Local retailers bemoan tax policy, upbeat about competition

The findings of the survey were released at a seminar organized recently by the Vietnam Chamber of Commerce and Industry (VCCI) in collaboration with the Association of Vietnam Retailers (AVR). 

The event in Hanoi focused on challenges that Vietnamese retailers might face in the context of new free trade agreements, particularly the pact with the EU (EVFTA) and the Trans-Pacific Partnership (TPP).

More than 35% of the surveyed retailers faced difficulties with high rental costs.

Around one-third also thought the country’s policy on taxes and market management was problematic. Meanwhile, 30% of respondents said local authorities set hurdles to their business.

Relevant authorities need to improve policies to create a better business climate for retailers, Nguyen Thi Thu Trang, director of the WTO Center at VCCI, told the seminar.

However, Trang said management agencies cannot intervene in the retail space rental as it is decided by supply and demand on the market. 

She also pointed out that while retailers in Vietnam are mainly selling local products, nearly half of the survey’s respondents said they have found it difficult to access and secure local supplies.

“It is a major issue when local retailers struggle to buy local products. The question is how we build a bridge between the producer and the retailer,” Trang asked.

Despite the perceived challenges, many Vietnamese retailers still are surprisingly upbeat about mounting competition, stoked by the arrival of more retail giants from Thailand, the Republic of Korea and Japan.

The survey, conducted in March and April across the country, found a majority of local retailers remained optimistic when facing the prospect of intensified competition from foreign retailers.

Up to 50-70% of the respondents said they are “confident” in their ability to compete in the local market. This result came even as many experts and media reports warned of the domination and aggressive expansion of foreign retailers.

According to the survey, 31% of local retailers believed that the participation of foreign businesses would actually leave positive impact on the market as they would help stimulate local consumption. Moreover, the polled businesses said they could learn from foreign peers in terms of corporate governance.

On the other hand, 8% saw the presence of foreign businesses as negative. Some said foreign rivals could outperform them in attracting local talent.

Dinh Thi My Loan, chairwoman of AVR, said local businesses keep a tight grip on traditional retail channels, which currently dominate the rail market.

Many Vietnamese retailers, for instance, are running grocery stores and specialty shops. Large retailers with more than 25 locations only account for 8% of the market, she said.

Local retailers, with their understanding of Vietnamese consumers, still have many advantages in keeping their market shares and even expanding into modern formats such as supermarkets, online retail and shopping malls, she concluded.