Foreign Trade University Faculty of Business Administration

Marketing assignment Topic 7: Development of Supermarkets in the World and reality in Vietnam
Group: inh Th Hng Anh Nguyn Thy Anh Nguyn Th Diu Linh Mai Th Ngc Tm Nguyn Phng Thy Class: A1, high quality, BA, K46.

Hanoi, 27- 04- 2010

TABLE OF CONTENT

I. Development of supermarkets in the world 1. The development of supermarket in US over the period 2 2. The spreads of supermarket in developing regions.3 3. Distribution and Replenishment process of supermarket5 4. Cut cost6 5. Example (Wal-Mart)7 II. Reality of supermarkets in Vietnam 1. Review of distribution system development in Vietnam over stages.11 2. Supermarkets in Vietnam: threats and opportunities..12 3. Solutions for domestic supermarkets..16

Preamble
Supermarkets are something popular but not everyone knows about its history and development. Therefore our report aims to provide an insight into supermarkets which is divided into two main parts The first part is about the development of supermarkets worldwide. For more details, it presents how supermarkets have developed, expanded and focuses on how supermarkets chains work so as to keep low cost and good quality products. In an effort to make the theory easier to grasp, we give an outstanding example of Wal-mart and its operating system. The second part pays attention to the realistic facts and figures in Vietnam, which is well-organized to illustrate how the theory of supermarkets in the world is put into practice in the context of Vietnam. From that we come to conclusion about general tendency of supermarket development for Vietnam in accordance with international scale.

I. Development of supermarkets in the world 1. The development of supermarket in US over the period Supermarket has experienced dramatic development since the first time it was introduced in New York City, US, in 1930. Its fundamental form was 1900s grocery stores of the Great Atlantic and Pacific Tea Company and other small regional players, which served only food, mostly dry items, canned foods, and non-perishable foods. Grocery stores of this era tended to be small (generally less than a thousand square feet) and also focused on only one aspect of food retailing. After that, in 1916, Piggly Wiggly stores, the first selfservice shop was established by Clarence Saunders. In 1920s, the chain-store explosion occurred with two large corporations. A&P operated over 10000 commercial stores by the end of the decade. Charles Merrill of Merrill Lynch arranged merger of most stores in the north west of America creating the set of Safeway Stores which especially controlled the west coast division of the Piggly Wiggly stores. Then, according to the Food Marketing Institute, Micheal J.Cullen opened the truly first supermarket named King Kullen. The chain stores of J.Cullen served several kinds of foods from separated food retailers with free parking lot, and discount for buying in bulk quantities. The model became popular and quickly applied to other chains such as A&P, Safeway, Kroger In comparison with the previous self-service stores, supermarket served larger range of products, emphasized on volume and had much larger area. By the 1950s, the development of supermarket reflected in the migration to suburban locations. In this period, the design of each chain was highly appreciated. Standardized designs were refined and modernized, creating instantly recognizable and iconic buildings such as A&Ps colonial-themed stores; the glass arch-shaped designs of Safeway, Penn Fruit and others; and the towering pylon signs of Food Fair and Lucky Stores. In 1970s, supermarkets have experienced the significant improvement in discount policy and warehouse stores. Numerous of stores in US embarked the discount programs, which mainly used the reduction in operating hours, cost-cutting technique, and elimination trading stamp. Additionally, to attract more customers, many stores were redecorated with carpeting, specialty departments, and colorful palette. By implementing this strategy, some stores simply re-imaged their current stores and kept the same name such as Lucky Stores of California. Others opened discounters under different names. The latest trend took place in 1980s, 1990s: mergers, upscale stores and warehouses. The market segmentation today grew out of discounting movement from the previous period. The middle range began to disappear, albeit slowly, as mainline stores went upscale and low end stores moved toward a warehouse model. Along with this trend, the re-emergence of superstores, featuring general merchandise and groceries under one roof became common. 4

