Lack of domestic business strategies

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Revenue from the domestic market of the wood industry reached US $ 3 billion per year. Photo: X.T

Busy with exports

Besides export markets, the domestic market is an important market for Vietnam’s wood industry. With a population of more than 90 million people and increasing growth of the middle class together with rapid urbanization growth not only in big cities but also localities, the consumption scale of wooden products in the domestic market is considered as to be high.

According to Department of Processing and Trade for Agro-Forestry-Fisheries Products and Salt Production (Ministry of Agriculture and Rural Development), it is estimated that the domestic market accounts for about 40% of the total trade value of Vietnamese wooden products. 40% of wooden products in the domestic market is for construction, 30% for rural consumption and 30% of urban consumption. Obviously, this is not a small market that local businesses can take advantage of to increase sales and market share. However, due to pursuing exports, domestic wood businesses are leaving their own home market.

At a survey of Vietforest, each Vietnamese household spends 6 million per year for demand for wooden products on average. The demand for wooden products for hotels, offices and new urban areas tends to increase rapidly. However, wooden products have not met the demand of this great potential market, the imported volume has been still high. The domestic wood market almost leaves to handicraft villages, small and medium size enterprises and focuses on the segment of furniture and wooden handicrafts and wood for construction. But the quality is not similar and design is limited so that the domestic wooden products get difficulties in attracting consumers.

Walking around De La Thanh street where a lot of wood stores are located, I pretended to be a buyer to buy some furniture, I found that besides a few stores which having their factories offer Vietnamese certain designs, most other stores offer wooden products imported from Malaysia, Singapore, Taiwan (China), Thailand and China.

Ms. Phung Thu Huong, an owner of a wood store on De La Thanh Street said that 60% of wooden products in her store were imported from foreign countries and remaining 40% manufactured by domestic enterprises with old-fashioned designs that are difficult to sell. Ms. Huong assessed that the consumption capacity of the domestic market for domestic wooden products was low because designs have not been improved and updated as much and quick as imported products while their prices are nearly the same.

Need to carry out a thorough search for the market.

Assessing the domestic wood market, Mr. Nguyen Ton Quyen, Vice Chairman of Vietnam Timber and Forest Product Association (VIFORES) stated that so far the wood processing and manufacturing enterprises and even the management agencies have only focused on export, but have not taken care of domestic market properly. It is proved that until now, we have not got a specific statistic on the volume of wooden products consumed in the country every year, main raw materials, origin and lack policies to develop the domestic wood market. And the fact that the local domestic wood market is usually provided by small businesses directly to consumers. While, if developing well this market, the enterprises will have a great opportunity to increase sales. At present, domestic demand for wooden products is growing rapidly, the revenue from domestic market of wood industry is estimated at US $ 3 billion per year (equal to half of export turnover of about US $ 7 billion in 2016)

Mr. Huynh Van Hanh, Vice Chairman of the Handicraft and Wood Industry Association of the Ho Chi Minh City (HAWA) acknowledged that 93% of Vietnamese wood enterprises are operating on a small and micro-size, 5,5% on medium size and the remaining on the large size. Small and medium size enterprises are weak on not only capital sources but only marketing, whereby they only want to manufacture to export, not to invest in the domestic market.

In addition, wood enterprises who want to access the domestic wood market are struggling to find distributors, because if they want to sell their products in the domestic market, they not only must process but also find consumption market and have business strategies to conquer domestic consumers. Therefore, to expand the domestic market, the State must issue appropriate policies to help wood Enterprise return to the domestic market.

Also, wood enterprises are currently lacking information on the domestic market, such as which type of woods is consumed in the domestic market and how much is the consumption volume, which design is attractive. Thus, the research and the analysis for market must be prioritized. Firstly, an official and wide system of distribution channels must be set up to ensure consumption. Another important factor is that the State should have mechanisms and policies to support the development of the domestic wood market.

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According to Nguyen Ton Quyen, in the context where the world and region have many changes, the good exploitation of the domestic market not only increases the turnover but also helps enterprises avoid the risk of exports. Therefore, wood enterprises need to quickly conquer the domestic market by promoting research and reorganizing the manufacturing stage to manufacture products in a variety of designs, types, with affordable prices and suiting domestic consumption demand. In particular, transferring direction from premium products to general segment and the connection between enterprises in each step to save production manufacturing costs and reduce product price.