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Copyright ©1999-2014 Vietnam Venture Group, Inc. All rights reserved. Updated March 1, 2004
By: James Taylor & Donald Brasher*
OVERVIEW: Vietnams Exports to the United States
Vietnams exports to the United States increased dramatically from virtually no exports in 1993 to about $388 million for 1997. Exports for the first seven months of 1998 were $288 million, reflecting a 22% increase over the earlier year.
Despite rapid growth, Vietnam remains a small and relatively unknown exporter with 0.1% market share of the nearly $900 billion U.S. import market. It is also well behind neighboring countries such as Thailand, Malaysia, China and Indonesia which have established large and growing export positions with the United States.
Vietnam shares many economic characteristics with these nations and currently has cost advantages in many product areas. There is little doubt trade with the United States will continue to grow as U.S. buyers discover Vietnamese sources. However, the critical question is whether Vietnamese exporters have sufficient understanding of how the United States market operates for different products, in order to best exploit opportunities that will be increasingly available to them.
The U.S. import markets for products such as apparel, footwear, and food products, are far more complex than they initially appear. Participants in the U. S. import market include U.S. manufacturers, retailers, buying agents, and independent wholesale importers. Each possesses different purchasing patterns, priorities, marketing channels, and customer bases. These interactions create a complex web. The effect is that foreign sellers are frequently foreclosed from access to major U. S. importers. This happens when foreign sellers are not able to identify the intricacies for, or to understand the requirements necessary to be considered a reliable supplier by, these importers.
The same is true in terms of geography. Many sizable regional buyers are receptive to new foreign sources of supply but are rarely contacted because foreign exporters are not able to identify them. Selling to the United States is also complicated by the changing relationship among retailers and suppliers, just-in-time delivery requirements, and the growing role of foreign buying offices of U.S. retailers.
Consequently, the majority of new exporters to the U.S., particularly small and medium-size firms, sell into segments of the import market for a particular product. Reliance on the normal routes of trade development -- trade shows and trade leads -- result in new exports, but at a level far lower than could be attained through more systematic and sophisticated approaches to the U.S. market.
Nor will an optimal level of exports be attained if these firms first expect to be contacted by potential U.S. buyers. The majority of large U.S. importers are receptive to new suppliers, but rarely seek new sources of supply. These firms are already working with multiple foreign firms and normally prospect for new suppliers only when current sources can not meet the needs of the importer.
Vietnamese exporters are entering the U.S. market at a time when demand for many products produced in Vietnam is increasing. However, major U.S. buyers are seeking to simplify procurement. They desire to work more intensively with fewer suppliers world-wide. Further, competition to sell the type of products Vietnam is currently exporting to the United States is intense. Most of the major nations against which Vietnam competes for U.S. sales have considerable experience and well-developed contacts in the U.S. market.
To go beyond the level of exports attainable through routine trade promotion, in order to reach the level of exports potentially available to Vietnamese suppliers, requires (i) an understanding of the dynamics and structure of the U.S. market; (ii) learning to identify high potential market segments; and (iii) developing a workable strategy to access these target buyers.
This is an on-going process which will allow Vietnamese manufactures to achieve a high level of initial market penetration and to respond quickly to changing market conditions.
OVERVIEW: The United States Import Market for Target Products
1. Woven and Knit Apparel
The U.S. import market for woven and knit apparel reached $45 billion in 1997. It is both a huge and a fragmented market. In 1977, sixteen nations exported at least $1 billion, six nations exported between $500 million and $999 million, and eleven nations exported between $100 million to $499 million in apparel to the United States.
Asian suppliers in 1997 accounted for 52% of imports by value, and a higher percentage on unit basis, of the entire market. However, Asian market share is slipping as the effects of NAFTA and the Caribbean Basin Initiate are felt. Among Asian suppliers, market share is moving in favor of the lowest cost producers. Korea and Taiwan lost significant market share over the past several years, which the Philippines, Indonesia, India and Sri Lanka improved their market position.
China, the largest single supplier to the U.S. market, is experiencing significantly lower export growth both for quota and cost reasons. Opportunities for Vietnam are considerable, given its position as one of the region's low cost suppliers and the absence of quota items.
Most U.S. importers buy apparel from two to five countries on a regular basis. They usually have more than one supplier in each country. U.S. importers prefer not to become overly dependent on any one nation or supplier. This preference should create opportunities for Vietnamese suppliers
Direct purchases by U.S. retailers and manufacturers dominate the import market. Independent wholesaling importers are a relatively small segment of the U.S. import market. Each type of buyer has different purchasing requirements and behaviors. New York and Los Angeles dominate the import market, but import less in actual dollar terms than buyers in other parts of the country.
The U.S. footwear import market reached slightly higher than $14 billion for 1997. China dominates imports with approximately 53% of the market share by value and 70% by units. This dominance has not prevented other countries, such as Indonesia, from increasing their market share. Concern about over-reliance on Chinese producers for low and medium-priced shoes is causing many major U.S. importers to increase imports from other countries. This has benefited Brazil, Mexico, and more recently, Vietnam and Indonesia.
The market for selling footwear to the U.S. market through importing wholesalers is limited. Although more than 500 firms import footwear, the majority of the value is controlled by U.S. manufacturers and retailers. Like apparel importers, these buyers have different purchasing scenarios and requirements which must be understood for foreign suppliers to become successful vendors. Further, the market is decentralized geographically, with many large buyers located outside major cities, in regions throughout the United States.
US frozen shrimp imports reached $2.557 billion in for 1997. Thailand was the dominant exporter with 24% of the import market on 1997 sales of $603 million. This compares to a 33% import market share on sales of $784 million in 1995. Thai exports consist of Tiger shrimp which command a premium price in the U.S. market. Tiger shrimp are also exported by other countries in the region. Imports from Bangladesh, India, and Indonesia were up significantly in 1996. Because the average major U.S. shrimp importer imports from an average of six countries annually, and is generally interested in new sources of supply, prospects for Vietnamese shrimp are good, even in a difficult market.
