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1、Getting Your Goods to Market in VietnamNavigating Vietnams Distribution Network for Goods and Services How to Find a Distributor in VietnamPartnering with a Vietnamese FirmPg 04Pg 07Pg 10Issue 54 June 2023|www.vietnam-From Dezan Shira&Associates Vietnam Briefing Issue 54 June 20232IntroductionCredit
2、sPublisher-Asia Briefing Media Ltd.Lead Editor-Melissa CyrillEditor-Mark Barnes Key Contributors-Uyen Nguyen,Thu NguyenDesigner-Aparajita Zadoo,Miguel Enrico Awww.india-www.vietnam-www.asiainvestmentresearch.orgwww.china-www.russia-Vietnam is emerging as a key market in Southeast Asia for a vast arr
3、ay of foreign goods and services,ranging from gourmet cheeses to automobiles.With a population of 100 million consumers,the demand for products is increasing rapidly as wages rise,cities urbanize,and a new consumer class emerges.The market is expanding at a breakneck pace,with more than 15 free trad
4、e agreements reducing trade barriers and tariffs.This presents an excellent opportunity for businesses to tap into the Vietnamese consumer market.However,entering the Vietnam market can be challenging.A thorough understanding of Vietnamese consumers and businesses,as well as the countrys distributio
5、n network,is essential to maximize returns.In this issue of Vietnam Briefing Magazine,we explore the basics of distributing goods in Vietnam,including the countrys distribution network structure,how to find a local distributor,and working with Vietnamese firms.By following this guidance,businesses c
6、an successfully penetrate the Vietnamese market and capitalize on its rapid growth.With kind regards,Alberto VettorettiALBERTO VETTORETTIPartnerDezan Shira&A Vietnam Briefing Issue 54 June 20233Asia Briefing Ltd.Unit 507,5/F,Chinachem Golden Plaza,77 Mody Road,Tsim Sha Tsui East Kowloon,Hong Kong.An
7、nual SubscriptionVietnam Briefing Magazine is published four times a year.To subscribe,please visit please explore the clickable resources below.Getting Your Goods to Market in VietnamContentsNavigating Vietnams Distribution Network for Goods and Services Pg 04How to Find a Distributor in VietnamPg
8、07Partnering with a Vietnamese FirmPg 10ReferenceVietnam Briefing and related titles are produced by Asia Briefing Ltd.,a wholly owned subsidiary of Dezan Shira Group.Content is provided by Dezan Shira&Associates.No liability may be accepted for any of the contents of this publication.Readers are st
9、rongly advised to seek professional advice when actively looking to implement suggestions made within this publication.For queries regarding the content of this magazine,please contact:All materials and contents 2023 Asia Briefing Ltd.Like Vietnam Briefing on FacebookFollow Vietnam Briefing on Twitt
10、erConnect with Dezan Shira&Associates on LinkedinView Dezan Shira&Associates on Youtube Follow usScan the QR code to follow us on WeChat and gain access to the latest investor news and resourcesConnect with us for the latest news,events and insights across Asia.Legal,Tax,Accounting Newswww.vietnam-
11、and W S Advisory and C Vietnam Briefing Issue 54 June 20234Navigating Vietnams Distribution Network for Goods and ServicesVietnam boasts a vast distribution network,spanning its long and narrow geography.The countrys distribution infrastructure comprises a central spine from which road and rail spli
12、t off to supply its outer regions.Its extensive coastline,which stretches from north to south,features numerous ports facilitating global trade.Additionally,Vietnam has approximately 22 airports that are used to transport a diverse range of goods across the country.Notably,the Hanoi to Ho Chi Minh C
13、ity air route is one of the worlds busiest.Vietnams land border crossings with Cambodia,Laos,and China see millions of tons of goods crossing through border stations every day.It is through these ports,airports,and border crossings that goods enter and exit the country,being transported by trucks,tr
14、ains,and planes to retail outlets throughout Vietnam.Mark BarnesAuthorAlongside rapid GDP growth,Vietnams consumer class is getting bigger and richer and spending their newfound wealth on a variety of foods,entertainment,travel,and assorted goods.In this chapter,we look at how these goods move in an
15、d around Vietnam.Chapter 1Traditional retail According to a 2021 Euromonitor market report,Vietnam is home to approximately 1,005 convenience stores,which are split among six key brands,both domestic and international.A separate report from Euromonitor,focusing on supermarkets,estimated that there w
16、ere 5,669 supermarkets operating in Vietnam in 2021.This marks a significant increase from the 1,672 stores recorded in 2016-almost triple the number in just five years.Online marketplaces In Vietnam,the development of e-commerce has leapfrogged traditional retail like supermarkets and convenience s
