Vietnam - Wood manufacturers struggle to reoccupy the home market

VietNamNet Bridge – Vietnamese wooden furniture manufacturers have vowed to reoccupy the domestic market, but they still do not know where they should start since they still have no distribution networks.

Vietnam has been known in the world market as a big wooden furniture exporter with the export turnover of 4 billion dollars a year. However, their products cannot be sold in the domestic market.

According to the Asian Development Bank (ADB), with the GDP growth rate of 6-8 percent, the domestic demand for wooden furniture products increases by 6-11 percent per annum. Meanwhile, Vietnamese experts believe that the domestic market grows more strongly by 10-15 percent per annum.

Foreign products on home market, domestic products on foreign markets

The Vietnam Wood and Forestry Product Association has affirmed that the Vietnamese wooden furniture market revenue is no less than one billion dollars a year. However, the one billion dollars do not run into the pockets of domestic manufacturers, because the market has been flooded with Chinese, Malaysian and Taiwanese products.

The recent market surveys have also found out that only 20 percent of the market turnover fall into the hands of Vietnamese enterprises, while the other 80 percent to foreign ones.

According to Dang Quoc Hung, Deputy Chair of Hawa, the association of wooden manufacturers in HCM City, while Vietnamese enterprises export hundreds of millions of dollars worth of wooden products to China, the Vietnamese market has been flooded with Chinese products.

China has emerged as a big wooden furniture importer to Vietnam. The majority of products exported to China are high grade products for high income earners. The products are made of hardwood and finely carved. Meanwhile, Chinese exports mostly made of MDF and low quality wood, target Vietnamese low and medium income earners.

For the last many years, Vietnamese enterprises have been uncared for the domestic market, but focusing on making products for exports.

The enterprises prefer making products for export to domestic consumption, because they simply do the outsourcing for foreign companies. Meanwhile, they do not have to survey the domestic market and design the products that fit the Vietnamese people’s taste.

Reoccupying the domestic market, how?

Wooden manufacturers have recently realized that in order to have a sustainable development, they need to “walk on both feet” – i.e. they need to conquer both the domestic and foreign markets.

A Hawa’s survey pointed out that its member companies’ turnover in the domestic market in 2011 reached 101.6 million dollars, which shows that Vietnamese companies are completely capable to occupy the domestic market.

However, the manufacturers have been warned that the enterprises still do not have enough conditions to develop the domestic market.

According to Nguyen Ton Quyen, Deputy Chair of the Vietnam Wood and Forestry Product Association, Vietnamese manufacturers would have to take care for both the production and distribution works, while they still do not have wholesale and retail networks yet.

Quyen also said that selling products on the domestic market proves to be not a wise decision for now. If enterprises export products, they would be able to enjoy the export tariff of zero percent. Meanwhile, if they sell their products domestically, they would have to bear many kinds of tax.

Hawa’s member companies have suggested opening a company specializing in doing marketing, distributing and building up distribution networks. However, to date, the project has not come true yet.

Translated by Thanh Mai

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