Brian Jeffrey
Vietnamese entrepreneurs often worry about ‘dying young’ in the ruthless price competition, particularly with foreign companies willing to absorb losses for a stronger market presence.
Pham Dinh Doan, head of Phu Thai Group, highlighted that the rise of Chinese companies in the market is a significant challenge for local businesses.
“While experts warn that competing solely on price can lead to a dead end, this strategy has proven effective for Chinese firms in entering the global market,” Doan explained.
For instance, Shein, a fast-fashion e-commerce platform, achieved a valuation of $100 billion in just a decade, securing a substantial share of the fashion market in numerous countries.
Another notable case is the Luckin coffee chain, which expands at an impressive rate, adding 5,000 new locations annually, exceeding Starbucks with a total of 10,000 shops worldwide.
Although selling products below production costs typically violates competition laws, the innovative accounting practices of Chinese firms make it challenging to secure legal evidence for disputes in international forums.
Doan provides an example from the candy industry, where about 5% of imperfect products are recorded at zero value, allowing companies to sell quality candies at significantly lower prices while still earning a profit.
Similarly, a disturbing trend is observable in the garment sector.
“Cross-border competition has devolved into price wars, which is generally viewed as unhealthy,” Doan remarked, noting the various tactics employed by Chinese firms to gain market traction in Vietnam.
“Various warehouses of Chinese products, each spanning 6-8 hectares, line the border, offering incredibly low prices,” he pointed out.
Additionally, Cotti, a Chinese coffee brand, is aggressively hiring with salaries ranging from VND20-30 million a month, a level no Vietnamese coffee brand seems able to match, raising concerns about staff poaching from well-established local firms.
“Companies like Shein and Cotti can access funding in the billions, allowing them to sustain losses in Vietnam for years, while local businesses cannot survive even a few months of losses,” Doan noted.
These financial disparities pose considerable challenges for Vietnamese firms, particularly for small and medium enterprises.
Doan emphasized the need for adaptation as the global market evolves rapidly in trading methods, scale, and technology. He warned that if Vietnam doesn’t accelerate its pace, it risks obsolescence in the future.
“Now is the time to speed up,” Doan urged.
He encouraged Vietnamese firms to reassess their growth strategies, focusing on enhancing intangible assets like potential, management capabilities, and workforce skills, due to their relatively limited tangible resources.
“There are several niche markets within the national economy waiting to be explored,” Doan advised.
“Collaborating with large and reputable partners can also leverage strengths for success.”
To Hong Trang, co-founder and deputy CEO of Digiworld, added that Vietnamese companies should seek niche markets inaccessible to Chinese and Thai competitors.
With significant advantages in the technology sector, Vietnam benefits from a creative and cost-effective workforce. The gaming industry, highlighted by the billion-dollar company Sky Mavis, exemplifies this potential.
Nguyen Doan Ket, Vice President of Rang Dong Light Bulb and Vacuum Flask JSC, reiterated that Vietnam holds a competitive edge in digital technology.
“We must carve out a ‘green path’ in this competitive landscape, combining technological advancements with effective pricing strategies,” he asserted.