17、tores.The convenience of online shopping and the ability to store large volumes of goods at low-cost warehouses has led to a relatively low demand for big-box style shopping complexes.This trend is further reinforced by the Vietnam Briefing Issue 54 June 20235Source:EuromonitorCircle KStore NameFami
18、ly MartMinistop(AEON Group)Bs Mart(Beri Jucker Plc)7-Eleven(Seven&I Holdings Co Ltd)Shop&Go Family Mart(FamilyMart Co Ltd)OtherTotal200230950000955shopConvenience stores in Vietnam Supermarkets in Vietnam Source:
19、EuromonitorStore Name20021Winmart+(Masan Group corp)Winmart+Winmart(Masan Group corp)WinmartAeon CitimartLanChi Mart(Central Retail Corp)Bach Hoa XanhCo-op FoodSatrafoodCo-opMartOther0001,700350345340335282423 20110 111128128Total326002,8882,8802,5244151,0081,7191,9440205256227
20、25252425106 0005,2025,8255,669 Vietnam Briefing Issue 54 June 20236lack of space in Vietnams cities,which have grown in both size and population at breakneck speed over the last decade.Vietnams e-commerce market generated US$14 billion in revenue in 2022 and is expected to reach US$32 bil
21、lion by 2025,cementing the e-commerce sector as a primary distribution channel in the country.While there are thousands of online retailers operating in Vietnam,three local brands The Gioi Di Dong,FPT Shop,and Hoang Ha Mobile dominate the online sales market.Nevertheless,a number of big internationa
22、l retailers,including Shopee and Lazada,are also operating in Vietnam.Social commerce Social commerce,as a subsector of e-commerce,is also gaining momentum as a dynamic and cost-effective channel for businesses and enterprises to approach customers.Though not quite as efficient and simple as e-comme
23、rce,this form of transaction has become incredibly popular in Vietnam.According to a recent Bain&Co report,social commerce in Vietnam accounted for 65 percent of Vietnams US$22 billion online retail economy last year.WarehousesThere is around 100 hectare of warehouse space in northern Vietnam and ar
24、ound 280 hectare of warehouse space in the south.This number is set to increase as demand surges for more and varied consumer goods.Furthermore,the e-commerce boom is seeing many retailers forgoing traditional retail stores and instead operating solely online.This is driving up demand for warehouse
25、space and delivery services.Courier,express,and parcel services Vietnams courier,express,and parcel services has grown exponentially in recent years and is continuing to expand.With a CAGR estimated at 15 to 18 percent,it is expected to be a US$3.5 billion industry by 2024.This has seen a range of c
26、ourier and delivery services spring up around the country offering low-cost,speedy delivery powered by the sharing economy and individual sub-contractors working with apps like Grab.SummaryThere is a myriad of ways of getting products into Vietnam along with a range of transport services to get them
27、 into the hands of Vietnams retailers,to then have them passed on to Vietnams 100 million consumers.Choosing the right way to do this can be critical to the successful launch of new products and brands.MARKET RESEARCHOur market research solutions quantify opportunities in different countries and reg
28、ions and encompass specific industries,clarify regulatory requirements for individual business lines,and help companies to better understand their long-term costs in new markets.To arrange a consultation,please contact us at or visit our website at .EXPLORE MORE Vietnam Briefing Issue 54 June 20237H
29、ow to Find a Distributor in VietnamHigh inflation and interest rates,along with currency fluctuations are all making it expensive and risky for businesses to expand into markets overseas.Between permits,registrations,and visas,as well as hiring staff and dealing with in-country logistics,it can also
30、 be a lot of work.In this light,using a local Vietnamese distributor may be a better option.This is not always easy and there are risks involved.That said,with the right advice and guidance,this can be an effective way of testing the waters,and with the right local partner,it can be a very lucrative
31、 way to get products and services to market in Vietnam.Why use a distributor in Vietnam?Ultimately,using a distributor means a smoother,faster market entry.There are a number of reasons why this is,but three core reasons stand out.Mark BarnesAuthorUsing a local distributor can be a low-cost,low-risk
32、,very quick way to enter the Vietnamese market.Finding the right distributor,however,can be tricky.Heres what you should be aware of when embarking on a distributor-dependent market entry.Chapter 2Communication is easierVietnamese is a tricky language to learn.Though English is commonly spoken,it is
