Cash & carry
An international wholesale chain is welcomed to Ho Chi Minh City. But
willit thrive?
HO CHI MINH CITY - Foreign investments of $120 million don't come
bouncing
into Vietnam every day of the week. So when German-owned Metro AG
announced
plans to open eight giant Metro Cash & Carry wholesale
outlets--launching
the first one on March 28 in Ho Chi Minh City--Vietnamese officials
rolled
out the red carpet. Apart from granting tax breaks, they made sure that
Metro's massive freezers and other heavy equipment cleared customs in
just
four days.
Vietnam's friendly welcome contrasts sharply with attitudes in Malaysia
and
elsewhere in the region, where hypermarkets have raised protectionist
hackles. While other countries fret over the prospect of local
enterprises
getting crushed, Vietnam seems to be buying Metro's argument that its
presence will benefit local companies.
The biggest lure: Metro's global chain of 337 wholesale outlets could
provide a window on the world for many Vietnamese products that
currently
lack distribution channels. "Metro will help Vietnamese entrepreneurs
keep
pace with those in other countries, " says Pham Xuan Ai, vice-director
of
the state-run Institute for Economic Research in Ho Chi Minh City.
Piggybacking on Metro's connections is a lot easier than starting from
scratch. Last year, a Hong Kong-based Metro affiliate purchased and
exported
some $75 million worth of Vietnamese goods, including textiles, shoes
and
furniture.
That number could swell this year, depending on the firm's continuing
evaluations of Vietnamese seafood and various agricultural products.
Starting in May, Metro executives promise that they will team up with a
German development group to help Vietnamese farmers introduce new crop
varieties and ensure the supply of quality vegetables.
And for some Vietnamese retailers, Metro is already providing a useful
model
for brighter, more hygienic displays of fresh meat, fish and produce. At
the
Saigon Union of Trading Cooperatives, known as Saigon Co.Op, executives
are
considering importing new equipment to improve cooling at its string of
supermarkets. "We have to try harder," says Nguyen Thi Nghia, president
of
Saigon Co.Op.
Wait and see
But not everyone is rushing to embrace Metro. As the name suggests, Cash
&
Carry rules out both credit and delivery--perks that buyers at Ho Chi
Minh
City's major hotels and restaurants have long enjoyed in centrally
located,
traditional markets like Ben Thanh. Delivery is a big issue because
Metro
launched its first store in the southwest corner of the city, a
40-minute
ride from the centre. "Prices [at Metro] are only 10% lower than they
are
outside. If you add transportation costs, the price is almost the same
as in
Ben Thanh," says Pham Vu Hiep, acting food-and-beverage manager at the
Rex
Hotel. For now, he's sticking with his traditional suppliers, who can
deliver goods within 15 minutes and extend daily credit of up to 20
million
dong ($1,315).
While opening day was jammed with an estimated 10,000 shoppers and
gawkers,
subsequent visits on a Sunday afternoon and Friday morning found trade
more
subdued, with short lines at checkout counters and a half-empty parking
lot.
One factor is Metro's worldwide insistence that it's a wholesale outlet
rather than a discount-retail chain. Potential customers must produce a
business-registration number to obtain a plastic entry card emblazoned
with
a photograph to avoid transferable use. And since few can afford cars in
Ho
Chi Minh City, they're limited to what they can cart away on their
motorbikes.
Another damper is the barring of children under the age of 14. While
Metro
aims to protect youngsters from getting hurt by the heavy machinery that
lifts items onto top shelves, the policy undercuts one of the main
functions
of shopping in Vietnam--cheap family entertainment. Witness the hordes
shuffling through the halls of Trang Tien Plaza, Hanoi's first major
mall,
which made its debut earlier this year. It's a natural trend, given the
lack
of recreational alternatives and the novelty of seeing a wide variety of
foreign goods in Vietnam.
Rather than draw window shoppers, Metro is counting on cajoling more
customers like 30-year-old Le Hong Diem, who hawks home-care products
such
as shampoo and toothpaste from a modest market stall. Although Diem
didn't
buy anything on her first two trips to Metro, on her third foray she
wheeled
two crammed shopping carts to the cash register and peeled off a fat wad
of
dong. Even though she estimates that shopping at Metro won't save her
more
than 100,000 dong, she says she doesn't mind paying the total bill of
4,525,100 dong in cash--and piling the massive load onto her motorbike
to
take back to her stall.
For Vietnam, the broader question is whether Metro's presence will
encourage
other foreign investors to jump in. "When a group like Metro invests in
Vietnam, it's a very strong signal of confidence in political stability
and
growth," says Doan Viet Dai Tu, a Ho Chi Minh City-based business
consultant
hired by Metro. Maybe so, but so far the numbers have been
disappointing: In
the first quarter, approved foreign-investment capital dropped 30% from
the
same period last year. To reverse the trend, Vietnamese officials must
show
that Metro won't be the only customer to get red-carpet treatment.
By Margot Cohen - The Far Eastern Economic Review - April 18, 2002
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