Distinguishing between wholesale and retail for FDI enterprises in Vietnam

During the process of investing and doing business in Vietnam, foreign-invested enterprises (FDI) must clearly understand the differences between wholesale and retail activities particularly because the legal regulations and business conditions for these two sectors are not the same. Accurately identifying the correct business sector not only helps the enterprise operate effectively but also ensures compliance with Vietnamese law.

1. Definitions of wholesale and retail

• Wholesale: This refers to the activity of purchasing goods and reselling them to intermediaries such as agents, distributors, or other businesses (not the end consumers). Wholesale transactions typically involve large quantities of goods.
• Retail: This involves selling goods directly to end consumers i.e., those who use the products rather than resell them. Retail activities usually take place at physical stores, supermarkets, or through e-commerce platforms serving individual consumers.​​​​​​​

2. Key legal differences for FDI Enterprises

a. Investment conditions

• Wholesale sector:
  • Vietnam has opened up the wholesale sector to foreign investors with fewer restrictions.
  • FDI enterprises may engage in import, export, and goods distribution activities in Vietnam upon obtaining an Investment Registration Certificate and, if applicable, a Business License.
  • Some specific goods (such as petroleum, rice, sugar, etc.) are still subject to restrictions or require separate licenses.

• Retail sector:
  • Retail activities are more strictly controlled, especially for FDI enterprises.
  • Establishing the first retail outlet can be done without an Economic Needs Test (ENT).
  • However, to open a second or subsequent retail outlet, the enterprise must pass the ENT a procedure that evaluates factors such as population density, number of existing outlets, retail floor space, and market competition.

b. Legal procedures

• Wholesale:

The procedures are relatively simpler than for retail.
Enterprises only need to apply for an Investment Registration Certificate and register their business. In some cases, a Business License is also required if distributing regulated goods.

• Retail:
  • A Retail Business License is mandatory and must be obtained from the Department of Industry and Trade.
  • For opening additional retail outlets beyond the first, the ENT must be conducted unless full market access has already been committed under relevant free trade agreements (FTAs).

See more: Conditions and procedures for establishing a retail business in Vietnam

3. Key notes for FDI enterprises

• Choose the right business sector from the start: Correctly identifying whether the business falls under wholesale or retail will affect the licensing procedures and project timeline.
• Research the list of permissible goods: Not all goods are allowed for distribution by FDI enterprises. Certain product categories such as pharmaceuticals, printed materials, books, weapons, rice, sugar, etc., remain subject to conditions or are restricted from FDI participation.
• Stay updated on WTO and FTA commitments: While many investment conditions have been relaxed due to free trade agreements, their implementation still depends on domestic legal provisions.

Clearly distinguishing between wholesale and retail operations is a critical step for FDI enterprises in Vietnam to formulate a suitable business strategy, ensure legal compliance, and effectively leverage market opportunities. Therefore, before making an investment, businesses should consult with a lawyer or a professional business advisory firm to avoid legal risks during their operations.