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VietNamNews

Wood processing firms struggle in local market

Update: December, 25/2012 - 11:06

 

Workers produce planks for export at Hoang Duc Linh Limited Company in the central province of Quang Tri. Many wood processing companies are faced with falling international demand. — VNA/VNS Photo Hoang Dat
HA NOI (VNS) — "While the export market is being successfully exploited, the domestic market has been left wide open," said Nguyen Chien Thang, chairman of the Handicraft and Wood Industry Association of HCM City (HAWA).

To address this gap, many wood processing companies facing slumping purchasing power in international markets have recently shifted to focus on the domestic market. But these firms are finding it difficult to defend their own turf.

Choosing a suitable segment and building up effective distribution channels were the two biggest challenges facing wood enterprises, who usually paid attention to fulfilling processing contracts for foreign partners rather than surveying the local market, said Deputy Director of Duc Thanh Wood Processing Co Le Hong Thang.

The domestic market held rich potential for wood processing firms. However, the majority of the population was located in rural areas, where many businesses lacked sufficient funds to expand their distribution channels, said Truong Thanh Furniture Corp chairman Vo Truong Thanh.

In order to develop in the domestic market, the firms should create long-term business plans, Thnh said, emphasising the importance of building up effective distribution systems.

Vietnamese firms have lost their market share to foreign wood companies due to capital shortages, so they struggle to develop luxury wooden goods that can compete with those provided by foreign companies, local experts said.

The firms' deeply-rooted dependence on imported raw materials, which makes their products more expensive, and their weaknesses in market research, design and distribution worsen the problem.

Domestic wood enterprises should implement a supply chain that includes more technical innovations, these experts advised.

Viet Nam ranks fourth among Southeast Asia's wood exporters, but just 20 per cent of the wood products consumed in the country are produced by Vietnamese enterprises, according to HAWA statistics.

The remaining 80 per cent of wood products in the country are imported from mainland China, Hong Kong, Thailand and Taiwan.

HAWA also predicted that the domestic consumer demand would increase by about 15 per cent per year. Demand for wood products for high-end apartments in HCM City and Ha Noi totals millions of dollars annually.

"Vietnamese enterprises should acquaint themselves better with domestic consumer tastes. If they focused on high to average income segments, they could definitely dominate the domestic market, instead of wrestling over foreign markets," Thang said.

Returning to the domestic market would help businesses to diversify their markets, limiting risks and resulting in higher profits, he said. — VNS

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