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Distribution & Sales Channels in Vietnam

Effectively organizing sales is a crucial consideration, not only during market entry but also when expanding operations in Vietnam. Key questions that arise include, “How can I successfully introduce my product to the market?” and “How can I increase product distribution within the market?”. In this article, GMA will explore the various sales channels utilized for importing and distributing products in Vietnam.

1. DIRECT SALES

Selling directly without any intermediary to Vietnamese customers is technically possible but does not seem to be the “usual” case. Due to a lack of networks and foreign partner trust, it is difficult to identify and contact “end-customers” in Vietnam. It will be difficult for foreign companies to maintain a client, even if they find one.

Many direct sales projects are initiated by Vietnamese parties who are actively searching for high-value and complex investment goods such as power plant turbines.

2. TRADE AGENT

In this channel, the agent is the one who has the contacts and network to arrange the sale. The sales contract is closed between the foreign supplier and the Vietnamese customer. Often, the exporter will also be responsible for maintenance and servicing (beware of Foreign Contractors Tax).

The agent will charge a fee for the services she provides. A disadvantage is that you may have less control over your client because the agent will be the one who has the most contact with them. Trade agents are often used for complex investment items, such as machinery. machinery. Trade agents can be private or corporate.

3. WHOLESALER ( aka “Reseller”)

The wholesaler will buy the product from abroad and resell it in Vietnam; hence it is often called a “reseller”. Essentially, all “commodities” will be sold through this channel. But we have also seen many “investment goods” producers working with wholesalers in Vietnam. 

The wholesaler will provide the complete range of market access from sales arrangements, contracting, importation, and invoicing to even maintenance and service. For commodities, the wholesaler can also hold stocks. While this solution is convenient for the supplier abroad it eats up margin and ends customer contact will be severely limited.

4. MULTINATIONAL DISTRIBUTOR

This is a distributor who has access to many markets. These “multinational distributors” come in two different types. There are two types of “multinational distributors”. In many of their target markets, such as Vietnam, they have subsidiaries. Distributors in hubs such as Bangkok or Singapore work with agents external to each market. These “multinational distributors” often cover a wide range of industries, either by using their own subsidiaries or a network of distributors. These partners can be a great solution, especially for small companies that have limited export capacities. 

These distributors can also be useful if an exporter is able to provide technology for multiple industries, which is often hard for a local distributor because they tend to focus on a specific industry. There are few multi-national distributors on the market, making it difficult to gain access. Working with a partner like this limits the exposure to the target market of the exporting firm to a minimum. This may seem like a strategy that is aimed at certain enterprises (essentially externalizing all export activities), but most other companies will want to have more control over their client base.

5. SALES AGENT and SALES SUBSIDIARY

  • Sales Agent:

A Sales Agent is a person working in cooperation with distribution partners. They are often creating and implementing marketing plans, engage in “cold calling” and overall strengthen the market presence of the exporter in Vietnam. 

Sales Agents can either be contracted as freelancers or may be employed through a distributor. Sometimes, the exporter finances an existing team member of the distributor which will then exclusively work on her/his products.

  • Sales Subsidiary:

In Vietnam, you can establish a sales branch if your sales volume permits or if other factors (such as company strategy and servicing requirements) dictate it. The subsidiary will be able to do sales, contracting, imports, invoicing, and maintenance/service, but it will also incur costs for its establishment and operation. Investors who are still deciding whether to invest should be aware that many sales subsidiaries only engage in part-time direct business with B2B customers. It is often because they lack the required networks, and compliance is an issue for local customers. Many international sales subsidiaries do direct business with foreign investors and use distributors to reach local clients.

Numerous companies begin by engaging in ad hoc business, directly selling their products in Vietnam. As they become aware of the market’s potential, they opt for a more systematic and long-term approach to gain market share. This often leads to collaboration with a local distributor, which, in the best-case scenario, accelerates turnover by tapping into their established customer network. Should the turnover show promise, exporters may take the decisive step of establishing a sales subsidiary, possibly encompassing local service, warehouse operations, or even assembly facilities.

IN CONCLUSION

In conclusion, mastering distribution and sales channels is crucial for success in Vietnam’s burgeoning market. Whether through distributors or direct sales, businesses must tailor their approach to resonate with evolving consumer behaviors. By doing so, companies can unlock untapped opportunities, enhance their brand presence, and forge lasting connections with Vietnamese customers. As Vietnam’s economy continues to flourish, staying adaptive to the changing distribution landscape is essential for sustained growth in this dynamic market.

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