Why are distribution challenges in Vietnam more acute than they are in other major ASEAN markets?
Multinationals operating in Southeast Asia’s major emerging markets tend to rely heavily on distributors, and nowhere is this more true than in Vietnam. According to a survey we ran while studying channel performance, companies tend to realize more revenue through distributors and sacrifice more margin to distributors in Vietnam than they do in Indonesia, Malaysia, Thailand, or the Philippines.
This wouldn’t be such a problem if companies were satisfied with their distribution partnerships in Vietnam. Unfortunately, they are not. Executives report significant difficulty partnering with distributors in the country and register particular frustration with Vietnamese distributors’ lack of financial and operational transparency. To make matters worse, many feel that they lack leverage to change the situation because a scarcity of available partners often makes switching a hollow threat.
This situation naturally raises the question: how can companies build better distribution partnerships in Vietnam at a reasonable cost? To find answers, we recently took a trip to Vietnam to interview multinational executives and distributors on the ground. During our discussions, the individuals we spoke with highlighted three issues that set Vietnam’s distribution landscape apart from that of other major ASEAN countries: significant regional divisions, low distributor maturity, and extraordinarily tight credit.
By taking these three issues into account and using the six tactics outlined in our report (accessible via our portal here), companies can avoid pitfalls in Vietnam’s distribution landscape and build better working relationships with their distribution partners.