PRIVATE LABEL DEVELOPING STRATEGY FOR SAIGON CO.OP

MINISTRY OF EDUCATION & TRAINING HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITEÙ LIBRE DE BRUXELLES SOLVAY BUSINESS SCHOOL MBMM PROGRAM PHAN LÊ NHẬT TRƯỜNG PRIVATE LABEL DEVELOPING STRATEGY FOR SAIGON CO.OP FINAL PROJECT MASTER IN BUSINESS & MARKETING MANAGEMENT Project tutor: Dr ĐẶNG NGỌC ĐẠI Ho Chi Minh City 2007 COMMITMENT DECLARATION I commit this is my own study I think that this is a first project mentioning about Private Label in retailing in Master course All figures and results detail stated in this project are true PHAN LÊ NHẬT TRƯỜNG ACKNOWLEDGEMENTS I would like to express my deepest gratitude to my Project Tutor, Dr Dang Ngoc Dai, for his valuable guidance, continuously advice, encouragement and constant support throughout this project His comments and suggestions which helped to this project not only in academic but also in practice I also would like to thank my mentor very much, Ms Tran Thi Kim Quyen – Vice General Directors in Saigon Co.op who has a lot of great ideas to advise me, it is very very helpful, logical and practical I would like to extend my gratitude to the Vietnam – Belgium Master in Business and Marketing Management Ho Chi Minh City, Vietnam, May 2007 Phan Lê Nhật Trường TABALE OF CONTENTS CHAPTER I: INTRODUCTION 01 1.1 Problem statement 01 1.2 Project objectives 02 1.3 Scope and limitation 02 1.4 Research methodology 02 CHAPTER II: THEORETICAL BACKGROUND 03 2.1 Definition and concepts of PL products 03 2.2 PL trend in the world, special in the retail industry 04 2.3 Some retailers and wholesaler in Vietnam 06 2.4 Benefits from PL products 06 2.4.1 Intangible benefits 06 2.4.2 Tangible benefits 06 2.5 Saigon Co.op’s situation of PL products 07 2.5.1 Organization 07 2.5.2 Marketing activities 07 2.5.3 Planning for PL products 07 2.5.4 Policy or rules of PL developing at Saigon Co.op 07 2.5.5 Quantity of PL products that Saigon Co.op has 08 2.6 Advantages of Saigon Co.op when making PL products 08 2.6.1 A familiar Co.opMart trade-name 08 2.6.2 A large distribution 08 2.6.3 Having ISO certificate 09 2.7 Disadvantages of Saigon Co.op when to make PL products 09 2.7.1 Personnel and professinal skills 09 2.7.2 Board of Directors’ supporting 09 2.7.3 From manufacturers 09 CHAPTER III: EXTERNAL AND INTERNAL ANALYSIS 10 3.1 External analysis 10 3.1.1 Economic conditions in Vietnam 10 3.1.2 Vietnam’s population 10 3.1.3 Consumer trend in Vietnam 11 3.1.4 Market research 11 3.1.4.1 Consumers’ awareness about PL products 11 3.1.4.2 Consumers’ evaluation about PL products 12 3.1.4.3 Which categories customers frequently use 13 3.2 Internal analysis 13 3.2.1 SWOT analysis 13 3.2.1.1 Strengths 13 3.2.1.2 Weaknesses 14 3.2.1.3 Opportunities 14 3.2.1.4 Threats 14 3.2.2 PL sales in 2005 and 2006 15 3.2.2.1 Comparison GM% between PL and all categories 15 3.2.2.2 Comparison GM% between PL and specific category 15 3.2.2.3 Quantity of SKUs of PL products 16 3.2.2.4 Which categories have best GM% 16 CHAPTER IV: STRATEGY TO DEVELOP PRIVATE LABEL 17 4.1 Product strategy 17 4.1.1 Group 17 4.1.2 Group 17 4.1.3 Group 18 4.1.4 Group 18 4.1.5 Group 18 4.2 Producing strategy 19 4.2.1 Cooperating with foreign manufacturers to make PL products 19 4.2.2 Cooperating with domestic manufacturers 19 4.2.3 Saigon Co.op makes PL products by themselves 19 4.2.4 Cooperating with regional manufacturers 20 4.2.5 Cooperate with big manufacturers 20 4.3 Pricing strategy 20 4.3.1 Pricing strategy for Group 20 4.3.2 Pricing strategy for Group 20 4.3.3 Pricing strategy