High rents and poor sales, a double-whammy for Vietnam retailers

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Empty shops at Lucky Plaza on Nguyen Hue Street, Ho Chi Minh City. Photo courtesy of Tuoi Tre

Le Ngoc Thang runs a fashion store at shopping mall Lucky Plaza on Nguyen Hue Street in
downtown Ho Chi Minh City.
He opens only at 1 p.m. since there are few customers at other times of the day.
“If I can sell anything, I'll die,” he says, a Vietnamese way of saying he has no hope of selling anything.
Afternoon is when people working in offices in the building break for lunch and spend some time walking around.
But these days only a few dozens stop by a shop in a day, and mostly to window-shop.
“They come since it is air-conditioned, and four or five visitors only buy one item between them.”
While reports say the economy is gaining momentum and manufacturing is improving, retailers in the country's commercial capital HCMC are moving out because of high rents.
Tina, who runs a shoe shop at Lucky, says she rents it for VND25 million (US$1,185) a month but "I sell [just] several pairs a week at most.”
Many vendors at the mall say rents have increased despite falling sales.
They say VND8-15 million a month fetched a shop in a good location a few years ago, like one facing the street on the ground floor or next to the stairs.
But now even a modestly located one costs more than VND20 million.
Many of the vendors are still there only because they have not found anyone to take over their shops and continue paying the rent.
A woman who has suffered losses each of the four months since she opened says she has been looking in vain for someone to take over the shop and stocks worth more than VND600 million (US$28,440).
“People are downbeat about selling fashion items at shopping malls. There is little chance I can give this to anyone.”
The poor sales has caused her to default on the rent, according to a stamp put in her shop by the mall owner.
Mai Anh, who runs a stall at Ky Dong shopping mall in District 3, says she paid VND100 million ($4,740) for four years plus VND2-3 million a month in the form of various fees, but the mall is now almost closed because of lack of sales.
She says the dozens of vendors remaining there wish to return their shops to the mall owner and get a refund or to find someone else to take over them.
Things are not much better outside shopping malls either.
Le Hung recently closed his clothes shop on Tan Son Nhi Street after just three months.
Tuoi Tre newspaper quotes him as saying: “I tried hard but could not survive since the sales was only enough to pay the staff. I lost around VND10 million a month in rent.”
He was confident of making profits since he bought cheap, but the daily revenue turned out be just around VND1 million a day.
Since he ended the contract early, the landlord refused to return his three-month deposit.
He had to sell his inventory worth nearly VND100 million at a night market. He could not sell all of it, he says.
Tran Quang Hung, who rents out a house on Ly Chinh Thang Street in District 3, says it changed hands three times last year.
The tenants were clothing or cosmetics vendors, and had no customers.
Hung thinks in the current circumstances retailers need to accept losses for at least three to four months before customers slowly come in, but most cannot afford that.
Rents on main streets are now at VND12-25 million a month. Doing the interiors and staff cost more money.
“One must have deep pockets and unique strategies to weather the situation,” Hung says.
Several houses on Hai Ba Trung, one of the main fashion streets, remain vacant.
One owner says a former tenant owes two months'  rent. “They imported shirts and stationery made by big brands, but could not sell them and had to make a clearance sale and close down.”
Managers of websites advertising sell-offs by vendors say their clients are willing to transfer their shop and sell the stocks for 50-70 percent of cost or even as “scrap.”
Le Viet Thang, director of Can La Co Company which runs www.sangquan.vn, says selloff ads in the first quarter equaled the number for the whole of last year.
An average of 80 – 100 shops want to change hands every day, he says, nearly 90 percent of them eateries, cafés, and fashion shops worth less than VND500 million.
But he blames the situation on vendors’ poor assessment of the market.
Government figures showed that the economy grew by a 3-year high of 4.96 percent in the first quarter.
HSBC's monthly reports said Vietnam’s manufacturing status was positive for six straight months until February with new orders and rising production.
But officials said there are not enough clues to forecast an imminent recovery. Figures from the Ministry of Investment and Planning showed that business closures and suspensions have continued to increase this year, rising by 12.2 percent year-on-year to 13,124 by the end of February.

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