Women walk near bottles of cooking oil at a supermarket in Hanoi. Local companies are struggling to liquidate stocks that piled up due to low sales.
Many companies are struggling to liquidate stocks that piled up as a result of the unusually low demand during Tet this year, with even the big discounts many have been offering to encourage inflation-weary shoppers proving ineffective.
Dao Duy Kha, vice general director of Vietnam Plastic Corporation, said demand for plastic products is very low, causing his firm's stockpile to rise by 20 percent year-on-year.
Plastic construction materials have seen demand plunge amid the frozen property market, he said, while plastic appliances saw few buyers even during the shopping season before Tet, as consumers cut spending to cope with galloping prices.
The recent imposition of an environmental protection tax on plastic bags hit their sales too, he said. "It will take us several months to sell the stocks, which are now equivalent to two months' production."
The large stocks mean firms are struggling with liquidity, especially since bank loans are not easy to get and carry high interest rates, he added.
Vu Thi Ngoc Lan, director of Hanoi-based garment firm Fashion Hanosimex, said sales had been down 20 percent this year. Since price cuts failed to sell out the stocks of winter garments, her firm would keep them until next winter, she said.
The manager of a supermarket in Hanoi said confectionery and beverage products and processed food accounted for a lion's share of products left over from Tet. If their expiry dates were not drawing close, producers could withdraw them and replace their New Year packaging, he said.
The stockpile index of the processing and manufacturing sector rose by 21.1 percent year-on-year in January, according to the General Statistics Office.
Economists suggested that companies have to speed up investment in technology to cut production costs, helping spur consumption.
Nguyen Thai Dung, deputy general director of the French-owned Big C supermarket, said the high inflation, which is still at around 20 percent, has hit purchasing power, hurting retail sales.
Consumption growth, in real terms, was only 4 percent in 2011, compared to 14 percent the previous year, he said.
The retail market would grow at an even slower pace this year as the high inflation and the global recession continue to bite deep, industry insiders have warned.
The Ministry of Industry and Trade estimates retail sales will rise by 20 percent this year, compared to 24.2 percent last year.
Many traders have offered discounts of 20-50 percent to woo shoppers, but this has failed to do the trick.
"Despite the reduction, prices of many products still stand high," Nguyen Thu Hoai, an administrative clerk at a foreign firm, said while passing a fashion shop offering discounts of up to 50 percent for winter garments.
"Traders want to sell their products at any cost, while consumers like me do not want to buy out-of-season products."
But Kha of Vietnam Plastic Corporation said: "At current prices, plastic firms see small profits. Meanwhile, the price of imported plastic materials is increasing every day. If we reduce selling prices, we will suffer big losses."
Economist Nguyen Minh Phong blamed the firms for the huge stocks saying many do not pay attention to market research and fail to forecast demand accurately.