Student’s name: Tran Thi Thanh ThuyStudent’s code: K124082347

DISTRIBUTION CHANNEL OF VIETNAM

Vietnam is a fast growing market in Southeast Asia which has a high and stable GDP growth, leading to consumer demand is also increased. Due to its huge consumption market of nearly 90 million consumers, distribution development system in this country is very potential. Distribution system plays an important role in the connection between producer and consumer.

Statistics from the government showed that the country now had more than 8,500 traditional markets, 636 supermarkets and 120 commercial centres and over 1,000 convenience stores. Viet Nam's total retail revenue in 2014 reached nearly VND 2.95 trillion or approximately $100 billion, an increase of 10.6 per cent in comparison with the previous year, and contributing 13-15 per cent of the Gross Domestic Products.

Before Vietnam joined the World Trade Organization, the distribution system was mainly markets and grocery stores, but now Vietnamese consumers' shopping habits were changing, with more spending in modern retail outlets due to convenience and health-related issues. Many consumers said that modern retail outlets gave them good access to new products, more confidence in food safety, and clean facilities. Viet Nam's retail market holds many opportunities for both foreign and domestic investors. Until 2015, Metro Cash & Carry has opened 19 trade centres while Aeon added 4 new shopping centres in big cities across Viet Nam. Big C invested $20 million in a new trade centre in the central province of Khanh Hoa late last year, raising its chain in Viet Nam to 29. Korea's Lotte retail group has invested $950 million on a chain trade centres and supermarkets across Viet Nam.

Competing with foreign retail businesses would be a big challenge for domestic companies. International retail groups have poured large investments into their business expansions in Viet Nam with the aim of gaining more market share. This can be seen through the opening of more outlets and trade centres to compete with local retail businesses. Vietnamese retail businesses also have plans to gain more market share having tried their best to stand firm in the local market. Co.op Mart has 77 supermarkets across the country (30 in HCMC and 47 in other provinces). The electronic retail company thegioididong.com also said it would open five new stores this year, bringing its total stores to 53. However, the local retail network remains poor and weak. Over the past few years, although the government and local businesses have upgraded infrastructure

1

and expanded the network, a lack of close co-operation and co-ordination among producers, businesses and localities has led to ineffective goods distribution.

In 2015, ASEAN Economic Community (AEC) has established and in the future, Trans-Pacific Partnership (TPP) comes into effect, Vietnam’s distribution system will be more expanded due to the entrance of foreign retail businesses. In the face of fierce competition, Vietnamese retailers and distributors will have to come up with strategies to stand firm in the local market.

2