#16 | Vietnam and a strong transformation in the digital economy – Guest Dr. Chen, Vice President of Qualcomm
Vietnam’s retail industry has seen many changes over the years, most notably the emergence and the strong influence of the digital wave. Businesses that face challenges must constantly transform to ride the waves of change. As a guest on The Next Power episode 3’s hot seat, guest speaker Nguyen Anh Duc believed that innovation must be planned step by step, as demonstrated by the demonstration of an old Saigon retailer’s business model. Co.op.
“People often see the word ‘innovation’ as having to be quick, but my personal opinion is that there are innovations that need to be quickly grasped, but there are innovations that we need to have plans, step by step,” Mr. Duc said at The Next Power.
Following the success of episode 2 of the S-World and VnExpress e-newspaper co-produced talk show “The Next Power,” episode 3 aired on May 26 and painted a picture of the shift of the cooperative business model in one of the retail industry’s leading enterprises, Saigon Co.op, through the story of guest speaker Nguyen Anh Duc.
Mr. Duc is currently the CEO of Saigon Co.op, the Permanent Vice Chairman of the Vietnam Association of Retailers (AVR), and a member of the Consumer Co-operatives in Asia and Pacific
“The Next Power” talk show series features Ms. Truong Ly Hoang Phi – Chairwoman of Ho Chi Minh City Young Entrepreneurs Association and former CEO of Vintech City (Vingroup), founder. cum Chairwoman of IBP and Mr. Le Tri Thong – Vice Chairman cum CEO of Phu Nhuan Jewelry Joint Stock Company (PNJ).
The show utilized intellectual products of Vietnamese entrepreneurs around the world, such as the Ohmni technology assistant robot (by Dr. Vu Duy Thuc), Mishima – a 3D-printed chair and ottoman set (by Le Diep Kieu Trang and Sonny Vu), and was held at Landmark 81, Southeast Asia’s second-tallest building.
In the past 10 years, along with the change in the market, the retail market has also undergone many changes. Mr. Nguyen Anh Duc stated that there are three major differences between the retail market 10 years ago and now. To begin, in the previous ten years, the traditional retail market, which included manufacturers, distributors, grocery stores, traditional markets, and so on, accounted for 90 percent. In the meantime, the modern retail market, which included supermarkets, hypermarkets, trade centers, convenience store chains, and so on, was dominated by small businesses. The modern market is currently growing, with a 25-28 percent share.
Second, there is a change in the nature of the business; for market participants, including FDI retailers, there are also changes in ownership and throne. “Most of the retailers who entered the Vietnamese market ten years ago are no longer present; the only exception is Saigon Co.op, which serves both domestic and foreign retailers,” Duc revealed.
Third, it is a shift in response to technological and other industry development trends. For example, contactless payment, cashless channels, and other trends that have impacted and profoundly changed the retail industry can be mentioned.
Faced with market changes and the appearance of many popular online commerce platforms such as Shopee, Lazada, and Tiki, the CEO of Saigon Co.op stated that this business is similar to that of other retailers. Other retailers are unable to avoid the sensation of being “out of breath.” This has aided Saigon Co.op in seeing itself and making changes.
Saigon Co.op’s innovation motivation can be attributed to both external and internal forces. The leader of Saigon Co.op believes that the internal Co.op is derived from a traditional and typical Vietnamese economic unit.
Saigon Co.op is a new type of cooperative economic organization based on collective ownership and autonomy in production and business operations. Saigon Co.op is currently constructing this model with 9 members. That intrinsic value is what allows this company to absorb positive values and create a push for change.
However, external market factors provide the most significant push. According to Mr. Duc, the retail market in Vietnam is at a very low level of development in comparison to other countries, so the participation of a large number of FDI enterprises in the market creates a driving force for retail market development. domestic corporation.
Furthermore, during the integration period, customer needs are increasing and there are more options, even for international trading floors, putting pressure on Vietnamese retailers. The Vietnamese market. Saigon Co.op faces greater, more direct challenges as a purely Vietnamese entity.
Informing the audience of The Next Power, which was co-produced by S-World and VnExpress e-newspaper, Mr. Duc stated that this industry has also changed to adapt. The first is a shift in marketing and customer service strategies. Instead of using mass marketing and mass service strategies, Saigon Co.op delves into the interests and needs of customers in each region, diversifying business models, product categories, and enhanced service utilities to better serve customers.
Furthermore, there is a shift in the mindset of business leaders, as well as a new cooperative. “It is this mindset that will serve as the foundation for many other Co.op changes, both now and in the future.”
Mr. Duc believes that this market in Vietnam has reached a tipping point, based on his many years of experience in the retail industry. The reason, he claims, is that the domestic market is shifting from traditional to modern, and then to online commerce. As a result, in order to survive and grow, businesses must forge their own path.
