Marketing Random

Supermarket channels and underground power: # 1 – Spit “bitter” to find “sweet”

Bringing goods to supermarkets is a difficult journey for manufacturing enterprises (businesses), especially small and medium enterprises. In order to survive in this retail channel, businesses have to perform a lot of “obligations” but the “right” to sell goods is mostly decided by the supermarket.

Want to put products into supermarkets of FDI enterprises and some supermarkets of Vietnamese enterprises, the “hard” discount rate is up to 25-35% plus many “soft” discounts that make many businesses have to coal, but must accept because it is impossible not to squeeze into this retail channel.

Both “king’s permission” and “village rules”

At the Vietnam Retail and Marketing Investment Forum held in March, the leader of the Domestic Market Department – Ministry of Industry and Trade said: “Vietnamese businesses encounter many difficulties when participating in the distribution chain of supermarkets, because in addition to having to go through a complicated procedure, they also have to pay high discounts and pay a series of fees, like display fees. , open code, shelf, marketing, sales bonus … “.

Economist Vu Vinh Phu – Former Chairman of Hanoi Supermarket Association affirmed: “Bringing goods to Big C supermarket with a hard discount of 20% and soft discount of 12% is an alarming issue for the Vietnamese economy.”

Customers shopping at the supermarket.

One business owner said that he had to accept a discount of 25% for a supermarket and that supermarket would require an increase of 32%. But not all, in addition to this “king’s permission,” to bring goods to the supermarket, businesses also have to spend other “village fees”, such as the cost of shelves, creating product codes, accounting, donating money to supermarkets. organize anniversary of the establishment, support supermarkets when opening more warehouses in the provinces. On average, with a product code, it takes nearly ten million dong for a company, if many products are sold, the cost is just like that. Not to mention, want to place orders in beautiful locations must add rental fees and must “foster” staff “take care” of the stall, otherwise, the goods are only sold in designated areas and confused with the ground. other goods.

However, the most difficult time is that the appraisal process of product inspection and other review procedures takes one year and the payment period is often “overdue”, making many enterprises lack capital even more difficult. difficulties in re-expanding production. In addition, businesses also have to compete with private brands of supermarkets that are always given priority to the shelves.

According to Mr. Phu, currently, only one in every 10 Vietnamese manufacturers can bring products into the supermarket of FDI enterprises, causing Vietnamese goods to be outdone and “pushed” out of the system to Foreign goods replaced.

According to economic experts, the fact that enterprises have to discount for supermarkets is the rule in the market mechanism. This is the business relationship between suppliers, manufacturers and distributors.

For every 10 Vietnamese manufacturers, only one manufacturer is able to bring goods into the supermarket of FDI enterprises, causing Vietnamese goods to be inferior and “pushed” out of the system to replace foreign goods.

Mr. Pham Binh An – Director of Ho Chi Minh City WTO Center said: “According to market rules, whoever holds the retail channel has the advantage of controlling manufacturers and consumer orientation. That is also why supermarkets have to optimize efficiency on each business area. Whenever they put a new product into the supermarket, they would have to eliminate goods from another company that did not meet it. ”

However, with many types of fees that are both “hard” and “soft”, businesses not only “suck the sweet potato” but also many supermarkets apply some other ridiculous policies. For example, in 2014, although the revenue from the sale of Minh Long 1’s products was over VND 30 billion, the supermarket X still arbitrarily raised the selling price, causing Minh Long 1 Ceramic Company to withdraw all of its goods. Or as Ba Huan Co., Ltd. was once asked by a supermarket to make their own labels processed goods at a price of 5% cheaper and the condition of accepting or withdrawing from that distribution channel made Ba Huan fall into the problem, because if accepted, it is like “do it yourself”.

Most recently, Big C supermarket suddenly announced to stop receiving goods from hundreds of Vietnamese garment enterprises, leaving these businesses in a passive position, even at risk of bankruptcy, showing the “underground power” of Supermarket channels are increasingly showing and putting heavy pressure on domestic businesses.

Not yet been “made difficult”

On July 6, 2019, sharing the common difficulties of garment enterprises at the Saigon Entrepreneur Editorial Office, Ms. Khuu Thi Thanh Thuy – General Secretary of Ho Chi Minh City Knitting and Knitting Association said: Big C sudden termination of orders with garment enterprises causing them huge losses, especially, when the work is reduced, does not guarantee income, workers will go elsewhere, until the enterprises have orders, there is no labor. The risk of many enterprises going bankrupt is money labels. ”

Display of goods in supermarkets.

Ms. N.T.N. – Representative of Enterprise A. shared pressing: “The company has cooperated with Big C for many years and the goods always meet the quality requirements. Each year, the company contracts to supply goods to Big C about 6 billion. The sudden cessation of Big C’s contract greatly affects the business as well as the company’s revenue and many other consequences, such as resolving inventories, unsold goods, raw materials, labor, even goods in progress “.

Ms. N.N. – Representative of Enterprise B. also said that: “If we follow the terms of the contract, Big C may not be wrong, but cultural behavior is not acceptable. Because usually, small garment enterprises have to spend about 5-10 billion VND for production plans for 6 months to a year, such as purchasing raw materials, estimating production costs, labor, not to mention many businesses still have having to borrow from a bank, Big C’s sudden stop receiving goods will cause businesses to lose this amount of money and still face difficulties in managing cash flow to pay interest rates, the risk of bankruptcy is real.

With the high discount rate at supermarkets, domestic small and medium enterprises are forced to push prices higher than outside by 15-30% to ensure profit, while cheaper Thai goods will make it difficult for Vietnamese products to compete. right in the domestic market.

Although Big C insists that stopping orders is only “temporary and planning to develop new brands, review the 200 apparel suppliers to develop the best quality products to serve. domestically and export ”, however, this argument is not clear. Big C has the right to choose the source of the goods, but we do not know what criteria to choose the supplier of Big C. Because, if I say quality criteria, I have cooperated with Big C since 2005, the product is always well evaluated. Specifically, every year, Big C sells nearly 7 billion of my company’s goods, but currently, we are not on the list that Big C considers ordering. Is there a reason why we do not spend so much on other expenses requested by supermarkets ”.

The director of this enterprise added that another inadequacy is that most FDI supermarkets require suppliers to supply high-quality, low-price products but they always offer very high discounts that businesses want. cooperation is no longer interest.

According to Ms. Ly Kim Chi, Chairman of Ho Chi Minh City Food and Food Association, with the application of high discounts at supermarkets, domestic small and medium enterprises are forced to push prices 15-30% higher than outside. to ensure profit, while cheaper Thai products will make it difficult for Vietnamese goods to compete in the domestic market.

Lu Y Nhi
* Source: Saigon Businessman


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