The Common Challenges for SMEs Entering Vietnam

Vietnam’s consumer market is among the most vibrant in Asia. With annual retail growth averaging 10–15%, a young population, and an expanding middle class, it has become a top destination for international brands—especially in FMCG, F&B, cosmetics, and household goods.

Yet, for many small and medium-sized enterprises (SMEs), success in Vietnam is far from guaranteed. The country’s growth potential is accompanied by a web of legal, financial, and operational barriers that can delay or even derail market entry. Understanding these challenges for SMEs entering Vietnam is crucial for any business aiming to gain a foothold in this fast-evolving market.

Vietnam’s market remains one of Asia’s most promising frontiers for international SMEs—rich in trade opportunities but marked by regulatory and logistical challenges when entering the country.

Regulatory and Legal Barriers

Among the most significant challenges for SMEs entering Vietnam are the country’s complex and multi-layered legal procedures. To establish a business presence, foreign companies must navigate several steps:

• Investment Registration Certificate (IRC) – required to approve the foreign investment project.

• Enterprise Registration Certificate (ERC) – to formally register a legal entity.

• Business License – mandatory for trading and retail activities.

• Retail Outlet License – required for each physical store, with the Economic Needs Test (ENT) applied to second outlets and beyond.

  
  

These processes can take between three to six months, often involving multiple agencies such as the Department of Planning and Investment (DPI) and the Department of Industry and Trade (DOIT). The interpretation of regulations can also vary between provinces, creating uncertainty and inconsistency.

Vietnam’s regulatory environment has improved since the 2020 Investment Law, but compliance remains demanding. SMEs must also monitor frequent updates on import regulations, product labeling, e-commerce, and taxation, which can affect both cost structures and go-to-market timelines.

Financial and Capital Limitations

Even when regulatory approvals are granted, financial pressure quickly follows. The typical SME entering Vietnam operates with around VND 10 billion (USD 400,000) in starting capital—a modest amount compared to the requirements of setting up a retail operation.

Upfront costs often include:

• Legal and consulting fees

• Warehouse and office rental

• Hiring and training local staff

• Marketing, sampling, and distribution setup

• Product registration and customs procedures

Because most SMEs rely on limited reserves or high-interest loans, cash flow constraints are common. Many underestimate the working capital needed to sustain operations through Vietnam’s long licensing and distribution cycles. Some brands exit prematurely after burning through budgets before seeing measurable sales.

Limited capital, high setup costs, and restricted access to financing remain key financial challenges for SMEs entering Vietnam’s fast-evolving consumer market.

Competition and Market Saturation

Vietnam’s retail and FMCG sectors are highly competitive, dominated by established domestic and international giants such as Co.opmart, Masan, VinCommerce, Aeon, and Central Group.

The reality is that while the market continues to grow, it is also increasingly consolidated. Local players have deep distribution networks and strong brand loyalty, while larger foreign corporations enjoy economies of scale. SMEs entering Vietnam often struggle to compete on price, visibility, and shelf presence.

The numbers tell the story: although total FDI in Vietnam reached USD 31.4 billion in 2024, the wholesale and retail sector attracted only USD 1.4 billion, representing less than 5% of total inflows. Most small investors remain cautious due to high competition and narrow margins.

Masan Group is among Vietnam’s leading FMCG powerhouses, reflecting the strong presence of local giants that make market entry highly competitive for new SMEs.

Logistical and Distribution Gaps

Distribution is both the opportunity and the bottleneck for SMEs in Vietnam. The country’s logistics infrastructure is uneven, with efficiency concentrated in Ho Chi Minh City and Hanoi while secondary provinces face bottlenecks in transportation and warehousing.

The structure of the retail ecosystem adds complexity. Vietnam’s General Trade (GT) network comprises over 1.4 million mom-and-pop stores, accounting for more than half of FMCG sales nationwide. Building access to these outlets requires relationships, incentives, and ground execution - something that takes years for new entrants to achieve.

Meanwhile, Modern Trade (MT) channels such as supermarkets and convenience stores are growing but impose strict listing fees, marketing commitments, and documentation requirements. SMEs without an established importer or distributor often find these barriers too high to cross.

Vietnam’s transport and logistics infrastructure remains uneven, posing challenges for SMEs seeking efficient nationwide distribution networks.

Cultural and Partnership Misunderstandings

Cultural adaptation is another underrated challenge for SMEs entering Vietnam. While the country is open to foreign business, its business culture is deeply relationship-driven. Trust, reputation, and local connections often matter as much as product quality or pricing.

SMEs unfamiliar with these dynamics risk choosing the wrong local partner—whether a distributor, agent, or logistics provider. Common issues include:

• Lack of transparency in sales reporting or inventory handling.

• Misaligned incentives between principal and distributor.

