HANOI: Amid fierce competition, the price war is heating up, requiring businesses to deliver added value and experiences to customers in order to retain them.

FPT Digital Retail (FPT Retail) posted a positive pre-tax profit in the first quarter of the year, which made for good reading in the company’s consolidated business-performance report.

In the first three months of the year, its consolidated revenue reached over nine trillion dong, a 17% increase year-on-year, accomplishing 24% of its yearly target.

For the FPT Shop chain, recent product restructuring efforts have resulted in a 3% gain in gross profit compared to the same period last year. And thanks to loans at favourable interest rates, financial expenses have decreased by 50% on-year.

As a result, FPT Retail achieved pre-tax profit of 89 billion dong during the period, 43 times higher than last year and accomplishing 71% of its2024 goal. This is also the best result for FPT Retail in the past five quarters.

The retailer’s online revenue witnessed 10% growth from last year to nearly 1.6 trillion dong.

The achievements bring some relief to FPT Retail’s leadership, but they still have concerns due to the painful lessons from the price war in 2023. The company suffered losses as a result of joining the battle.

In 2023, FPT Shop’s revenue reached nearly 32 trillion dong, leading to significant losses amounting to billions of dong.

During a recent AGM, the company’s chief executive officer Hoang Trung Kien acknowledged the difficulties faced in the business selling things like smartphones and computers due to the prolonged price war. As a consequence, 30 FPT Retail stores were closed in 2023, and around 50 more closures are anticipated this year due to inefficiencies.

The intense price competition with rivals caused a significant decline in FPT Retail’s gross profit margin, reaching a low point of 8% in the second quarter of 2023.

The price war is believed to have started when the Mobile World Investment Corp (MWG) launched its “Too Cheap” campaign in April 2023. Television and household appliance prices were slashed by up to 50%.

In response, FPT Shop quickly adopted the slogan “Wherever it’s too cheap, it’s cheaper here”, while other retail chains like CellphoneS and Viet Mobile Tech also had to enter the competition.

Consequently, the Viet Mobile system experienced modest 10%-15% sales growth in the first half of 2023 compared with the same period in 2022, marking its lowest growth rate in years.

CellphoneS struggled to maintain profits amid a price war with other major chains in 2023. As a result, their store expansion plans for the first two quarters were postponed.

Meanwhile, MWG also witnessed a historic decline in profits. Chairman Nguyen Duc Tai apologised to shareholders for failing to meet the set targets. Additionally, the company’s stock was removed from the VN Diamond index, and several investment funds reduced their holdings of MWG shares, despite previous strong interest.

FRT Retail, recognising the pointlessness of the price battle, declared its withdrawal and shifted its focus towards expanding product categories to stimulate growth in the latter half of the year.

Price competition was also a prominent topic at Masan Group’s annual shareholders’ meeting.

WinCommerce, a unit of Masan Group, is now focusing on changing consumer perceptions of prices at its WinMart and WinMart+ supermarkets. Previously, they didn’t prioritise price competition.

 - ANN