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Firms expect small profits this Tet
The current state of the market is already putting a damper on the holidays as many producers and traders are only making short-term business plans for Tet (the lunar new year festival) to minimise business risks.
Most enterprises in the past ramp up the production of commodities intended for Tet, which ushers in the spring, as early as October. However, this year both producers and traders are hesitant to come up with production schemes for Tet, traditionally one of the most profitable times of the year for businesses.
For example, the Viet Nam Food Industries Joint Stock Company (Vifon) recently entered into materials purchasing contracts with terms much shorter than usual. In more concrete terms, Vifon’s contract terms are now only two to three months long, instead of the usual six months with domestic suppliers or an entire year with international ones.
Meanwhile, the Tan Tien Plastics Packing Company has seen the number of deals with producers of consumer and food prices dwindle. Its business usually picked up in September but a troubled forecast for its main clients due to this Tet market’s predicted low purchasing power means fewer goods to be produced, or wrapped.
According to the HCM City Union of Trading Co-operatives (Saigon Co-op), this year consumers are focusing on the daily essentials and staying away from superfluous luxuries. This pattern is not expected to change much as Tet approaches.
At Saigon Co-op chain, customers’ purchasing power luxury items like cosmetics and clothing dropped considerably despite the many promotion programmes being launched.
An Dong Plaza is not faring much better. The goods volume sold by local traders there is a third of the same period last year. Again, no significant change is expected as distributors there have received just a handful of orders from their agents in neighbouring provinces.
Producers and traders are carefully selecting a list of commodities that are predicted to be in more demand once Tet comes in order to decrease business risks. However, this strategy also translates into smaller profits from the year’s most lucrative season.
The rise of supermarkets
With their increasing popularity, the Vietnamese supermarket industry is described as a "land of milk and honey" for both domestic and foreign retailers.
According to the Singapore-based Synergistic Real Estate Management and Network (SRE) recent survey, many Vietnamese consumers put supermarkets on their list of shopping destinations they cannot do without. The amount of money spent at local supermarkets this year is double last year’s figure.
A chief reason more and more Vietnamese are flocking to supermarkets is the sheer diversity of goods.
Moreover, famous brand names, entertainment services and higher safety standards are also bringing in customers.
The National Economics Institute says that the country has 30 major trading centres, more than 2,000 supermarkets and 1,000 convenience stores, in addition to more than 9,000 marketplaces.
While the millions of petty traders at local marketplaces can scarcely compete with supermarkets in attracting customers, major retail groups, especially foreign-owned ones, are achieving significant growth.
Germany-based Metro Cash and Carry, for instance, has 8 supermarkets nationwide, and has achieved an annual growth rate of 45 per cent with a turnover of over $500 million. In light of their success, the company plans to build a new chain of supermarkets in the central provinces of Quy Nhon and Binh Dinh and more southern provinces.
After more than two years of operation, Malaysia’s Parkson, in close coordination with the TD Plaza system, achieved a 35 per cent annual growth rate.
France-based Cacino Group used its Big C franchising model with domestic partners to set up a chain of supermarkets in major cities like Ha Noi, HCM City, Hai Phong, Da Nang, Can Tho and Dong Nai.
Many predict these trends to go on and the country will see more foreign retail giants making use of the supermarket industry’s potential in the coming years.
With more capital, experience and skilled staff on their side, foreign retailers should prove to be formidable rivals for local ones.
Consumer goods prices
The lowering prices of a host of materials used in many industries is expected to create a new consumer price level.
The prices of many materials have fallen by 5 – 25 per cent from the last two months because of lower world prices of key items like petroleum or steel.
For instance, plastic materials used in producing plastic packaging now cost VND25,000 per kilo, a far cry from the VND36,000 recorded in early August. Meanwhile, prices of chemicals used in detergents decreased 12 – 15 per cent.
A tonne of palm oil used to process cooking oil now goes for $550 and $600, compared to the previous rate of $750 – 850.
Rates of ingredients for powdered milk, including skim and regular cream milk, went from $2,900 and $3,200 to $2,600 and $3,100, respectively.
Many producers and traders responded to the price drops by cutting prices through sales promotions. Big C supermarkets in HCM City are among the pioneers in lowering prices. Since October 8, Big C has cut the prices of more than 400 items, mostly food and home appliances, by 5 – 45 per cent.
Meanwhile, the Maximark chain focused its sales on cosmetics and confectioneries.
As a result, prices of cooking oil products were cut by 10 – 20 per cent, milk products by 5 – 7 per cent, and fresh food by 5 – 10 per cent. The price of a live pig was down by VND2,500 to VND40,600 per kilo.
Other food and vegetable items had price drops of VND1,000 – 3,000 per kilo.
VNN
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