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Mon, May 22, 2006 - Page 10 News List

Vietnamese love of supermarkets sparks war between domestic and global firms

RETAIL BOOM Turnover in the retail trade is expected to double by 2010, setting the stage for a battle between five domestic companies and two foreign-owned chains


Employees of a French-owned BigC supermarket work at counters in Hanoi in this image from May 9. Last year, retail trade in Vietnam increased 20 percent from the previous year, with a turnover of US$23 billion.


Vietnamese street-sellers may one day be nothing more than a tourist attraction thanks to a new-found local love of supermarket shopping, a retail trend that has sparked a war between domestic and global distributors.

The battle promises great rewards, as US consulting firm AT Kearney has ranked Vietnam as the third-most attractive country in the world for mass retailers, behind India and Russia and ahead of China and Ukraine.

Last year, retail trade in communist Vietnam increased 20 percent from the previous year, with a turnover of US$23 billion. Official forecasts say that figure will surpass US$50 billion in 2010.

"Vietnam's distribution will develop along the lines of that seen in China or Thailand," predicts Uwe Holzer, managing director of Metro Vietnam, a subsidiary of German retail giant Metro.

"This will mean a move from traditional open markets to supermarkets, hypermarkets and specialized distributors," Holzer said.

In China, half of all consumer purchases are now made in modern shops, compared with just 13 percent in Vietnam, according to market information firm TNS WorldPanel Vietnam.

The Vietnamese only adopted the shopping cart in 1995, with the opening of a small supermarket in Ho Chi Minh City by local company Citimart. The first Western-style superstore, operated by France's BigC, opened its doors three years later in Dong Nai Province northeast of the former Saigon.

But the trend only caught fire in recent years once Vietnam recovered from the Asian financial crisis of the late 1990s, attracting young, urban professionals and middle-class housewives lured by sleek television ad campaigns.

The bird flu crisis, which hit Vietnam hardest with 42 deaths since late 2003, coupled with global awareness of the need for product traceability have also helped spark the rise of mass distribution in Vietnam.

And in a country where people endured food shortages just 20 years ago, the idea of shopping in a fully-stocked supermarket is an attractive one.

"These stores have become places for weekend outings, where people spend three hours with their families and friends," says BigC managing director Guy Lacombe.

"The Vietnamese consumer is very aware of prices, but also of the fact that the stores he goes to enhance his social standing. Consumers like finding their dream products," Lacombe said.

Vietnam has five domestic supermarket chains vying for customers -- including state-owned Coopmart, which has 15 stores nationwide -- and two foreign-owned chains. BigC operates four superstores and Metro has six.

The local companies benefit from reduced operating costs and better choices of location, but they lag far behind their foreign competitors in terms of experience.

"We have no big, well-known distributors. It is said that the reason is capital shortage. But human resources, a ... strategic vision and marketing skills are also issues," trade ministry official Hoang Tho Xuan told the Saigon Times earlier this year.

Vietnam's efforts to join the WTO by year's end, a symbol of the country's increasing global economic integration, could spell doom for local retailers.

"Our distributors should be aware that their future path is to become big distributors or die," said the official, who heads the ministry's domestic market policy department.

The government is trying to support domestic distributors with credit lines and tax breaks, but competition is only heating up as more foreign retail giants are entering the fray.

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