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No price cuts in store, despite sagging sales
Producers are unwilling to cut sky-high prices to boost sales out of fear that their profits will sink while they wait for demand to increase.
Despite sharp drops in raw material costs over the past months, prices of most products and services in the domestic market remain disproportionately high.
Statistics show that since August 2008, the price of petrol and gas - important input materials for production - have fallen over 40 per cent from the highest peak. Materials for food have also seen massive cuts of 30-50 per cent since the beginning of the year.
The price of palm oil from Malaysia, the main material for making vegetable oil, has stayed at US$700 per tonne this month, according to the Viet Nam Vegetable Oil Joint Stock Company. This has dropped from $1,200 per tonne since the beginning of the year.
The price of milk has been plummeting across the global market. Since the first signs of price drops appeared in October, milk prices have slid by 30-50 per cent.
These price drops have not been passed on to the domestic market. Most product prices have not been lowered - especially for processed food, confectionery and dairy products.
Hai Ha-Kotobuki confectionery producer has even raised some of its prices by 10-20 per cent.
Electronic products, however, have dropped 5-10 per cent.
No way
Producers admit that raw materials are now cheaper, but said that they would not consider lowering sale prices at a time when demand is not high.
Slashing sale prices while demand is low will reduce their profit, they claim.
Vu Dinh Anh, deputy head of the Market and Price Research Institute under the Ministry of Finance, said that producers were unable to sell commodities, but were determined not to slash sale prices to offset this.
He said: "Producers have been keeping prices high to swell their profits. Most businesses do not want to sacrifice earnings to boost sales, but the economic climate has changed. Massive growth has been replaced by economic recession."
"As sales slump, businesses dare not cut sales prices, fearing that reduced sales volumes would be unprofitable. Experienced sellers know not to seek profit from upping prices, but from upping the volume of products sold."
The biggest problem is the domestic producers' thinking, he said, adding that most producers are not used to lowering prices.
"The behaviour of petrol distributors is an example. They raised the petrol prices as soon as the world's price increased, but they have been very slow to lower domestic prices, since the world's price decreased."
Anh said that businesses should realise that their sale prices are too high in comparison to people's incomes.
"They should think of ways to clear stocks, and the simplest way to stimulate demand is to slash sale prices. They should not demand profit all the time. Sometimes, they have to accept loss, and use the profit from some periods to cover losses in other periods. They have to learn to stop losses," he said.
Viet Nam News
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