Chairman of Vinatex: Uniqlo, Zara, H&M cannot be copied in the domestic market

Chairman of the Vietnam National Textile and Garment Group (Vinatex) Le Tien Truong shared about the challenges of domestic textile and garment enterprises in the face of "giants" - foreign fashion brands such as Uniqlo, Zara, H&M...

- Conquering the market of 100 million people is still a "talkative" story of domestic garment enterprises. What do you think about this fact?

- Textile enterprises are still developing the domestic market. Last year, the domestic market increased 40% compared to 2021, in which export varieties, domestic textiles increased very well in the first half of the year and began to face difficulties in the third quarter.

In the fourth quarter, many good brands, such as Viet Tien, slowed down and sales decreased. Or like the fashion center of Vinatex, the year before the year-end revenue was over 1 billion VND per day, this year the highest revenue is only 500-600 million VND.

In the past two years, many domestic fashion brands have reduced the number of stores and limited new openings. They have to "gather" to certain locations to reduce costs, optimize operations and try to offer products that are attractive enough to consumers' incomes.

In fact, domestic consumption depends on the economy and people's income level. The announcement of the Ministry of Planning and Investment in 2022 shows that the average salary in production is only around 6.5 million VND per person per month. That is, with this income foundation, businesses cut all costs, accept low profit margins, it is difficult to stimulate demand on a large scale.

Ông Lê Tiến Trường, Chủ tịch Tập đoàn Dệt may Việt Nam (Vinatex). Ảnh: Quang Nam

Mr. Le Tien Truong, Chairman of Vietnam Textile and Garment Group (Vinatex). Photo: Quang Nam

- Purchasing power decreased, but there are still foreign fashion brands, such as Uniqlo, which expanded retail stores in Vietnam last year. What do you think about this trend?

- For foreign firms investing in Vietnam is just one of the strategies and goals they are doing. Fashion brands such as Zara, H&M are not profitable when entering Vietnam. That is, they accept losses in Vietnam to expand the market, but profits in other markets, globally, the other loss is not a problem. That is the advantage of a global brand, a global business.

With Vietnamese businesses, it is different. We must develop the domestic market on the basis of making a brand that corresponds to the capacity of our distribution system.

Vietnamese garment and fashion enterprises that do and develop the domestic market cannot copy the way big brands do when opening and massively opening centers and shops to "massively cover". We cannot fight directly like that, but must rely on the analysis of internal forces, do it in our own way, suitable for the Vietnamese people.

Like May 10, Duc Giang, Nha Be... are also "walking on two legs" in the domestic market. For example, last year, May 10 launched the women's fashion brand DeTheia, carefully invested in international processes, from design to production, tailoring according to Vietnamese tastes... This direction is to choose a way. fighting "guerrilla" next to "big brother", entering the niche market - where the big foreign fashion brands, with their cumbersomeness, cannot serve.

Here is the story of "fight" between the small and the giant, the problem is to choose which way to fight. If we choose to fight like a giant, we will surely fall.

- Looking back at 2022, how do you see it?

- 2022 is a very special and emotional year for textiles. The first six months of the year saw good growth, purchasing power increased again after two years of the epidemic. But we ourselves as textile workers noticed something a bit unusual, orders in the first and second quarters were very high. Consumers in other countries appear to buy more than they need, ie "overbought", causing orders to skyrocket.

Besides, consumers are also ordering in larger quantities than before due to concerns about shipping and delivery times lasting several months. This caused the order volume to skyrocket. Textile and garment growth in the first half of the year is 30%, 5-6 times higher than the average of previous years.

The situation changed dramatically in the second half of 2022. At the end of June, many consumer firms had their inventories increased by 50-60%. The market began to deteriorate from August and went down from September. Interest rates and inflation increased in many key export markets of textiles and garments such as the US, Europe, etc., causing demand to shrink very quickly. buy discount. Textile and garment are in the group of 5 consumer goods that decrease when inflation is high.

