Retail businesses ready for new consumption cycle

When the business results reporting season for the first quarter of 2023 and the general meeting of shareholders pass, businesses continue to find new directions in the context of unpredictable factors of the domestic and foreign economy. is still in existence.

Bumpy start

In the first quarter of 2023, the net profit of Mobile World Investment Joint Stock Company (HoSE: MWG) plummeted 98.5% year-on-year, to a 10-year record low. This result reflected the negative impact of reduced consumer demand in the context of high interest rates, cautious sentiment, and delay in spending of many customer groups. At the end of this quarter, MWG’s net revenue also decreased by 28% over the same period; gross profit decreased by 36%, corresponding to a net decrease of more than 2,900 billion dong compared to the same period in 2022.

The ICT product line, which accounted for the largest proportion of sales of the Mobile World and Dien May Xanh chains, had to record a 40% decrease in revenue due to weak demand. Bach Hoa Xanh also decreased by 20% in the number of points of sale compared to the first quarter of 2022.

Also noting the plunge in business results, FPT Digital Retail Joint Stock Company (FPT Retail, HoSE: FRT) said that it was constantly being negatively affected by the pressure of demand reduction and strong competition in the market. retail, especially at the FPTShop chain. This pressure caused FRT’s overall market revenue to drop sharply in the last quarter. Although the revenue of the first quarter of 2023 remained flat compared to the same period last year, reaching VND 7,752 billion, but the company’s profit after tax decreased by 99% to only VND 2 billion. And with this result, FRT only completed 8.3% of the annual profit plan.

Once affirming that “the enterprise has not had a single quarter of loss”, in the first quarter of 2023, Digital World Joint Stock Company (Digiworld, HoSE: DGW) recorded a decrease of 44% in revenue compared to the same period last year to VND 3,900 billion. , while profit after tax reached VND 78 billion, down 63% compared to the first quarter of 2022.

Digiworld management once forecast that the purchasing power of the retail industry will continue to be weak until 2024, the second half of 2023 may recover compared to the first half of 2023 but not much, the purchasing power is expected to return to normal usually in the second half of 2024.

Ready for a new consumption cycle

According to BIDV Securities Company (BSC), DGW is facing a challenging year in 2023 when people’s consumption declines and consumer finance tightens for non-essential products.

However, in reality, in the face of difficult circumstances, DGW has actively prepared a series of plans to deal with the “headwinds”, seeking opportunities in new categories.

Accordingly, “one step ahead”, DGW has been reaping achievements in finding opportunities from a new direction, which is the household goods industry. In the last 2 years, DGW has signed product distribution contracts with many potential brands such as Whirlpool and Joyong in the household goods and consumer goods industries with ABInBev and industrial equipment through the Acison merger. This is considered to be a growth catalyst for the company in the next phase of Vietnamese consumption.

With the continuous expansion of distribution through new product groups and segments, DGW will diversify more to reduce the risk of dependence on ICT distribution. VNDirect Securities Company expects sales of household appliances, consumer goods and industrial equipment to increase the proportion of DGW’s revenue in 2023-2026, increasing from 11.9% in 2023 to 17.6% in the year 2026.

In 2022, FRT’s FPTShop also experimented with selling household goods and recorded a positive signal, contributing 2.5% of total revenue with a relatively high gross profit margin of 20-25%. FRT expects that in the next 3 years, this segment will contribute 15% of the total revenue of FPT Shop chain. Particularly in 2023, according to FRT’s plan, the company will focus on gradually improving gross profit by selling more household goods in existing FPTShop stores. It is known that up to now, there have been more than 300 FPTShop stores selling household goods, which is expected to increase to 600 stores by the end of the year.

In addition, the company also gradually expanded its product portfolio according to the shop-in-shop model. According to this year’s report, FRT may add a series of new industries such as selling motorcycles and motorbikes; maintenance and repair of motorcycles and motorbikes; selling spare parts and auxiliary parts of motorbikes and motorbikes; retail sale of bicycles and spare parts in specialized stores; repair of bicycles, watches, other personal and household goods, not elsewhere classified.

Also looking for a new growth engine, in the context that the ICT industry has no longer a mutant factor, MWG chose to participate in the price-lowering war, although this direction is assessed by the company’s management as a reduce profit margins. “With strong financial advantages and well-controlled inventory risk, TGDD/DMX will proactively implement a competitive pricing strategy to attract and retain customers,” said MWG’s leader.

And, the initial price reduction strategy proved effective when, thanks to the promotion of the “too cheap” program to attract customers, MWG’s revenue in April 2023 recovered by 20% compared to the previous month.

According to Mr. Nguyen Duc Tai, Chairman of MWG, the competitive pricing strategy is not a direction for the difficult 2023 alone, but a long-term direction for the company to serve the group of customers who love TGDD/DMX but were afraid before. on price.

“If the macro situation is good in the last 6 months of the year, MWG will reach the destination in both revenue and profit, otherwise, it will only reach the revenue target”, the MWG leader affirmed.

Giving a general assessment of the prospects of retail businesses, according to the thesis of BSC, Vietnam’s consumer market is a potential market in the coming time thanks to a population of over 100 million people and a young population with 70% of people are under 35 years old, of which the majority of young people grasp technology trends well. Along with that is the growth of e-commerce and the expansion of the middle class, which is stimulating demand for a variety of products from consumer electronics to home appliances.

These factors are expected to help the revenue growth of these products to be sustainable at 6 -10% per year in the period 2023-2026.