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NEWS UPDATES Asean Affairs     29  December 2010

Vietnamese retailers lose competitive edge

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Vietnamese firms are losing out to their foreign counterparts in the race for expanding their share of the lucrative retail market that is growing at 25 percent annually, industry insiders say. HCM City has this year witnessed rapid expansion by foreign invested retailers.

Big C, a subsidiary of French Casino Group, has opened five new outlets in the city, bringing the total number in Vietnam to 14.

Germany's Metro Cash & Carry has just inaugurated it's 13th retail centre in southern Vung Tau City while Lotte Mart, owned by South Korean-based Lotte Group, has opened a new supermarket in District 11's EverRich Building in HCM City.

Many foreign retailers have announced their intention to put new projects into operation next year.

The expansion strategy has paid off for foreign retailers who have increased their combined share of the domestic retail market to 40 percent from 10 percent in 2008.

Nguyen Ngoc Hoa, chairman of the Saigon Co.op, one of the country's leading domestic retailers, admitted that foreign retailers had developed strongly in recent years.

He said in the past foreign retailers wanted to locate their shops in big areas, often in the city's outskirts areas, but in recent years, they have shown their willingness to put up shop in inner city, renting smaller areas to develop their business.

The director of a Vietnamese retail company in the city said the fiercer competition has disadvantaged domestic companies.

Vietnamese retail enterprises could not match foreign firms in many aspects including financial wherewithal and the ability to absorb losses for longer periods, he said.

With their considerable financial strengths, foreign retailers were ready to pay higher rentals than market rates to open retail outlets in prime locations, he said.

And because they had the ability to absorb losses for 9 to 10 years, they often sold their commodities at lower than cost prices to attract customers in the initial years of operation, he added.

Domestic companies were not able to do this because they did not have the capacity to absorb losses for more than three to five years, he said.

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