VietNamNet Bridge – The home appliance market has become “peaceful” again after it became boisterous for one year with a stiff competition among the suppliers.

The tough year 2012

The home appliance market dropped dramatically in 2012 with the minus 20 percent growth rate.

An electronics and digital technology product distribution company in Hanoi revealed that while its turnover was high at VND1.6 trillion, the profit was modest at VND30 billion, which was just equal to 50 percent of that in 2011.

The supply chain opened two more shops in Hanoi in 2012, which made the operation cost of the chain increase by 50 percent, Meanwhile, the sales increased insignificantly, which has led to the sharp fall of the profit.

Other big guys such as Pico, Media Mart, Top Care, Viet Long, Nguyen Kim and Best Carings all have reportedly met big difficulties to the slow sales. A lot of distributors have reportedly incurred loss and shut down some of their shops.

Analysts say a home appliance supermarket needs to have the sales of VND20-30 billion a month to be able to exist. Meanwhile, the supermarkets in Hanoi could sell some VND100 million worth of products a day in 2012.

While the sales dropped so dramatically due to the weak demand, the war among home appliance centers turned stiffer than ever. It is estimated that the distributors need to raise the sale prices by 15-20 percent in order to cover the increasingly high costs.

However, in fact, they had to slash the sale prices and run sales promotion campaigns with the offered price discounts of up to 50 percent to attract more buyers. Right after a distributor announces a sales promotion program, another would follow, offering even higher price reductions to scramble for clients.

Going bankrupt, selling businesses

Analysts have noted that the “price war” has stopped temporarily. Distributors have realized that if they continue fighting each other, they would kill themselves, because the product prices have been lowered to the deepest low, which have eaten up banks’ profits.

Some distribution chains have said they would follow new sales strategy in 2013. Customers would be allowed to use products first and pay later, or they would be able to change products if they are not satisfactory about the products. Therefore, analysts think home appliance suppliers would not continue slashing sale prices to attract buyers like they did in 2012.

Experts also think that it’s now not the time for distributors to slash sale prices and bargain products away, but the time for them to get stronger and expand the distribution networks to get prepared for a new development stage.

Home appliance distributors now all move ahead with the plans to expand the distribution networks by opening more retail points. The premises could be not too large, but they need to be located near residential quarters, which would allow to cut down expenses and increase the efficiency.

The experts have commented that it’s now the golden time for the distributors to set up more shops, since the premises rents have decrease significantly, thus allowing to lease advantageous premises at the best costs.

There is another important reason behind the distributors’ decision to expand their distribution networks: they are awaiting foreign investors. Local newspapers have reported that a lot of foreign investors have been seeking to buy Vietnamese retail networks in their plant to penetrate the Vietnamese market.

Tran Thuy