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Industry fears precedent set as Vietnam mobile retailer exits Thai-owned Big C

Saturday, September 24, 2016, 11:56 GMT+7

A leading mobile phone retailer has had to close more than 20 outlets within the Big C supermarkets across Vietnam after the latter came under Thai ownership, which industry insiders see as a possible precedent for other future cases.

MWG, the operator of the The Gioi Di Dong mobile phone chain with more than 1,000 outlets countrywide, has shut down its stores at 22 Big C venues over the last year, according to a report sent to the company’s shareholders last week.

MWG said in the document, which briefs shareholders on the company’s business results in the Jan-Aug period, that the withdrawal of its mobile phone stores from Big C, as requested by the supermarket chain operator, is a normal move.

“It was just a normal business agreement between the two parties,” MWG head of media relations Dang Thanh Phong told Tuoi Tre(Youth) newspaper.

In late April, France's Casino Group announced it had agreed to sell its Vietnam unit to Thai conglomerate Central Group for 1 billion euros (US$1.14 billion).

Earlier in January 2015, Central Group also acquired a 49 percent stake at Nguyen Kim, another major Vietnamese retailer of mobile phones and electronic products.

“This means it comes as no surprise that Big C Vietnam, under the new ownership, had to adjust its business strategy,” Phong said.

“Obviously, Big C Vietnam would have to make space within its supermarkets for Nguyen Kim to sell its merchandise.”

The The Gioi Di Dong stores therefore had to leave to make room for Nguyen Kim, according to the MWG media relations man.

“The withdrawal is totally voluntary from our side,” Phong said, adding the closure of 22 stores does not affect the retailer’s operations.

“The sales from our Big C outlets were modest compared to the 1,000 stores outside,” he elaborated.

MWG opened its maiden The Gioi Di Dong store at the Big C supermarket chain in the southern province of Dong Nai in March last year, with both sides hoping to leverage each other’s strength from the “shop-in-shop” business model.

Shop-in-shop, or store-within-a-store, is an agreement in which a retailer rents a part of the retail space to be used by a different company to run an independent store.

MWG hoped to attract Big C supermarket-goers to its stores and has since opened 21 other outlets before the agreement was terminated as Central Group took over the chain.

Many experts and industry insiders have said the case of MWG has rung an alarm bell for other Vietnamese businesses when it comes to shelving their goods at the Thai-owned Big C.

This is a precedent that Vietnamese businesses will fail to distribute their goods on home soil, according to experts.

“Foreign-owned retailers may make commitments to support Vietnamese-made goods, but their top priority is always profit,” Pham Ngoc Hung, deputy chairman of the Ho Chi Minh City Union of Business Associations, told Tuoi Tre.

Local businesses have repeatedly lamented that under the new leadership, Big C Vietnam has had released many unfair policies that disadvantage local suppliers.

The foreign-invested supermarket operator would ask for discount rates of up to 20 percent, compared to only 10 percent of domestic supermarkets, and sometimes clears payment 45 days later than contracted, according to local businesses.

The director of a frozen food supplier said he has to stop distributing his products via Big C due to the rising expenses.

“The more I sell, the bigger loss I incur,” he complained.

Big C now has 32 outlets across Vietnam, while many other foreign retailers also have plans to strengthen their foothold in the Southeast Asian country.

South Korea’s Lotte Mart has recently opened its 12th supermarket and plans to reach 50 outlets by 2020. Japanese AEON, with four Vietnamese outlets so far, is set to make Vietnam its second biggest market in Southeast Asia after Malaysia.

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