Wooden furniture: expensive Chinese labor force means opportunities for Vietnamese

The increasingly high labor cost in China is not only a great opportunity of the US manufacturers alone. Vietnamese wooden furniture manufacturers can also see the opportunities. However, it is unclear if they can grab the opportunities.

According to Tran Viet Tien from Gia Long Corporation, the average labor cost in China has risen to 260 dollars per month, much higher than 90 dollars per month in Vietnam.

Ngo Thi Hong Thu, Deputy General Director of the Truong Thanh Wooden Furniture, said that Chinese products’ FOB prices are 71-5 percent higher than Vietnamese, not including freight cost, VAT gap and other expenses. This is really a golden opportunity for Vietnamese wooden furniture manufacturers go grab to re-conquer the domestic market, which has been dominated by Chinese products.

Vietnamese products are now clearly cheaper than Chinese, especially the labor intensive ones, which are being exported to China as well.

Cooperation – the key of success

Vietnamese manufacturers have realized their old bad habit of working separately, while understanding that it is necessary to join forces to diversify products and intensify their strength.

Vo Quang Ha, Director of Tan Vinh Cuu Company, said that the best solution for now is that Vietnamese enterprises need to cooperate with each other. “Our company is now cooperating with some partners in Binh Duong province. Tan Vinh Cuu is providing their timber and get goods to sell at our shops,” Ha said.

Some big manufacturers have hired foreign designers, especially Filipino designers, who have been well known for designing and accept the lower wages than the ones from Europe.

Nguyen Quoc Khanh, General Director of AA Company, said hat the company has spent a lot of money to develop the designing staff, which is a part of the plan to develop the domestic market. He has affirmed that the professional qualification of AA can be compared with foreigners. AA plans to open Designer Café, which would serve as the place for designers to get together.

Nguyen Chien Thang, Chair of the HCM City Fine Arts and Wooden Furniture Association (HAWA), believes that the domestic market is growing rapidly, which can bring big opportunities to the Vietnamese manufacturers. The demand for wooden furniture has been increasingly high, when more and more big hotel, resort projects are under implementation. Meanwhile, the demand from households is also very big in a market with 85 million consumers.

How to turn opportunities realistic?

Great opportunities have become more obvious, but experts say difficulties have not been eased over the last three years, since domestic wooden furniture saw the export orders decreasing dramatically and decided to return to exploit the domestic market.

In 2005, Truong Thanh Furniture kicked off a plan to exploit the domestic market. It planned to provide interior decoration product packages to big construction projects. The business on the domestic market has been growing year after year, which is expected to bring 35 percent of the total turnover of 2400 billion dong in 2011.

However, according to Ngo Thi Hong Thu, Truong Thanh now still prioritizes making products for export, not for the domestic market.

“The biggest problem now in exploiting the domestic market is that enterprises would have to spend too much money on workshop premises, and designing, sale expenses and marketing,” Thu said.

“Truong Thanh now has five shops in HCM City, Binh Duong and Buon Ma Thuot City in Dak Lak. But we understand that the shops just aim to popularize Truong Thanh’s products to the public, while in fact, they have not brought profit,” Thu added.

If planning to develop the domestic market, manufacturers will have to spend money and time to build up the distribution networks, while this is really a hard job for them. Thang said that there is no big distributor who is capable to distribute big volumes of products, thus allowing consumers to access different models of products.

In fact, enterprises have joined forces with set up shops in order to save the expenses on retail premises. In order to set up a showroom, one needs a retail premises of no less than 500 square meters. Meanwhile, the sky high premises rents prove to be unaffordable for many enterprises.

Source: SGTT

Tags: Wooden furnitures