After a long time of only focusing on exports, Vietnam’s enterprises are turning to the domestic market too. Domestic consumption of textile products in Vietnam has increased 10 to 15 per cent a year. Currently the market share of Vietnam’s textile industry is only 20 per cent in rural areas and about 60 per cent in urban areas.
And in urban areas domestic enterprises’ products must compete for a market share with imported goods. In addition smuggled goods have a significant share. Tax evasion and non-documented businesses make things very difficult for domestic legal enterprises. Products of unknown origin have flooded rural areas.
Currently, Vietnam’s retailers face challenges due to high rental costs. Leases get terminated without warning, so no enterprise dares to invest a lot because they are not sure how long they can rent the shop. Vietnam’s export market is larger than its domestic market. In contrast, India’s domestic market is three times larger than the export market. Indonesia’s domestic market is double that of the export market. Hence, when export markets face difficulties, these countries still have a basis to withdraw to and develop their domestic markets, a luxury that Vietnamese enterprises don’t have.
While the domestic market is estimated at $4.5 billion, the industry’s production capacity is $35 billion. This mismatch creates a problem for domestic manufacturers.