Four Vietnamese giants join hands to compete with foreign businesses

25-Jul-2017 Intellasia | Phap Luat TPHCM | 6:00 AM Print This Post

In the context that foreign retailers enter Vietnam in large number, the Association of Vietnam Retailers (AVR) has recently proposed that the government set up a retail group on the basis of the cooperation of four leading domestic retailers now including Saigon Co.op, Phu Thai Group, Saigon Trading Corporation (Satra) and Hanoi Trading Corporation (Hapro).

Explaining about this proposal, Dinh Thi My Loan, Chair of AVR said in the eyes of foreign investors, Vietnam retail market is one of the most attractive retail markets and has much potential for development. However, Vietnam retail businesses still face many difficulties and limitations.

Therefore, AVR wants to re-start and re-establish the aforementioned model as the leading multiownership retailer in Vietnam, thereby opening up output for Vietnamese products. The four aforementioned businesses have a turnover of $4-5 billion/year.

Loan added, previously, the government used to be very supportive, expecting that the aforementioned model will support the retail market a lot. However, that model failed. One of the main reasons was the lack of access to premises in the provinces that wanted to develop.

Meanwhile, Huynh Van Minh, CEO of Vietnam Distribution Association Network Development and Investment Joint Stock Company (VDA), said the company was established in 2007 by the four aforementioned giants. This group will become the parent company and take on what a single business cannot do. The aggregation of infrastructure, premise network, capital, experience, market, goods, etc. of the four aforementioned companies will be huge. When VDA is successful, foreign investors have to consider if they want to acquire distribution and logistics systems in Vietnam.

Minh emphasized that “We also plan to open hypermarkets, warehouses in prime locations in such large cities as Hanoi, HCM City, Hai Phong, etc. However, VDA’s failure was because of inconsistent policies and mechanisms, there a large gap between theory and practice. Specifically, in terms of land policy, some provinces are still willing to support premises while some others are not”.

On the other hand, when VDA was just formed, the State had the policy of not allowing non-core investment. Therefore, Satra and Hapro had to divest. After their divestment, the two remaining members did not have enough potential. “The policy of divesting outside was right but for such companies as Hapro, Satra, there is nothing wrong to invest in the retail group but they still had to divest”, said Minh.

It is necessary for giants in the retail industry to cooperate to form a solid, strongly developing institution to dominate the domestic market and export Vietnamese goods. However, to avoid the past failure, many people said that the State should remove obstacles in mechanisms, policies and retailers themselves must reach a consensus.

Furthermore, Minh said he is calling to establish a new style retail group that has many differences from the old model. For example, any component can participate in this model. Especially, this model will not follow the consensus mechanism like the old one in which each member contributed 25 percent stake but who invest more will run.

“Besides, the new retail group has also intends to establish an agricultural supermarket system. Farmers entering this supermarket will be able to purchase everything from seeds, fertilisers to foods, machines, etc. at reasonable price and do not have to be afraid of buying counterfeit goods”, said Minh.

Dr Dao Xuan Khuong, a consultant in distribution and retail said for the new retail group to operate effectively, it is possible to follow the model of VinMart + or Mobile World Group. In addition, it is also possible to invest in Saigon Co.op so that this company will lead and become a strong corporation, thereby bringing into full play the strength and position of Vietnam retail.

Brand expert Vo Van Quang said, in many countries, there are leading retail groups such as Lotte (South Korea), Aeon (Japan), Central Group (Thailand), Parkson (Malaysia), etc. These groups orient professional retail and penetrate into new market to clear way for their goods rather than letting businesses to find export markets themselves. For example, thanks to Alibaba, Chinese goods can be sold to many countries.

Therefore, it is essential that Vietnam has a national-scale retail group with international level and vision. “In the immediate future, retail group must have a global brand and professional management model comparable to professional retail brands such as Lotte, Robinson, Aeon, 7-Eleven, Parkson, etc. If the new retail group is determined to develop, experts and international colleagues are ready to participate in the consultancy on strategy and professional system planning right from the first steps”, stressed Quang.

 

Category: Business

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