Vietnam's traders say ‘odd’ discount limit slows sales

By Mai Phuong, Thanh Nien News

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50 percent is Vietnam's maximum markdown. Business insiders said the government’s 50 percent discount limit hasn't helped flagging consumption and backed-up stockrooms.Photo: Diep Duc Minh 50 percent is Vietnam's maximum markdown. Business insiders said the government’s 50 percent discount limit hasn't helped flagging consumption and backed-up stockrooms.Photo: Diep Duc Minh

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Clothing and electronics traders in Vietnam are desperate to clear their inventories at any price, but city laws only allow them to halve their prices.
Business insiders said the government’s 50 percent discount limit hasn't helped flagging consumption and backed-up stockrooms.
Lien An Thach, the sales director of major electronics chain Cho Lon, said retailers are willing to sell damaged and defective merchandise as cheaply as possible.
Because of the law, however, Thach said his chain has offered the products to employees with few positive results.
“I’ve seen shocking campaigns of 70-80 percent discounts abroad, but that is not allowed in Vietnam,” he said.
During a recent meeting with HCMC officials, a representative from the Thanh Nhan computer retailer said that most electronics retailers are sitting on large inventories due to the economic downturn.
And given the global pace of innovation, electronics products are considered obsolete six months after they come out.
The desire to offer bold discounts is strong, he said.
Clothing retailers have the same gripe.
Ngo Duc Hoa, board chairman of Thang Loi international garment company, comes out with a new line of products every season, so when a season passes, any items left behind need to be unloaded at a discount.
“We’d accept losses to recover as much as possible so we could reinvest in new production. But even though we want to sell the surplus clothing real cheap, we just can’t due to the 50 percent limit,” Hoa said.
“The rule is unreasonable and impractical,” he said.
A source from a garment company in the northern province of Bac Ninh, who asked not to be named, said that for many reasons, a large portion of its winter line remains unsold.
The company is short of funds for new production as well as space to store the new items.
“We need to cut the prices by 60-80 percent,” he said. 
The anonymous source said some local stores have offered discounts of up to 70 percent, but large retailers risk swift punishment from market managers for following suit.
Cao Tien Vi, general director of Saigon Paper Corporation, said the limit, which came into effect in 2006, is out of date.
The rationale for the law wasn't clearly outlined. But officials maintain it exists to prevent the dumping of cheap goods onto the market. 
Vi argues its time Vietnam follow global retail trends.
“Other countries allow discounts of 70-80 percent all year round. Why not Vietnam?”
He said the rule is causing more difficulties than ever as consumption continues to slide.
“It doesn't just limit the competitiveness of local businesses but also takes away opportunities for low-cost consumer products,” he said.
He said commercial policies need to be flexible, to stimulate consumption and give more space for businesses to make their own calls.
Hoa also said the most important factor to help private firms survive would involve allowing them to make their own sale and pricing decisions, especially amid competition from cheap imports flooding the market.
So the government should not intervene too severely by limiting discounts, he said.
Cao Sy Kiem, chairman of the Association of Small and Medium Enterprises (which represent 90 percent of businesses in Vietnam), said discounts and clearance sales offer a reasonable means for businesses to recover funds.
Kiem said the limit doesn't sound like a proper means of managing the market, which is supposed to become gradually more free and open.
“Vietnam is integrating deeply and widely into the global economy, so we have to play by international rules. We can’t be the odd one out.”

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