Exporting Products Through Foreign Distribution Chains

There are more than 170 foreign invested retail facilities in Vietnam

According to the Ministry of Industry and Trade (MOIT), there are more than 170 foreign invested retail facilities in Vietnam, of which 110 facilities have area of more than 500 square meters belonging to multinational retail groups such as Big C, Lotte Mart, Aeon and Emart.

Foreign investors began eyeing the Vietnamese distribution market in the early 2000s. Thai investors now have four hypermarket systems, including Mega Market with 19 supermarkets, B’smart with 75 convenience stores, Big C with 32 supermarkets and Robinson. The Thai Central Group now holds 49 percent of Nguyen Kim home appliance retail chain’s shares.

The Japanese have Aeon Mall (hypermarket chain), Saigon Centre (shopping mall), and Family Mart (convenience store), and South Koreans have Lotte, Emart and GS25.

Vietnamese enterprises want to distribute their goods through these foreign-owned distribution chains. However, only a small number of them can do this.

An analyst explained that most of the enterprises are small and medium sized which cannot make big investments to satisfy requirements set by foreign retailers and bring products to sell at their chains.

Nguyen Thi Mai Anh, deputy director of the Hanoi Investment, Trade and Tourism Promotion Agency (HPA), also said Vietnam still lacks enterprises powerful enough to access foreign distribution systems. 

Vietnamese enterprises are small with modest capital and low competitiveness. Meanwhile, the technical barriers set by foreign retailers are high.

Quoc Binh, the owner of TQ, a dried fish production workshop in Dong Thap province, said he once sold products at a supermarket in 2016, but he stopped this in March 2017 because of many obstacles.

The supermarket only accepted TQ’s products after one year of examination. After he brought products to the supermarket for sale, another problem arose – the payment time.

The contract signed between TQ and the supermarket said that the payment for orders coming at the beginning of the end of the month would be made on the 12th of the next month.  

“Small and very small enterprises have limited financial capability. The deferred payment would cause difficulties for their operation,” he said.

At the supermarket, advantageous positions are reserved for products of large enterprises and best sellers. 

While domestic supermarkets require avdiscount rate of 10 percent on average, foreign supermarkets want the sky high discount rate of 25 percent. Besides, producers are usually asked to join retailers’ sale promotion programs, which is a financial burden for them.

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