'Big fish eat small fish' in the electronics industry

DNUM_AFZAJZCABH 09:23

Opening new points of sale is not only a battle between large businesses, but also helps systems take away market share from small stores.

A report by MB Securities Company (MBS) released at the end of 2016 said that the retail market for technology and electronics products in the past was inherently quite fragmented and dispersed with a total of more than 7,000 retail stores nationwide, holding about 50% of the market share. Along with the expansion of the “big guys” who own chain stores with many homogeneous product lines and services, MBS forecasts that the number of small retail stores will decrease.

The strategy of expanding sales points of large enterprises not only narrows the market share of small retail stores but also puts weak supermarket chains at risk of closing.Evidence is that in recent years, many big names have left the market such as Viet Long, TopCare in Hanoi, and in Ho Chi Minh City, HomeOne, Best Carings. A big name in the electronics industry, Pico, also had to close some stores due to great competitive pressure.

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Large supermarket and electronics store chains have continuously expanded their systems in recent times. Photo: Anh Tu

“The continuous expansion of new points of sale by major competitors causes many businesses to be surpassed or even crushed if they stand still for a while,” said Mr. Le Quang Vu, General Director of Media Mart, when explaining the continuous opening of new stores by businesses in the industry.

“Previously, the sales range of a supermarket could be up to 30-40km, but now the density is higher, so the radius has been reduced to only 5-10km. If there are few points of sale, how can we compete with dozens of other points in the same area?" he said.

However, the pressure to open new stores also causes the efficiency of exploiting the space of electronics retail chains to decrease. If in 2012, each square meter of space brought Tran Anh an average of more than 30 million VND per month, this figure by the end of 2015 was only more than 20 million VND. The revenue of 12 million VND per square meter of Dien May Xanh in 2015 also decreased slightly compared to the previous 2 years.

However, according to Mr. Vu, those are only short-term figures because expansion also means having to invest in land, labor, etc., so the efficiency of land exploitation in the beginning may not be high.In the long term, experts are still quite optimistic about electronics revenue growth.

“Many small businesses and stores are closing, which is an opportunity to increase revenue. In addition, the trend of shopping in shopping malls because of better return policies is also one of the factors driving the market,” said Mr. Vu.

C's dataGFK Vietnam Technology and Retail Market Research Co., Ltd.shows that in the second quarter of 2017, the revenue of 6 out of 7 groups of Vietnamese electronic technology products still grew strongly compared to the same period. In particular, the revenue of product groups with large proportions such as mobile phones, refrigeration, electronics, and household appliances all had double-digit growth.

"An attractive market is always full of competition. Vietnam is still a developing country with a young population, a large demand for technology products, and an easy shopping mentality," said Pico's leader.

According to him, electronics manufacturers are always updating new technology and new designs to stimulate the shopping and changing needs of users. Moreover, many locations in provinces and cities in Vietnam are still in the early stages, so revenue growth is still promising.

A GFK report also shows that during the 2011-2015 period, demand for these products grew at an average rate of 15.7% per year and continued to maintain double-digit growth.

MBS also commented, tIn the future, the industry development trend will continue to focus on large retailers with high coverage store systems and good service quality.

"In addition, consumption of electronic goods will partly shift from traditional retail channels to online shopping channels.Most consumers are using online channels to check prices and product features, then go to retail stores to check and buy. Therefore, chain retail stores also tend to reduce product display space," the report stated.

However, Media Mart leaders also said that expanding the system will only be effective when the business can control operations, find suitable premises at reasonable prices in the long term, especially inventory management because this risk in the electronics sector is very large.

According to VNE

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'Big fish eat small fish' in the electronics industry
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