Foreign retailers have made stronger presence in the Vietnamese market over the years, posing great pressure on their domestic competitors.
|Illustrative image (Source: VNA)
According to the Department of Domestic Market under the Ministry of Industry and Trade, the retail market of Vietnam has seen a strong wave of investment with such big names as Central Group from Thailand, Aeon from Japan, Lotte from the Republic of Korea, and most recently, Auchan Retail from France.
According to head of the department Le Viet Nga, Vietnamese retail market is attractive due to large and young population. Besides, household consumption is forecast to rise 10.5 percent per year to 714 USD per month in 2020, and the coverage of modern retail system compared to other regional country remains low, at only 25 percent.
The conclusion of negotiations and signing of new-generation free trade agreements containing commitments to open the service, investment and distribution markets has also drawn more foreign investors into the Southeast Asian country’s retail market.
The increase in market shares of foreign retailers has posed a number of challenges for domestic ones.
Nga said that the biggest challenge for the domestic retailers is their weak competitiveness, noting that over 90 percent of domestic retailers are small and medium-sized.
Meanwhile, foreign firms are financially capable and have internationally-standardized governance and operating systems. Merge & acquisition deals allowed them to enter the Vietnamese market as quickest as they wish, she said.
Other challenges come from local macro management where a legal framework formed for retail market development has yet to be complete and comprehensive, and the efficiency of policies and legal regulations in the field have yet to be strictly implemented in localities.
Experts commented that competition among retailers benefit consumers, giving them more choices. However, they agreed that the Government should work harder to create an equal and transparent competition between domestic and foreign firms, and between traditional and modern retail channels.