Vietnamese garments cannot compete with cheap Chinese products on the home market. Meanwhile, garment exporters are thirsty for orders.
Garment companies scale down production because of market narrowing
It’s more difficult than ever to regain the domestic market which has been dominated by cheap Chinese products. The economic recession’s blow is telling on Vietnamese garment companies now, forcing them to scale down the production, narrow the distribution network.
The Saigon 2 Garment Company is simply trying to maintain its presence on the market, so as to make its brands familiar to consumers, while it does not have any plan to expand production or develop new products.
The company has cut the output for domestic consumption by 20-25 percent. In the past, the company launched 70-80 new models to the market, while the figure has been halved.
Ngo Thi Bau, Director of Nguyen Tam Fashion Company, the owner of Foci brand, said on Nguoi lao dong that she never seen such a weak market demand in the last 20 years.
“The demand is so weak and it’s nearly impossible to make the profit of 20 percent to pay bank loan interest rates. Meanwhile, businesses have to pay many other kinds of expenses as well,” Bau complained.
“We have delayed all investment plans,” she continued.
According to Nguyen Van Tuan, Deputy Secretary General of the Vietnam Textile and Apparel Association, the domestic market has been controlled by Chinese cheap products. Meanwhile, Vietnamese products have higher quality but higher prices, are not the choice of the majority of Vietnamese consumers in the context of high inflation.
In an effort to rescue themselves, the Vietnam Textile and Garment Group Vinatex has organized a lot of sale campaigns, offering 30-40 percent price discounts. Vinatext Mart is considering setting up a trading floor for sale-off products. Other garment companies have been trying to lure buyers by slashing sale prices and launching the products that fit the pockets of the majority of consumers.
However, Tuan said the efforts by enterprises would not help them escape the difficulties, if they do not have the support from the State. At present, the high grade product market segment has been fallen into the hands of foreign famous brands, while the lower grade market segment is being controlled by Chinese products. Vietnamese manufacturers cannot compete with Chinese in prices because they have to pay overly high interest rates for bank loans.
Exporters move heaven and earth to seek orders
Tran Dang Chuc, General Director of Thien Nam Company, complained on Dau tu that his company has not exported any products in the last few weeks.
Though Chuc’s company exports products under FOB mode, i.e. it exports finished products and does not do the outsourcing for foreign companies, it nearly cannot export products at this moment. The company’s main export markets such as China and Turkey all have cut down the number of orders, while trying to force the import prices down. As a result, the 1800 workers of Thien Nam are working at a moderate level.
Nguyen An, General Director of Garmex Saigon, also said that the company has been informed by its European partners that the retail turnover of garment products in Europe has dropped by 30 percent. Therefore, the importers have also cut down the orders to Vietnamese producers.
“Garment companies have seen the orders drop by 30 percent, while small enterprises are the biggest sufferers,” he said.
Ninh Thi Ty, President of the Ho Guom Garment Company, also said that the unit price has dropped by 10 percent as the foreign partners do not accept the previous prices.
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