Studying the retail system of staple goods of Vietnamese enterprises in the rural areas of the Red River Delta region

point of view, the definition can be synthesized: “Staple goods are essential and indispensable goods for daily life to meet basic human consumption needs” 2.1.1.2 Retailing staple goods Retailing staple goods is a business activity that involves selling essential goods for daily life to meet the basic, direct needs of the end consumer for their personal use, not for business. 2.1.1.3 Staple goods retail system of enterprises Staple goods retail system of an enterprise is an organized collection of stores of that enterprise, having an interactive, binding relationship with each other and working together to retail goods which are essential for daily life, meet basic and direct needs to customers and eventually letting them use for personal, non-business purposes. 2.1.1.4 Research on staples retail system in rural areas of enterprises The rural area is an administrative boundary area not covering the area of a ward or a district in a town or city and is managed by the basic administrative level, the People's Committee of a commune or town or township. Studying on staple goods retail system in rural areas of enterprises is understood as all business activities including: situation analysis, target determination, planning system of points of sale and design of mixed retail policies in order to perfect the staple goods retail system of businesses in communes, towns and townships. 2.1.2 Basic characteristics of staple goods retail system in rural areas of enterprises - Regarding the structure of staple goods retail system of enterprises in Vietnam: Retail facilities belonging to staple goods retail system of enterprises in rural areas are mainly in the form of agents of manufacturers, distributors or convenience stores and mini supermarkets. - Regarding the distribution of points of sale of staple goods retail system of enterprises in rural areas: The density is still low, not covering the market, not creating a retail brand for consumers, mainly concentrated in the area. town area. - Regarding the structure of goods in staple goods retail system of enterprises in Vietnam: Focus on exploiting to meet the great demands of rural consumers, including processed food, personal care and family goods, stationery products. - Regarding the provision of additional services and services in staple goods retail system of enterprises in rural areas: modern stores have not had many opportunities to penetrate into the rural market. - Regarding the method of promotion in the retail system of staple goods and branding of enterprises: the form of promotion is mainly - About staff in staple goods retail system of enterprises: limited quantity and quality 2.1.3 The role of staple goods retail system in rural areas of enterprises 2.1.3.1 The role for consumers and the community - Changing consumer habits, bringing local people the opportunity to experience civilized shopping environment, modern and comfortable retailing methods. - Contributing to economic growth and the local development. - Creating jobs for local workers. - Improve the quality of life of people. 2.1.3.2 The role for businesses - Connecting production and consumption in rural areas. - Connecting information from consumers to manufacturers and vice versa. - Helping retail businesses dominate the rural market. 2.1.4 Popular types of retail in the staple goods retail system in rural areas of enterprises 2.1.4.1 Types of staple goods retail system according to sales method a) Types of traditional stores include: Traditional wet market; Traditional grocery store b) Types of modern stores: Trade center; supermarket; mini supermarket; convenience store; specialty store. 2.1.4.2 Types of staple goods retail types according to ownership form Classification of form of staple goods retail patterns by ownership class includes some basic types as follows: Independent unitary establishment; Retail chain stores; Retail cooperative sales base; Retail facilities belonging to manufacturers; Franchising retail facility. 2.2 Contents of research on staples retail system in rural areas of enterprises 2.2.1 Situation analysis of staple goods retail system in rural areas of enterprises 2.2.1.1 External factors External factors include: Market factors; Competitive factors; Factors related to the fluctuation of environment 2.2.1.2 Internal factors Internal factors include: financial resources; locations and retail spaces in rural areas; human resources; relationship with suppliers; supply chain management system; collecting and processing market information system, customers ... 