Mr. Duc, speaking about Saigon Co.op’s preparation steps prior to the digital wave, stated that the Co.op floor is no longer in the position of placing an order to sell or simply opening a store to be crowded. Change, on the other hand, means having “modern things, trends, trends that we have to go in a very steady and selective way.”
According to the CEO of Saigon Co.op, businesses are currently experiencing two transformational trends in the 4.0 era. First, most retailers are going online and digitizing. Businesses will increase their investment and create online business forms. However, there is still a tendency for the giants in the e-commerce market to return to direct business development.
Amazon, for example, with the acquisition of the Whole Foods store chain and the development of the Amazon Go convenience store system. Or Alibaba, which is building Hema stores to promote direct business.
With limited resources, Saigon Co.op must consider and implement a different change strategy when transitioning from direct to online business. That is, to exploit the “intersection points” between these two forms. To put it another way, Saigon Co.op has devised a strategy to “bring online closer to face-to-face” and “live closer to online.”
Customers at Saigon Co.op, in particular, will have the opportunity to enjoy additional values from the online store when they shop in physical stores. Furthermore, rather than investing large sums of money to build large, high-risk online platforms, Saigon Co.op relies on existing physical stores to convert them into Dark Stores (retail stores exclusively for online shopping) during operation and development.
“Saigon Co.op’s motto in innovation is to be frugal innovation, “do more with less,” based on limited foundations that can be built a lot.,” Mr. Duc told The Next Power.
Mr. Duc describes the culture of Saigon Co.op as one of frugality and thrift. This stems from the company’s beginnings as a traditional unit with a cooperative model. But thanks to these values, Saigon Co.op has built its current position as the foundation for a future sustainable development journey.
The cooperative business model appears to be very old when it first appeared in the 18th century, but it is still in use in many developed countries around the world today. Among them are large corporations such as Crédit Agricole Group of France, REWE of Germany, and others.
In Vietnam, Saigon Co.op is a typical business after a long period of existence and development (33 years), but the company still maintains its position as one of the leading retailers. The cause stems from the development of a ‘new’ version of this model that is in line with the times.
Concerning the factors that led to the formation of a new cooperative ecosystem at Saigon Co.op, in the face of the integration of online and direct business, the leader of Saigon Co.op stated that the goal of this business, like any other retailer, is to create its ecosystem. However, with the motto “do more with less”, Saigon Co.op’s approach to ecosystem development is very different. It is inviting small investors to join, thereby establishing a model in which many investors own and serve a common customer community.
“We want to do anything, we just do what we are good at, and we invite our companions to join us to build a common platform,” Mr. Duc explained.
The cooperative ecosystem of Saigon Co.op is constantly changing to keep up with the market’s constant changes. Co.op’s innovations include new business models and new businesses serving new customer segments, as well as internal changes.
Typically, after being affected by the Covid-19 pandemic, the labor market experienced significant fluctuations, and many workers chose to quit their jobs to do freelance work. Saigon Co.op has made changes to adapt to these changes.
It is caring for employees so that they can remain connected to the business, as well as assisting employees in understanding traditional values and market values for development. It can be said that balancing these two interconnected factors has aided Saigon Co.op’s long-term development during and after the pandemic.
Mr. Duc, speaking about the model’s competitive advantage at Saigon Co.op, stated that the challenge of a retail unit is that “the employees are both highly specialized and labor-oriented.” As a result, the level of competition for people in this industry is even higher.
The model’s equality of labor, with no disparity between unskilled and intellectual workers, is both an advantage and a disadvantage. Mr. Duc stated that Co.op is looking for a solution to this problem, specifically how to separate the two objects while not creating cultural differences between them.
Another remarkable innovation step is the linked Saigon Co.op fund, which is the accumulation of employees who work for Co.op for 5 years, 10 years, or retires from Co.op. These are the amounts of saving that, according to Mr. Duc, are “very meaningful” in addition to employees’ monthly pay. Furthermore, while there are no mechanisms related to shares or stocks, Saigon Co.op does provide mechanisms related to the benefits of participating members, among other activities.
Finally, the good spiritual values of a cooperative organization bring to employees pride and cohesion that few other businesses with other business forms can provide.
“…it is the tradition of education and training that instills in employees the good values of a cooperative organization – an organization that is probably difficult to find in other markets, but does not have to be exclusively for the Vietnamese market – giving a worker a sense of pride so that the employee has a connection with the Co.op,” Mr. Duc explained.
Watch the third episode of the Talk show The Next Power here to gain a better understanding of the Saigon Co.op ecosystem’s innovation journey!