7 June 2006
Retailers must be ready for foreign competition http://www.nhandan.com.vn/english/business/070606/finance_5tin.htm#Retailers%20must%20be%20ready%20for%20foreign%20competition
With Vietnam's accession to the World Trade Organisation (WTO) nearing, domestic retailers expect to face fierce competition from giant international retailers.
Domestic businesses have been warned that even though the Government was trying to create favourable conditions for them to compete, they needed to join forces and work cooperatively if they do not want to lose out on their own home turf.
According to Vo Van Quyen, deputy director of the Ministry of Trade's Domestic Market Policy Department, plans are to open the retail distribution market gradually to give domestic distributors a chance to compete with more experienced and better-financed foreign retailers, while pressuring them to change in order to keep up.
Despite the Government's assurance, many domestic enterprises fear that the penetration of foreign distributors will leave already struggling local retailers in even worse shape.
There are currently about a million family-owned retail shops and businesses in operation, Quyen said. Their small sizes, coupled with few resources and limited manpower, he added, leave them ill-equipped to meet the competition from international distributors.
Cooperative effort was needed, Quyen said, noting that competition was inevitable once Vietnam joined the WTO. Success and failure were part of the business cycle, and those businesses that could not match the development pace would eventually fail, he said.
Domestic retailers needed to focus on improving their competitive advantages as well as on creating new ones to face the challenges from foreign competition.
There are currently 15 international retail stores operating nationwide, but only a few, e. g., Metro Cash & Carry and Big C, have mounted ambitious plans to open multiple outlets.
Others, like Zen Plaza and Diamond Plaza, have only opened a single outlet. These foreign retailers currently account for only 1-2% of the overall retail market.
Domestic retail chains like Intimex, Sai Gon Coop Mart and Vinatex command a more impressive 9%, while a whopping 90% of the nation's retail market belongs to smaller, individually-owned retail stores.
The opening of Metro Cash & Carry in Da Nang, according to Quyen, caused a rather dramatic commercial revolution in one of the country's largest city. Local retailers, despite lacking modern distribution systems and technology, quickly responded to the challenge, upgrading technology and increasing both choices for customers and service quality.
The Ministry of Trade has also been working on domestic commercial development strategy for 2006-10 and beyond, proposing incentives in land, credit, investment preferences, training, etc., aimed at helping domestic distributors improve their competitive edge.
These types of incentives, in line with WTO policies of national treatment, will be new to retailers as they have previously only been applied to businesses in other sectors, according to Quyen.
Retail, he said, was assuming greater importance in the economy and was to be included on the preferential industries list, giving retailers access to development assistance fund and import and corporate income tax incentives.
Despite these efforts to help domestic retailers, local businesses needed to cooperate and set up large, professional and modern distribution networks if they wanted to survive, Quyen said. (VNA)
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