After the price war, the retail giant suddenly has a bright spot.

Still facing difficulties due to "price war"

The price war in 2023 is still causing many big retailers to seriously decline. Technology (ICT) products - which are non-essential goods - are witnessing even fiercer competition in the context of weakened purchasing power.

Mobile World (MWG) of Mr. Nguyen Duc Tai is the unit that initiated the price reduction war, forcing its direct competitor FPT Retail (FRT) under the management of Ms. Nguyen Bach Diep to join in to protect its market share. Then there was the race to lower prices to the bottom by other units such as Mobile Vietnam, CellphoneS...

The price war inadvertently dragged MWG's gross profit margin down to 15.3% in the third quarter of 2023, the lowest level in the past 8 years. Revenue from the sale of computers, phones, and electronics alone recorded just over VND20,800 billion, down 14% year-on-year and down 4% compared to the previous second quarter.

mwg tgdd.png — The price cut race to protect market share has caused MWG's gross profit margin to fall to an 8-year low. *(Photo: MWG).*

The ICT sales boss said that the purchasing power of phones and electronics in general is still weak and has not shown any significant signs of recovery (except for some products due to seasonal factors). Customers still have the need to buy and replace damaged products, but they are more cautious and careful in making detailed decisions when the economic situation is still volatile.

"The company must offer shopping options with attractive prices and many promotions, accepting a reduction in gross profit margin to attract customers and maintain revenue," according to part of MWG's explanation document.

Meanwhile, FPT Retail admitted that the ICT retail market in the third quarter has not yet clearly recovered despite having passed the low point of the year. The revenue of the FPT Shop chain alone in this quarter only reached over 4,100 billion VND, down 14% compared to the same period.

As a result, the accumulated revenue in the first 9 months of the year reached 12,222 billion, down 20% compared to the same period and only contributed 52% to FPT Retail's total revenue. Currently, this system has about 791 stores selling phones and electronics nationwide.

Based on selling medicine, selling vegetables

Amidst the existing difficulties in the ICT business sector, these two retail giants have a bright spot thanks to their strategic pivot to new business sectors such as food and pharmaceutical retail, as well as unexpected revenue from finance.

In contrast to the gloomy context of the phone segment, the Long Chau pharmacy chain continues to be a strong growth driver for FPT Retail. The company has opened 447 new pharmacies since the beginning of the year and maintained sales of about VND1.1 billion/pharmacy/month, thereby bringing revenue to VND11,088 billion, up 69% over the same period last year.

This result helped FPT Retail still have total revenue in the first 9 months of the year reaching 23,160 billion VND, the highest level in its operating history.

The company's accumulated profit is still quite negative with a loss of VND 197 billion. This result is mainly due to consumers tightening spending on non-essential goods and fierce competition, while the pharmaceutical chain is in the expansion phase so it has not contributed much to profits.

In the third quarter alone, FPT Retail had a pre-tax profit of more than 1 billion VND, although it decreased by 99% compared to the same period, it was a great improvement compared to the huge loss of the previous quarter.

frt fptshop longchau 1.png — FPT Retail's revenue hits record high thanks to pharmaceutical growth momentum. *(Photo: FRT).*

The Gioi Di Dong has a stronghold in Bach Hoa Xanh, a food retail chain that is a bright spot with increasing sales. Cumulative revenue from the beginning of the year reached nearly 22,300 billion VND, up 12% over the same period last year (in the third quarter alone, it increased by 21%).

Average sales per store reached VND1.65 billion/month, continuing the growth streak since changing the store layout. This retail giant expects revenue per store to continue to increase in October 2023 but believes that gross profit margin will be affected due to the rainy season.

Bach Hoa Xanh is still the growth engine to help Mobile World limit the negative impacts of the electronics segment. The group's total revenue recorded nearly VND30,300 billion, down just over 15% compared to the same period in the third quarter of last year. Pre-tax profit plummeted 87% to VND182 billion.

A more notable point is that financial revenue increased dramatically by 78% to 620 billion VND, an unexpected lifeline to help this retail group escape losses by a hair's breadth.

In fact, in the context of difficult business, Mobile World leaders have generously deposited huge amounts of money in banks to earn interest. The company has nearly 22,500 billion VND in banks and more than 800 billion VND in cash.

The two retail giants also recorded positive signs in terms of labor structure when witnessing a return to growth. Mobile World currently has about 68,374 employees, an increase of 348 people compared to the second quarter (but still about 6,500 people lower than at the beginning of the year due to previous layoffs).

Meanwhile, FPT Retail also aggressively recruited about 1,174 more employees in the most recent quarter, bringing the total number of employees to 16,662 at the end of September (and also higher than at the beginning of the year), mainly to serve the expansion of Long Chau.

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