Garment and Textile Companies Facing Dilemma in Local Market

According to the General Statistics Office of Vietnam, in the first two months of 2009, Vietnam was estimated to obtain US$658 million from footwear export, down 7.3 per cent. In the context of world market changes and the EU’s strict regulations imposed on Vietnamese footwear products, this year, Vietnam Leather & Footwear Association (LEFASO) has boosted sales in the local market, considering this as the momentum to develop the footwear sector in the near future.

LEFASO said, with population of over 85 million people. Vietnam consumers some 102-110 million of pairs of different shoes annually, bringing the footwear industry revenues of US$621 million.

 

LEFASO believed that the locally-made products are more competitive than exports; therefore, enterprises focus on design and distribution network development. On the other hands, it is important to establish local distribution channels, particularly developing traditional handicraft villages and footwear businesses so as to improve quality to meet the local demand.

 

In order to do this, in terms of finance and credit, the association has recommended the government and the Ministry of Industry and Trade to assist small and medium-sized enterprises and domestic producers as they are encountering difficulties, on the verge of liquidation and plan to dismiss 20 per cent of their labourers.

 

Regarding tax and policies, the association also expects to get financial assistance for trade promotion inside the country such as the organisation of trade fairs and events. This activity aims to form a distribution network across the country and balance exports and domestic production.

Under the MoIT’s report 2009 presented to the Deputy Prime Minister, LEFASO targets export revenue of US$5-5.3 billion, up 10 per cent on-year and the figure is expected to climb up to US$6.2 billion in 2010.

In the situation of export difficulties, many companies decide to come back the local market and search for new destinations. However, no all businesses can do that. To date, they has just paid attention to export markets like EU, the US and Eastern Europe. Meanwhile products from China, Taiwan and Malaysia are largely dominating the internal market share. Only some brands namely Vina Footwear, T &T, Bitis and WT can stand in the local market. Now it is not easy for Vietnamese firms to penetrate into the domestic market.

 

Moreover, Vietnam has not yet built a professional distribution channel like many countries in the world.

 

Exporters have concentrated on looking for processing orders. Whilst firms making products for domestic consumption themselves also work as distributors because building a separate distribution network is very costly. It takes much time and money to set up trademarks, particularly more than 70 percent of Vietnamese firms are small and medium-sized enterprises. In reality, LEFASO has intended to join hands with some local distributors such as VinaGiay (foot wear), T & T and Bitis. However, many producers opposed this as they said they did not want to share distribution channels with their rivals.

 

The coordination among Vietnamese businesses in distribution remains weak. For instance, in distribution system of WT, if there are many different brands displayed at shops, sellers will introduce their products to customers, not products by other firms. Especially, most of products on WT’s shelves are imports.

 

Besides, footwear companies need to cooperate for constructing “made in Vietnam” brand and competitiveness. 

 

Vietnamese firms have more advantages than foreign rivals: Mr Nguyen Cam Tu, Industry and Trade Deputy Minister

Vietnamese companies own many advantages in the local market. Firstly, they understand Vietnamese people’s consumption taste than foreign ones. Secondly, 85 per cent of Vietnamese people still select tradition distribution channel, meanwhile, foreigners mainly develop modern channels in Vietnam. Thirdly, fees for production distribution and marketing in the local market are also cheaper.

To gain successes, businesses need have a strategy for customer care. The MoIT is completing demand stimulus programme, aiming to domestic consumption. Each business itself needs to work out a business and production strategy to deeply penetrate into the domestic market.

To explore the local market, state management agencies, enterprises and consumers should reach consensus. Earlier, the ministry’s trade promotion activities aim to boost exports. The government has allowed the MoITt o deploy policies and measures to accelerate trade promotion in the home market. The MoIT is executing "Selling Vietnamese products to rural areas” programme. The rural market accounting for 70 per cent of the country’s total population see great potentials for development. Moreover, over the past time, enterprises have only attended to export markets and local urban areas. Goods supply activities for the rural market has not received due attention. For this reason, rural areas have been home to bad-quality, illegally-imported and fake products. We will also intensify sales at industrial parks.

For my part, companies must be calm and learn experience from failure to stand firm in this difficult situation. Besides, they should further study market demand and seek assistance from the community and associations.

 

It is not easy to strengthen the domestic consumption demand as purchase power in the country has been on the fall and importers’ competitiveness is bigger. Consumers have many choices. Additionally, they are more and more careful in selecting goods. To gain customers’ confidence, products have to diversified design, ensured quality and have quality standard and priced made public.

To dominate the home market, firms need to focus on common people, low-income groups but have to ensure their products’ quality. If Vietnamese products have good quality, they will surely win local customers’ confidence.

Huong Giang