2.2.2 Identify the targets for staple goods retail systems in rural areas of enterprises a) Financial target Financial target is the most important target, including quantitative, measurable indicators. Indicators are divided into two levels: Company/retail sytem level and store level/sales methods. Financial goals are also divided into groups: Input target; Output target; Productivity targets b) Meeting customers’ needs target Staple retail enterprises are not only aiming to sell lots of goods, collect lots of money from customers, but more importantly to meet customers’ needs, bring value and satisfy customers with the whole shopping experience. c) Other targets In addition to the target mentioned above, staple retail enterprises in rural area can also set other personal and social goals, positioning business images. 2.2.3 Planning location for staples retail in rural areas of enterprises 2.2.3.1 Determine the area in the staples retail planning system of enterprises a) Identifying areas in staples retail system planning in association with retail strategy of enterprises - Buying behavior of customers on the targeted rural market of the enterprise. - Targeted rural markets’ density - Uniqueness of retail services b) Identifying retail areas with consideration of law and social factors When selecting areas, locations to set up staples selling points in rural area, enterprises also need to consider issues such as the development of new rural areas close to the urban areas, the hypermarkets development against trend, retail planning system for the area of the local state agencies, construction standards, administrative procedures. 2.2.3.2 Identifying retail locations in the staple retail planning systems in rural areas of enterprises a) Evaluate locations to determine the location and number of retail points in one rural area Factors used to consider include: (1) Economic conditions, (2) competition level, (3) strategy of the population in the area and target market relevance level, (4) operating cost. When analyzing and selecting areas, retail enterprises also need to decide the number of selling points in each rural area. b) Factors to consider when evaluating a specific staples retail location There are 3 factor groups: characteristics of retail locations; characteristics of the trade area; the store's expected sales. 2.2.4 Design mixed retail policies in rural areas of enterprises The approach of designing retail policies (goods management, store design) with the specific characteristics of rural area are generalized in the 4As approach: Affordability, Availability, Acceptability, Awareness (Chintan Shah, 2013). 2.2.4.1 Merchandise management policy for rural areas a) Merchandise management system in retail enterprises In general, retailers have the same basic structure in classifying and purchasing staple goods: merchandise group, department, classification, SKU. b) Product assortment and merchandise planning Product assortment of a staple retail enterprise manifests through 4 parameters of breadth, depth, length and consistency of the assortment (Nguyen Bach Khoa and Cao Tuan Khanh, 2011). Merchandise planning includes two processes: product assortment planning and merchandise value planning (Dang Van My, 2017). c) Pricing for retailing staple goods Rural consumers not only concern about low prices, but also willing to consider higher prices if the product brings practical benefits. 2.2.4.2 Staple goods store design in rural areas a) Objectives of store design The main objectives of store design are to (1) implement corporate strategy, (2) build loyalty by providing satisfactory shopping experiences for rural customers, (3) increase sales per purchase, (4) control the cost, and (5) meet legal requirements. b) Elements of store design There are three main factors needed to be considered in designing retail store for staple goods, those are : (1) Site layout, (2) Table, signboard and image system, (3) Special area 2.3 Criteria for evaluating staple retail systems in rural areas of enterprises The evaluation criteria can be divided in to groups, including: financial criteria; criteria for assessing customer satisfaction; other evaluation criteria 2.4 Domestic and international experience on staple goods retail system in rural areas and lessons for Vietnamese enterprises 2.4.1 Experience of Bach Hoa Xanh mini-supermarket chain of Mobile World Joint Stock Company (in the South of Vietnam) Bach Hoa Xanh mini-supermarket chain (BHX) has a retail system covering urban areas and penetrating rural markets in Ho Chi Minh City and neighboring provinces. This model is a valuable practical lesson for Vietnamese staple retail enterprises in Red River Delta o complete their retail system in current and future period. 2.4.2 Experience of Pantaloon Retail India Ltd. (India) The organization manages the retail system in the Western way but factors such as store layout, goods display, valuation, store atmosphere follow the customs of each area, including rural ones of India. This innovative application has helped Pantaloon brand to quickly approach the very traditional customers, as well as to have a modern and effective management model. 