On the other hands, mergers and leveraged buyouts affected almost all the major chains. A&P was sold to German interests. Safeway took itself private in 1987 to avoid a hostile takeover and lost half its geographical reach in the process. 2. The spreads of supermarket in developing regions Unlike the North America and Europe, the development of supermarket of developing regions has great achievements only in 1990s when there was the rapid rise in economic growth. The determinant of the diffusion of supermarket in developing countries can be explained by the demand of the consumers and the supply of supermarket services. On the demand side, the urbanization, consequently has forced women into the workforce outside home, increased womens incentive to seek shopping convenience and processed foods to save cooking time. Additionally, the rapid rise in capita income of the middle class, the growth in ownership of refrigerators during 1990s and growing access to cars and public transport reinforced the trend. Before the mid 1990s, the development of supermarkets was very slow as only domestic enterprises were involved. In the 1990s and after, foreign direct investment (FDI) was crucial to the take-off of supermarkets. The incentive to undertake FDI by chains from Europe, the United States and Japan was due to saturation and intense competition in home markets and much higher profit margins by investing in developing markets. Moreover, initial competition in the receiving regions was weak, generally with little fight put up by traditional retailers and domestic-capital supermarkets. The growth of FDI in food retailing overwhelmed the overall growth of FDI that was highly encouraged by those countries government. Addition, retail procurement logistics technology and inventory management were revolutionized in the 1990s. This was led by global chains and is diffusing now in developing regions through knowledge transfer and imitation and innovation by domestic supermarket chains. The supermarket chains have spread through the whole Latin America, then Asia, and then southern, eastern Africa. The supermarket share of food retail sales for the leading six Latin American countries averages 30 to 75 percent: Brazil has the highest share, followed by Argentina, Chile, Costa Rica, Colombia and Mexico. Those six countries account for 85 percent of the income and 75 percent of the population in Latin America. The average processed food retail share over several Southeast Asian countries Indonesia, Malaysia and Thailand is 33 percent, but is 63 percent for the East Asian countries of the Republic of Korea and Taiwan. The supermarket sector in China is the fastest-growing in the world: it started in 1991, by 2003 had 55 billion dollars of sales and 30 percent of urban food retail, and is growing by 30 to 40 percent a year. Supermarket diffusion is also expanding rapidly in Central and Eastern Europe (CEE). In northern CEE the share of supermarkets in food retail now stands at 40 to 50 percent. In southern CEE share is on average 25 to 30 percent but growing rapidly. The most recent venue for supermarket take-off is in Africa. South Africa is the frontrunner, with roughly a 55 percent share of supermarkets in overall food retail and 1700 supermarkets for 35 million persons. Kenya is the other one, with 300 supermarkets and a 20 percent share of supermarkets in urban food retail. 5

Second, the take-over of food retailing in these regions has occurred much more rapidly in processed, dry, and packaged foods such as noodles, milk products and grains. Additionally, the supermarkets progress in gaining control of fresh food markets has been slower, and there is greater variation across countries because of local habits and responses by wet markets and local shops. Usually the first fresh food categories for the supermarkets to gain a majority share include such as potatoes, chicken, beef and pork, and fish. For example in Latin America, the share of supermarkets in fresh foods is roughly one-half of the shares in packaged foods. For example, in Brazil, where the overall food retail share of supermarkets is 75%, the share in Sao Paulo of fresh fruits and vegetables is only 50%. Thirdly, there has been a general trend from supermarkets occupying only a small niche in capital cities serving only the rich and middle class, to supermarkets spreading well beyond the middle class in order to penetrate deeply into the food markets of the poor. They have also spread from big cities to intermediate towns, and in some countries, already to small towns in rural areas. About 40 percent of Chiles smaller towns now have supermarkets, as do many small-to-medium sized towns even in low-income countries like Kenya. Furthermore, supermarkets are now spreading rapidly beyond the top-60 cities of China in the coastal area and are moving to smaller cities and to the poorer and more remote northwest and southwest and interior. Lastly, the supermarket sector in these regions is increasingly and overwhelmingly multi- nationalized and consolidated. For example, the top chain in Brazil is Po de Acar (in partnership with Casino, of France, since 1999), and the top chain in China is the giant national chain Lianhua (based in Shanghai), with some 2 500 stores, in partial joint venture with Carrefour. This trend, which is done by a large amount of FDI, reflects the rapid consolidation in US and Europe. The supermarkets marvelous expansion is all thanks to the efficient way in which it runs the business processes which will be shown below. 3. Distribution and Replenishment process of supermarket Replenishment process is carried out at night so that the store can offer as many as possible options for customers in the following day and they will have more time to shop and obtain their goods. Supermarkets often ultimate the logistic system that includes direct delivery to stores and warehouse replenishment system. Individual stores place an order with their suppliers while a store in a supermarket chain receives deliveries from its distribution center. In that case, delivery schedule is carefully considered to be made on certain days per week in order to minimize the cost of transportation. Because reducing the number of deliveries per week means that the size of each delivery is increased, fewer deliveries mean there is a greater likelihood that some amount will not fit on the shelf. Therefore in large supermarkets, backroom is an indispensable area which is not on the sales floor and is used for storing excess product. 4. Cut cost Traditional supermarkets usually offer products at low prices by reducing their economic margins. Certain products (typically staple foods such as bread, milk and sugar) are occasionally sold as loss leaders, that is, with negative profit margins. To maintain profit, 6