for Group 21 4.3.4 Pricing strategy for Group 21 4.3.5 Pricing strategy for Group 21 4.4 Distribution and displaying 21 4.5 Marketing strategy 22 4.5.1 Advertising strategy 22 4.5.2 Promotion strategy 24 4.6 Personnel strategy 25 4.7 Bonus policy 25 LIST OF FIGURES Figure 01: Private label is growing around the world 04 Figure 02: Private label market Share in the world 2005 05 Figure 03: Private label share in Asian Pacific 05 Figure 04: Period of GDP per capita 10 Figure 05: Retail sales value of goods and service in year 1996 – 2005 10 Figure 06: Market share between traditional markets and modern distribution 11 Figure 07: Top ten of product groups bought by consumers in 2006 13 Figure 08: GM% of PL and all categories 15 Figure 09: GM% of each category in average 15 Figure 10: Comparison GM% between PL and related categories 16 Figure 11: Number of SKUs in 2005, 2006 and end of March 2007 16 ABBREVIATION PL : Private Label GM : Gross Margin SKU : Stock of Keeping Unit WTO : The World Trade Organisation REFERENCES ACNeilsen (2006), Vietnam Private Label 2006, Malaysia Ashok Ranchhod (2004), Marketing Strategies, Pearson Education Malaysia Sdn Bhn, Malaysia General Statistic Office Tinh hinh kinh te xa hoi nam 2006, http://www.gso.gov.vn Ogenyi Omar (1999), Retail Marketing, Redwood Books Ltd, Great Britain Philip Kotler, Gary Armstrong, John Saunders, Veronica Wong (2001), Principles of Marketing, Third European Edition, Rotolito Lombarda, Italy Statistical Office In Ho Chi Minh City (2006), Statistical Yearbook 2005, Ho Chi Minh City EXECUTIVE SUMMARY Co.opMart trade-name occurred in 1996 After eleven years, there are 21 Co.opMart supermarkets in which 14 Co.opMart supermarkets in Ho Chi Minh city and Co.opMart supermarkets in other provinces So far, Co.opMart is a biggest supermarket chain in Vietnam Co.opMart is belonged to Saigon Co.op, Saigon Union of Trading Co.operatives Everyday there are about 80,000 customers shopping at all Co.opMart supermarkets through POS Co.opMart’s customers are people from 20 to 55 years old, low or middle income Co.opMart has the loyal customer program that attractive 251,000 customers joining in which there are 89,000 customers becoming member of Co.opMart Private Label (PL) brands were traditionally defined as generic product offering that competed with national brand Often the lower price alternative to the real thing, PL carried quality Yet, they still grew and prospered by providing consumers lower priced options for what was often a low involvement purchase decision Retailers continued to push more and more PL products into different categories of the marketplace because they represented high margins and the promise of profitability with little to no marketing effort The key to successful marketing management for retailers is to understand the contribution and role of their proprietary or “own” brands in the long term business strategy and marketing mix of the retail store and consider both the supply side and the demand side of the equation Effective category management can enable retailers to solidify and optimize supply chain relationships Strategic brand management goes 26 APPENDIX Exhibit 1: Current Purchasing Department and Private Label Division Manager Deputy Manager Deputy Manager Deputy Manager Industrial Food Garment Houseware Deputy Manager Health& Beauty Fresh Food Private Label Industrial Food Deputy Manager Purchasing Support House-ware Garment Exhibit 2: The future Private Label Division Private Label Manager Purchasing Support Fresh Food Frozen Food