Vietnamese fashion brands warned about more competitive future

Hong, a housewife in district 1 in HCM City, said she was satisfied about what she had bought on Black Friday.

One Gap shirt was priced at US$15-17 only during the big sale. Counting tax, shipping and delivery fees, Hong had to pay VND450,000, which was just equal to the price of Vietnam-made products of the same kind.

Other branded goods cost about VND500,000-600,000, a price level which Hong said was ‘affordable’ for her and other urbanites.

Hong hopes that after TPP import tariffs will fall to zero percent and foreign-made products will sell at lower prices.

Nguyen Thi Dien, CEO of An Phuoc Garment Company, said the zero percent import tariff would force Vietnamese enterprises to compete more fiercely. 

Small manufacturers would have to leave the market or import products to sell domestically instead of making products themselves.

Vietnamese companies have had to compete with imports from Thailand, China and South Korea in the mid-tier market segment for years, especially since 2012, when import tariffs on ASEAN garments were cut to zero percent. 

A lot of Vietnamese producers had to scale down production because of the ASEAN imports.

According to the Vietnam Textile and Apparel Association, only 20 percent of Vietnamese enterprises still want to make products for the domestic market, while the majority of them will focus on making products for export.

Hoang Ve Dung, deputy general director of Vinatex, said that more foreign products would penetrate the Vietnamese market, which is a threat to domestic enterprises.

Dung went on to say that there are only two ways for domestic enterprises to exist and develop – make products under their own designs and develop their own brands, and expand their retail networks, from retail shops to shopping malls, from urban to rural areas.

According to the Ministry of Industry and Trade, the consumer value of the domestic textile & garment products in 2014 was US$3.5 billion, or VND75 trillion. 

However, the real figure could even be higher, if counting the sales of products with unclear origin.

There are about 200 foreign fashion brands in Vietnam which account for 60% of the sales of mid- and high-end market segments.