2.4.3. Combining e-commerce with rural retail systems of JD.com (China) JD.com's innovative ways of integrating e-commerce with rural retail outlets have helped this enterprise to expand its retail system across Chinese rural markets. This is an outstanding experience for Vietnamese enterprises in investing and completing staple goods retail system in rural area of Vietnam. 2.4.4 Lesson manipulated in staple goods retail system in rural areas of Vietnamese enterprises Lessons manipulated for Vietnamese enterprises: Firstly, it is necessary to carefully study about the characteristics of Vietnamese rural customers and determine the potential of the rural market that they chose; Secondly, assortment, display and pricing of commodity; Third, forming local supply chain and using local labor; Fourth, combine store and e-commerce retail in rural areas. CHAPTER 3: CURRENT SITUATION OF STAPLES RETAIL SYSTEM OF VIETNAMESE ENTERPRISES IN RURAL AREAS OF THE RED RIVER DELTA 3.1. Overview of the retail environment of staple goods in rural areas in Red River Delta 3.1.1 Natural, socio-economic conditions in rural areas in Red River Delta The Red River Delta currently has 11 provinces and cities. Rural areas in Red River Delta include 2018 communes and towns. The topographic and transport conditions are quite favorable with the highest population density over the country, helping the Red River Delta become an attractive market for the development of retail trade. 3.1.2 Domestic policies and international commitments relating staples retailing in rural areas in Red River Delta The domestic policies and international commitments relating staples retailing bring Vietnamese enterprises in the rural areas in Red River Delta not only development opportunities but also challenges: Opportunities for enterprises: infrastructure development, improve rural inventory system; policies for developing modern retail types (such as supermarkets, shopping centers) of enterprises has gradually approached rural markets; diversity sources of goods brought from FTAs have been valid. However, some limitations still exist, along with no motivation and hidden challenges against Vietnamese enterprises such as: The overall strategy for the retail industry is still in progress; enterprises are not received incentives in financial merchandise and private credit; overlapping policies; quality control is not tight; there is no mechanism to encourage human resource training for retail industry; there is no policy to promote the establishment of trading centers connecting retailers and manufacturers; slowly issued plan cannot adapt with the change; there is no specific incentive policies for enterprises who develop a staple retail system in rural areas. 3.1.3 Overview of consumers in rural areas in Red River Delta - Due to the increasing income, living expenditure is expected to increase. - Urbanization has helped to narrow the gap between rural and urban consumers. - Two traditional retail types (markets and grocery stores) are still the first choice, however, more than 30% of rural customers have approached and shopped in modern retail formats. - Personal care products, household items, milk, spices are purchased from supermarket and shopping malls but with low frequency. - Convenience and proximity are also the criteria affecting decisions of purchasing location. - Rural consumers are influenced by crowds more than urban ones. - Three important channels of information for rural people in the North of Vietnam include: 1. Advice from friends, family of relatives; 2. Advertisements on TV; 3. Advice from retailers (Kantar Worldpanel - Media survey). - General and mini supermarkets are highly appreciated by rural consumers in comparison with other types of retail. 3.1.4 Overview of Vietnamese staples retailers in rural areas of Red River Delta In rural areas of Red River Delta, retail businesses are popular at the micro, small and medium scale, which are formed from individual businesses and grocery stores. In addition, the Red River Delta has had the appearance of a retail system of of nationwide businesses or in provinces and in new urban areas or town centers. The majority of retail establishments in the Red River Delta region are invested by small and medium enterprises operating mainly in the field of commerce, some big enterprises with financial potential and multidisciplinary activities. The surveyed retailers all deploy store-retail, a small number of enterprises initially combined the non store-retail via the internet and telephone. 