VietNamNet Bridge – The home appliance market has become “peaceful” again after
it became boisterous for one year with a stiff competition among the suppliers.
The tough year 2012
The home appliance market dropped dramatically in 2012 with the minus 20 percent
growth rate.
An electronics and digital technology product distribution company in Hanoi
revealed that while its turnover was high at VND1.6 trillion, the profit was
modest at VND30 billion, which was just equal to 50 percent of that in 2011.
The supply chain opened two more shops in Hanoi in 2012, which made the
operation cost of the chain increase by 50 percent, Meanwhile, the sales
increased insignificantly, which has led to the sharp fall of the profit.
Other big guys such as Pico, Media Mart, Top Care, Viet Long, Nguyen Kim and
Best Carings all have reportedly met big difficulties to the slow sales. A lot
of distributors have reportedly incurred loss and shut down some of their shops.
Analysts say a home appliance supermarket needs to have the sales of VND20-30
billion a month to be able to exist. Meanwhile, the supermarkets in Hanoi could
sell some VND100 million worth of products a day in 2012.
While the sales dropped so dramatically due to the weak demand, the war among
home appliance centers turned stiffer than ever. It is estimated that the
distributors need to raise the sale prices by 15-20 percent in order to cover
the increasingly high costs.
However, in fact, they had to slash the sale prices and run sales promotion
campaigns with the offered price discounts of up to 50 percent to attract more
buyers. Right after a distributor announces a sales promotion program, another
would follow, offering even higher price reductions to scramble for clients.
Going bankrupt, selling businesses
Analysts have noted that the “price war” has stopped temporarily. Distributors
have realized that if they continue fighting each other, they would kill
themselves, because the product prices have been lowered to the deepest low,
which have eaten up banks’ profits.
Some distribution chains have said they would follow new sales strategy in 2013.
Customers would be allowed to use products first and pay later, or they would be
able to change products if they are not satisfactory about the products.
Therefore, analysts think home appliance suppliers would not continue slashing
sale prices to attract buyers like they did in 2012.
Experts also think that it’s now not the time for distributors to slash sale
prices and bargain products away, but the time for them to get stronger and
expand the distribution networks to get prepared for a new development stage.
Home appliance distributors now all move ahead with the plans to expand the
distribution networks by opening more retail points. The premises could be not
too large, but they need to be located near residential quarters, which would
allow to cut down expenses and increase the efficiency.
The experts have commented that it’s now the golden time for the distributors to
set up more shops, since the premises rents have decrease significantly, thus
allowing to lease advantageous premises at the best costs.
There is another important reason behind the distributors’ decision to expand
their distribution networks: they are awaiting foreign investors. Local
newspapers have reported that a lot of foreign investors have been seeking to
buy Vietnamese retail networks in their plant to penetrate the Vietnamese
market.
Tran Thuy