As a price war rages between Vietnamese suppliers and foreign retailers, conglomerate Vingroup has entered a deal with an allegiance of nearly 250 local manufacturers and suppliers, promising not to squeeze their profit margins.
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 it the largest chain in Vietnam.
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.
Big C, the country's biggest foreign supermarket chain, 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 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.
Source: thanhniennews.com
