Jan 1, 2013

Vietnam - How big is the Vietnamese branded goods market (part 3)

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VietNamNet Bridge – Though meeting big difficulties in doing business now, the Vietnamese businessmen distributing branded goods still have reasons to hope in a brighter future.

An executive of GL Company, distributing March Jacobs, Chloe, Givenchy, Loewe, Michael Kors, Pinko, Lanvin branded goods complained that the import tariffs are very high at 15-30 percent. Besides, enterprises have to pay 10 percent of VAT as well.

While branded goods bear the high import tariff of tens of percent when entering Vietnam, in other markets like Singapore or Hong Kong, they are imposed zero percent. This has led branded goods less competitive in comparison with other countries and prompted people to buy goods from overseas.

Regarding the sale prices, analysts say the minimum price levels are clearly stipulated in the contracts signed between brand owners and distribution companies. The Vietnamese distributors can set the actual sale prices higher by several percent than the fixed prices.

However, if the distributors cannot have the revenues as committed, they would be considered as violating the contracts. In this case, the foreign brand owners would have the right to terminate the contracts sooner than expected. The scenario occurred with many Vietnamese distributors.

Especially, distributors have to compete with each other in sales once the distribution right is granted to several sales agents. Therefore, distributors have to keep the profits at minimum levels in order to stay competitive.

Some brand owners set very high requirements on the decoration, goods display, image exposition and ad campaigns, which means that Vietnamese distributors have to pay high for the activities. Besides, they have to pay tax and have to struggle with counterfeit goods.

Jonathan Hanh Nguyen, President of IPP Group, which is believed to hold 70 percent of the branded goods market in Vietnam, has noted that while in foreign countries, people hunt for the latest fashionable products, Vietnamese consumers hunt for branded goods in the sale-off season. This makes the distributors’ revenue decrease considerably.

The market needs a push

The “push” here is the development of the shopping-tourism centers. The travelers to Hong Kong in 2012 spent 6 billion dollars on shopping during their stays in the city.

The income from the tourists’ shopping activities proves to be the main source of income of the tourism industries in Thailand, Malaysia and Singapore.

HCM City, in the development strategy by 2020, is expected to become a finance, trade tourism and exchange center in South East Asia. Especially, a lot of efforts to turn HCM City into a shopping center have been made over the last many years.

In order to attract tourists to Vietnam and persuade them to spend money when traveling to HCM City, a branded goods center needs to be set up. However, no move has been made so far in the plan on building such a center.

Jonathan Hanh Nguyen, President of IPP Group, has revealed that IPP would join forces with the Ministry of Culture, Sports and Tourism to launch the 2013 national tourism year program with the themed “branded goods year.”

The program is believed to help attract foreign currencies to Vietnam when millions of foreign tourists spend money to buy branded goods in the destination country.

This is the plan which can help turn HCM City into a shopping center in the true sense of the word. This is the model being followed by most of the big shopping malls in the regional countries such as Singapore, Thailand, Malaysia and the Philippines.

China, in an effort to attract more foreign currencies, is considering removing the import tax on branded goods. Instead, it may collect tax from enterprises.


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