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Domestic businesses complain it’s difficult to squeeze into supermarkets   2012-07-15 - VietNamNet

All manufacturers want to put their products on sale at supermarkets. However, they always have to struggle hard to obtain the right to display products on the shelves there.

Manufacturers have to queue up to enter supermarkets

Recalling the days when approaching supermarkets – a new distribution channel in Vietnam, Le Thi Thanh Lam, Deputy General Director of Saigon Food, said she had to wait 45 minutes to be able to meet the representative of the supermarket.

After tough negotiations, Saigon Food’s products were accepted to be put on sale at the supermarket. However, Lam later found out that the products were put on disadvantageous positions which could not catch the attention from buyers.

When Lam complained about this, she was explained that her products got familiar to customers already, and the products would be found no matter where they are put. Meanwhile, the supermarket needed to use advantageous positions for new products in order to better introduce new products to customers.

“Why do enterprises have to spend money to survey the market and consumers’ behaviors, then?” she questioned.

Le Hoang Thanh, a senior executive of Tan Quang Minh Company, also said that it’s very difficult to reach agreements with retailers on putting products on sale at their networks. Thanh said supermarkets now tend to require higher discount rates. Besides, supermarkets always ask manufacturers to advertise their new products to turn the goods more familiar to customers. Therefore, it takes at least 2-3 months to successfully have products sold at supermarkets.

A representative of a small bag company said that supermarkets play a lot of tricks to demand for higher profits. They set up a lot of kinds of fees and discounts in order to make bigger profits. At first, the fees seemed to be insignificant, but in fact, they could be up to 10 percent in total, which is a burden on enterprises.

However, Bui Duc Hue, Director of Sao Viet Distribution Company, said that supermarkets, like other businesses, always try to optimize their profits.

“There are hundreds of thousands of suppliers. Supermarkets would prioritize the ones who can bring higher business efficiency,” he said.

Still trying to squeeze into supermarkets

An executive of a processed food company said that supermarkets always require discount rates, price reductions and the financial support for the supermarkets’ sales promotion campaigns.

If counting all kinds of expenses, the total sales cost would be up to 40 percent, which means no profit or little profit for enterprises. Meanwhile, due to the input material price increases, a lot of companies have incurred big losses.

“However, we would not give up the distribution channel. Having goods sold at supermarkets would help manufacturers popularize their products and brands,” he said. Supermarkets also understand their advantages, therefore, they always require too much from manufacturers.

Hue from Sao Viet also said that if enterprises do not put goods on sale at supermarkets, their brands would not be able to exist on the market. Official reports all show that supermarkets have very high annual growth rate of 40 percent per annum, which shows that this is an effective retail channel. Therefore, manufacturers have no other choice than accepting the requirements set up by supermarkets.

However, Nguyen Quoc Khanh, a marketing officer of Saigon Nutritious Food Company, said that in general, only small businesses have to bear unfavorable conditions. In principle, enterprises would have to offer higher discounts rates for the products with low turnover. Meanwhile, big enterprises which have well- known products can impose their terms in the deals with supermarkets.

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