33、 far from universal.Translating Vietnamese is easy enough with myriad digital tools available.However,the mismatch in structure and syntax can make accurately interpreting what is being said very difficult.A local distributor can avoid these problems.Its also worth noting that Vietnam is rich in tra
34、dition and culture,and this can play a big part in how people communicate.How respect is inferred and to whom it is directed,for example,can be a complex and nuanced web with over 14 different pronouns that are used interchangeably depending on who is talking to whom and in what context.Understandin
35、g these fundamentals of the Vietnamese language can be crucial to successfully entering the Vietnamese market.Vietnam Briefing Issue 54 June 20238Local distributors have established distribution networksLocal distributors already have established distribution networks.A good local distributor will k
36、now retailers and transportation firms and have the connections a business needs to quickly and effectively get their products to market.Furthermore,local distributors already have relationships with a broad range of people in the supply chain.The value of these relationships should not be underesti
37、mated.In Vietnam,it is common for businesses to lean heavily on personal relationships in order to get work done.Successful distributors will have these networks and know how to utilize them most effectively.Its easier to manageForeign companies engaging local distributors typically do so on an outr
38、ight sale basis.As in,the foreign supplier sells their goods to the distributor and the distributor is liable for the full payment.This means that the risk of not being able to sell the goods is taken on by the local distributor.How do you find a distributor in Vietnam?Finding a local distributor ca
39、n be as simple as conducting a search online.However,this can be risky with many unknowns.Its also,to an extent,unnecessary.There are a number of tried and tested ways to get high quality advice on finding a distributor in Vietnam.Business matchmaking servicesBusiness matchmaking services connect fo
40、reign enterprises with local distributors that meet their specific requirements.For example,a business matchmaking service will typically already have connections in product specific fields.For example,cold chain distributors for dairy products or perishables.Whats more,business matchmaking services
41、 will provide analysis and insights into the market and provide valuable business intelligence to further assist entrants into the Vietnamese market.Connecting with local associationsConnecting with local associations,particularly national chambers of commerce,can be extremely helpful when entering
42、the Vietnamese market.These institutions have their own broad networks and offer networking events that are often attended by a mix of both international and domestic industry leaders.Some of the key local associations foreign investors should be aware of are:American Chamber of Commerce Vietnam(Amc
43、ham Vietnam)European Chamber of Commerce(Eurocham Vietnam)Australian Chamber of Commerce(Auscham Vietnam)Canadian Chamber of Commerce(Cancham Vietnam)Market researchThere are a number of foreign firms already working with domestic Vietnam enterprises in imports,exports,and distribution.Networking ev
44、ents can be a great way to meet like-minded business owners for advice.This is usually most effective in person,but there are a broad range of social media groups that producers can use to find and vet local distributors.That said,this has its limitations,and it can be difficult if firms are unfamil
45、iar with the local culture Vietnam Briefing Issue 54 June 20239or those that lack the time to undertake the necessary network.Moreover,it can result in costly lapses in due diligence.In instances like this,it is advisable to speak with a third-party professional services firm to provide the necessar
46、y information that is aligned with the client companys business goals and corporate culture.Are there risks working with local distributors?As with any business partnership,there are a number of risks when working with local distributors.This is particularly true when combining two business cultures
47、 from different parts of the world.Understanding these risks can help businesses to safeguard against them.A lack of controlWhen a company engages a local distributor they give up some control of the sales process.The Vietnamese firm in a distribution agreement will generally handle the sales,market