supermarkets make up for the lower margins by a higher overall volume of sales, and with the sale of higher-margin items. At present, many supermarket chains are attempting to further cost reduction resulting from some innovation thanks to globalization and the development of information technology as well as transportation. Firstly, the check-out lane with human cashiers has been replaced by self-service check-out machines, where a single employee can oversee a group of four or five machines at once, assisting multiple customers at a time. The installation of self-service check-out system is shown whereby the productivity of the supermarket is maintained, no significantly increased floor space requirements occur while labor cost is significantly reduced. Secondly, new distribution method going hand in hand with procurement system play the most important role in one supermarkets cost reduction strategy. Procurement is the acquisition of goods and/or services at the best possible total cost of ownership, in the right quality and quantity, at the right time, in the right place and from the right source. There has been a marked tendency to shift from procurement by individual supermarkets to a centralized system involving a central buying office with distribution to stores through several distribution centers over a country. This is done in order to reduce coordination costs, generate economies of scale by buying larger volumes and working with fewer wholesalers and suppliers per unit merchandized, and to have tighter control over product quality and freshness. Supermarkets move from mainly buying at wholesale markets or from a list of customary suppliers, to contracting production that meets the specific grades and standards of the retail chain. The leading chains are shifting toward direct purchase from growers under the preferred supplier system, from traditional wholesalers to specialized/dedicated wholesalers that are specialized in a product category and dedicated to supplying supermarkets. Therefore, supermarkets will be able to select producers capable of meeting quality and safety standards and thus lower transaction costs for the chain both through lower search costs and by reducing the number of suppliers per unit sold. In both multinational and national supermarket chains, there also has been a shift toward cross-border procurement systems. Cross-border sourcing allows the procurement of the best value products from various countries and also, in the case of fruits and vegetables, enables seasonal supply constraints to be more easily addressed. 5. Example (Wal-Mart) a. Introduction Wal-Mart is more than just the world's largest retailer. It is an economic force, a cultural phenomenon. It all started with a simple philosophy from founder Sam Walton: offer shoppers lower prices than they get anywhere else. That basic strategy has shaped Wal-Mart's culture and driven the company's growth. Now that Wal-Mart is so huge, it has unprecedented power to shape labor markets globally and change the way entire industries operate. Wal-Mart has been able to keep its prices low through cutting-edge technology, a frugal corporate culture and a push to make suppliers sell merchandise at cheaper and cheaper prices. Its sophisticated use of technology, its corporate culture of watching every expense, and above all else, its mission to keep prices low have made Wal-Mart successful. b. Foundation and growth 7

