The Hanoitimes - A new supermarket strategy based on producing goods under in-house labels, pose several challenges to domestic manufacturers in providing low priced, high quality products.
As part of the new strategy, supermarkets aim to co-operate with local manufacturers in producing goods such as home appliances and food, attaching in-house labels for distribution via their own systems upon completion.
Cutting down on costs associated with advertising and distribution, the new strategy aims to ensure high quality while affording an opportunity for supermarket prices to be lowered by 10-30 per cent.
One manufacturing director admitted that his company faced a number of difficulties due to the introduction of cheaper products, which would make their own products less competitive.
For example, supermarket notebooks are sold at VND3,900 each, while the price for the same product was usually double that at other retail outlets.
During May, a supermarket introduced a new type of soap, branded with its own label, the price of which was around 30 per cent cheaper than that of its competitors.
Due to lowered prices, manufacturers are set to become weaker, possibly even turning into outsourcing units for supermarkets, according to a market expert.
However, some believe that new supermarket products could do little harm to already established brands. They are only being distributed through modern systems, which helps manufacturens innovate, operate at full capacity and earn higher profits while avoiding direct competition.
According to a report, drawn up by the Centre of Business Studies and Assistance (BSA), around 50 domestic manufacturers have been producing goods for supermarkets.
The BSA report cites the Saigon Coop as an example of a supermarket which has co-operated with 45 domestic producers, including Kinh Do corporation, the Sai Gon Paper Company and Phong Phu Garments, in producing products.
According to the report, the trend is nothing new, led by Metro Cash & Carry who introduced many of its own products upon first entering the Vietnamese market.
Since 2007, Big C has also started producing in-house labelled products, with many additional domestic supermarkets following in the footsteps of their foreign counterparts.
The Saigon Co-op currently sells 150 in-house labelled products while Vinatex Systems, run by the Vietnam Garment and Textile Group, has been selling in-house labelled products under its Vinatex Fashion trademark.
Vinatex is set to announce three new trademarks during the course of the year, to be distributed at over 60 of its stores nationwide.