According to Sai Gon Tiep Thi newspaper, in 2006, Dang Le Nguyen Vu, CEO of G7 Commercial Services Co., inaugurated his chain of 500 G7 Mart convenience stores countrywide, beginning an ambitious and overweening journey to achieve his strategic target.
However, many economic experts at that time warned G7 Mart of tough challenges ahead since the novice company would have to directly compete with seasoned retailers including Co.op Mart, Maximark and Metro.
Vu, however, was confident that his comprehensive preparation for the chain would help him overcome all obstacles.
He said at that time there were around 160,000 retail stores around the country, 10,000 of which accounted for 70 percent of the manufacturers’ sales.
G7 aimed to compete directly with these 10,000 rivals, which were in fact indispensable parts of the manufacturers’ distribution chains. By declaring war against these retail stores, G7 Mart was in fact declaring war against the suppliers of goods and products to these stores.
As a result, the convenience stores failed to secure good deals with manufacturers who will supply them with products of good quality at competitive prices.
As it happened, G7 Mart stores constantly had to buy goods at high prices and there were times when they could not even manage to fill their stocks.
A former supervisor at a G7 Mart store said 80 percent of the 1,000 items on sale at the stores in G7 Mart chain had higher prices than those of other retailers.
“Not only did G7 Mart fail to negotiate for a reasonable price deal, it was also treated like a family’s black sheep by the manufacturers,” he said.
“The manufacturers seldom provided the best-selling goods to stores in G7 Mart chain, lowering consumers’ trust in the stores.”
Not long after its inauguration, G7 Mart has to gradually shut down its stores in the northern, central and south-west markets.
Even in the only remaining market in Ho Chi Minh City, G7 Mart also had to cut the number of its stores citywide by half and kept only two salesmen for its staff.
According to economics expert Le Dang Doanh, one of main causes for the failure of G7 Mart chain is that it overestimated and overextended itself in a market which has already seen fierce competition amongst domestic and foreign retailers.
Doanh said the company had also failed to “hook up” with the manufacturers, which was a crucial factor in the retailing sector.
“This is a valuable lesson for those entrepreneurs planning to jump into this field,” he said.
Moreover, G7 Mart also assigned logistics tasks, such as goods delivery, to a third party, which often showed no care to its customers.
This only worsens G7 Mart’s failure in competition with other rivals, an employee of the chain said.
“The hired delivery company has simply brought the goods to the customer’s door, dropped it off, asked for the payment and then drove off,” he said.
“What customer would ever want to stay loyal to such stores with such annoying delivering style?”