Vietnam Supply Chain and Distribution

Vietnam is emerging as an attractive market for foreign companies, thanks to its economic growth, burgeoning middle class, strategic location, and government incentives. As brands enter or strategise their expansion in the country, it is important to understand the unique features of the country’s unique supply chain network and distribution mechanism.

Vietnam Supply Chain

Vietnam has two major economic hubs: the North, centering around Hanoi, and the South, centering around Ho Chi Minh City. Inland transportation is mainly via road, which is supported by a network of 1,822 km of highway as of September 2023.

The Northern Vietnam Region Supply Chain

Hanoi, the capital city, is the center of all commercial activities in the Northern region. Goods are imported/exported via Noi Bai International Airport in Hanoi for air cargo, which can accommodate 203,000 tons of cargo per year, and the port system in Hai Phong province, which can handle up to 170 million tons of cargo per year, for sea cargo.

Warehousing/distribution center systems are largely established in Hanoi, and its adjacent provinces, such as Bac Ninh and Hung Yen, allowing efficient outreach to Hanoi and other areas.

The Southern Vietnam Region Supply Chain

Ho Chi Minh City is the commercial and financial center of both the Southern region and Vietnam. Access to the global supply chain is connected via Tan Son Nhat International Airport inside Ho Chi Minh City with a capacity of 350,000 tons of air cargo per year, and via Phu My port system, which handled 6.3 million tons of imported cargo in 2023, in Ba Ria – Vung Tau province. Long Thanh Airport, which is under construction and is expected to be completed in 2026, will add 5 million tons of annual cargo capacity for the region. Ho Chi Minh City also has a river port system that supports cargo transshipment from Phu My.

Binh Duong and Dong Nai provinces play a crucial role in the supply chain, providing warehousing/distribution center infrastructure for the region.

Inland transportation

The domestic ground logistics network is primarily conducted via road. The Vietnamese government has issued many policies to support the development of road infrastructure. The country currently has around 1,822 km of highway with a target to reach 3,893km by 2026, 6,470km by 2030, and 9,014km by 2050.

Vietnam distribution structure

Vietnam’s retail distribution system includes a mix of traditional/general trade and modern trade channels, with an emerging role of e-commerce. The general trade channels, which consist of local grocers, market stalls, and street vendors, account for around 2/3 of Vietnam’s retail sales. The modern trade network only makes up around 26% of the retail sales value and is usually available in major cities and urban areas.

Modern trade channels

Distribution via modern trade channels is quite standardised and straightforward. Vietnam’s modern trade distribution network is supported by several key retail players in each industry. These retailers have established internal distribution centers and distribution networks.

Some of the major players:

Grocery & Consumer goods
- Wincommerce: over 3,000 stores under the brands WinMart & WinMart
- Saigon Union: nearly 1,000 points of sale under different brands, such as Saigon Co.op, Co.opmart, Co.opXtra
Technology & Electronics
- Mobile World: nearly 4,000 stores under different chains, such as thegioididong.com, Dien May Xanh, Bach Hoa Xanh
- FPT Retail: around 800 stores under the brand FPT Shop and F.Studio (specialising in Apple products)
- MediaMart: more than 300 stores nationwide

General trade channels

General trade channels are deeply rooted in the local culture and are widely used by consumers. Utilising these channels allows brands to penetrate the larger extensive population. However, developing an effective general trade network requires massive investment and resources.

A large sales force is necessary and usually divided by areas to ensure coverage of the large amount of small retailers. Delivery to points of sale is normally in small quantities and done via small trucks or motorbikes. Accordingly, local distributors are often engaged to circumvent the intensive labor requirements.

Due to the heavy investment in general trade, foreign brands usually enter the modern trade channel first to test the market, before taking further steps and expanding via general trade channels.

Frequently asked questions about Vietnam’s Supply Chain

What are the supply chain challenges of Vietnam?

There are several issues with the current state of Vietnam’s supply chain system, such as:

– Infrastructure: The logistics infrastructure is still developing, with limited synchronization and connectivity between different modes of transport. There is a shortage of modern warehousing facilities in Vietnam.

– Fragmented industry: The logistics industry in Vietnam is highly fragmented, with many small and medium-sized players

– Regulatory complexity: Navigating Vietnam’s regulatory environment can be challenging for businesses.

These factors can add to the costs for businesses, cause delays in operations, and lead to efficiency.

Why are companies entering Vietnam?

Despite the supply chain challenges, foreign companies are still moving to Vietnam, both as a manufacturing location and a consumer market. Vietnam has experienced steady economic growth and consumers are having higher disposable incomes.

The growing middle class and increasing consumer spending create a strong market for various products and services. Vietnam is embracing technological advancements, particularly in digitalisation and automation. This modernisation enhances the efficiency and competitiveness of businesses operating in the country. The current supply chain challenges are also being improved step by step.

Interested in entering the Vietnam market?

Here at GLOBAL ANGLE, we conduct market research in Vietnam. Our local Vietnamese partner, team members, and local researchers are based in the country for on-the ground and comprehensive market research and business consulting services. We can conduct detailed research on Vietnam’s supply chain and distribution according to your business needs.