Many wood businesses share that exporting during inflation is even more difficult than during Covid-19. What is the current specific situation of businesses, sir?
During Covid-19, the company had good growth, 50% growth in 2020 and nearly 100% growth in 2021. In 2022 and 2023, export turnover stagnated and is currently declining. Sales and sales volume are currently down over 30% compared to the same period last year.
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| Mr. Trinh Duc Kien - Deputy Director of Ke Go Company Limited |
Another difficulty that businesses face is that when sales volume drops, they are forced to sell at lower prices than last year. This is a common situation for businesses in the industry.
We have to look at the reality that the wood industry has gradually developed over the past 20 years and the 2020-2021 period has seen a breakthrough. However, it is not that businesses have had an unusual breakthrough or a good business strategy, but we have to recognize that in those two years we enjoyed many advantages from China closing down production, reducing circulation and exporting goods. Taking advantage of that opportunity, we have gained many new customers and markets, most wood businesses have developed. Now that China has reopened, our businesses are immediately facing difficulties.
Faced with difficulties in the export market, what solutions are businesses currently implementing?
We have two groups of solutions, the first of which is sales promotion. In which, we proactively diversify our products. Currently, we have plywood, disposable wooden products, and wooden rolling products. These three products do not have the same market up and down speed. Although industrial products have declined, disposable wooden products still have growth. This is the secret to helping the company not face difficulties.
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| Disposable wooden products have strong growth |
In terms of markets, we are currently expanding to new markets such as Australia and New Zealand, bringing the company's total number of markets to 38. Our advantage is that the consumer wooden product line is a product line that is needed everywhere and does not depend on any one market. We sell to countries that have a tendency to reduce plastic waste to diversify the market.
For customers, in the past, street vendors bought from anyone who needed them. When the market declined, suppliers who did not have a deep relationship were eliminated. Therefore, now we have to find a way to enter their supply chain and become a list of suppliers they select. Even when demand declines, businesses in their system will be favored to receive orders. As for street vendors, when facing difficulties, it will be difficult to manage because they do not know where to turn. To do that, businesses must improve themselves and change, making a lot of effort.
For production, we have a factory. When the market is difficult, a new trend appears that we will have many small orders and require fast delivery. So we reduce the module to meet the needs as quickly as possible. We do not just follow large orders, these small orders can also help businesses have more revenue.
Now that aggregate demand is down, price competition will be fiercer and we will have to change to reduce costs. The best way is to automate as quickly as possible. We have negotiated to import more automated machinery in the third quarter to improve competitiveness, improve automation capabilities, and cut costs.
What are the specific trade promotion solutions that businesses have implemented so far and how effective are they, sir?
We appreciate the fact that the Government has recently taken many actions to remove difficulties for businesses in finding markets and promoting sales. Recently, the Ministry of Foreign Affairs held a meeting with wood businesses, mobilizing 30 ambassadors from various countries. The meeting discussed the Government's implementation of an economic diplomacy program for diplomats abroad to promote support for businesses, including wood businesses connecting with customers, promoting business, fairs... or having a summary report on the market. This is an activity that should be maintained to support businesses.
For businesses, we have to proactively seek out customers and promote ourselves in Japan and Thailand. This year, we will have more trips to find customers and promote products.
Nowadays, there are many tools such as online advertising for customers to find customers. This is also a very good tool, suitable for small and medium enterprises.
In addition, we have groups with product lines together to have the opportunity to increase customers. This is an effective way because businesses can share costs, share market information and have more sales opportunities.
Any crisis will have an end. And any business that is prepared in terms of raw materials, people, premises, and machinery to “catch the wave” of market recovery will win big. What is your comment on this? How has this activity been and is being implemented in your business?
This is not the first time we have encountered difficulties because businesses have faced many difficulties before. Businesses understand that we will have certain cycles and after each difficult period there will be a new development cycle. We cannot predict how long the difficulties will last, but at some point it will pass and we must prepare and maintain our “health” until that time. Surely after that, consumer demand will increase.
We are preparing for the market to boom again by mid-2024. We are doubling our factory in Bac Kan to increase production capacity. This is a good time to evaluate our capacity, we have to automate many stages. We will invest in machinery to improve production capacity, meet delivery times, and reduce production costs.
In addition, we have to upgrade ourselves because we cannot produce as before. We will have to apply new quality management systems and standards that we have not paid much attention to before. If we want to sell to demanding markets like the EU or the UK, we will have to have higher standards such as the BSCI Standard on social responsibility to workers.
Overall, this is a difficult period but we still have to work to prepare for the upcoming period.
Thank you!
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