3.2 Current situation of staples retail system in rural areas in Red River Delta of Vietnamese enterprises 3.2.1 The situation of staples retail system in rural areas in Red River Delta of Vietnamese enterprises 3.2.1.1 External elements a) The situation of staples retail market in rural areas in Red River Delta Total staples retail sales increased rapidly. Markets and groceries are still popular in rural areas, beside the emergence of modern retail types such as supermarkets, small and medium-sized shopping centers. Staple retail businesses in rural areas are generally in small scale, operating mainly in the commercial aspect, but there are also some with nationwide scope, having their own retail chain system. The main retail form is still through the stores. b) Situation of competition in staples retail business in rural areas in Red River Delta The level of competition in rural areas is not really fierce, Vietnamese enterprises that want to dominate the rural staples market will have to face mainly traditional retail types and overcome the specific difficulties of the rural market. 3.2.1.2 Internal elements Beside some large enterprises with nationwide operating scope, most of Vietnamese staple retail businesses in Red River Delta are small and super small scale. The ambition to invest in the development of modern retail types seems to face greater challenges compared to the limited capacity in terms of capital, organizational level and management ability. 3.2.2 Current situation of determining targets staples retail system in rural areas in Red River Delta of Vietnamese enterprises According to the author’s survey results in 2017, the most important factors affecting the decision to invest in staples retail system in rural areas in Red River Delta of Vietnamese enterprises related to the enterprises themselves and the market. For those that have decided to invest in rural areas in Red River Delta, depending on the scale, potential and development strategy, each enterprise set up different goals for its retail system. The author conducted a survey to specifically assess the importance of the common goals for businesses in investing staples retail system in rural areas in Red River Delta. The result is presented as follows: Figure 3.8: The importance of targets for the staples retail system at current time and the period of 2020 - 2025 Note: 1 = Very unimportant; 2 = Not important; 3 = Average; 4 = Important; 5 = Very important Source: Survey results (2017) 3.2.3 Current situation of staples retail planning system in rural areas in Red River Delta of Vietnamese enterprises * Current situation of retail system planning of Vietnamese enterprises regarding retail type: For shopping centers: Some large enterprises, which have sufficient capacity, have planned investment in shopping centers in rural districts in Red River Delta. However, in fact, not many of those plans are being implemented, except for a few small shopping centers (category 3 or not yet regarding the shopping center classification). For general/specialized supermarkets: Enterprises aim to increase the number of retail outlets to cover the market. The same and medium scale supermarket area are popular, corresponding to type 2, type 3 in the supermarket classification. For mini supermarkets, convenience stores: Stores have small area, only from 30 - 200 m2, arranged closely to residence hall. Some chain of large enterprises are often planned to be developed in urban areas first, then extended to suburban areas, but the number is still limited. Meanwhile, small convenience stores and small supermarkets invested by small and medium local enterprises often lack of location planning, have not determined strategies and goals clearly for their retail system. * The importance of regional and site selection criteria in retail system planning Factors affecting the selection of retail site are shown in Figure 3.10 Figure 3.10: The importance of criteria when selecting areas and locations for setting up retail establishments of rural enterprises in RRD Note: 1 = Very unimportant; 2 = Not important; 3 = Average; 4 = Important; 5 = Very important Source: Survey results (2017) The criteria especially appreciated by enterprises in the selection of areas and locations include: Close to or in the high density population areas (4.45 points); convenient traffic (4.4 points), and residential characteristics and income (4.3 points). 3.2.4 Situation of mixed retail policies in rural areas in Red River Delta of Vietnamese enterprises Figure 3.11 indicates the average value of the importance of criteria used to select the items structure, based on the survey results of author in 2017. Figure 3.11: The importance of criteria used to select product assortment of enterprises in rural areas in Red Rural Delta Note: 1 = Very unimportant; 2 = Not important; 3 = Average; 4 = Important; 5 = Very important Source: Survey results (2017) In order to comprehensively evaluate mixed retail policies for retail enterprises in rural areas in Red River Delta, the author conducted a survey about the importance of criteria used to select retail establishments of customers and self-assessment of enterprises on the same 5 grade scale, and compared the results (Figure 3.12). Figure 3.12: The importance of retail establishments selecting criteria of customer versus self-assessment of enterprise Customer: 1 = Very unimportant; 2 = Not important; 3 = Average; 4 = Important; 5 = Very important Enterprise: 1 = Very weak; 2 = Weak; 3 = Average; 4 = Satisfied; 5 = Very satisfied Source: Summary of the author's survey results (2017) The results illustrate that most of the criteria that customers value when choosing stores are related to the advantages of modern retail types and enterprises are doing quite well. This can be considered as an encouragement for those operating or preparing to invest in modern retail facilities in rural areas in Red River Delta. 