Customers shop for fresh fruit at Co.opMart Cong Quynh in HCM City. The domestic retail sector expects to increase its contribution to GDP from the current 14 per cent to 23 per cent in 2014. — VNA/VNS Photo Kim Phuong

HCM CITY  (Biz Hub) — The domestic retail sector expects to increase its contribution to the Gross Domestic Product (GDP) from the current 14 per cent to 23 per cent in 2014.

Chairwoman Dinh Thi My Loan of the Viet Nam Retailers Association (VRA) said the sector has several advantages that make the target achievable.

She explained that the sector still has "big room" for both foreign and domestic investors to develop their business.

The country's population has climbed up to 90 million, a majority of which was young people who use up to 70 per cent of their income for shopping.

Given this shopping tendency as well as the statistics that every 100,000 people needed a big trade centre, every 10,000 require a supermarket and every 1,000 people one or two convenience stores, Loan said.

However, even big cities in Viet Nam including HCM City and Ha Noi do not have enough retail establishments to meet these standards, she noted.

In rural areas, which are home to 70 per cent of the country's population, retail distribution systems are not well developed and do not meet local demand, she said.

According to statistics compiled by VRA, the country now has 717 modern retail centres and 8,600 traditional markets.

Viet Nam's modern retail ratio still is rather low at 22 per cent, compared with other countries in the region including the Philippines with 30 per cent, Thailand with 46 per cent, China with 51 per cent and Malaysia with 60 per cent.

"To grasp this market's available potential, more and more enterprises want to invest in the retail sector," Loan said.

"In the first nine months of the year, 11,000 enterprises have resumed business after temporarily stopping due to the economic downturn. Up to 30 per cent of these are involved in the retail sector," she said.

Competitiveness

Fully foreign-owned retailers number just 21, but they still dominate the domestic retail market thanks to their professional management skills and efficient distribution system, as well as abundant sources of commodities.

"Domestic retailers have some weaknesses including limited professional skills, insufficient sources, unprofessional distribution systems and prices that are not competitive."

To sharpen their competitive edge, domestic retailers should fully exploit the advantages they have, she said.

For instance, they should make optimal use of the long-term, close relationship between them and consumers to expand their market share.

Domestic producers should also improve the quality of their products as well as their packaging to make them more attractive to the customers.

Loan also stressed the need for retailers to increase human resource quality.

"A retail enterprise can develop only when they have staffs who can not only sell commodities directly but also take good care of customers. Good managers are also very important to help the enterprises outline effective development strategies," Loan said.

Many senior economists agreed with Loan saying that domestic retail enterprises would find it difficult to compete with the foreigners if they did not improve themselves.

This is an urgent task of great importance given that more and more famous foreign retailers from around the world were looking to enter the Vietnamese retail market.

Domestic retailers should also join hands with each other to multiply their strength and thus increase their competitiveness, the experts said — VNS