Retail manufacturers cast expansion eye overseas

Vast majority of retail manufacturers are considering diversifying their operations beyond Vietnam, DHL Global Forwarding survey finds.

DHL Global Forwarding, the leading international provider of air, sea, and road freight services, recently held the DHL Fashion and Retail Conference in Ho Chi Minh City, attended by over 60 customers from retail brands and manufacturers around the country who also participated in a survey held at the event.

“Our survey indicated that while most agreed that Vietnam will continue to be where the majority of their operations will be based, 61 per cent of respondents are also exploring nearby Cambodia, with others naming Indonesia, Thailand, the Philippines, Bangladesh, and Sri Lanka as possible diversification locations,” said Mr. Archer Fu, Vice President, Head of Business Development, at DHL Global Forwarding Asia Pacific.

Indeed, 59 per cent of respondents have operated in Vietnam for more than a decade, with an overwhelming 82 per cent citing Vietnam’s attractive manufacturing and labor costs as the main deciding factors in their decision to base their facilities in the country. However, only 9 per cent shifted their operations here over the past one to two years, while 11 per cent indicated that the US-China trade tensions prompted their move.

In a panel discussion moderated by Mr. Mark Cheong, Head of Marketing and Sales at DHL Global Forwarding Vietnam, the audience concurred with panelists that logistics costs as a percentage of Vietnam’s GDP is still relatively high at 20.8 per cent and measures need to be taken to remain competitive.

“Close to half of respondents believe that digitization of customs processes to expedite approval and access are important and over 70 per cent agreed that investments to boost infrastructure such as roads, sea, and airport facilities, and bonded warehouses etc., are needed to bring down logistics costs,” Mr. Fu added.

When quizzed about factors that have impacted their business, however, 54 per cent of respondents said that the trade relationship between the US and China has had the largest impact, though 27 per cent and 17 per cent of respondents, respectively, felt that the EU-Vietnam Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership had impacted their business positively, underscoring the importance of bilateral and multilateral trade agreements in the development of the manufacturing industry in emerging markets.

“Vietnam’s positioning as a key manufacturing hub for the world has strengthened over the years, aided by political stability, business-friendly policies, the availability of land and labor, and its geo-strategic advantages,” said Mr. Swati Wig, Head of DHL Consulting Asia Pacific. “Vietnam also has a fast-growing domestic consumer base for retail.”

“While Vietnam has invested significantly in transport and logistics infrastructure and skilling the labor force for the retail sector, it is important for the country to keep an eye on costs and land availability and to add value-added activities for retail and fashion to its portfolio as more companies build their presence here.”

[Source: vneconomictimes 4th September 2019]