2012: a difficult year for the retail market

For the retail market, 2012 is particularly a difficult year, what with a drastic decline in turnover. This was the content of a seminar titled “How retailers can overcome difficulties in 2012” held yesterday, May 11, in Ho Chi Minh City.

Dinh Thi My Loan, standing vice chairwoman of the Association of Retail Dealers of Vietnam, said that in 2012, the CPI reduced constantly. This means that the inflation is initially under control. However, the economy is revealing signs of a recession, the consumer power has decreased, and the numbers of businesses going bankrupt have increased.

According to Cao Sy Kiem, chairman of the Vietnam SMEs Association, in many localities as many as 40 per cent of small-and medium-sized enterprises (SMEs) have gone bankrupt because of the ongoing economic downturn, and in some provinces even 50 per cent.  “The number of businesses that have gone bankrupt or withdrawn from the market has doubled since last year,” he said.

The Ministry of Planning and Investment reported that nearly 18,000 enterprises had disappeared from the market in the first 4 months of the year (an increase of 9.5 per cent against the same period in 2011). Among them, the number of retailing businesses going bankrupt is the highest with more than 5,000. This is the largest figure ever announced by the ministry.

However, Kiem said the reality may be harsher than what was reported by the ministry. “The number of 18,000 businesses that have gone bankrupt is still a rosy number. To my knowledge, the fact is different. It must be much higher,” he said.

WonderBuy, a retain compamy has filed for bankruptcy in a Ho Chi Minh City court( Photo: VnExpress)

Tran Dinh Thien, Head of the Vietnam Economics Institute, agreed with Kiem saying that he had “reliable evidence” showing the number of bankrupt businesses was as high as 30-35 per cent or 3 to 4 times higher than the figure given by the Ministry of Planning and Investment.

Pham Thanh Cong, a high ranking expert of the market analyzing Nielsen Company, said in 2011, the saving index of Vietnamese people was as high as 70 per cent in comparison to average 59 per cent of the Asian people. Thus the purchasing power of people has been badly affected.

In the first quarter of 2012, the turnover of supermarkets in HCMC was 10 per cent behind target with stockpiles mounting every day. The situation is even worse in electronic shopping centres where the purchasing power decreased 30-40 per cent.

There is an example of a Ho Chi Minh City electronics shopping centre ‘WonderBuy. Last year, it annouced that,“Will be out of service for 10 days to fix electrical problems,” but actually it has declared bankruptcy, said the general manager of operations. WonderBuy has filed for bankruptcy in a Ho Chi Minh City court, and so, theoretically, it has three to six months to clear debts and find another location to resume operations.

In terms of revenue and business performance, electronics shopping centres can not compete with other big brands, high rents, and the economic recession, the main cause of bankruptcy.

The association reported that around 20 per cent of the smaller retailers had gone bankrupt in the first 4 months of the year, while 70 per cent were in very difficult situation, meaning their production had become stagnant, Loan said.

Danh Quy, director of Planning and Investment at Saigon Co.op revealed that during recent meetings with customers, he realised their spirits were low. “The era that customers only picked up products and paid has gone. They told me they could only  see the light at the end of a tunnel with goods of the reasonable prices,” he said.

However, the big retail businesses can withstand the difficult times. One solution that many customers are satisfied about is how big companies will make good on promises of promotional sales as Saigon Co.op has done.

The series of discount programmes will refund customers who buy its products, with the total value of the programme reaching multi billion Vietnam dong.

Another solution for coping with financial pressure is several trading companies settle problems by resolving wages, unemployment benefits, insurance for employees paid in the form of existing products or devices that are being used in supermarkets. 

In any case, due to financial shortages, the trading companies have to re-organise and find out way to enhance the competition.

“The grass root solution is that policies concerning all factors such as access to bank loans, stockpiling, and profits should be changed in the macro-economic management level to support the retail economy”, Loan said.

Source SGGP, Translated by Dan

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