Sam Walton opened his first five-and-dime in 1950. His vision was to keep prices as low as possible. Even if his margins weren't as fat as competitors, he figured he could make up for that in volume. In the early 1960s, Walton opened his first Wal-Mart in Rogers, Arkansas. The company continued to grow, going public in 1970 and adding more stores every year. In 1983, the first Sams Club members-warehouse store opened. The first Supercenter opened in 1988, featuring a complete grocery, and 36 departments of general merchandise. By 1989, there were 1,402 Walmart stores and 123 Sams Club locations. Employment had increased tenfold. Sales had grown from $1 billion in 1980, to $26 billion. In 1990, Wal-Mart surpassed key rival Kmart in size. Two years later, it surpassed Sears. Walton continued to drive an old pickup truck and share budget-hotel rooms with colleagues on business trips, even after Wal-Mart made him very rich. He demanded that his employees also keep expenses to a bare minimum - a mentality that is still at the heart of Wal-Mart culture more than a decade after Walton's death. Today, 8,400 stores and club locations in 14 markets employ more than 2.1 million associates, serving more than 176 million customers a year. Walmarts history is a perfect example of how to manage growth without losing sight of your values. c. Wal-Marts strategies Traditionally, Wal-Mart has essentially had a low-cost, high volume strategy. The strategy aims at customer satisfaction through low prices and relatively good customer service. Low cost: Wal-Mart has lower operating expenses than the industry average. The primary cost advantage is Wal-Marts superior distribution capability (location of stores, inside-out growth patterns, cross-docking, superior information management). High volume: Industry analysts watch Wal-Marts growth of sales figure very closely. Wal-Marts prices are low by the industry standard, which, combined with its lower costs, indicates a strategy that aims at growth in volume through grabbing increased market share. Customer Satisfaction: Low prices, advanced data management and extremely motivated employees means a better customer experience than at other discount retailers, even though Wal-Mart remains a self-service retailer. In addition, the large size of the traditional Wal-Mart stores adds convenience by offering a one-stop solution by offering a wide range of products. In the words of Sam Walton, Wal-Marts aims at creating a loyal customer base by lowering their cost of living through offering quality and other products at significantly lower prices, while surprising them on the convenience and service level side. Its worth mentioning that Wal-Mart acquired volume through a careful consideration of locations, away from competition. Today, however, Wal-Mart is experimenting with extending its original strategy. There are three avenues being considered: internationalization, different formats (neighborhood stores) and expanding the product range to offer more complete customer solutions like travel, insurance and banking services. Still, in terms of strategy, the internationalization option is essentially an extension of Wal-Marts traditional strategy to different countries, whereas the other two options are new ground for Wal-Mart. d. Wal-Marts competitive advantages 8

It is believed that Wal-Mart has five distinct competitive advantages, which are set forth in the table below. Under fit and scope, these activities implement the basic strategies of Wal-Mart, which are low cost, high volume, customer satisfaction. Competitive Advantage Activities implemented - Cross-docking, - Predominance of Wal-Marts own distribution centers - Inside-out location strategy. - Integrates suppliers via IT and treats them well in terms of pricing; they are more partners than value takers. Trade-Offs - Expense - Partnership relationship with suppliers - Sophisticated IT

Fit and Scope - Economies of scale match volume-based strategy. - Cost savings from lower inventory levels. - Cost-savings can translate into lower prices and more customer satisfaction. - Improves supply chain and lowers distribution costs. - Additional cost savings from elimination of manufacturer reps.

Distribution capabilities

Partnership relationship with suppliers

Advanced data-mining

- Active collection and usage of customer purchase behavior information.

Workforce culture

- Customer oriented Workforce motivated through generous monetary participation and belief in Wal-Mart culture

- Maintenance of Every day every day low low prices prices

- Relatively high cost of goods sold. - Integrated IT - Access to sales and inventory information for 3rd parties. - Useful data for suppliers - Expense and - Improves customer satisfaction time through more accurate forecasting of demand. - Lower costs through reduced inventory and shrinkage. - Improved matching of supply and demand. - Good customer service is not - Many staffs compromised by self-service benefits. and low cost structure => Strong improving customer loyalty. corporate culture. - Stores can respond more - Employee quickly/flexibly to changing enablement from demand. sophisticated IT. - Continuous improvement mindset. - Improves customer satisfaction - Only possible through low prices. so long as you Matches volume-driven really have the strategy. lowest 9

- Drives down costs through less Prices. advertising. - Steady prices improve stability of supply chain. e. Business segments Wal-Marts operations comprise three business segments: - Wal-Mart Stores: The Wal-Mart Stores segment includes supercenters, discount stores, and neighborhood markets in the United States, as well as walmart.com. This segment offers general merchandise, grocery merchandise, and financial services and products. It is the largest segment of Wal-Mart, accounting for 64% of the fiscal 2008 net sales and operates stores in three different formats in the United States, as well as Wal-Marts online retail operations... - Sams Club: The Sams Club segment includes the warehouse membership clubs in the United States, as well as samsclub.com. This segment primarily provides hard-goods, soft-goods, institutional-size grocery items, and selected private-label items under the members mark, bakers & chefs, and Sams club brands. - International: The International segment includes various formats of retail stores and restaurants, including discount stores, super-centers, and Sams Clubs that operate in Argentina, Brazil, Canada, the Peoples Republic of China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, and the United Kingdom. f. Corporate culture Sam Walton, Wal-Marts founder, believed its teamwork that makes Wal-Mart special. As its business grows and the pace of modern life quickens, Sams philosophy of teamwork has still be focused because Wal-Mart believes the ability to work together affects the quality of service its customers receive. In addition, Wal-Marts corporate culture also bases on the inclusion of: - Wal-Marts three basic beliefs, which include respect for the individual, service to customers and striving for excellence. - Open communication, which consists of door opening policy and associate opinion surveys. - Focus groups - Mutual support by helping each other best serve our customers and each staff has an opportunity to do something great for the team - Mutual respect by looking for and expect the best in others and anticipating that everyone wants to be successful and always looks for ways to improve. g. Awards and recognition

