Garment companies scaling down production for domestic consumption

Vietnamese garment companies once tried to expand the production for domestic consumption when exports markets got narrowed due to the global financial crisis. However, they now have to scale down the production because of the slow sale and high stocks.

An enterprise, which makes fashionable products and has a large distribution network comprising of 40 shops and agents nationwide, has reported that by July 25, the inventory volume had reached 62 percent of the total output.

Domestic consumption down

The sale director of the company said that the big stocks have made the company incur a loss of up to one billion dong. The sale has been going very slowly since April 2011, even though the company has continuously launched sale promotion campaigns, offering big discounts, gifts and lucky draws.

“The owner of the enterprise has agreed to sell products at 80,000 dong for the products priced at over 200,000 dong. However, I am not sure if the low price can help clear the big stocks,” he said, adding that he knows another company which has more retail shops, still has not cleared the stocks, though it is selling at 50,000 dong only.

Dang Quynh Doan from Viet Thy Fashion Company, said that not only housewives, but the youth nowadays also try to save money. “Previously, every young consumer would buy at least two items out of the five items he liked. Meanwhile, he only buys one item,” Doan said.

She went on to say that the sales of Viet Thy have increased by 15 percent in comparison with the same period of the last year. However, if deducting the 20 percent in price increase, this would mean a sales decrease.

Co-op Mart has also reported the 20 percent growth rate in garment product sales. However, according to Bui Thi Hanh Thu, Deputy General Director of Saigon Co-op, if not counting on the price increase and the opening of many new Co-op supermarkets lately, this would mean no growth rate in garment sales.

Meanwhile, Vo Van Tan, the owner of Viet Tay Garment Company, said that the sales dropped by 35 percent in May and June.

Viet Thang has reported that the kate fabric volume left unsold has reached 4.5 million meters. Nguyen Duc Khiem, Chair of Viet Thang said that in March 2011, he signed contracts on selling kate fabric at 25,000 dong per meters. Meanwhile, he has just sold the same product at 17,000 dong per meter after a lot of exertion. Especially, he had to persuade the partner to accept the price by accepting deferred payment.

The owner of a private enterprise which specializes in wholesaling fabric at Soai Kinh Lam Market in HCM City has also complained that hundreds of thousands of meters have been kept at four storehouses. He said he bought the fabric at 20,000 dong per meter, while selling at 15,000 per meter now.

“I have to pay transport fee, offer deferred payment for three months. But I still cannot clear the stocks,” he said.

Scaling down production

Khiem from Viet Thang said that every week, he has to stop two production shifts, because of the slow consumption on the domestic market.

Workers of the three other companies which own well-known fashion brands have also reportedly been staying off work three days a week.

Private workshops which produce ready made clothes are working only several days a week, while workers do not have to stay late at night and begin working early in the morning any more.

Chair of a HCM City based garment company with more than 4000 workers, which plans to swallow weak enterprises, said that he has a list of ten of garment workshops in bad situation in districts 12, Hoc Mon and Thu Duc. The workshops have been working at moderate level, while they still cannot pay workers and plan to shut down.

Source: SGTT

Tags: Vietnam garment exports, Vietnam Garment industry