3.3 Criteria for assessing the retail system of staple goods in rural areas in the Red River Delta of Vietnamese enterprises The company has paid attention to the basic criteria in monitoring and evaluating the retail system such as finance, personnel and customers. Because most of the businesses are small and medium-sized enterprises, even micro, they do not pay attention to the criteria of system structure. Some enterprises, depending on their specific characteristics, have begun to use a set of criteria for evaluating productivity in retailing, allowing enterprises to evaluate the performance of the retail system in investing, using people and facilities. 3.4 Overall assessment of staple goods system in rural areas in Red River Delta of Vietnamese enterprises 3.4.1 Success and convenience Firstly, the Vietnamese Communist Party's policy and the legislation of the government encourage the development of rural retail trade. Secondly, most of the provinces in Red River Delta have developed commercial planning or retail planning as a basis for the development of the local distribution system. Thirdly, the rapid speed of urbanization, the commercial infrastructure of rural areas in Red River Delta has been gradually improved. These are favorable conditions to complete retail systems in rural areas in Red River Delta. Fourthly, staples retail system of Vietnamese enterprises has been formed and gradually developing, contributing to the diversity of retail system and upgrade commercial infrastructure of rural areas in Red River Delta. Fifthly, staples retail facilities of Vietnamese enterprises have tried to diversify products assortment in rural areas in Red River Delta. Sixthly, Vietnamese enterprises invested in staples retail system in rural areas in Red River Delta have contributed to improve civilization and people's life. 3.4.2 Limitations and causes 3.4.2.1 Limitations Firstly, most of Vietnamese retail enterprises in rural areas in Red River Delta are small and super small; spontaneous development, lack of connections between small retail businesses, and between small retail businesses and manufacturers to form retail systems and larger scale chains having stronger competitiveness. Secondly, most of staples retail businesses in Vietnam are not really interested in planning the overall business strategy, including the development plan of a retail system and investment in branding for the business itself. Thirdly, staples retail system is still limited in structure, quantity and market coverage. Fourthly, the modern retail types still contain certain limitations, not completely modern, the scale and content of operations are irrelevant to the name due to the influence of real conditions in Vietnam. Fifthly, although Vietnamese retail businesses have made a lot of efforts, product assortment is still not really diversified and fully meet the needs of rural consumers. Sixthly, the quality of the workforce is not high, not commensurate with the development needs. 3.4.2.2 Causes of limitations a. Objective causes Firstly, the economies of the rural areas in Red River Delta are unequally developed Secondly, the legal framework supporting enterprises is not really good Thirdly, investment encouragement and preferential policies are still slowly issued, inconsistent and limited. Fourthly, logistic costs are still high, unprofessional connecting the source of goods since the infrastructure is not synchronized. Fifthly, the awareness of some local leaders is inappropriate about the position, role and potential of retail industry in general and domestic retail businesses in particular. b. Subjective causes Firstly, most of the businesses are in the progress of finding and forming the appropriate retail system model. Secondly, retail enterprises are mainly developed from individual, small businesses with weak financial capacity and limited ability to raise capital. Thirdly, awareness as well as the ability to prevent counterfeits and poor quality goods, access origin, ensure food hygiene of retail are still limited. Fourthly, the ability to gather information and forecast the market demand of domestic enterprises in rural areas in Red River Delta is still weak. Fifthly, the quantity and quality of the local workforce in the retail sector in rural areas in Red River Delta is generally low. CHAPTER 4: SOLUTIONS FOR COMPLETING THE STAPLES RETAIL SYSTEM OF VIETNAMESE ENTERPRISE