Electronics retailers spend their way to bankruptcy

By Bao Van, Thanh Nien News (The story can be found in the March 21 issue of our print edition, Vietweek)

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An outlet that was shut down by Ho Chi Minh City-based electronics chain HomeOne last year after sustaining prolonged losses

After splurging to expand in recent times to attract customers, many electronics and home appliance retailers have gone bust in what has become a fiercely competitive market.

Late last year three outlets of electronics chain HomeOne based in Ho Chi Minh City shut down after sustaining prolonged losses.

Ebest closed two outlets in HCMC and Da Nang, while other retailers like Best Carings and Wonderbuy shut down earlier.

Many small retailers in HCMC’s Hai Ba Trung Street were also forced to close down.

Electronics retailers frequently launch discount campaigns, sometimes selling at below input cost to attract customers and compete with rivals.

The promotion programs sometimes last for a month, Nguyen Vinh Phu, chairman of the Hanoi Association of Supermarkets said.

“Some retailers with limited financial capacity cannot continue the programs for a long time. So weak retailers are forced to leave the market.”

In addition to offering the discounts, retailers also raced to open new outlets. The owner of an electronics retail shop said it is a way to keep market share and go one up on rivals.

But the opening of a new outlet could cost tens of billions of dong (VND1 billion = US$47,600), while demand is still limited because of the economic situation.

It has caused many retailers to suffer losses.

Nguyen Thanh Hai, marketing manager of electronics retailer Media Mart, said the Hanoi market faces an oversupply.

Thus, more competitors are scrambling for a shrinking pie with more and more promotions. But the routine nature of the discounts is making customers indifferent to them.

It is a sea change from the sight of customers jostling for sale-off products a few years ago.

Explaining the reason for the bankruptcy of many retailers, a spokesperson for electronics store Nguyen Kim said many investors entered the market when they did not understand the business well. “It requires large investments, experienced management, and good post-sale service,” he said.

To remain in business, some electronics retailers have expanded to rural areas where demand is not saturated yet and rents and salaries are lower than in big cities.

Thus, they have more opportunities in these markets, Phu said.

But since customers there do not have deep pockets, they should sell at reasonable prices and offer reliable warranty services to attract business.

Many retailers say meanwhile that they plan to focus more on online sales because of its big potential by helping them reduce costs for better prices.

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