48、ing,and customer service aspects of moving a product.This can have consequences for suppliers if these activities are not executed to the required standard.A failure to adequately carry out an exchange,repair,or refund of a faulty product may lead to consumers singling out the brand publicly rather
49、than the distributor.Conflicts of interestDistributors often work with a number of different suppliers at any one time.In the event that they are responsible for two similar products,they may choose to favor one over the other by limiting the supply available on the market or the number of facings i
50、n a supermarket,for example.This can be particularly problematic when exclusivity clauses are included in distribution contracts.Firms should BUSINESS MATCHMAKING Our Business Matchmaking service profiles,qualifies,and connects foreign companies to local suppliers,distributors,customers,and M&A targ
51、ets.This includes identifying targets,qualifying candidates,organizing meetings,and providing translation support.To arrange a consultation,please contact us at or visit our website at .EXPLORE MORElook into their local partners other distribution agreements and ensure from the outset that there are
52、 no conflicts of interest or that if there are there is a plan in place to mitigate this risk.Cross-cultural communicationWhereas a local firms ability to communicate with Vietnamese consumers can be an asset,communicating with Vietnamese suppliers may be a challenge for some foreign firms.Foreign f
53、irms often find that they have a vastly different work ethic from their local counterparts.For example,responding to emails can often take days and communications are not always clear.Vietnamese people tend to avoid outright refusing a request and will often agree to a proposition even though they d
54、o not intend to follow through.This can make business partnerships tricky.That said,this can be mitigated through clear communication from the foreign partner and through consistently checking and reconfirming arrangements.SummaryOverall,utilizing a local distributor to get products into the hands o
55、f Vietnamese consumers is a cost-effective option,with proven results.It does,however,mean giving up some control over how goods are sold in Vietnam.Vietnam Briefing Issue 54 June 202310Partnering with a Vietnamese FirmForeign market entrants may opt to establish joint ventures with local firms in V
56、ietnam for greater control over their business operations and to facilitate the distribution of their products or services.This approach presents several opportunities for foreign companies,including access to local market knowledge,expertise,and networks,as well as reduced risks associated with nav
57、igating an unfamiliar market.Partnering with a Vietnamese firm can offer foreign companies a cost-effective and efficient approach to entering the Vietnamese market by leveraging the local partners knowledge and connections.In some industries,engaging a local partner may even be legally required.How
58、ever,while partnering with a local firm presents several benefits,it does not necessarily guarantee an easy market entry.For more control over a businesss operations,foreign market entrants often establish joint ventures with local firms to get their products or services to market.This approach redu
59、ces the risks associated with navigating an unfamiliar market but also comes with its own set of challenges,such as the need for effective communication and conflict resolution between partners.Chapter 3Foreign companies may still face challenges as they navigate differences in cultural and business
60、 practices,communication barriers,and complex legal and regulatory frameworks in Vietnam.Nevertheless,collaborating with a local partner remains a popular and effective strategy for foreign companies looking to establish a foothold in Vietnam.Do you need a Vietnamese partner to establish a business
61、in Vietnam?While previously a local business partner was required for foreign companies to start a business in Vietnam,there are now several sectors in which 100 percent foreign ownership is allowed.However,some industries still have restrictions on foreign ownership,known as conditional sectors in
62、Vietnam.Mark BarnesAuthor Vietnam Briefing Issue 54 June 202311Conditional business linesConditional business lines in Vietnam refer to sectors with restrictions on foreign ownership and operations.Foreign investors who wish to conduct business in these sectors must comply with certain conditions an
63、d regulations set by the Vietnamese government.Failure to meet these conditions may result in penalties,fines,or even revocation of business licenses.The sectors include:Advertising services;Agriculture,hunting,and forestry related services;Telecommunication services;Travel agencies;Tour operator se
