Price storm whirling businesses

The fact that consumers are tightening their belt in the year-end shopping season has caused headache to manufacturers. In order to stimulate the demand, they have no other choice than slashing the prices. This means that they will see their turnover and profit going down.

People fastening their belt, manufacturers cannot sell products

The Tet sale season is forecast to be less profitable this year due to the decreasing purchasing power. While the average salaries do not increase, the prices of all kinds of goods have been increasing rapidly.

A survey released in November by TNS Vietnam, a market surveyor, showed that there have been big changes in the savings and consumption pattern of Vietnamese people since the global financial crisis. Especially, Vietnamese people have cut down on dining out, entertainment and home appliance purchases.

According to Thanh nien newspaper, in Hanoi, even though supermarkets, fashion and cosmetics shops have been trying to lure more customers by offering big promotion campaigns on the occasion of Christmas and New Year 2011, the purchasing power remains weak. Nguyen Kim Shopping Centre on Trang Thi Road in Hoan Kiem district, for example, is running a large promotion campaign. However, Nguyen Huy Hoang, a salesman here said that the purchasing power remains the same

“The Christmas sale season has begun several days ago. The shop has been decorated so that customers can feel the Christmas atmosphere. However, the number of visitors is just a little higher than usual,” Hoang said.

Thu Hoai, a saleswoman at an underwear shop on Tran Nhan Tong street said that though the shop is offering big discounts of 10-50 percent, the sales remain modest.

“The prices of food and other kinds of goods have been skyrocketing and people now have to tighten their belt. They only spend money on the most essential goods,” Hoai complained.

According to Saigon Tiep thi newspaper, the food market is also quiet, though the New Year 2011 will come in just two weeks, and Tet will come in more than one month. Representative of S.G. Fisco said that the sales of its most important products have not seen any considerable increases.

Le Thi Thanh Lam, Deputy General Director of the company believes that the purchasing power this Tet will not be high, because consumers will only buy the most essential goods for their Tet parties, though she hopes that the sales on some peak days will increase.

Tran Van Hac, Business Director of CP Company, also said that the company’s processed food products have been selling slowly. Meanwhile, another business said that the sales of processed food now are lower by 20-30 percent compared to the same period last year.

To raise prices or not?

It seems that producers face a dilemma. In principle, producers have to reduce prices, if they want to boost sales. However, if they do not, they will see the profit going down. The problem is that the input material prices all have been increasing sharply, while enterprises still cannot raise the prices of finished products.

Answering Saigon Tiep thi newspaper, Pham Thi Thanh, Director of Tan Pham Gia Company said she is not happy, even though orders from supermarkets are plentiful. Thanh said that the fibre price has increased two folds, from 60,000 dong per kilo to 120,000 dong per kilo. However, supermarkets do not accept the increases, and even require higher discounts at 40-50 percent. As the result, consumers have to buy products at high prices, while the manufacturers do not get the profit.

Thanh also complained that she needs capital, but when she contacted banks, she found that she would have to pay sky high interest rates at 18-20 percent per annum.