Vietnamese suppliers band together amid price war with foreign retailers

By Chi Hieu, Thanh Nien News

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A file photo of a Vinmart supermarket A file photo of a Vinmart supermarket

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Conglomerate Vingroup, which has been expanding its retail business, has entered a deal with an allegiance of nearly 250 local manufacturers and suppliers, promising not to squeeze their profit margins. 
The move came amid a war between Vietnamese suppliers and foreign retailers. As large retail chains compete with one another on aggressive low-price models, some have reportedly forced suppliers to cut prices or offer higher rebates. 
Vingroup has pledged support to the group of suppliers by accepting low commission payments for a year. Organic food products, including meat, fruit and vegetables, will be carried by Vingroup's retail stores for free. 
Over the past two years Vingroup has opened 650 convenience stores around the country, making its the largest chain in Vietnam. The conglomerate, which has invested $300 million in the retail sector, is also operating 100 supermarkets and 50 shopping malls.
Conflicts between suppliers and retailers became more intense a few months ago. 
According to local media reports, foreign retailers are controlling more than 50 percent of the local market, which gives them negotiating power and earns them up to 20 percent in commissions. In comparison, local retailers usually demand a commission rate of 10 percent from suppliers. 
In a high-profile case, the Vietnam Association of Seafood Exporters and Producers (VASEP) last month sent a letter to Big C, the country's biggest foreign supermarket chain, asking it to stop demanding more from suppliers and threatening to cut supplies.
Besides high commissions, Big C, which is now owned by Thailand's Central Group after a 1 billion euro (US$1.1 billion) acquisition from France's Casino Group in April, was also accused of charging various fees to carry products for local suppliers. 
Vietnam's retail sales rose 10.6 percent from 2014 to VND2,469 trillion ($109.4 billion) last year, according to official figures.

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