The U.S. seafood industry consists of about 5,100 firms with nearly 900 firms importing shrimp. Most importers also are engaged in one or more other activities including fish processing, brokering, wholesale distribution, and restaurants. Despite of this complexity, purchasing scenarios are generally similar for most importers. However, there are some significant differences between the buying behavior of major importers and the large number of small importers in the market.
The volume of coffee imported in 1997 was 5% higher than the volume imported in 1995, but due to the rising world price for coffee, the value of imports increased 45%, from $2.605 billion in 1996 to $3.727 billion in 1997.
Growth in imports of Arabica beans was responsible for most market growth. However, 1997 non-Arabica beans imports increased 6% in volume and by 34% in value over 1996. Vietnamese coffee exports are almost entirely non-Arabica, but Vietnamese coffee exports in value declined from $109 million in 1996 to an estimated $105 million for 1997, a drop of 4 per cent.
Prospects for Vietnamese coffee depends on reaching non-Arabica buyers who are not currently familiar with Vietnam as a supplier. The per kilo cost from Columbia, Brazil and Guatemala, the top three suppliers of non-Arabica beans, was well above $3. Vietnamese landed costs were $1.27 per kilo versus $2.63 for the average cost.
There are several hundred firms currently importing coffee. These range from the major coffee processors, large multi-product food importers, regional coffee distributors, a small number of significant retailers, and a large number of small importers. Although coffee is a commodity, these different buyers have distinctly different publishing requirements and windows of import market.
5. Cashew Nuts:
The U.S. import market for shelled cashew nuts was $306 million for 1997. This reflects a nearly 25% increase from the $245 million imported in 1995, representing a 24% increase in volume and a 1% decrease in price per kilo. The import market is dominated by India and Brazil which supplied 88% of the 1996 market. However, this is lower than 95% supplied by these nations in 1995.
Vietnamese exports reached $15.5 million in 1997 compared to $7.8 million a year earlier. Vietnamese costs per kilo were 5% lower than for Brazil and 13% lower than for India. About 60 firms currently import cashews on a regular basis, but only five of these firms bought from Vietnam during 1996. The majority of the import market has yet to be tapped, and the remaining group of 55 firms include several major nut processors and major importers.
Vietnam is not currently exporting any significant quantity of furniture to the U.S. market. However, the import market for furniture grew by 17.4% in 1997, from $12.022 billion in 1996 to $14.116 billion the next year.
China, Taiwan, Malaysia, Indonesia, the Philippines, and Thailand are ranked among the top foreign suppliers to the U.S. market. Their combined 1997 sales of $5.357 billion accounted for about 38% of all furniture imports. These are formidable competitors, but the market for Asian furniture is shifting in favor of lower cost producers. Taiwan, Korea, and Thailand experienced lower sales in 1996, while China, Indonesia, India, and Malaysia increased their furniture exports.
Given this trend, opportunities may also exist for Vietnamese made furniture as well.
The U.S. import market consists of three major segments, each of which account for about one third of the import market: (1) Independent importers who resell to regional wholesalers and to smaller furniture chains; (2) U.S. manufacturers producing part of their product line abroad; and (3) U.S. retailers, including high priced department stores, national furniture chains, and warehouse and home center chains carrying furniture. There are significant differences both in how each of these importers buys furniture abroad, and the requirements for a foreign vendor to become a supplier.
7. Leather Goods:
The classification "leather goods" is broad, consisting of luggage and other travel articles, purses, and wallets made from leather, textile materials, or plastic. Vietnam is exporting a small volume of bags made from textile or plastic to Japan. The U.S. import market for this category of goods in 1997 was $1.5 billion. Eight of the top ten suppliers are Asian nations.
The same pattern of higher cost Asian countries (Korea and Thailand) loosing U.S. export sales to lower cost Asian rivals is occurring with leather goods. This situation raises the possibility of Vietnamese exports also being able to establish an export base in the United States with proper marketing. Success here would allow Vietnamese manufacturers to slowly expand into the broader $5.5 billion import for all leather goods.
There are between 500 to 600 firms currently importing leather good. In terms of value, this market is highly concentrated, however. U.S. manufacturers of brand name labels and major retailers control 80% of the import market, and of these, 80 firms account for about 60% of total imports. The balance is held by independent importers who generally supply smaller retail outlets. Again, the importing scenarios vary by type of buyer and size of company.
Editorial Note: The Bilateral Trade Agreement signed in July 2000 may make parts of this article seem dated. However, the basic information is still valid. In fact, the areas of interest highlighted are still the best bets for foreign investors who seek to fully capitalize on the new, lower tariffs available to the BTA. This article is re-published to help domestic and state owned Vietnamese companies learn some of the intricacies necessary for entering the U.S. import market. As we all prepare for Normal Trade Relations, this article is equally as important to help foreign investors focus on and understand better the potential in Vietnam for goods that can be sold to the U.S. markets. We find that Vietnam is for many reasons a good manufacturing and export location. Export to the U.S. market is one of many reasons foreign companies might want to consider establishing or expanding operations in Vietnam. Please contact V V G if you have specific questions about any of the issues raised here.
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James Taylor is with the Washington, DC law firm of Ablondi, Foster, Sobin and Davidow, p.c. Donald Brasher is with Global Trade Information Services, Inc. in Columbia, SC. This article was originally distributed by the Vietnamese American Business Counsel of Washington, DC and is reprinted here with their grateful permission. The authors retain all their copyrights. Return to top of page.
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