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Over the past 4 decades, Wal-Mart has been proud to serve the communities where it operates. From its foundation, Walmart has received numerous awards for its work. A sampling of its recent recognition can be listed as: 2010 World Environment Center Gold Medal for International Corporate Achievement in Sustainable Development. Ranked number 1 for Retail and number 9 Overall as Fast Company's "Most Innovative Companies 2010". Ranked number 3 out of 35 other retailers in the Q3 2009 Covalence ethical reputation index in 2009. 2009 Sustainability Excellence Award Voluntary Inter-industry Commerce Solutions (VICS). Top Companies for Female Executives National Association of Female Executives in 2008. II. Reality of supermarkets in Vietnam 1. Review of distribution system development in Vietnam over stages a. Traditional retail system For a very long time, Vietnam distribution consisted of traditional markets namely wet markets or street markets. However, the structure of social and business relations changed under French colonial rule. With the decree to spatially concentrate the sale of perishable goods, traditional street market trading was significantly reduced. Under the central planned economy (19541984), the Government controlled the whole economic process and opened selling places in the largest retailing areas. Private trading sector almost got eliminated. Under economic policy reforms (Doi Moi in 1986), farmers have long-term leases on plots of land. They may sell their output in markets. After 1986, as agricultural output boomed, rural marketplaces developed rapidly. To mention first, an organized bazaar (formal bazaar) is defined as a market established by the local authorities. A management board usually manages this kind of market. These organized bazaars have basic, but poor, facilities, including water supply and waste treatment systems. They lack refrigeration equipment and do not process fresh foods into branded goods for resale. There are various types of goods sold at organized bazaars. There are a substantial number of the traditional mom-and-pop stores, which are family-owned retailers that sell a limited variety of processed food, dry goods, drinks and household supplies. Another is the booming, spontaneous development of informal bazaars called Cho Coc: frog markets. The sellers lay out their wares (mainly fresh food) along streets, roads or wherever it is convenient for customers to shop. Retailers in these informal bazaars are mainly farmers and the poor. b. Rise of modern retail network Over the past 10 years, Vietnam has experienced an increase in the number of supermarkets. The first supermarket was a state-owned enterprise opened in 1993, named 11

Minimart, but it was closed down 4 days after opening, because of insufficient stock levels to meet the enormous demand, despite prices being 2030 percent more than those of traditional retailers. Citimart - the countrys first supermarket owned by private enterprise came to Ho Chi Minh City (HCMC) in 1994. After that, approximately 70 supermarkets more were quickly established in HCMC and another 20 in Hanoi. The number of supermarkets and shopping malls has increasing rapidly from only 12 (10 supermarkets and 2 trade centers) in 6 of 64 cities and provinces in 1995 to 210 supermarkets and 32 shopping malls in 30 cities at the end of 2004. 2. Supermarkets in Vietnam: threats and opportunities a. Opportunities Today, such a developing economy opens Vietnam up to a lot of opportunities and bright prospects in the field of supermarket investment. Along with the overall national development, the living standard of people is improved a great deal. People gradually get the concept of shopping in supermarkets for higher quality and safer products rather than go to traditional markets. So the better living standard is, the more chances for supermarket to develop. In addition, external factors like urbanization or government support create a fertilized field for supermarket invasion in Vietnam. The fact that Vietnam turns from an agricultural economy to an industrial economy gives rise to the overpopulation in big cities in this nation. As a result, the demand for goods and food increases, this certainly leads to expansion in different kinds of commercial places including supermarkets. After the event of integration into WTO, Vietnam trade is much more thriving with the cooperation and investment from developed countries which give us a lot lesson in supermarket operating and management b. Threats Beside opportunities, supermarkets in Viet Nam face such a number of threats as follows: Shopping habit is one of the most influential factors that enterprises should pay attention to. Unlike other countries, Vietnamese households tend to buy food and vegetables used for a day not for monthly storage. They usually go to traditional markets so that goods can be bargained for the most reasonable prices and in small quantity. Thus, the factor leads to limitation in fresh food category development. As can be seen, prices and convenience of supermarkets also make it difficult for customers to change their habits. However, high price is unavoidable because companies need big amount of investment to establish a wide network of supermarkets with modern facilities. Furthermore, most supermarkets are located in the outskirts or far away from the center of residents, which consequently decreases the customer visiting frequency Until supermarkets find their way out of these problems, there will be more obstacles for them to attract more consumers and expand their network. Last but not least, stiff competition is such a threat to supermarkets in Vietnam .Since its emergence in Vietnam, supermarkets can be divided into four main kinds based on their investment sources including state-owning, private-owning, joint venture and 12

