Vietnam retailers worried about foreign takeover

Since Vietnam opened up its borders for foreign investment, the country has been booming with an influx of international retail players — from convenience stores 7-Eleven to department stores Aeon Japan, Takashimaya, Walmart and Thai-owned Big C Vietnam.

Without questions, some of the biggest foreign retail players come from Japan and South Korea. Three major Japanese players have strong presence in the country — 7-Eleven, FamilyMart and Ministop — of which local retailers are concerned will affect their bottomline.

(Read also: South Korean retailers rush to cash in on Vietnam)

7-Eleven’s announcement of rapid expansion in the country has retailers and government bodies worried. While convenience stores’ main competitor in the country is Vinmart with 1,000 stores, 7-Eleven plans to have 1,000 stores under its belt in the country within 10 years.

The sudden surge of foreign investments into the country has pushed forward deputy prime minister Trinh Dinh Dung to revisit tax land payments and allocation of land to local retailers in order for them to stay relevant as foreign retailers fixate themselves in the country.

Dung said the retail business sector plays a very important role in regulating and orienting production. “Problems still exist in the domestic market management undertaken by ministries, branches and local authorities, especially in the implementation of the regulation on ENT (economic needs test),” he said.

(Read more: Vietnam gets its own consumer, retail products test labVietnam aims USD10bn in online sales by 2020)

This is not the first time a government official has stepped up to protect the welfare of local retailers. In July 2016, local retailers rallied together to urge the government to provide incentive programmes and capital support so they can resist an overall foreign takeover.

Are retailers in Vietnam concerned with a non-existent problem? According to analysts observing the shifting retail landscape of Vietnam, “the key is not who sells goods, but what is sold.”

“Vietnam seems to worry too much about the expansion of foreign retail networks, thinking that foreign products will flood the market and harm local production.”

Domestic retailers need not focus to much on Vietnamese-made products, but instead look at diversifying its offering through foreign suppliers. “This will force manufacturers and suppliers to improve their product quality.”

While foreign retailers may be moving in fast, they will still face their fair share of challenges. Vietnam is not short of local conglomerates with strong financial capabilities. While foreign retailers have expansion and growth in the country planned, Vingroup, The Goio Di Dong, FPT and Vinamilk are all diversifying their portfolios beyond retail.