Textile giants eager to be supplier for domestic retailers

Many big exporters have struggled to develop their retail chain in domestic market due to lack of experience in retail business

Textile producer Garmex Sai Gon, one of the country’s largest textile exporters, has inked an agreement worth VND100 billion ($5 million) to become a supplier for local fashion retailer Blue Exchange this year.

The move has startled analysts since the Ho Chi Minh City-based textile firm already established a chain of fashion shops with the brand named Saga in 2004.

“Saga seems to be booming, with positive sales, diversified designs and broad distribution network,” says Garmex Sai Gon chairman Le Quang Hung.

“However, the chain actually incurred losses due to a large inventory, low return-on-investment rate and profit margin, which were not announced officially.”

Garmex Sai Gon gradually reduced the chain’s operation before shutting it down in 2004.

Many big textile exporters have suffered heavy losses from making forays into the domestic market due to lack of experience in retail business, Hung notices.

The profit margin from export shipments drops to below 10 per cent due to the global economic turmoil, he discloses.

“If we set the margin [10 per cent] for the domestic market, we will have great advantages over other competitors,” Hung says.

“They comprise of low-prices and high-quality products and the capability of supplying up to hundreds of thousands of apparels in a short period of time.”

Blue Exchange, meanwhile, is among the city’s most popular fashion retailers, with a chain of 140 shops nationwide.

It is seeking suppliers that produce hi-quality apparels in large volumes without requiring either initial investments or materials. Therefore, Garment Sai Gon is one of its top picks. 

“ASEAN is expected to become a free trade area by 2015. As a result, apparels from Singapore, Malyasia and Thailand will strongly enter Vietnam, while local retailers such as Blue Exchange will have chances to hit store shelves in neighboring countries,” Hung says.

“Garment Sai Gon will also consequently have opportunities to boost sales.”

The firm notices that it has to rely on the core business since it suffers heavy losses from trying to become a local retailer, which were caused by a huge inventory and unstable consumption, he says.

“We are skilled at textile. We are among the biggest suppliers for many European fashion groups. Thus we can easily become the biggest suppliers for local retailers,” Hung says.