Local fashion firms fear mid-tier foreign brands
Local fashion firms fear mid-tier foreign brands
Though experiencing an annual two-digit growth rate for years, some of Vietnam’s longstanding fashion companies fear that more mid-tier foreign fashion brands will enter the market after the Trans Pacific Partnership takes effect.
Making its debut in 2009, Seven AM has had a large distribution network, with shops in 13 provinces and cities. White Ant, a women’s office fashion brand, has set up nine showrooms, including eight in Hanoi and one in Thailand.
Mai Nguyen, the founder of Mike Style, also said his business has been satisfactory over the last two years with a growth rate of 30-40 percent.
The owner of Sensorial, a women’s fashion brand, reported a 35 percent growth rate in 2014. After the first series of shops in HCM City, Sensorial will open shops in Da Nang and Hanoi.
Nguyen Huu Phung, the owner of Thoi Trang Viet Company, which owns the Ninomaxx brand, noted that Vietnamese fashion companies have been hurrying to expand their distribution networks by opening one-stop shops, preparing to compete with foreign brands in the near future.
However, Phung noted that fashion shops in Vietnam are not large, with an area of 1,000 square meters on average, smaller than the 2,000-3,000 square meter shops in other countries.
Also, according to Phung, the initial cost to open a shop is VND6-8 billion, which is beyond the financial capability of small- and medium-d enterprises.
When asked about profits from the one-stop shops, Phung said the greatest advantage of the model is that it helps increase the presence of Ninomaxx in the domestic market, though profits have not been satisfactory.
A salesman of Ninomaxx noted that the retail rents remain very high, while purchasing power has been decreasing, which has made some shops unprofitable.
“The April, Christmas and Tet holidays are considered the high sale seasons. However, the demand was very weak even on those days in 2014,” he noted.
Dang Quynh Doan, director of Viet Thy Fashion Company, also said the most difficult days are still ahead.
Once the Trans Pacific Partnership Agreement (TPP) is signed, the mid-tier brands from the US and Japan would be formidable rivals for Vietnamese brands.
Brands from Malaysia, which will also be a TPP member, would also be big rivals to Vietnamese, Doan said, if they can bring their products to Vietnam with preferential tariffs. Raw material imports from the country would also have a low tariff.
Entering the domestic market in 2007, Nguyen Tam Company, targeting mid-tier customers, opened 60 shops bearing the Foci brand throughout the country. However, the chain has lost stores because of a sharp fall in sales.