100% foreign investment. The competition between domestic and foreign supermarkets is much harder after WTO accession of Vietnam. With more capital and experience than domestic retailers, foreign firms have their sights set on dominating Vietnams retail sector. Currently, big enterprises such as Metro Cash and Carry (Germany), Big C (France), Parkson (Malaysia), Zen Plaza (Japan), and Diamond Plaza (Korea) have acquired their own network and tended to expand more. According to Ministry of planning and investment, some giant corporate is working on joining Vietnam retail market. Three most significant ones are Wal-Mart (US), Tesco (UK), and Carrefour (France); beside are Asian top retailers including Dairy Farm (Hong Kong), and South Asia Investment Pte (Singapore). As mentioned in the part I, they all have long history in distribution and experience in building and managing professional retail network. The annual revenue of existing international supermarkets shown in Table 2 illustrates how proficiently and efficiently they have performed. Table 2: List of major supermarkets, hypermarkets and wholesale stores in Vietnam

Retail name

Outlet type

Ownerships

Turnover Number of (US$ outlets mil) 14 supermarket s, 136 6 convenient stores 3 hypermarket 26 s, 1 supermarket

Locations and expansion plans

Percent of domestic goods

Co-op Mart

Supermarke ts, convenience stores Hypermarke ts, supermarket s Supermarke ts, department stores Supermarke ts, convenience stores Supermarke ts, department

Cora

Local company operated under cooperative law Local joint venture with Casino Group of France

Mainly in HCMC, 8090 Plan: other cities HCMC, More Dong Nai than 90 and Hanoi HCMC, Nha Trang, expand to 70-90 Can Tho soon HCMC, Hanoi, Can 70-90 Tho, Dong Thap Haiphong, Hanoi

Maximart

An Phong privately3 owned company Privatelyowned company State-owned company 6 supermarket s, 5 stores 4

31

Citimart

20

Intimex

10

13

stores Fivimart Supermarke ts Privatelyowned company State-owned company Privatelyowned company 3 2.5 Hanoi and plan to More expand to than 70 HCMC HCMC HCMC HCMC, Hanoi, Haiphong, 85-90 Can Tho, Da Nang Hanoi 30-40

Satra Diamond markets

2 6

2.5 2.5

Metro Wholesales Cash&car stores ry

100% foreign investment 6 company (Germany) Local jointventure with 1 Seiyu of Japan Private-owned 3 company

220

Seiyu Hanoi Narko

Supermarke t Supermarke t

17

21

Hanoi

80-90

Sources: USDA Foreign Agricultural Service (2005), Nhieu et al. (2005) and data collected from Vietnam Ministry of Trade. In the contrary, ours is still green and in short of investment, experience, and longterm strategy. The distribution network is weak due to layered intermediaries from manufacturers to customers, small economic scale, and uncommon standard of management and technology. In addition, the incapability in storage also makes it hard for domestic supermarkets to lower prices and fulfill customers demand. Generally, proportion in domestic supermarkets goods supplies involves 40-50% of consignments, and the rest is available. Thus, when suppliers raise the price of products, many big supermarkets get into shortage and unwanted negotiation with manufacturers. Lets take Metro or Big C as a comparison. They both have strong relationship with manufacturers, tight rules about quality and time of delivery; hence, many levels of intermediaries are eliminated and sources of goods become more stable let alone flexible price adjustment. Thus, to local companies, lack of sources of permanent supplies can make them inactive to monitor products which results in customer dissatisfaction. The core problem lies in separating activities of manufacturers and circulating agents. The vague bond between them makes it challenging to exploit local abundant sources as well as technological transferring. Without corporation, domestic supermarkets are unable to ensure quality of products, enhance reputation and compete with the giant wave of international retailers.