Industrial Food Health& Beauty Care Garment House-ware 27 Exhibit 3: Co.opMart television advertising 28 Exhibit 4: Current promotional information at Co.opMart’s entrance 29 APPENDIX QUESTIONNAIRE CO.OPMART’S PRIVATE LABEL PRODUCTS Hello, my name is: , we are carrying out a research on Co.opMart’s Private Label (be products with Co.opMart logo on the package or/and a sentence: this is Saigon Co.op’s Private Label product) Your information is very helpful for us to develop Private Label products to meet higher needs from consumers Please save a little your time to answers the following questions: AWARENESS: Q1 Which states is the most suitable to yours? (Showcard), (one answer only) I have not known Co.opMart’s Private Label products yet (Transfer to Q7) I have known Co.opMart’s Private Label products but not bought yet (Transfer to Q2) I have known Co.opMart’s Private Label products and have bought but I stop buying now (Transfer to Q3) I have known Co.opMart’s Private Label products and have bought and continue buying (Transfer to Q4) Q2 Why you have known Co.opMart’s Private Label products but not bought? (Transfer to Q7) Q3 Why you stop buying Co.opMart’s Private Label? (Transfer to Q7) 30 USAGE: Q4 Please evaluate private label that you have bought at Co.opMart as the following factors? No 10 not Factors absolutely agree Price Product quality Assortment Convenience when using products Hygiene of products Information on package Package designing Package colors Promotion types Brand’s prestige Not agree Neutral Agree Absolutely agree 2 2 3 3 4 4 5 5 2 2 2 3 3 3 4 4 4 5 5 5 Q5 What is your evaluation about prestige of Co.opMart trade name and Co.opMart’s PL products? (using 10 point scale) Prestige Co.opMart trade-name Co.opMart’s Private Label Q6 Beside Co.opMart’s PL products, have you ever bought PL products from other retailers? No MaxiMark BigC CitiMark Metro Other …………………………… 31 MEDIA: Q7 Which are information channels that you know about new products? No Media No Television News papers Advertising panels Flyers Internet Marketplace Traditional markets Supermarket Trade center Showroom Grocery stores Q8 What news papers or magazines that you often read? No Newspapers/ Magazines No Newspapers/ Magazines No Newspapers/ Magazines Youth (Tuoåi treû) Women’s world Labor Saigon times 10 Young People (Thanh nieân) People Marketing Vietnam economic 11 Saigon liberation Women Enterprise’s forum 12 Others: Q9 What television channels you like? (many answers), what program you like in that channel?(one answer only) what is time you watch?( one answer only) Television Channels 1.HTV 2.HTV 3.VTV1 4.VTV2 5.VTV3 Television program Time Television channel 6.BTV1 7.ÑN1 8.HTVC 9.SCTV Others: Television program Time 32 PERSONAL INFORMATION: Q10 Interviewer’s full name: Gender: male, female Age: E-mail: Q11 Please let us to know your frequency of using e-mail? No Factors More than time(s) per day No time per day Factors Less than times per week but more than times Less than time per week Q12 Which statement is suitable to you when you buy a product? No Statements I would like to buy products without testing or tasting before buying I would like to test or taste products before buying I would like to buy products basing on previous experience Other: Thank you for your answering! 