expects to have 1,200-1,300 supermarkets, 180 trade centers and 157 shopping centers by 2020.

Economists rank Vietnam the 30th most vibrant retail market in the world. Famous retailers from Japan, France and Thailand have invested in Vietnam, presenting domestic retailers with fierce competition.

Enhancing business capability

To be able to compete with foreign rivals, in the opinion of Pham Dinh Doan, domestic retailers should bring into play their own advantages. They should concentrate on developing niche markets to avoid direct competition and on promoting new retail forms and specialized supermarkets. He also encouraged domestic retailers to cooperate with foreign-invested companies in some stages of value chains.

According to Vu Thanh Son, General Director of the Hanoi Trade Corporation (Hapro), domestic retailers need to provide high-quality supply services, invest in retail shop and supermarket chains, and associate with each other to develop new retail forms. In addition, in his opinion, domestic retailers should expand their distribution networks in localities and act as distributors for various manufacturers.

Dinh Thi My Loan believes fierce competition and advanced technologies require domestic businesses to devise long-term strategies to promote modern retailing. “Modern retail channels are projected to account for a 40 percent share of the retail market by 2020,” she said.

The Vietnamese retail market grew well in 2017 with total sales of goods and revenue from services reaching an estimated VND3.93 trillion, up 10.9 percent compared with 2016. Growth in 2016 was 8.3 percent compared with 2015.