• Overpromising market coverage without realistic capacity.

Additionally, communication gaps and differing decision-making hierarchies can lead to misinterpretations or conflicts. Conducting proper due diligence and understanding how Vietnamese partners negotiate, prioritize, and manage relationships are essential steps for sustainable collaboration.

Understanding the Vietnamese Consumer

Beyond partnerships, success also depends on grasping Vietnam’s unique consumer insight. Many SMEs mistakenly assume that “Asian markets” behave similarly, but Vietnamese consumers exhibit distinct decision-making patterns.

They are brand-curious yet value-conscious, seeking trust and practicality over luxury or prestige. Instead of status-driven purchases, Vietnamese buyers emphasize authenticity, quality, and community validation. Peer recommendations and localized storytelling often outweigh global branding efforts.

For example, while Gen Z in Thailand or Korea may respond to aspirational campaigns, Vietnamese Gen Z values relatability and local relevance. They engage more with influencers, social proof, and culturally grounded messages than with generic global marketing.

Understanding this emotional and behavioral context allows foreign brands to localize their communication, adapt packaging formats, and fine-tune price positioning—bridging cultural gaps faster and more effectively than competitors who rely solely on imported strategies.

Vietnamese consumers value authenticity, practicality, and community recommendations—showing distinct insights that differ from other Asian markets where SMEs typically operate.

The Key Challenges for SMEs Entering Vietnam Today

Another major obstacle stems not from the market itself, but from how SMEs approach it. Many companies rush into establishing a legal entity before validating their product’s local fit.

Common mistakes include:

• Entering too early with insufficient market testing.

• Underestimating lead time for regulatory approvals.

• Neglecting distribution readiness before shipment.

• Choosing an unsuitable entry mode, such as forming a 100% foreign-owned entity instead of partnering with a local license holder.

A more effective approach for SMEs is often a phased entry strategy—starting with a pilot test under a local partner’s license to assess market response before full-scale investment. This model reduces risk and provides data-driven insights for long-term planning.

Emerging Regulatory Pressures (2024–2025)

As Vietnam’s consumer market matures, regulatory compliance is becoming stricter, not looser. New laws aim to protect consumers and ensure market integrity:

• The 2023 Law on Consumer Protection (effective July 2024) enforces stronger requirements for transparency, warranties, and product traceability.

• Decree 87/2023/ND-CP targets counterfeit goods and mandates tougher penalties.

• E-commerce and data protection laws require digital platforms to verify sellers and report transactions.

While these measures enhance trust and align Vietnam with international standards, they also raise the cost of compliance for smaller entrants. For responsible SMEs, however, this shift represents an opportunity: being compliant, transparent, and traceable can become a competitive advantage in an increasingly regulated market.

The Vietnam Consumer Rights Day 2025, organized by the Vietnam Consumer Protection Association, highlights the country’s growing emphasis on consumer welfare and market transparency. This initiative aligns with the 2023 Law on Consumer Protection, which strengthens transparency, warranties, and product traceability across Vietnam’s marketplace.

Turning Barriers into Opportunities with Local Expertise

Every challenge in Vietnam’s market entry landscape has a corresponding solution—most of which revolve around leveraging local expertise.

Partnering with a trusted market enabler allows SMEs to enter Vietnam faster, more safely, and with lower risk. Rather than spending months obtaining licenses and building infrastructure from scratch, SMEs can collaborate with a Vietnamese entity that already holds the necessary legal framework to import, register, and distribute products.

This model shortens time-to-market from six months to just four to six weeks, enabling brands to test real market demand before committing heavy investment.

Companies like Go2Market (G2M) Vietnam have developed exactly such a structure—acting as an authorized importer and distributor for foreign SMEs under a transparent, legally binding partnership. G2M’s approach is grounded in compliance, data-driven reporting, and commercial accountability, allowing SMEs to focus on building brand awareness while the local partner manages operations and legal formalities.

It’s a practical embodiment of being “market ready, shelf ready”—ensuring that compliance, logistics, and sales channels are established before a single product hits the market.

From Legal Burdens to Market Readiness

Vietnam is one of Asia’s most promising yet complex markets. For international SMEs, the opportunities are immense, but so are the challenges of entering Vietnam—from legal procedures and financial constraints to cultural nuances and logistics hurdles.

The key to success lies not in rushing entry, but in understanding the market’s intricacies and building local trust. Choosing the right approach—and the right partner—can make the difference between a costly failure and a scalable success.

By combining preparation, compliance, and collaboration, SMEs can unlock Vietnam’s true potential. And for those seeking a compliant, data-driven, and transparent path forward, Go2Market (G2M) Vietnam serves as a reliable bridge—helping brands go from concept to shelf, ready for one of Asia’s most dynamic consumer landscapes.