33 APPENDIX Exhibit 01: Question - Which states is the most suitable to yours? Frequency Percent Valid I have not known Co.opMart’s Private Label products yet I have known Co.opMart’s Private Label products but not bought yet I have known Co.opMart’s Private Label products and have bought and continue buying Total Valid Percent Cumulative Percent 70 69.3 69.3 69.3 2.0 2.0 71.3 29 28.7 28.7 100.0 101 100.0 100.0 Exhibit 02: Question - Please evaluate private label that you have bought at Co.opMart as the following factors? Valid Missing Total Cookies Cakes Frozen food Spring roll Rice Garment Total System Frequency 13 28 73 101 Percent Valid Percent Cumulative Percent 4.0 14.3 14.3 5.0 17.9 32.1 12.9 46.4 78.6 3.0 10.7 89.3 1.0 3.6 92.9 2.0 7.1 100.0 27.7 100.0 72.3 100.0 34 Exhibit 03: Question 4_1 - Please evaluate private label that you have bought at Co.opMart as the following factors? Price? Valid Missing Total 3.00 4.00 5.00 Total System Frequency 10 19 31 70 101 Percent 9.9 18.8 2.0 30.7 69.3 100.0 Valid Percent 32.3 61.3 6.5 100.0 Cumulative Percent 32.3 93.5 100.0 Exhibit 04: Question 4_2 - Please evaluate private label that you have bought at Co.opMart as the following factors? Product quality? Valid Missing Total 2.00 3.00 4.00 5.00 Total System Frequency 17 31 70 101 Percent 1.0 5.9 16.8 6.9 30.7 69.3 100.0 Valid Percent 3.2 19.4 54.8 22.6 100.0 Cumulative Percent 3.2 22.6 77.4 100.0 Exhibit 05: Question 4_3 - Please evaluate private label that you have bought at Co.opMart as the following factors? Assortment? Valid 2.00 3.00 4.00 5.00 Total Missing Total System Frequency 11 13 31 70 101 Percent 3.0 10.9 12.9 4.0 30.7 69.3 100.0 Valid Percent 9.7 35.5 41.9 12.9 100.0 Cumulative Percent 9.7 45.2 87.1 100.0 35 Exhibit 06: Question 4_4 - Please evaluate private label that you have bought at Co.opMart as the following factors? Convenience when using PL products? Valid Missing Total 2.00 3.00 4.00 5.00 Total System Frequency 16 31 70 101 Percent 1.0 5.0 15.8 8.9 30.7 69.3 100.0 Valid Percent 3.2 16.1 51.6 29.0 100.0 Cumulative Percent 3.2 19.4 71.0 100.0 Exhibit 07: Question 4_5 - Please evaluate private label that you have bought at Co.opMart as the following factors? Hygiene of PL products? Valid Missing Total 3.00 4.00 5.00 Total System Frequency 13 12 29 72 101 Percent 4.0 12.9 11.9 28.7 71.3 100.0 Valid Percent 13.8 44.8 41.4 100.0 Cumulative Percent 13.8 58.6 100.0 Exhibit 08: Question 4_6 - Please evaluate private label that you have bought at Co.opMart as the following factors? Information on package? Valid Missing Total 3.00 4.00 5.00 Total System Frequency 15 11 31 70 101 Percent 5.0 14.9 10.9 30.7 69.3 100.0 Valid Percent 16.1 48.4 35.5 100.0 Cumulative Percent 16.1 64.5 100.0 36 Exhibit 09: Question 4_7 - Please evaluate private label that you have bought at Co.opMart as the following factors? Package designing? Valid Missing Total 2.00 3.00 4.00 5.00 Total System Frequency 15 30 71 101 Percent 1.0 7.9 14.9 5.9 29.7 70.3 100.0 Valid Percent 3.3 26.7 50.0 20.0 100.0 Cumulative Percent 3.3 30.0 80.0 100.0 Exhibit 10: Question 4_8 - Please evaluate private label that you have bought at Co.opMart as the following factors? Package colors? Valid Missing Total 3.00 4.00 5.00 Total System Frequency 10 13 29 72 101 Percent 9.9 12.9 5.9 28.7 71.3 100.0 Valid Percent 34.5 44.8 20.7 100.0 Cumulative Percent 34.5 79.3 100.0 Exhibit 11: Question 4_9 - Please evaluate private label that you have bought at Co.opMart as the following factors? Promotion types? Valid Missing Total 2.00 3.00 4.00 5.00 Total System Frequency 13 29 72 101 Percent 3.0 12.9 6.9 5.9 28.7 71.3 100.0 Valid Percent 10.3 44.8 24.1 20.7 100.0 Cumulative Percent 10.3 55.2 79.3 100.0 37 Exhibit 12: Question 4_10 - Please evaluate private label that you have bought at Co.opMart as the following