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Returning to domestic market, exporters meeting obstacles
In trying to exploit the domestic market, enterprises have been facing a lot of obstacles: The market is flooded with low-cost imports.
Many enterprises have been targeting the domestic market since facing difficulties exporting products with the world’s market narrowed. They believe that the domestic market of 85 million consumers is full of potential. However…
Losing ground in home market
Enterprises in many production fields have to compete fiercely with import products right in the home market. Though plastics, textile and garment and footwear producers have slashed sale prices, they are still finding it hard to get a foothold with the landslide of import products with low prices and diverse designs.
Vo Van Duc Bay, Deputy Director of Cho Lon Plastics Company, said that though its sale prices have decreased by 15-20 percent, products are still selling slowly.
According to the HCM City Plastics Association, some 50 percent of plastics companies have had to stop or cut production because they cannot sell products. Garment and footwear producers prove to be having the biggest difficulties, not only because their sale prices are less competitive, but also because domestic products are inferior to imports in terms of design and distribution network.
The director of a footwear company in HCM City related that China-made products are selling at 10-15,000 dong for a pair of sandals and 50-70,000 dong for a pair of shoes. The imports have been brought illegally across the border into Vietnam and are now selling on every corner and in every market.
Other industries have also been facing big difficulties in the domestic market. According to the Vietnam Steel Association, domestic steel producers have been under heavy pressure since December 2008. China-made products began flooding the domestic market at the end of last year after the Government of China slashed export taxes on many kinds of products. This helped import products become 700,000-1 million dong per tonne cheaper than domestic products.
When talking about the capability of enterprises to thrive in the domestic market, Tran Du Lich, former Head of the HCM City Economics Institute, said that Vietnam-made products are falling out of favour in traditional distribution channels, while the products cannot penetrate modern distribution channels due to lack of experience and professionalism.
Meanwhile, a paradox exists that foreign-invested distributors in Vietnam have been selling domestically-made products through their distribution channels. Metro and Big C, for example, have 90-95 percent domestic products on their shelves. This shows that domestic products have opportunities to access domestic consumers if domestic producers can fix their shortcomings.
Two scenarios for domestic market development
Experts have identified two scenarios for the development of the domestic market.
In the first scenario, enterprises only target the domestic market at this moment, considering this a temporary measure while waiting for export markets to recover.
Associate Prof Dr Tran Dinh Thien said it would be risky if enterprises only considered the domestic market a temporary market. It could happen that by the time businesses were able to set up a domestic distribution network, the global crisis would be over.
In the other scenario, enterprises return to the domestic market and consider this a strategic move. In this case, the Government needs to take full advantage of the crisis to restructure the domestic market.
Thien said: “We cannot say which market, domestic or export, we should target. Enterprises should push up selling products in foreign markets if they can find opportunities, while it would also be good if they can sell products on the domestic market.”
VietNamNet, LD
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