Vietnam ships on average US$3 billion worth of wood products to many countries all over the world and is among the biggest furniture exporters in Asia. But on the contrary, wood exporters have long lost local market to imported products. As the global market encountered a slump following the crisis in 2008, many local furniture makers were thrown into the hot water when seeing overseas orders dwindling, and therefore had to rethink their approach by re-exploring the local market.
By Thai Hang in HCMC
Visitors at a furniture showroom. The products are often made to overseas orders, but local woodworking enterprises are trying hard to win back local market share - Photo: Thai Hang Vietnam ships on average US$3 billion worth of wood products to many countries all over the world and is among the biggest furniture exporters in Asia. But on the contrary, wood exporters have long lost local market to imported products. As the global market encountered a slump following the crisis in 2008, many local furniture makers were thrown into the hot water when seeing overseas orders dwindling, and therefore had to rethink their approach by re-exploring the local market.
It was therefore understandable when Binh Duong Province’s wood processors association decided to hold an exhibition targeting local customers in December last year, the moment when the global economy was still reeling from the crisis. A few months later, the Handicraft and Wood Industry Association in HCMC (HAWA), the biggest wood manufacturers association in the country, decided to hold its first-ever exhibition - Vifa Home - on furniture in this November, also to target the local market.
It’s from the crisis that wood makers have learnt that they need to stand on both feet instead of just focusing on exports like they used to do. This year, therefore, is expected to mark their return to regain their local shares.
Nguyen Ba Tuan, director of Hawa Corporation, organizer of Vifa Home 2010, remarks that a developing real estate market and higher living standards of the people in a market of over 86 million is luring wood exporters back to the local market.
Tuan says Vifa Home 2010 targets two key groups of clients, namely hotels and resorts, and building and condo contractors. He also invites to the fair many showroom owners and retailers from across the country as retailing is seen as the most effective way to reach customers.
Nguyen Quoc Khanh, owner of AA Corporation specializing in interior décor and furniture, notes that although the woodworking industry has developed for more than 10 years, home-made furniture products are still unpopular among local customers, who prefer buying and using products imported from China, Hong Kong, Malaysia and even from Italia.
“The most important thing is that the local market can yield as much as exports can,” Khanh stresses. Local furniture consumption is expected at between US800 million to US$1 billion, a very attractive market share for wood makers, according to Nguyen Ton Quyen, secretary general of the Vietnam Timber and Forest Product Association (VIFORES).
Knowing the fact is just the beginning. The biggest challenge is that most wood processors turn out products en masse for big overseas orders, shunning the local segment that requires small orders only.
The next challenge is that local wood processors have primarily relied on exports without caring about the need to establish a retail system for their own. To return to the local market effectively, they will have to set up stores and showrooms.
Take a look around retail stores on Nguyen Thi Minh Khai and Ngo Gia Tu streets and elsewhere in HCMC, it’s very easy to realize that made-in-Vietnam products are mostly suitable for mid-income customers. Meanwhile, salesmen at such stores are ready to introduce to guests other imported products, mostly from China and Malaysia with diverse designs and of different materials.
However, there have been more wood exporters opening their showrooms along these furniture streets this year, a way to confirm their determination in returning to the local market. However, many say high leasing charges plus big investment needed to open showrooms at a time when the local purchasing power remains weak in the beginning often pose a lot of difficulties to them.
Khanh of AA Construction says firstly manufacturers must gain a market share of 20% to 25%, and to do so, manufacturers must seek to boost sales via retailers with more than 2,000 stores across the country. “Customers are still familiar with the traditional selling chain such as small stores around their places,” Khanh explains.
Wood makers in theory have their strong points, including a better understanding of customer’s tastes. Besides, in recent years, the fast-growing real estate market and higher living standards have also boosted demand for interior decoration items and furniture. The local market seems to be an ideal land for wood makers.
“But gaining the market against imported items is not an easy task,” Khanh admits.
To smoothen out their new approach to the local market, many woodworking enterprises choose to supply furniture items for big construction projects such as hotels, resorts, and apartment buildings which demand larger quantities of items more suitable to the current production scale and capacity of local companies.
Savimex Corporation is among those. Nghiem Nhat Nam, director of Savi Décor, has set up a new branch of the corporation specializing in designing and setting up interior patterns for residential and commercial constructions in cities and towns in Vietnam.
Nam reveals that revenue of the new branch has picked up rapidly from 30-40% just two years after the establishment.
“For the moment, the revenue ratio between the construction and retail sector is 9 to 1, and I’m planning to change it in the future,” he says.
According to his plan, Nam will make use of his contacts with big customers of large buildings as a way to introduce Savimex products in the retail network that he’s going to expand in big cities such as HCMC.
“Currently, the hardest part is finding the right site at an acceptable leasing fee to introduce the products to the market. Next we have to better understand the tastes of customers in terms of both materials and designs, but this requires a lot of time. However, I think I’m going to make it,” Nam said.
Savimex is already a well-known wood maker for the Japanese market over the past 20 years, and for other markets such as the U.S. and Canada as well. But its name seems strange to local people. Other wood makers are in the same situation in finding their way back to the local market.
On the same purpose, connecting manufacturers and local customers, and bringing their names onto the markets are also the expectation of associations such as Hawa and Binh Duong Furniture Association in holding furniture fairs for locals.
After the fairs, obviously wood makers will continue with their own plans for winning back the local market. They have come to understand that by standing on their two feet, they will be able to survive a crisis.
The Saigon Times Daily