Demand is low, manufacturers scramble to get, keep orders. The unit price of Vietnamese goods is more expensive than some competitors (Bangladesh, India, Pakistan...) because the VND/USD exchange rate is higher than the local currencies of these countries compared to the USD. This forces businesses to reduce selling prices to keep orders.

This pressure makes many businesses struggle, without good accumulation, it is difficult to maintain cash flow. Working in textiles for 25 years, I have never seen in just 1 month all market signals "turn around", so different.

- Compared with competitors, where is the position and competitive advantage of Vietnam's textile and garment?

- In 2022, Vietnam's textile and garment exports will reach 44-45 billion USD, ranking third in terms of scale, after China and Bangladesh. However, in terms of growth rate, Vietnam ranks second after Bangladesh, with an increase of 10.5-11% last year.

Vietnamese enterprises have competitive characteristics that are different from competitors, can do small orders, many types of products, difficult techniques. Small orders are still the trend here, buyers do not order too large quantities, only a few thousand units per order.

For example, there is a product code of a foreign buyer who only orders 700 products, but May 10 can still do it. This shows that the enterprise has good management skills and is quick to change to adapt. In principle, small orders will be difficult to manage production on a large factory floor, specializing in making dozens of products at the same time. In addition, good labor productivity is a factor that helps businesses offset high unit prices compared to competitors.

Demand is currently down but will return. The behavior of global buyers does not have to reduce orders, reduce purchases at all businesses. They choose and prioritize orders from good businesses, so just now there are businesses with good growth, 5-10%, but there are also units that lack orders to exhaustion.

- What advantage does Vinatex have to be the buyer's choice when the recovery wave comes?

- We define two goals that must be maintained, which is to retain employees and secure a position in the global production chain.

Last year, textiles, footwear and wood were the three sectors with the largest reduction in labor. But Vinatex did not decrease, but recruited more and the average salary increased by 15% compared to 2021, at 9.7 million VND per person per month. To do this, we accept to sacrifice profits and short-term finance in difficult market conditions to stabilize labor, especially skilled people. It will be difficult to recruit skilled and experienced workers if they quit.

Without a stable policy to retain employees, it will be difficult for businesses to maintain a competitive position with other competitors.

Regarding the goal of maintaining its position in the production chain, orders that do not bring high profits are still done by Vinatex. Buyers place orders, hire other units, and later pull them back is not easy.

Vinatex accepts short-term financial sacrifices to wait for the market's recovery, when the recovery wave comes, buyers come to them first.

Công nhân Công ty Dệt kim Đông Xuân, thuộc Vinatex, trong ca sản xuất. Ảnh: Quang Nam

Workers of Dong Xuan Knitting Company, belonging to Vinatex, in a production shift. Photo: Quang Nam

- How do you forecast the recovery scenario in 2023 of textile and garment exports?

- 2022 is a lesson for textile workers when it is difficult to make a long-term forecast scenario as before.

If the interest rate hike, especially the US, has not stopped, inflation is not controlled... then no one dares to say that the global economy will have a "soft landing" in the first half of the year. Not to mention, many forecasts indicate the possibility of a large-scale global economic recession. On the contrary, if the global economy has a "soft landing" in the first two quarters of the year, demand will rebound very quickly, as the recent decline is largely due to a decrease in psychological demand.

In general, at present, no one dares to forecast the textile and garment growth scenario in 2023. The current situation shows that demand is still low in the first quarter and depends heavily on world economic signals.

- What are the solutions for businesses to cope with the scenario where demand continues to decrease, sir?

- The entire textile and garment industry currently has 13,000 businesses, each with a different response, but there is no common prescription for all. Even within Vinatex, the response solutions of the member units are also different.

Of course, Vinatex has an advantage over other units in that it has a variety of production fields (yarn, textile, dyeing, sewing...), so when the demand is still low, we take advantage of it to increase the connection of internal chain capacity. set.

Increasing internal links also helps us to connect in terms of working capital, reduce the inventory load on each other's systems, thereby creating a competitive space with better prices and ensuring jobs and keeping workers.

Anh Minh