Prices jumping to high levels, retailers fear sales will go down

March 1 will be the opening day for a new price increase wave in Vietnam as nearly all manufacturers and suppliers have announced price increases starting from that day.

Manufacturers and suppliers all have announced that they will raise their sale prices from March 1 in a reaction to the 20 percent petrol price and 15 percent electricity price increases. Meanwhile, retailers have anticipated that sales will decrease at least by 30 percent due to decreasing purchasing power.

Everything ready for… March 1

Huynh Huu Tuan, Manager of Citimart Chu Van An in Binh Thanh District in HCM City, said that to date, the supermarket has received notices from suppliers on the price increases of 100 percent of goods. The products which bear direct influences from the petrol and electricity price increases will increase by 10-18 percent, while the products which bear indirect influences will increase by five percent. The new prices will be applied as of March 1.

Nguyen Thi Anh Hong, General Director of Maximart, said that suppliers announced the price increases many days ago, even before the electricity and petrol price increases were announced, because the price increases were foreseeable.

Hong said that she received the notices on price increases from 200 suppliers last week alone, or 10 percent of total suppliers. “The price increases are about 10-18 percent, mostly applied to food, sweets, drinks, vegetable oil and plastics,” she said. “This will be a terrible price increase wave, since the price increases will apply to all products, and the increases will be very sharp”.

At retail markets, the prices of foods and vegetables have been increasing slightly as sellers say they have to spend more money on fuel to carry goods to the markets. Beef is now selling at 200-220,000 dong per kilo, while pork, the main meat used in Vietnamese meals, is selling at 80,000-83,000 dong per kilo. The vegetable price has increased by 3,000-5,000 dong per kilo.

The price increases have led to decreases in consumer purchasing power. Ho Phuoc Hai, Director of Binh Dien wholesale market in HCM City, said that the purchasing power has decreased by 10 percent after Tet. He said that many kinds of goods, especially seafood, have been selling slowly due to the high prices, while retailers have lessened their purchases because they find it hard to sell to consumers who now have to tighten their belt.

The suppliers raised sale prices right after the State Bank announced the dong/dollar exchange rate adjustment. Some home appliance centers said that they have received “oral notice” from suppliers that the prices will go up by 3-10 percent to be applied to the new consignments. “The sharpest price increases will be applied to the best sellers or new models,” representative from Thien Hoa Home Appliance Center said.

Retailers fear purchasing power will go down

The biggest worry for retailers is that the price increases will cause the purchasing power to decrease. Consumers will have to cut down expenses on many items as they have to pay higher prices for their children’s studies, electricity and water bills and travel.

Tuan from Citimart Chu Van An said that the supermarket’s sales have dropped by 20 percent in comparison with the same period of the last year. Tuan complained that the discount rate per product offered by producers and suppliers remains unchanged, while the sales have been decreasing and the management fees of retailers have been increasing since they have to pay higher for electricity, wages and retail premises.

“In fact, the contracts on leasing premises will be valid for many years. However, the problem is that we will have to pay more money to buy dollars to pay rent,” Tuan explained.

Nguyen Phuong Thao, Director of Maximart Cong Hoa, has noted that consumers have changed their shopping habits and they tend to consider the products’ prices more carefully before making decisions.

A representative from Maximart said that the sales of the supermarket remain stable, but in doing business, when the turnover does not increase it means that the turnover is decreasing. However, she said, she will only be able to determine the influences on purchasing power in early April. “We are very worried about the purchasing power. We cannot be optimistic in such circumstances,” she said. – Vietnamnet

Tags: Vietnam retail market, Vietnam Retail Sales