Following Vietnam’s WTO commitments, foreign distribution enterprises are eligible to set up retail joint-ventures in the country as of earlier this year and wholly foreign-invested businesses just two years later, in 2009.

A master plan for the trade and distribution industry could be completed in 2010, Hoang Tho Xuan, head of the Trade Ministry’s the Domestic Market Policy Department said, adding that only 10 out of 64 cities and provinces submitted local planning.

He emphasized that those plans that were completed and already submitted are to date, inadequate.

Local plans call for the construction of wholesale markets and other commercial facilities, but the projects have yet to be added to the trade ministry’s master plan.

The race to build wholesale markets without being aware of the pitfalls was resulting in inefficient investment.

For example, Huynh Van Minh, general director of Saigon Trade Corp. (Satra), said Satra built a duty-free shop in Moc Bai bordergate area in the southern Tay Ninh province. But later the local government licensed the Construction Corp to build a similar store adjacent to it.

The situation forced Satra to negotiate to buy out the constructor’s project, after which a foreign retailer set up shop across the street, posing further competition to deal with.

Additionally, many provinces had yet to map out plans for developing market places, supermarkets and commercial centers, leaving retailers uncomfortable with investing in these provinces.

Most domestic retailers forecast harsh competition as they still lack capital and professional skills, with savvy foreign enterprises making plans to enter the developing but high potential market.

Financing is not a problem for supermarket operators, since banks were keen to lend to viable projects, but finding floor space is a real problem as the success of the retail sector means demand is high

Minh said another drawback is the fact that staff payment in retail firms is still low, leaving retailers unable to hire highly-qualified managers who can develop the businesses.

Foreign players

Following Vietnam’s WTO accession earlier this year and easing of restrictions, multinational foreign retailers in the country have unveiled plans for major expansion.

The German Metro Cash & Carry plans to open four more outlets – one each in Ho Chi Minh City and neighboring Dong Nai province, Hanoi, and the central Nha Trang city.

The company plans to invest US$17 million in each outlet.

It has six outlets in Vietnam – two in HCMC and one each in Hanoi, Can Tho city in the Mekong Delta, Danang, and Hai Phong – which have annual revenues of €200 million ($259.5 million).

Parkson retail group, a leading Malaysian shopping mall operator, plans to invest about $70 million to open 10 stores in commercial hubs like Hanoi, Danang, Can Tho, and Ba Ria-Vung Tau.

It recently opened its second outlet in Hai Phong after the first outlet was unveiled in HCMC’s District 1.

Leading European retail group Vindemia plans to open a Big C superstore in Danang this year, tapping a market forecast to have plenty of room for foreign players.

It has several outlets in northern Vietnam and one in HCMC.

Other newcomers that will have a major impact on the market include Wal-Mart and JC Penny, making it even more difficult for local products get shelve space, and leaving domestic retailers up against stiff competition.

Source: Thanh Nien