SMEs say foreign retailers control distribution channels

Vietnamese manufacturers are having difficulties in distributing their products as foreign retailers control modern distribution channels.

Many businesspeople say that it is becoming more difficult to bring their goods to large supermarkets for sale.

Nguyen Thanh Hung from Hung Tan Farm Produce said he has to go through many stages to have his products displayed on supermarket shelves.

As the procedures are time-consuming, it takes five to seven days on average for farm produce to be available at supermarkets.

Meanwhile, supermarkets are ordering goods in small quantities each time, so the company has to pay more for transportation fees.

Other businesses complain that as supermarkets defer payment for goods, they do not have capital to maintain production.

“Supermarkets promise to make payments within 30 days, but they often deliberately delay the payment. I know many small businesses don’t have money for re-investment,” a businessman said.

He said that supermarkets require discount rates of 23-25 percent.
“Because of this reason, I have postponed my plan to enter supermarkets for two years,” he complained.

Nguyen Vinh Phu, former chair of the Hanoi Supermarket Association, confirmed that in Vietnam products have to go through many intermediaries before reaching consumers.

As a result, manufacturers make modest profits and consumers have to buy goods at unreasonably high prices, while retailers and intermediaries enjoy the biggest profits in supply chains.

“I have enough evidence to prove that some retailers are blocking suppliers by many kinds of charges and fees. This will discourage suppliers and manufacturers, and will kill domestic production,” Phu said.

The problem, according to Phu, is that foreign retailers are dominating modern retail channels.

Foreign retailers have been flocking to Vietnam in recent years. With advantages in capital, technology and business experience, they are keeping the upper hand over domestic ones.

Analysts estimate that modern retail channels (supermarkets, convenience stores and minimarts) make up 50 percent of total sales. This means that those who control the retail channels will have big power and a decisive voice in supply activities.

In other words, they have the power to set quality standards, distribution conditions and discount rates, and decide which products they will sell.

The director of a seafood company confirmed that Vietnamese manufacturers now depend on modern distribution channels, so they have to accept the requirements set by retailers.

“We have fallen into a dilemma. If we enter supermarkets, we will have to pay too many expenses which eat into our profits. But if we don’t, we will miss an important distribution channel,” he said.

Source: VNN