Electronics brands fight uphill battle at home

When asked about air conditioners, salespeople at a store in HCMC’s Thu Duc city mainly show buyers foreign products like Daikin and Panasonic, or the more budget-friendly Casper and Gree.

When customers ask about local brands, the staff only recommend a few models but with a warning to consider carefully as these products “are not much cheaper than foreign brands.”

On its website, Vietnam’s largest electronics retailer Dien May Xanh offers over 200 different air-conditioners, only 15 of them made by Vietnamese companies Nagakawa, Kangaroo and Funiki.

In the case of TVs, washing machines and refrigerators, Vietnamese brands have almost disappeared from shelves.

At other retailers such as Nguyen Kim and Cho Lon, only a few Vietnamese brands, accounting for less than 5 percent of all products, are displayed.

This has been a trend for years. The country has around 10 local electronics brands, but most are barely known to consumers.

Nagakawa, one of the leading firms, posted sales of less than VND500 billion between 2008 and 2017. Its revenues rose to VND1.02 trillion in 2019 thanks to an expansion in the product portfolio, but profits have only been around the VND10-billion mark, with the net profit margin falling from 3 percent in 2015-2017 to around 1 percent in 2018.

Funiki, owned by steel giant Hoa Phat, recorded annual sales of under VND1 trillion between 2016 and 2020.

Meanwhile, popular Japanese brand Daikin posted revenues of around VND12 trillion.

Daikin and Panasonic each have around 25 percent of the air conditioner market, followed by LG and Samsung of South Korea and Sweden’s Electrolux.

Challenges

Nagakawa’s management has attributed slow growth to “fierce competition” in the market, which has over 100 brands.

The company has to reduce prices to remain competitive with cheap products from China while increasing spending on marketing to gain market share.

Other weaknesses of Vietnamese brands include distribution and sales policies.

Nagakawa only set up a nationwide sales network in 2020, according to its annual report.

Funiki’s products only appeared in supermarkets last year. It currently has 2,000 outlets, much lower than that of foreign brands.

Foreign brands, meanwhile, offer around 5-10 percent commission to sellers to incentivize them, a rate local brands cannot afford, making them lose out in cities and retreat to rural areas.

Potential

But there are opportunities for Vietnamese brands to grow, especially in air conditioning.

Only 31 percent of Vietnamese households have air conditioners, much lower than the ownership rate of TVs (92 percent), refrigerators (80 percent) and washing machines (50 percent).

The home appliances market in Vietnam was estimated to be worth VND62 trillion last year, with air conditioners accounting for VND16.75 trillion, according to data from leading market research company GfK.

Demand is expected to surge thanks to rising temperatures, economic growth and improving affluence.

By 2050 Vietnam’s average temperature will be 0.26-2 Celsius degree higher than in 1986-2005, GEMMES Vietnam forecast in a recent report.

The country’s GDP growth was over 6 percent between 2014 and 2019.

Back on track

Nagakawa is planning to consolidate its position in the north , expand to the south and develop new sales channels.

Considering marketing most sustainable path to success, the company aims to build branding strategies for its portfolio.

Hoa Phat, the parent company of Funiki, is focusing on raising output. It is building plants in the northern province of Ha Nam and southern province of Ba Ria – Vung Tau, both of which will start operating soon.

The steel giant also plans to carry out research so that its appliances meet international standards and to export.

Expanding distribution channels, enhancing promotions and warranty are key to winning in the domestic market.

Local brands should focus on building their brand image through marketing and advertising, the manager of an electronics store in the southern province of Long An told VnExpress.

“When customers buy a product, they hardly inspect the specifications carefully. The first thing that comes up in their mind is whether the brand name sounds familiar or not.”