factors? Brand’s prestige? Valid Missing Total 3.00 4.00 5.00 Total System Frequency 13 10 29 72 101 Percent 5.9 12.9 9.9 28.7 71.3 100.0 Valid Percent 20.7 44.8 34.5 100.0 Cumulative Percent 20.7 65.5 100.0 Exhibit 13: Question 4_11 - Please evaluate private label that you have bought at Co.opMart as the following factors? Which promotion types that consumers like? With free gift Valid Discount on price Lucky draw 4.00 Total Missing System Total Frequency 13 1 24 77 101 Percent 12.9 8.9 1.0 1.0 23.8 76.2 100.0 Valid Percent 54.2 37.5 4.2 4.2 100.0 Cumulative Percent 54.2 91.7 95.8 100.0 Exhibit 14: Question 5_1 - What is your evaluation about prestige of Co.opMart trade-name and Co.opMart’s PL products? (using 10 point scale) Valid Missing Total 5.00 8.00 9.00 10.00 Total System Frequency 13 10 29 72 101 Percent 1.0 12.9 5.0 9.9 28.7 71.3 100.0 Valid Percent 3.4 44.8 17.2 34.5 100.0 Cumulative Percent 3.4 48.3 65.5 100.0 38 Exhibit 15: Question - Beside Co.opMart’s private label products, have you ever bought private label products from other retailers Valid Missing Total No Maxi-Mark Big C Metro Total System Frequency 17 26 75 101 Percent 16.8 2.0 5.0 2.0 25.7 74.3 100.0 Valid Percent 65.4 7.7 19.2 7.7 100.0 Cumulative Percent 65.4 73.1 92.3 100.0 Exhibit 16: Question – Information channels that consumers know about new products Valid Television News papers Advertising panels Flyers Market place Total Frequency 73 10 Percent Valid Percent 72.3 72.3 9.9 9.9 Cumulative Percent 72.3 82.2 3.0 3.0 85.1 101 7.9 6.9 100.0 7.9 6.9 100.0 93.1 100.0 Exhibit 17: Question - What newspapers or magazines that consumers often read? Valid Missing Total Youth newspaper Labor newspaper Marketing newspaper Women newspaper Young People People newspaper Police newspaper Total System Frequency 64 14 2 94 101 Percent 63.4 2.0 13.9 8.9 2.0 1.0 2.0 93.1 6.9 100.0 Valid Percent 68.1 2.1 14.9 9.6 2.1 1.1 2.1 100.0 Cumulative Percent 68.1 70.2 85.1 94.7 96.8 97.9 100.0 39 Exhibit 18: Q9_1 - What television channels you like (many answers)? Valid HTV7 HTV9 VTV1 VTV2 VTV3 SCTV VTC1 HBO Total Frequency 87 1 1 101 Percent 86.1 5.0 3.0 1.0 1.0 2.0 1.0 1.0 100.0 Valid Percent 86.1 5.0 3.0 1.0 1.0 2.0 1.0 1.0 100.0 Cumulative Percent 86.1 91.1 94.1 95.0 96.0 98.0 99.0 100.0 Exhibit 19: Q9_2 - What program consumer like in that channel? Valid Missing Total Movies Game show News Music Advertising Health advises Singing with star singers News report Consumer advises Market news Total System Frequency Percent Valid Percent 34 33.7 35.1 33 32.7 34.0 12 11.9 12.4 6.9 7.2 5.0 5.2 2.0 2.1 Cumulative Percent 35.1 69.1 81.4 88.7 93.8 95.9 1.0 1.0 96.9 1 97 101 1.0 1.0 1.0 96.0 4.0 100.0 1.0 1.0 1.0 100.0 97.9 99.0 100.0 Valid Percent 5.9 94.1 100.0 Cumulative Percent 5.9 100.0 Exhibit 20: Question 10 - Gender Valid Male Female Total Frequency 95 101 Percent 5.9 94.1 100.0 40 Exhibit 21: Question 11 - Please let us to know your frequency of using e-mail? Valid Missing Total 00 1.00 2.00 3.00 4.00 Total System Frequency 1 9 22 79 101 Percent 1.0 1.0 8.9 8.9 2.0 21.8 78.2 100.0 Valid Percent 4.5 4.5 40.9 40.9 9.1 100.0 Cumulative Percent 4.5 9.1 50.0 90.9 100.0 Exhibit 22: Question 12 - Which statement is suitable to you when you buy a product? Valid I would like to buy products without testing or tasting before buying I would like to test or taste products before buying I would like to buy products basing on previous experience Total Frequency Percent Valid Percent Cumulative Percent 32 31.7 31.7 31.7 37 36.6 36.6 68.3 32 31.7 31.7 100.0 101 100.0 100.0