Textiles seek measures to keep its position in the domestic market

Textile enterprises still face difficulties Photo: Internet

Small scale market

After a long time of only focusing on export, currently, many enterprises thought about developing both export and the domestic market. The domestic consumption of textile products increased by an average of 10-15%/year with a scale of $US 4.5 billion and the Vietnamese population is 100 million people, which are the ideal conditions for textile enterprises to control the domestic market.

Working in the Textile industry for many years, Mr. Le Tien Truong, the General Director of the Vietnam National Textile and Garment Group (Vinatex) gave another view on controlling the domestic market. Mr. Truong said, meanwhile the industry’s production capacity has risen to $US 35 billion, the scale of $US 4.5 billion is too small to harmonize the production when export reduces.

Looking into neighboring countries can clearly, we can clearly observe this issue. For example, China’s export capacity is up to $US 260 billion, the domestic market is $US 260 billion, India’s domestic market is three times larger than export, meanwhile Indonesia’s domestic market is double export. Hence, when the markets face similar difficulties, these countries still have a basis to withdraw to and develop their domestic markets. “Meanwhile, our domestic market only meets the production capacity of the textile industry for nearly 2 months, so it does not create the balance for export and will cause more difficulties compared to countries with a large domestic market” Mr. Truong said.

Not only being a small-scale market, Vietnam’s textile products fiercely compete with smuggled products and products of unknown origin which flood into rural areas. Currently, the market share of Vietnam’s textile industry only accounts for 20% in the rural areas and from 55 to 60% in urban areas. Mr. Truong said, if we do not drastically and absolutely handle smuggled goods, and tax evasion goods and non-documented business, it will be very difficult for domestic legal enterprises to compete.

In urban areas, although the market share accounts for 55 to 60% the domestic enterprises’ products must compete for market share with imported goods from ASEAN when the tariffs are gradually decreasing under Trade agreements not including the habits of goods imported from foreign countries.

Focus on some measures

With such a small-scale domestic market, Mr. Truong stated that all enterprises are impossible to develop the domestic market. Only $US 4.5 billion cannot share for 6,000 enterprises not including imported goods. If all enterprises develop the domestic market, it will be difficult in maintaining the efficiency of the domestic market. Therefore, a certain key measure to maintain the domestic market is very necessary.

The key measure which the Textile industry needs is towards the enterprises with good market share in the domestic market, promote enterprises to expand the scale to reduce the price and the method of using a common distribution system. The leader of Vinatex gave the example, Viet Tien’s distribution system only has clothes but they have up to 3.000 shops in the country. Hence, the method of using the common distribution system will be distributing more underwear of the Dong Xuan knitting Company and the towels and bed sheets of Phong Phu Company. These are additional goods and do not compete with each other.

In fact, this method reduces the cost of developing a new system- a huge cost in Vietnam. Currently, the majority of Vietnam’s retailers are facing great challenges on rental costs and the loyalty between the landlord and the tenant. “if a shop performs well, the lease may be terminated after two years, so no enterprises dares to invest a lot because they are not sure how long they can rent the shop”.

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In addition, consumption in Vietnam has been improved in big cities shopping in trade centers but until now, trade centers are not a main channel for Vietnamese, they are still interested in buying in retail stores. This is an advantage for the textile enterprises to apply associated plans and using a common distribution system as above. This association helps enterprises develop multiple shops with additional goods as well as exploit at maximum level the efficiency of permanent assets.