Regulation on sale promotions might help foreign retailers crush smaller competitors

The Decree 81 guiding the implementation of the Commercial Law stipulates that the promotional value can be equal to up to 100% of the prices of promotional goods instead of 50% as stipulated in the old Decree 37.

Manufacturers and retailers are gearing up to prepare for the huge sale promotion campaign on the occasion of National Day, September 2.

A representative of Saigon Co-op, which holds the largest market share in the south, said on Nguoi Lao dong that the retail systems belonging to Saigon Co-op plan big discount rates for some strategic products. Big C, Lotte Mart and Aeon have also said they have got ready for the campaign.

In the campaign, retailers will, for the first time, be able to offer the discount rate of 100% for products.

Experts have applauded the new decision, saying that this will benefit customers because they can buy goods at best products, and benefit retailers and manufacturers as well, because they can apply the most suitable pricing policies to attract customers.

However, the experts warned that the new regulation may pave the way for unhealthy competition. Big retail chains may dump prices to lure customers and then corner the market. As a result, small retail chains will be swallowed by the big ones.

Do Quoc Huy, marketing director of the Vietnamese owned Saigon Co-op, said if enterprises sell products at below cost prices, this will lead to unhealthy competition. Therefore, it is necessary for management agencies to control the input prices of products and apply heavy sanctions to deter violators.

Huy also thinks that in the long term, the regulation on 100% promotion value will bring advantages to big retailers.

Saigon Co-op is one of ‘big retailers’, and so is Vinmart. However, there are only several Vietnamese retailers like these. The majority of big players in the market are foreign invested.

The Hanoi Supermarket Association, which has dissolved, once estimated that 50 percent of the retail market share belonged to foreign groups. Some experts believe the real figure was higher.

More and more foreign retailers have flocked to Vietnam recently. They have not only opened hypermarkets and shopping malls, but also small supermarkets and convenience stores.

Vu Vinh Phu, a retail expert, estimates that each sale point in foreign retail chains has revenue 5-7 times higher than Vietnam’s supermarkets. Therefore, once foreign retail chains have the right to raise promotion value, they will have more ‘weapons’ to struggle with Vietnamese ones.