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3. Solutions for domestic supermarkets Domestic supermarkets need to implement strategic changes to gain competitive advantage over foreign ones. Needless to say, they should base on their national backup by understanding Vietnamese habits and tastes and offering products and services which suit them most. This objective can be only achieved by ensuring both quality and quantity of goods as well as upgrading distribution network to make prices and costs decrease. The crucial thing is that local retailers should enhance the proficiency of management and look clearly into process of manufacturing together with circulating products. Whats more, sense of initiative can be raised if they build up stable and reliable areas of supplies. It requires more investment in modern and organized warehouses. To add more, the establishment of trading floors for fresh food and other necessities can help local supermarkets get rid of price pressure from suppliers. Moreover, facilities and technology development also need concentration. In the digital era, e-activities should be invented to assist distribution and selling more effectively. For instance, technical system should be implemented to control relationship between retailers and suppliers as well as manage input of sources to warehouses and other shelves. Wal-Marts system can be exemplary enough for them to learn and adjust to their own. By doing this, we can save up a large amount of cost spending on delivery and storage. Additionally, the corporation of local supermarkets plays an essential role to their existence. This union not only helps reduce costs of selling and buying but also creates a modern and professional retail network. For example, Vietnam Distribution Network Development and Investment Joint- stock Company (VDA) starts the trend with joint of four big domestic retailers including Hapro, Satra, Saigon Co.op, and Phu Thai Group. The corporation, consequently, makes up a large amount of investment consisting of VND 1.500 billion in stage I (from 3/2007 to 10/2008) for structure of modern commercial facilities and warehouse systems, and VND 3.000-6.000 billion in stage II (from 11/2008-10/2011) for hypermarkets, distribution centers, franchise, and financial export. From the case of VDA, local supermarkets should shake hands and use all of their advantage to face with giant foreign ones and win this battle. In conclusion, supermarket is a concept too familiar and indispensable in peoples lives in most countries. On worldwide scale, there are a lot of sophisticated supermarket systems to meet ever-increasingly demand of people. Surely in future, this kind of trade will become more and more popular and convenient. In light of Vietnam context, supermarkets are not something new but need lot of improvements in order that internal businesses can share fair playing field with foreign counterparts

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References:
1. e-JOURNAL OF AGRICULTURAL AND DEVELOPMENT ECONOMICS Vol. 1, No. 2, pp. 168-183, 2004 2. ACNielsen. 2002. China Dynamics: FMCG Sales Grow 8 percent in 2001 (available at www.asiapacific.acnielsen.com.au, September). 3. Balsevich, F., Berdegue, J.A., Flores, L., Mainville, D. & Reardon, T. 2003. Supermarkets and Produce Quality and Safety Standards in Latin America. 4. The grocers: the rise and rise of the supermarket chains By Andrew Seth, Geoffrey Randall, 2nd edition 5. The quick history of the supermarket (available at www.Groceteria.com) 6. VietNamNet Bridge - http://english.vietnamnet.vn/ 7. Masayoshi Maruyama and Le Viet Trung - Supermarkets in Vietnam: Opportunities and Obstacles 8. Viet Bao Viet Nam - http://vietbao.vn/ 9. Website of Ministry of Industry and Trade - http://www.moit.gov.vn/ 10. http://lottemart.com.vn/vn/ 11. http://vietnamnet.vn/ 12. www.walmart.com 13. Walmart's strategy analysis by Peter De Boeck, Alejandra Duran, Ilan Hadass, June Tan and Christian Zapf 14. A Method For Analyzing The Delivery Frequency From A Distribution Center To A Retail Grocery Store by Christopher Wayne Kerslake Bachelor of Science, Mechanical Engineering, University of Minnesota 15. Wholesale markets in the era of supermarkets and hypermarkets Developments in Central and Eastern Europe by Andrew W. Shepherd, Agricultural Marketing Group, FAO, Rome 16. Management of supermarket operations by Chinese Corruption Prevention Department

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