Business “plagued” by epidemic

Many premises in prime locations in Ho Chi Minh City have fallen into a slump, without tenants. Photo: N Hue

Others look to move their business online to reduce operating costs.

Burden of ground

According to the General Statistics Office, in February, the peak month of the Covid-19 epidemic, the country had 4,567 enterprises that registered for temporary cessation of business, up 62% over the same period in 2019, while 3,841 enterprises stopped operating and awaited dissolution procedures, an increase of 121%. Generally for the first two months of the year, there were nearly 16,200 enterprises that temporarily suspended their business, up 19.5% over the same period last year. The number of enterprises that ceased operations pending procedures for dissolution was also up to 9,400 enterprises.

According to a unit leasing retail space in Ho Chi Minh City, compared with before the outbreak of Covid-19, the number of visitors to shopping centres and supermarkets decreased from 40-50%. The number of visitors to food and drink shops on the day fell by 20-30%, and by the weekends up to 50%. Sales at convenience stores and shopping centres are down 40%. The customers dropped seriously so revenue also dropped sharply.

This is also why a series of business premises on the favorable routes of Ho Chi Minh City such as Phan Xich Long, Nguyen Trai, Le Thanh Ton, Ly Tu Trong and Tran Quang Khai are hanging signs to find tenants and transfer the premises. According to real estate consulting firm Savills, the price of renting space on major roads in Ho Chi Minh City ranges from US$5,000 to more that tens of thousands of dollars. While business activities were always fiercely competitive, the complex epidemic situation became "a drop of water to spill glass", causing many business units to be forced to "run away to save life".

Facing the difficult business situation, many rental units used policies to reduce rental prices to share difficulties with customers. Vincom Retail JSC said it will spend 300 billion VND to support partners renting commercial centre space throughout the system. The support package will be for the discount of ground rent for partners, partly for the issuance of preferential vouchers and promotions for customers to shop at Vincom. The rate of rent support is considered and assessed according to the level of the impact in the region and the business sector of the enterprise to decide. According to Tran Mai Hoa, General Director of Vincom Retail Joint Stock Company, this VND 300 billion support package not only helps partners ease the cost burden but also allows them to concentrate resources and build attractive incentive programmes to attract customers.

Since the beginning of March, Hung Thinh Group has also implemented a programme to discount rental space for commercial centres in projects invested by the group and its member units to share difficulties so that partners can do business in the difficult period. Pham Thai Binh, General Director of Hung Thinh Retail Joint Stock Company - a member unit of Hung Thinh Group said Hung Thinh will consider each case to decide the best reduction in the range of 20-40%, maybe even more. The support will also be flexible depending on the evolution of Covid-19.

Meanwhile, on business premises on major roads in Ho Chi Minh City, many businesses have negotiated with the land owners, offering discounts. The price reduction in this time is a solution seen as mutually beneficial. Because the cost of space is too large while the business decline can hurt businesses, while finding a new tenant in the current conditions is quite difficult.

Distribution channels go online

While the traditional business model has struggled due to lack of customers, online business platforms are bustling with buyers thanks to a series of stimulating promotions. A series of offline activities have been moved online to suit the epidemic. Typically, the Ho Chi Minh City Book Fair in 2020 scheduled to be held from 16 to 22/3 at Le Van Tam Park was postponed. Instead, Ho Chi Minh City Book Publishing Company (FAHASA) organised FAHASA Online Book Association 2020 on Fahasa.com website with many attractive promotions such as: Buy book with price of VND 1,000, discount up to 70% and buy goods receive gift vouchers of 100,000 dong. Similarly, the "Young Books March" event of the Young Publishing House was moved online.

By promoting online sales channels, sales of bookstores also increased significantly. Reportedly, online book sales of Phuong Nam bookstore system in February leapt by 70% compared to the same period in 2019. Fahasa's e-commerce revenue also jumped by 55% in the first two months of 2020.

Similarly, at many food service and fast food businesses, the number of customers coming to eat at the restaurant is sparse, but according to staff, from Tet to now, the number of orders placed through websites and delivery applications such as Go Food and Grab Food has increased greatly.

The development of e-commerce tools, digital platforms and devices has helped businesses solve customer access quickly without having too large space and lots of manpower and activated 24/7, eliminate geographical distance, approach and understand the manufacturer as best as possible, shortening the order processing time. Thanks to these advantages, online sales are booming not only in "lightweight" industries such as fashion and food, but also the furniture industry is considering going more online to save cost for space and access to a wider customer base. Over the weekend, representatives of wood furniture business associations in Ho Chi Minh City, Binh Duong and Dong Nai signed a cooperation deal with domestic and foreign technology enterprises to convert numbers and promote sales through e-commerce channels.

The wood and furniture processing industry is characterised by the need for large spaces to display and introduce products, serving the habit of "touching, seeing with the eyes" of consumers. However, nowadays virtual reality (VR) technology and 3D has been able to help customers can visit the showroom or factory from a distance. The expansion of online distribution channels in the wood industry is considered in line with current trends, because the traditional business model of a chain of stores has shown many inadequacies and difficulties because of high operating costs and less dynamism.