Facing difficulties, small merchants rush to liquidate shops

The retail premises rents keep rising, while the purchasing power keeps decreasing as people fasten their belt in the high inflation, which has forced many small merchants to liquidate shops.

The boards with the words “sale off for store liquidation” can be seen everywhere in Hanoi. The noteworthy thing here is that the shops’ owners do not offer discounts to attract more buyers, but to bargain away the products to take back the investment capital before they shut down business.

Nguyen Kim Hoa, the owner of a fashion shop on Pham Ngoc Thach Street in Hanoi, said that she has to slash the sale prices by 50-70 percent to take back capital. Hoa has decided to shift to another kind of business, because the retail premises rents have become unaffordable for her.

“The landlord has asked me to pay 1.5 million dong a month in rents. As the sale goes slowly, I cannot earn enough profits to cover such a high rent,” Hoa said.

She went on to say that the business has become unsatisfactory for the last six months with the sales degrading continuously. Since the products have become more expensive, the purchasing power has decreased. Hoa’s loyal clients do not visit the shop regularly any more. Some of them said they have decided to purchase cheap popular clothes on “pavement markets” instead of going to luxury shops.

“I once offered big discounts to attract buyers. But I only offered the discounts of 10-20 percent. Now I have to lower the sale prices by 70 percent,” she complained. “Now the sale prices are nearly equal to the cost prices. I hope I can sell all the products prior to September, so that I can take back money to start a new business”.

Like Hoa, Huong Lan, the owner of the shop on Cau Giay Street has also decided to apply the same 20 percent discount rate to all products available here because of the changes in her business plan.

Since the landlord has raised the premises rents, Lan has to move to another place which is farer from the center of the city and has lower rents.

Lan said that she would not be able to sell the same products at the new shop. She would have to consider the living standards of local residents, the demand and other conditions to decide what to sell. Therefore, Lan has to bargain away the available products.

Meanwhile, Loc, the owner of a mobile simcard shop, has decided to lease his current shop on Hong Mai Street. He said that the shop is being owned by his family which he once used for his business. However, as the business has become unsatisfactory for the last few months, Loc has decided to stop doing business himself to take another job.

“The retail premises would bring me 6-7 million a month, which is even higher than the profits I can get if I do business myself,” he said.

The boards with the words “for leasing” have also been hung at the entrance doors of many houses. Hung, the owner of a street front house on Mai Dong Street said that a client gave back the house to him 10 days ago and he still cannot find a new client.

“I asked him to pay one million dong more in the rent, and he refused and left. I have no other choice than asking for the higher rent–everything is getting more and more expensive,” Hung said.

Meanwhile, many small merchants do not give back the premises to the landlords, but decide to transfer the premises to other merchants. Under the contracts of this kind, small merchants would transfer the premises which have been re-decorated, the goods unsold, the list of supply sources and the list of loyal clients as well.

With this mode, the owners of the shops do not have to bargain products, while they still get back some money from the products they get. Meanwhile, the buyers would have the products while they do not have to spend time to look for. They would also have loyal clients and especially, keep the names of the shops

However, it is not easy to sell shops under this mode. Analysts say the sellers need to have good business for the last three years and have good loyal clients.

Nam, a broker said that the mode can be applied only to those, who do not need to take back money immediately, because it is very difficult to find out the people, who share the same ideas in the decoration and the products for sale. – Vietnamnet

Tags: Vietnam retail market, Vietnam retail spaces