Short of cash, Vietnamese companies skimp on market development

Though they’ll agree the internal market has great potential, many enterprises hesitate to jump in. They say it’s because they lack money to tailor products to Vietnamese taste or develop distribution channels, according to a Tuoi Tre report.

Vietnamese consumers are smarter nowadays

After launching her summer collection in June, Quyen, the owner of the young fashion brand ‘T’, was dumbstruck when customers complained about the quality of certain wares, saying, for example, “It does not look like a shirt. The pink colour is not really pink.” Just three days after the launch, Quyen took the shirts off the shelves, suffering a heavy loss — 100 million dong.

“If I had not ordered the shirts removed from our shelves, more customers would have found the flaws, and my loss would have been even bigger,” Quyen said. “Consumers nowadays are very choosy. They do not accept low quality products.”.

What happened at Quyen’s store is not unique. “If you are inattentive just for a while, you will lose your market share to other manufacturers, because consumers nowadays have many choices,” said Nguyen Thi Dien, a director at the prestigious An Phuoc Company.

Dang Quynh Doan at Viet Thy Fashion says his firm is also worried most about losing market share. It does not dare to enlarge its shop network because the company is not well prepared for this. First of all, Viet Thy aims to upgrade its sales procedures, upgrade product quality and update displays at existing shops.

Market development costs money

Diep Thanh Kiet, Deputy Chairman of the Leather and Footwear Association (Lefaso) and also Deputy Chairman of the HCM City Garments, Textiles, Embroidery and Knitting Association, said many member companies of the two associations now plan to make products for domestic consumption instead of focusing efforts solely on making products for export.

“There’s a paradox,” Kiet says. “Although Vietnam’s garment and footwear manufacturers are among the top suppliers in the world, very few have succeeded in developing their business in the home market.”

Lefaso members now provide 65 million pairs of shoes and sandals to the Vietnamese domestic market every year, meeting about 50 percent of demand. Meanwhile, the majority of imports come from China.

According to Kiet, it is not so easy for domestic manufacturers to exploit the home market. They are used to making high class goods, but seventy percent of Vietnamese consumers can’t afford to pay more than 100,000 dong per pair for sandals or 250,000 dong per pair of shoes.

Meanwhile, to set up and equip a footwear workshop with 100-150 workers, investors need to spend at least $3000 per person. The investment cost will even be higher if investors set up workshops to make soles or do embroidery. “This is beyond the capacity of small enterprises,” Kiet said.

Tran Huu Thanh, Director of Long Thanh Leather Footwear Company, a firm that’s been making shoes for 55 years, said that to expand their position in the home market, besides mobilizing a lot of capital, enterprises need to do well in building brand recognition, organizing production and setting up a distribution network.

Bui Thi Huong, public relations chief at Vinamilk, agrees. She believes that expanding the distribution network is the best way to sell products, because when retail shops are located everywhere, consumers will not have to spend time looking for products. Vinamilk now has 140,000 sales points nationwide.- Tuoi tre

Tags: Vietnam companies, Vietnam enterprises