Firms in race for survival

Even strong businesses could lose their feet within the next two years without marked improvements in the market, warned Vietnam Young Entrepreneurs Association members.

Son Ha Group chairman Le Vinh Son said Son Ha’s business was benefiting from new demand for stainless steel products in Europe, but the group had to cut back in personnel to save costs.

“The government’s recently announced bailout package acts as an encouragement to firms, but still fails to create turnarounds, laying fundaments for firms to steadily develop,” said Son.

In fact, a lack of lower-cost loans and sinking consumption were a perfect storm for firms.

According to Kangaroo Group chief executive officer Nguyen Thanh Phuong, the group once succeeded with the strategy to turn out products based on customer tastes.

“This year was a complete change. Consumers choose what they need but not what they like. This changing pattern created a nosedive in sales. Hence, the government’s decision on three month value added tax payment delay is less meaningful to firms,” Phuong said.

Vietnam Retailers Association figures showed that retail sales revenue of products and services hiked 5 per cent by early in the second quarter of 2012, far lower than 2010 which saw low growth in total retail sales and services revenue (7.6 per cent).

Ho Chi Minh City’s Co.opMart supermarket chain investment director Danh Quy said sales at Co.opMart slid 10 per cent on-year in the first four months of 2012. Earlier, Co.opMark aimed to achieve 30 per cent growth in full-year revenue against a 34 per cent hike in 2011.

Maximark Cong Hoa’s director Nguyen Thi Phuong Thao admitted customers’ invoices reflected sagging payment amounts. In the past, each voucher value was around VND350,000 to VND500,000 ($16-$24) against a current VND300,000 ($14) per voucher.

To survive tough market conditions, Maximark decided to just select services providers with best pricing terms and willing to join its diverse sales promotion programmes. Many production firms had to remove products from supermarket shelves after failing to meet these requirements.  

Son said foreign partners from Japan and the US wanted to shift orders for stainless steel products from China to ASEAN countries due to the former’s rising production costs, but most Vietnamese firms could not take advantage of this situation.

“Firms are striving hard to survive, let alone taking advantage of new business opportunities. If tax rates were cut, this could create a new investment trend and foreign investors may jump into Vietnam,” Son said.