VietNamNet Bridge – A lot of distribution chains have stopped operation or declared bankruptcy because they cannot compete with foreign powerful giants. In fact, the deaths of domestic retailers have been anticipated.

Domestic retailers leaving the market

When the Viet Hung new urban area in Long Bien district was set up, the Hanoi Trade Corporation (Hapro) went ahead of any other retailers, opening a supermarket on the first floor of the K3 bloc in the new urban area.

After some days, FC Mart also inaugurated a supermarket at P2 bloc in the same new area. Both the supermarkets had been very bustling until the day Big C, a foreign distribution giant, opened Bic C Long Bien, and Vincom, a big real estate developer, opened Vincom Long Bien.

The supermarkets owned by Hapro and FC Mart have become quiet since then. An officer who once worked for FC Mart, said that the owner of the distribution chain had to lay off workers because the supermarket’s sales were very low.

She said local residents in Viet Hung and Long Bien district would rather to go shopping at Big C or Vincom than going to small supermarkets in the locality.

“The quality of products and the prices are nearly the same. However, consumers still prefer going to big supermarkets, where there are a wide range of products and a lot of services, including restaurants, cafes and amusement areas for children,” she explained.

Ninomaxx, Maxxstyle, Foci and Legamex – the most well known fashion brands in Vietnam – have decided to cut down the number of retail branches. Home appliance distributors have either gone bankrupt (Wonder Buy) or scaled down the business, such as Best Caring, Pico or Media Mart.

Chair of the Hanoi Supermarket Association Do Vinh Phu has admitted that retailers have been facing big difficulties, adding that more retailers would go bankrupt in 2013.

In the first six months of 2012, Hanoi reportedly had 12,000 businesses dissolved or bankrupted, ¼ of which were distributors.

Fivi Mart, Intimex, the members of the 21-member association have to cut down the number of retail branches, while some others have reported the 5-10 percent falls in the turnover.

Phu said the demand has dropped dramatically due to the price increases. People go to supermarkets just to buy food and essential goods (70 percent).

“20 percent of inventories have been kept at supermarkets, while the other 80 percent at manufacturers, or importers,” Phu said.

Foreigners flocking in

Phu said that Vietnamese small retailers with the average capital of hundreds of billions of dong cannot compete with the big foreign guys with the capital of hundreds of millions of dollars and the global networks.

“As for foreign groups, the losses in some markets would be offset by the profits from other markets. Meanwhile, Vietnamese retailers, described as the small fishing boats, would sink immediately in a big storm,” Phu noted.

While Vietnamese retailers go bankrupt in masses, the number of foreign invested distribution chains in Vietnam has been increasing significantly. Metro Cash & Carry has opened 10 more centers, Big C 13, Parkson 7.

Deputy Head of the Central Institute of Economic Management Vo Tri Thanh said that the deaths of domestic retailers were anticipated when Vietnam became the member of WTO.

Under the WTO commitments, since January 1, 2009, Vietnam has to open the retail market to foreign investors.

However, domestic retailers have collapsed sooner than previously expected. Thanh has noted that local authorities have been competing with each other to attract foreign retailers.

“Once foreign investors can set up retail branches on the advantageous positions in the localities, domestic retailers would be surely swallowed up,” THanh said.

Nguyen Ha