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Company chains: hidden pitfalls can deter progress

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The rapid expansion of food amp; beverage, restaurant and pharmacy chains in the last few years has led to the general opinion that they are easily profitable. But there are pitfalls that companies must be aware of.

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In 2012, Vissan, a meat supplier, opened new sale points, creating a large network of 230 shops in HCMC. The company said in a report that shops selling Vissan’s products are located in nearly all districts of the city.

The opening of the shops was part of the business strategy developed by Van Duc Muoi, who was the company’s general director at the time. He believed that ‘the market leads production’ and pursued the strategy ‘where supermarkets are, there are Vissan’s products’.

However, Tuoi Tre on April 11 reported that Vissan has closed 60 shops, while keeping about 40 showrooms in HCMC.

Vinmart, the retail brand of Vingroup, has been expanding its network with Vinamart and Vinmart+ shops present in nearly all residential quarters, and central and suburban areas.

Vingroup’s head, Pham Nhat Vuong, the first Vietnamese dollar billionaire recognized by Forbes, said at an event two years ago that in expanding the Vinmart network, he accepted the 80/20 ratio, which means that he would still be satisfied if 20 percent of the shops had to close at a later date.

An analyst said that, in developing business chains, investors will have to make hefty investments and accept failure. 

He said that while many business chains have prospered, many others have had to shut down after years of operation. 

The shops in the same chains share a brand and central management, and usually have standardized business methods and practices. If one or some shops of the chains incur a loss, this will seriously affect the others.

Last year, many dining service chains opened, but others shut down or reduced the number of restaurants. 

The KAfe restaurant chain shut down after one year, after calling for $5 million worth of foreign capital. Gloria Jean’s Coffees also closed after 10 years in Vietnam. And Saigon Café shut nearly all of its cafes in its chain within one year.

Prior to that, Illy Café and NYDC left Vietnam. Local chains Passio and Urban Station, which reaped big fruits in the first phase of operation, have not made a breakthrough in recent years.

Pharmacy chains are currently a hot business field with more chains and more shops set up recently.

Pharmacity JSC opened its 100th drugstore on April 12. Christopher Blank, the founder and CEO of Pharmacity, said the goal is to open 500 stores by 2020.

 

Source: VietNamNet

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