Thursday, July 19 2018


Shiseido lesson well heeded

Update: March, 29/2012 - 10:35

by Hong Minh

On Saturday morning, an advertisement hit my mobile phone with information about a promotion campaign for the re-opening of a Shiseido showroom at a shopping mall in Ha Noi.

My first thought was: "What? Is the recent series of complicated legal disputes over the Japanese cosmetic brand ‘Shiseido' over?" It is not.

Still, the disputes involving the Japanese-owned brand's subsidiary Shiseido Cosmetics Viet Nam (SCV), its local partner Thuy Loc Company Ltd and individual investors in their retail network, which led to the shutdown of 40 retail outlets, leaving 200 employees without jobs, are ongoing.

And while the question on who owns the Shiseido showrooms that re-opened in the Parkson and Vincom malls in HCM City and Ha Noi recently remains unknown, the news makes me think about whether Vietnamese enterprises are too unskilled or unprofessional in dealing with foreign partners.

The dispute started at the end of last year and reached a peak when SCV decided to sue Thuy Loc for VND29 billion (US$1.4 million) at the Viet Nam International Arbitration Centre. It also managed to get the HCM City People's Court to freeze Thuy Loc's bank accounts earlier last month.

Meanwhile, other investors, who poured 30-60 per cent into several Shiseido outlets, have said they were preparing to sue both SCV and Thuy Loc to the tune of VND97 billion ($4.7 million) for losses suffered through unfair trade practices. They blame the Japanese-invested firm as well as Thuy Loc for having promotions exclusive to outlets fully owned by SCV, undercutting sales in the jointly-owned shops.

According to Thuy Loc General Director Le Hoai Anh, the company became the exclusive distributor for Shiseido products in Viet Nam in 1997. A year later, the company and its partners invested in some outlets to help develop a nation-wide network for the brand.

Anh said that for over 15 years, Thuy Loc and other investors had developed a professional nationwide retail network with hundreds of well-trained staff to successfully make the luxurious cosmetic brand familiar amongst Vietnamese customers.

In January 2010, SCV took over distribution from Thuy Loc, turning the Vietnamese company into a retailer, Anh added. The case sounds familiar to many others. In the past, many Vietnamese enterprises co-operated with foreign partners for business reasons, then claimed they had been flung away by their partners.

In the Shiseido case, in 1997 foreign companies were only allowed to establish representative offices in Viet Nam. So, the Japanese firm had to rely on a Vietnamese company for distribution.

The entry of Viet Nam into the World Trade Organisation (WTO) in 2007 was described as a process of "coming to the ocean from a stagnant pond" as the Vietnamese market opened up to all domestic and foreign companies to invest in a so-called "fair playground."

SCV had three years (from 2007 to 2010) to fulfil all necessary procedures to take back distribution of Shiseido products from an unhappy Thuy Loc.

In an interview with the Saigon Times, Anh said that many clauses regarding SCV's responsibilities towards individual investors were not written into the contract because she believed in SCV's prestige.

"I and other investors were too careless," she said, "This is a bloody lesson well learnt."

Being an official WTO member means enterprises have to operate in an open and fair market. They should be well equipped with knowledge of international and domestic laws. As shown, trust without a legal framework means nothing in business.

It is hard to decide who is right and who is wrong, but for years, Vietnamese enterprises have been operating with little advice or knowledge on business and law from professional agencies, especially when dealing with foreign partners. Many co-operation contracts are said to have been signed blindly.

The Ministry of Industry and Trade's research institute predicts that the average growth of the retail market will remain high at 23-25 per cent a year until 2015 and that in foreign investors' eyes, the country will remain among the top five most beneficial markets.

Vietnamese enterprises should be prepared for this.

It is time for Vietnamese firms to decrease their dependence on foreign partners and their advice. They should see themselves as more than just a stepping-stone for big operators to penetrate the domestic playground! — VNS

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