Covid-19 helps Vietnamese wood change business model

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Illustration. Photo: Nguyen Thanh

Export decrease by 2.5%

In the first fivemonths of this year, according to the Ministry of Agriculture and Rural Development, exports of wood and wood products reached US$3.94 billion, down 2.5% compared to the same period in 2019.

Vietnam's timber and timber products industry is one of the sectors heavily affected by the Covid-19 pandemic, along with seafood and vegetables. The impact of the pandemic has been particularly pronounced since March.

Although the US, China, Japan and South Korea stayed the main export markets of Vietnam with 83.5% of total export value of wood and wood products, these markets have all givennotices of rescheduling or cancellation of orders.

According to the Vietnam Association of Wood and Forest Products, more than80% of shippers exporting to the US have announced to stop buying and cancel orders new situation.

Some 81% of enterprises exporting to the EU market have received notice of canceling orders and extending orders. The markets of Japan, Korea and China dropped by 60-80%.

With the complexmovements of the disease, currently customers do not come to the factory to checksamples. Therefore, Vietnamese timber enterprises have not yet signed new orders for2020-2021.

This has led many factories to potentially close and stop operating in the near future,meaning hundreds of thousands of workers face unemployment,and this ensures there is no job and social security for workers for along time.

Motivation for changing business model

According to the Department of Agro-product Processing and Market Development (MARD), in May the control of the Covid-19 pandemic in key export markets of Vietnam was a good sign.

In the US, many states began to lift lockdownorders and return to economic activities to reduce the risk of declining growth and reducing unemployment caused by the Covid-19 pandemic in the context of the pandemic pattern that is still relatively complicated in this country.

In the EU, the lockdownordersaregradually being removed, which is also a positive sign for Vietnam's timber exports. In Italy, manufacturing, construction and distribution are allowed to operate again.

Talking to reporters of Customs Newspaper, Do Xuan Lap, Chairman of the Vietnam Association of Wood and Forest Products, as well as Director of TienDat Wood Industry Joint Stock Company, emphasisedthat the Covid-19 pandemicwill continue to cause difficulties for Vietnam's wood processing and export industry. However, in 2020, the wood industry can still grow sharply.

The furniture market, especially core products with multi-billion dollar sales, is shifting to Vietnam. Besides, the pandemic in Vietnam has been controlled basically well, creating investment attraction and great demand for goods from Vietnam. Countries in the world have a policy of living with pandemics, gradually opening markets.

In order to manage the difficult period, according to Lap, businesses need to develop good product and customer strategies.

Specifically; when the world liveswith a pandemic, the products for family garden, products for kitchen, bathroom and bedroom (accounting for 60% of wooden furniture for American families) were given priority and arealso products with great demand in the world.

In addition, tablets and plywood are products which the world has high demand for (the first fourmonths of export of tablets reached $108.2 million, up 31% over the same period last year).

With the development of customer market strategy, Vietnam offers markets that contain good pandemic control or are still opening markets (Australia, Japan, Korea, Germany, China, US). These are also the major markets where Vietnamese wood consumption is for both immediate and long-term use for Vietnam's wood processing industry.

"Enterprises are actively changing their sales skills, labeling and packaging requirements for online sales," Lap said.

Commenting on the fact that the Covid-19 pandemic brought not only challenges to the timber industry but also an opportunity to transform for the industry, arepresentative of the Department of Agro-Processing and Market Development saidin the chain business model,the store is currently facing difficulties due to large operating costs and a lack of dynamism.

Covid-19 was the driving force to transform the online business model and promote application of digital space in the wood industry. Processing enterprises in the industry must take advantage of the opportunity to restructure apparatus to operate more efficiently as well as accelerating the transformation of businessmethods.