Flood of foreign retailers forces Vietnam to take action

• Vietnamese retail giant joins forces with local firms to compete with foreign rivals
• Foreign invasion threatens domestic retail market share
• Vietnamese retailers struggle against foreign rivals
• Vietnam retailers face increasingly tough competition

With a growing middle class and a sizable young population, Vietnam’s retail market has become increasingly lucrative for foreign investors. Official statistics show there are roughly 600,000 retail outlets nationwide, and it is estimated that the current figure will jump by 45 percent in the next four years.

Following a number of free trade agreements, Vietnam has also opened up its retail market to foreign direct investment.

Vietnamese retailers are going head to head with foreign players like Japan’s Aeon, South Korea’s Lotte and Thailand’s Big C.

Vietnam's retail market is listed in the top five in Asia and ranked 28th globally in terms of growth. Photo by Phuong Viet

As foreign investors aim to set up an extensive retail network in a short period of time, they have chosen to either acquire or form partnerships with local businesses. The latest $700 million acquisition of Metro Vietnam by a major shareholder in Thailand’s consumer product group Berli Jucker is a typical example.

Many industry experts view the trend of foreign retail conglomerates breaking into the Vietnamese market as a real threat to local retail companies.

The Vietnamese government, however, has adopted a consistent viewpoint that the process of global integration has become an irreversible trend.

Mergers and acquisitions reflect a common trend in global integration, said Vo Van Quyen, head of the Domestic Market Department under the Ministry of Industry and Trade.

“The press has run stories about foreign retailers making difficulties for domestic retail companies. However, the view is that with the market opening, it is easier for Vietnamese goods to enter foreign markets, and foreign investors should also find it easier to enter the Vietnamese market,” said Quyen at a meeting on Monday.

Foreign-invested companies have accounted for 75 percent of retail revenue in Vietnam over the past 10 years, official figures show.

“Openeing markets are is a growing trend. We should view the acquisitions of Big C and Metro by foreign investors in the same way we see Vingroup’s acquisition of Ocean Mart and Vinatex Mart,” he continued.

The Vietnamese government is following retail reforms by reducing market entrance barriers which will result in fierce competition between local and foreign retailers. However, it doesn’t mean authorities will stand by and watch the domestic retail industry be dominated by foreign competitors.

Vietnam will make use of the safeguard measures that are legal under the World Trade Organization agreement, said Quyen.

He added that Vietnam will not allow foreign-direct invested companies to distribute nine products, including rice, sugar, medicine and crude oil.

The Industry and Trade Ministry is currently drawing up a development strategy for the domestic retail industry towards 2020 with a vision to 2030.

“We need to create favorable conditions to help domestic retailers become more competitive. We also need to conduct thorough studies of the retail market, especially research into compliance of competition laws by foreign-direct invested companies,” said Minister of Industry and Trade Tran Tuan Anh.