64、rvices;Entertainment services;Electronic gaming businesses;Container handling;Customs clearance services;Auxiliary transport services;Internal waterways transport,rail and road transport services;Banking;Pharmaceuticals;and Defense.SUCCESSFUL PARTNERSHIPSSanofi and Vinapharm The collaboration betwee
65、n the French pharmaceutical and healthcare MNC Sanofi and Vinapharm dates back to 1993,and their expanded partnership agreement now encompasses all of Sanofi Vietnams products.Vinapharm is a significant collaborator in Sanofis newly constructed factory in Saigon Hi-Tech Park,with a total investment
66、of US$80 million.The new facility has been designed based on modern architectural models and meets the Good Manufacturing Practices(GMP)regulations of the Ministry of Health and Australias TGA.The factory has an initial capacity of 90 million boxes of medicine,and the potential to increase productio
67、n to a maximum of 150 million boxes annually,manufacturing a wide range of pharmaceutical and healthcare products.Their collaboration has gone from strength to strength in Vietnam,and these two firms continue to work together successfully.X Vietnam Briefing Issue 54 June 202312Foreign Ownership Limi
68、ts in Some Key SectorsPercentage of foreign capital contribution based on WTO Specific Commitments in ServicesDescriptionNotesVNAFASWTOVJEPAVKFTAEVFTACPTPPTelecommunication services Non-facilities-based services65Facilities-based services49Services incidental to agriculture,hunting and forestry51Bas
69、ic telecommunication services:Virtual Private Network(VPN)Non-facilities-based services70Facilities-based services49Audiovisual Services with regard to motion picture production,distribution and project services.51Special cases51Maritime transport servicesEstablishment of registered companies for th
70、e purpose of operating a fleet under the national flag of Viet Nam49Electronic games business49Internal waterways transport495Road transport services7049-5149-5149-5149-5149-51Maritime transport servicesContainer handling services704949497049Establish VN flagged fleet49Rail transport serv
71、ices7049-5149-5149-5149-5149-51Security service business50Price appraisal services35Logistics49-51Aviation34-49Air transport services3430Source:Vietnam Foreign Investment Agency Vietnam Briefing Issue 54 June 202313Choosing the right local firm to partner withChallengesInformation can be hard to fin
72、dVietnams business environment has undergone significant changes in the last decade.However,some successful businesses still prefer to maintain a low-profile to avoid increased scrutiny from authorities.As a result,it is not uncommon for local companies to operate without a website.And,if they do,th
73、e website is often poorly maintained with contact details that are hard to locate or not updated.This can be challenging for foreign firms who are accustomed to doing business in a more straightforward and transparent manner.Communicating with Vietnamese firms can be difficultEven if a foreign firm
74、manages to locate a potential partner online with contact details,they may encounter a second common problem:Vietnamese companies may not respond to phone calls or cold emails,particularly if the form of communication is in English.Furthermore,there may be cultural differences to navigate,particular
75、ly in terms of working styles and managing human resources.Overcoming these challenges is crucial for the success of a joint venture.In this regard,working with a professional services provider who is familiar with the local culture and business landscape can be invaluable.SUCCESSFUL PARTNERSHIPSToy
76、ota Vietnam and Vietnams Engine and Agricultural Machinery CorporationThe Toyota Vietnam Company(TMV)is a partnership between three major entities,including Toyota Motor Corporation Japan holding a 70 percent stake,Vietnam Engine and Agricultural Machinery Corporation owning 20 percent,and Singapore
77、 KUO Co.,Ltd.,which holds the remaining 10 percent.Established on September 4,1995,with a total investment of US$89.6 million.TMV manufactures vehicles at its plant in Vietnams Vinh Phuc province.XXKUO Vietnam Briefing Issue 54 June 202314What to look for when choosing a JV partnerFirms that are ope
78、n to change and willing to adaptVietnams business culture is evolving,and while it may not align with the practices of foreign firms,there are signs of progress.Decision-making can be challenging due to cultural and structural differences,as its not always common to raise issues or disagree with sen
79、ior staff.However,this is gradually changing,especially among younger workers in emerging industries.There is a growing desire to operate like modern businesses,and foreign firms that partner with the right domestic companies can help steer them towards prosperity.Business leaders who are straight f
