Wooden furniture manufacturers still cannot exploit advantages

VietNamNet Bridge - Wooden furniture manufacturers enjoy preferences thanks to a zero percent import tariff applied by many big export markets. However, very few enterprises can exploit the advantages.

Wooden furniture manufacturers enjoy preferences thanks to a zero percent import tariff applied by many big export markets. However, very few enterprises can exploit the advantages.

One of the names in the group of businesses that export products under their own name is AA Corporation, which provided interior furniture to 5-star hotels and cruise ships. 

It is one of a few Vietnamese companies which can provide products under the AA brand to international construction works, including Accor, Sofitel and Ritz Carlton in America, Europe and the Middle East.

Wooden furniture manufacturers enjoy preferences thanks to a zero percent import tariff applied by many big export markets. However, very few enterprises can exploit the advantages.

Established as a fine arts enterprise, Gia Long Company has gradually jumped into the wooden furniture manufacturing factor. Gia Long unexpectedly displayed collections of wooden furniture products at the recent Vietnam Wooden Furniture and Interior Decoration Trade Fair.

Tran Viet Tien, director of Gia Long, believes that there are always great opportunities for enterprises which can design products of their own.

“The design can make up 50-60 percent of the products’ value. This explains why enterprises which can design products always can get better profits,” he said.

However, not all enterprises can design products like AA and Gia Long. Scansia Pacific and Minh Phat decided to go their own way – making products in accordance with designs from Germany and Denmark.

An analyst noted that Vietnamese manufacturers prefer hiring foreign designers because domestic designs cannot satisfy them. But this is not always the best choice. 

Minh Phat at one time hired Malaysian designers, but it is now an outsourcing enterprise. It was too costly to hire foreign designers, and difficult to sell products under Vietnamese brands.

Outsourcing for foreigners

Minh Duong Company is well known in Vietnam for its high stable growth rate of 13 percent per year. After two decades of operation, it now has four factories and seven production workshops with 2,000 workers who make products for the South Korean, European and the US markets.

However, despite the large scale, Minh Duong has a low profit margin and faces high risks. 

An analyst estimated that the profit margin for outsourcing enterprises is not higher than 5-7 percent.

Artificial wood

While the majority of Vietnamese enterprises still make products of natural wood, some have tried with artificial wood and have had encouraging results.

Le Duc Nghia, CEO of An Cuong, said in 2014, the company invested $3-5 million in its artificial wood processing factory.

Nghia said only 5 percent of Vietnamese enterprises use industrial wood in making wooden furniture products, while industrial wood has been used by Thailand and Malaysia for a long time. The two countries make products for export to the US and Europe.