Wooden product exports post impressive growth

SGGP
While the Covid-19 pandemic has affected many export industries, the forestry industry still posted growth in both export value and volume with wood and wooden product exports in the first two months of this year hitting US$1.5 billion, an increase of 10.1 percent compared to the same period last year.

Vietnam's wooden products are fond of by the global market. (Photo: SGGP)

Vietnam's wooden products are fond of by the global market. (Photo: SGGP)

Frankly, the Covid-19 pandemic affected both sides. The annual international furniture and home accessories fair Vifa Expo 2020, which was expected to open on March 11 this year, had to postpone as the acute respiratory disease caused by the new coronavirus has been spreading rapidly in the world.

Vifa Expo 2020 is the first trade fair of the year and an important selling season as many enterprises have prepared for a year to release new products as well as business ideas for this year. Earlier, the pandemic also delayed several furniture trade fairs around the world.

Architect Nguyen Quoc Khanh, Chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (Hawa), said that the organizers of the Vifa Expo 2020 has consulted many channels and asked for opinions of participants, a major of enterprises suggested to postpone the opening date of the trade fair as most of the customers from the US, Europe, and Japan all canceled their visits. Moreover, the ASEAN Furniture Industries Council also moved a series of specialized trade fairs in the ASEAN.

From another perspective, the impacts of the imposition of anti-dumping tax on China’s wooden products of the US urged many enterprises to move out of China. Now, the Covid-19 pandemic has also made the production of wooden products in the leading wood-processing country more and more sluggish as most factories have not opened or operated perfunctorily, causing a disruption in the supply chain and a supply crisis to the world.

Big customers in the US, Australia, Japan, or European countries have more and more incentive to shift their interest to other countries, of which, the ASEAN is an ideal alternative market and Vietnam, the second-largest in Asia and the fifth largest wood exporter in the world, becomes a promising candidate when all the production resources of Vietnam are available.

Mr. Dien Quang Hiep, Chairman of the Binh Duong Furniture Association, said that the impacts of the pandemic on the wood processing industry have not been significant as raw materials are mainly exploited from domestically-grown plantation forests or imported from the US, Canada, and African countries while the markets of Vietnamese wooden products are European countries, the US, and Japan.

Besides, Vietnam also has many new-generation free trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Especially, the EU-Vietnam Free Trade Agreement that was recently ratified by the European Parliament and will become effective this year will create encouragement for the wood industry to develop when import tariffs of products imported into the EU will be cut to zero percent, as well as the preferential tariffs between Vietnam and other countries in the world and many new markets are opened. It is important that enterprises need to be sensitive to the opportunity.

Hawa said that before a crisis is usually a milestone of change, enterprises with fast adaptability will make use well of market development opportunities. Currently, the disease has spread rapidly, causing consumer behavior to change. This has been creating pressure and challenges, forcing enterprises to innovate and improve all of the stages, from designing, producing to trading, of which, digital transformation is the key.

Currently, the traditional business model of a chain of stores faces difficulties due to high operational costs and a lack of dynamic features. Lately, Pier 1 Imports, a large furniture retailer in the US, has filed for bankruptcy. Therefore, the Covid-19 outbreak is the driving force for the digital transformation to happen faster.

Digital transformation is fundamentally agreed by enterprises but they are confused about the way to carry out it. Mr. Tran Hien, the co-founder of Ecomstone – a business partner of Amazon in Vietnam, said that the disease causes an obstruction but also creates opportunities to switch to online business for more positive changes.

He cited that a Thai company determined to build an online store on Amazon; after a year, the growth was above 30 percent. Hawa together with Ecomstone can analyze the potentials, identify competitors as well as customers to evaluate the market then step by step build a general store on Amazon, thereby building an own brand for Vietnam’s wooden furniture instead of mere processing that brings low value and customers do not know who the manufacturers are. 

According to Architect Nguyen Chanh Phuong, Vice Chairman of Hawa, to get an export turnover of $20 billion in 2025, enterprises need to approach by a new direction, diversify selling channels, and increase the product value.

The difference in the current starting point between Vietnamese wood processing enterprises and developed countries is not much. However, if enterprises remain standing still during this period, they will be left behind. Therefore, the Vietnamese enterprise community needs to boldly transform.

Mr. Truong Gia Binh, Chairman of the FTP Corporation, emphasized that in the digital age, it is not that large enterprises defeat small counterparts but fast-moving companies defeat slow-moving ones. However, he also noted that in the world, 70 percent of enterprises carrying out digital transformation fails. If the industry rushes to transform when there are no fundamental steps of change, causing a part of it to be unable to keep up, it will become a hindrance.

By Cong Phien – Translated by Thuy Doan

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