80、orward and professionalIn traditional Vietnamese businesses,decision making often occurs over extended periods in informal settings,such as local bars or restaurants.While this may initially seem refreshing,foreign firms can find it time-consuming and a hindrance to progress once the novelty wears o
81、ff.It is important for foreign firms to assess the leadership team of their Vietnamese partner company and ensure a suitable level of professionalism exists.Once a partnership is established,it can be challenging to dissolve.What are the benefits of partnering with a Vietnamese firm?More controlComp
82、ared to using a distributor,working with a Vietnamese company can give foreign firms a lot more flexibility and control.As part owner of the company,firms can get involved in key decision-making and influence strategy and planning.This SUCCESSFUL PARTNERSHIPSHonda Vietnam and Vietnams Engine and Agr
83、icultural Machinery CorporationHonda Vietnam is the largest FDI joint venture in Vietnam.This is a partnership between Japans Honda Motor Company,Thailands Asian Honda Motor Company,and Vietnams Engine and Agricultural Machinery Corporation.Honda Vietnam has invested more than US$400 million in the
84、establishment of three factories,comprising two motorcycle factories and an automobile assembly plant in Vietnam.Two of these factories are located in Vietnams Vinh Phuc province,north of Hanoi.The third is in Ha Nam south of Hanoi.X Vietnam Briefing Issue 54 June 202315BUSINESSS ADVISORY SERVICESAs
85、 one of the largest operations in Asia for registering foreign-owned businesses,we are well equipped to advise companies on the best way to structure their business entities to meet their goals and maximize operational efficiency.To arrange a consultation,please contact us at or visit our website at
86、 .can pay huge dividends whereby foreign firms can utilize their experience and expertise giving themselves and their Vietnamese partner the edge over their competitors.Dealing with the authoritiesEntering into a partnership with a Vietnamese firm can be very productive when roles are clearly define
87、d and each side plays to their strengths.Having a local partner with boots-on-the-ground knowledge and experience can make market entry much easier.This is particularly true when working with the authorities to arrange permits or certifications,for example.Familiarity with local business customs and
88、 culture can help to build a firms professional relationships which can often be utilized to simplify processes and procedures and move things along faster.Less red-tapeFurthermore,by partnering with an established Vietnamese firm,foreign firms may find that they have access to already established d
89、istribution networks,professional networks,as well as premises that are already fitted out and ready to go.In this way,firms can focus on improving what already exists to make it more profitable rather than become bogged down with working through the red tape involved in establishing a new business.
90、Foreign ownership limitsThere are also foreign ownership limits in a number of key sectors.As a result,by regulatory necessity,foreign firms may need to partner with a Vietnamese company.This is most common in,but not limited to,key services like banking,mining,and defense.Notably,Vietnam is current
91、ly on a trend towards greater deregulation and market liberalization and foreign ownership limits in many sectors are being reduced.By partnering with a local firm now,it may give foreign companies a first-mover advantage in the future if ownership limits are relaxed.Foreign firms may also find,down
92、 the track,that they are able to buy out their local partner making for a much more seamless market entry.SummaryForming a partnership with a Vietnamese firm has its challenges;however,it does give a business more control over how its products are distributed in Vietnam and their market reach.This m
93、ay also result in higher profit margins and better returns.But businesses should choose their local partners carefully to ensure they avoid conflict and that their market entry is as smooth as possible.In this respect a boots-on-the-ground consultancy can help.As experts in due diligence,business ma
94、tchmaking,and cross-country benchmarking,Dezan Shira and Associates is a leader in assisting new firms to enter the Vietnamese market.EXPLORE MOREScan this QR codeVisit our mobile page andget the latest updates investors news and resources with usOur Offices in VAsiapedia is a collection of resource
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