Stores shy away from stocking up 

Last updated: 11/19/2010 10:15 

A staff member pulls a pile of goods inside a supermarket in Ho Chi Minh City

Many businesses have planned to avoid stocking up on consumer goods in preparation for the new year holiday season, fearing decreasing purchasing power as the dong continues to sink and import costs spike.

Nguyen Thi Nga, owner of a confectionery shop in Hang Buom Street, said that by the same time last year, her candy shop had stored up some 30 tons of goods in preparation for the Tet Lunar New Year in February.

This year, Nga says she worries that price hikes may drive down consumer demand so she's carefully considering storing up to avoid inventory problems.

This month, many supermarkets increased the price of most consumer goods by 5-15 percent due to current market woes.

On the black market, the dong weakened to as much as 21,030 per dollar on Thursday, compared to 20,970 two weeks ago. In August, the dong was devalued by 2 percent.

Nga predicts that the dollar hike will raise the cost of imported products, while prices of locally-made food products will also rise because many ingredients are imported. Meanwhile, the number of shops and supermarkets has sharply increased in recent years, making business more difficult.

“I wouldn’t dare stock up on inventory like I did last year,” said Tran Thi Hanh, owner of a dried food stand in Dong Xuan Market. “Considering the current hike in the price of goods, it is difficult to predict future purchasing power. Meanwhile, banking interest rates are also high, thus storing products for two to three months will not bring much profit.”

Moreover, there is a great surplus of goods. As the capital supply rises, firms could remain active in their business late into the year, and buy time as the market changes, she said.

Nguyen Khanh Vinh, manager of Le Mart supermarket, said storage and unloading costs are also rising as the firm begins stocking up goods for the big shopping season ahead. In order to cover the cost of their large pre-holiday orders, many small business owners take out bank loans, and pay monthly interest rates of 1.2-1.3 percent.

Le Mart typically begins stocking up on inventory around this time so they can continue to sell consumer goods at reasonable prices during the holidays, when costs tend to soar.

However, given their narrow profit margins, Vinh’s firm plans to stock up only on essential consumer items, at maximum two months before Tet.

Dao Duy Kha, vice general director of the Vietnam Plastic Company, said given the high exchange rate between the dong and dollar, and the increasing prices of imported materials, his firm has not bothered to stock up on much this year.

“We have to use dollars to import materials, which we then turn around and sell for dong,” he explained. “If we store a large volume of products, it will take a long time to recoup our capital. Meanwhile, the dollar price rises every day. Thus, we will suffer losses when importing materials for the next round of production.”

Nguyen Thai Dung, vice general director of the supermarket Big C Thang Long, said his firm has already signed contracts to buy some 75 percent of its holiday season inventory.

“Consumption will rise during Tet, while prices of most consumer goods are expected to continue to rise late this year,” he said. “So, reserving goods is better.”

Reported by Ngan Anh

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