Small local suppliers are being confronted with demands for huge trade discount rates and bribery in order to access supermarket distribution.
Local suppliers find blocks to supermarket access
At the workshop on the retail market, Pham Ngoc Hung, vice chairman of the HCM City Business Association, said in order to get products on display, firms are being arm-twisted into paying VND10-20m (USD454-909) for each type of product. They also have to bribe sorting and placement staff or their products won’t be displayed properly.
Small sized firms aren’t in a position to pay huge amounts and also have to accept huge trade discount rates to get their products displayed, especially export firms who consider discount rates as marketing costs. As a result, this has encouraged even higher discount rates.
Le Thi Thanh Lam, director of SaigonFood TM Company said foreign-owned supermarkets were asking for huge discount rates while domestic supermarkets were indifferent toward them. "Some supermarket haven't met us for five years," she said.
In addition, local distributors are losing in competition and have not been able to prove their credibility.
Last month, Vietnam Association of Seafood Exporters and Producers asked supermarkets to lower the discount rate as several supermarkets had demanded a higher rate after their mergers and acquisitions. Big C Supermarket recently asked to raise the discount rate to 17%-25%, which was leading to several firms wanting to terminate contracts. Some even speculated that the Thailand's TCC Holdings Co Ltd., the new owner of Big C, were happy to see Vietnamese producers fail as they could source produce from Thailand. VASEP then asked Big C to keep the rate at 15%.
Another pressing problem is that supermarkets are losing customers. A survey by the Vietnam Institute for Trade, under the Ministry of Industry and Trade, showed that even though Vietnam’s retail market is developing with over 700 supermarkets and convenience stores, customer trust is decreasing rapidly.
Pham Nguyen Minh and Hoang Thi Huong Lan from the institute said people went to the supermarket due to guaranteed quality, and then hygiene, food safety, services, prices and convenience. But supermarkets were losing quality in terms of their products, marketing and even services because many products of unknown origin were found displayed. According to Minh, in order to earn consumer trust, supermarkets must reduce service costs and work more closely with distributors and marketing departments to make sure their prices are stable and products are in stock.
