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Retailers fear deflation   2012-05-24 - TBKTSG

The retail industry is experiencing the gloomiest days with products unsold and merchants leaving the market. Most of the enterprises which got bankrupted in the first four months of the years were retailers.

 

Retailers have become worried stiff as economists have warned that the national economy may fall into the deflation.



“Thought the deflation remains just prediction, retailers have every reason to worry about the best, since sale has been going very slowly, while the inventory volumes have been increasing unceasingly,” said Dinh Thi My Loan, Secretary General of the Vietnam Retailers’ Association.



According the association, 5297 out of the 17,735 enterprises which got dissolved or stopped operation in the first four months of 2012 were retailers. Meanwhile, Pham Thanh Cong, a senior executive of Nielsen, a market survey firm, said consumers nowadays tend to cut down spending to protect themselves in the context of high inflation, which has put a hard pressure on businesses.



In 2011, the saving index in Vietnam climbed to 70 percent, much higher than the average level of 59 percent in Asia. The increasingly high prices have prompted people to keep away from luxury goods and spend most of their money on essential goods and services. Especially, they tend to buy the products with price discounts and offered gifts.



“The priority order is as follows: consumers would pay the biggest attention to the goods that they can enjoy price discounts. Besides, they would also be attracted by the offered gifts and lucky draws for prizes,” Cong noted.



Phan Van Thien, Deputy General Director of Bibica, a sweets company, has affirmed that enterprises nowadays would take every possible chance, including the smallest chances, to slash the sale prices in order to stimulate the demand.



“If you do not ease the sale prices, you may loose clients, because your rivals would surly slash the sale prices to lure more buyers,” he said. “Once you los your market share, you would be very difficult to regain the market.”



Loan from the Vietnam Retailers’ Association has urged the government to speed up the process of slashing the corporate income tax to 20 percent from the current 25 percent in order to ease the burden put on retailers’ shoulders.



Especially, the association has requested the government to strictly control the prices of input materials such as electricity, water, coal and fuel. Once the input materials prices keep stable at reasonable prices, the production costs and sale prices would be reasonable and affordable by consumers.



However, analysts have pointed out that the biggest problem now for enterprises which needs to be settled to the every root is the lack of capital. Therefore, the retailers’ association is considering proposing to set up fund to support small and medium enterprises, which creates sources of capital for commercial banks to lend to enterprises.



Once enterprises can borrow money and mortgage for the loans with goods, they would be able to arrange capital to continue their production and stimulate the demand.



The retailers have suggested slashing or exempting from the value added tax VAT to stimulate the society’s demand. This would not only help retailers boost sales when the goods and services become cheaper, and clear their big stocks, but also help the national economy avoid the deflation.



Besides, cutting down the personal income tax, loosening consumer credit and slashing interest rates all should also be considered as the necessary comprehensive measures to stimulate demand.



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