The market’s optimism towards the end of 2022 had triggered a chain of negative consequences, leading to an unstable situation in the Vietnamese mobile industry due to miscalculations made by agents.
When the iPhone 14 was launched, despite having a high demand, the sales were slow due to insufficient supply to meet the market’s needs. However, genuine retailers have high expectations for the “Apple season” in 2022. Market indicators suggest that domestic retailers and distributors have ordered more equipment than what domestic users can absorb. By the beginning of 2023, most user’s needs have been met as there are now hundreds of thousands of iPhone 14 units in stock at dealers. This has caused debt pressure and cash flow issues for many large retail systems, resulting in instability in Vietnam’s mobile industry.
Successful opening season
Reflecting on the first half of 2022, the mobile market in Vietnam experienced a period of decline after the Lunar New Year shopping season, with limited prosperity. However, short-term buying power was boosted by Apple’s price cuts on the iPhone 11 and iPhone 12. The launch of the iPhone 14 was the most significant highlight of the market, with genuine retailers receiving over 150,000 orders shortly after opening pre-orders. The iPhone 14 Pro Max was particularly popular, leading to a shortage of this model due to a difference in demand. Only a small group of customers were able to get their hands on the device during the first delivery, and even early adopters had to wait 1-2 months.
To address this situation, major retail systems have stated that they are working closely with Apple to import goods and fulfill pre-orders for customers. However, smaller businesses are also impacting distributors as they prioritize purchasing machines. According to certain sources, some retail systems are even intentionally inflating their order quantities to receive priority in picking up supplies during times of severe machine shortages. However, this virtual order number also puts dealers at risk of inventory issues once the goods arrive.
Optimism Trap
Between mid-October and the end of 2022, domestic retailers received positive feedback on the market due to favorable business conditions. However, the only challenge businesses faced was the limited supply of iPhones, despite the output. This is where errors began to surface.
In reality, the number of orders received by domestic retailers does not accurately reflect the market demand. Customers, having learned from previous sales shortages, chose to register with multiple dealers to increase their chances of obtaining the device early.
According to a buyer in HCMC, he had ordered three iPhone 14 Pro Max from different retailers, and one of the orders was delivered on October 14, 2022. The remaining two orders were canceled by this customer. This approach was also shared by many others on social networks during the opening season for the iPhone 14. In reality, the amount lost from a deposit is much lower than the price difference of the device sold on the secondary market. Additionally, many agents do not require deposits from customers in the early stages.
Furthermore, a large number of sold iPhone 14 devices did not reach end users during the initial sale, and some individuals took advantage of the high demand to speculate, hoard equipment, and wait for resale to make a profit.
These factors created a “virtual” demand in the market at the end of last year. In fact, the purchasing power from the market is not that high.
And: Chain of dominoes collapsed
The crisis officially started in early January. A very large batch of iPhone 14 was supplied to the domestic market.
However, it was this batch of iPhone 14 that triggered a series of unexpected consequences, adversely affecting the entire industry.
According to the product manager of a large domestic distributor, the root cause of this crisis is the uneven arrival of goods. At times, there would be a complete sell-out for a month, followed by a sudden rush of devices arriving at once. If this inventory could have been evenly spread out by week or month, the situation would have been manageable. However, with such large fluctuations, distributors are unable to maintain a stable inventory and experience disruptions to their cash flow.
As per this person, when the goods arrive, the distributor must quickly push them to retail partners to reduce their bank debt. Agents receive a large quantity of goods and quickly reduce prices to boost consumption and limit inventory.
However, the market demand decreases after a prolonged waiting period, and the popularity of the device becomes difficult to sustain. This causes the aforementioned shipment to become a huge inventory pressure for retailers.
In contrast, when a big dealer lowers the price, individuals who are “collecting” devices to make a profit quickly sell them to “cut losses”. This results in a large number of devices being introduced into the market simultaneously.
There is a rumor in the retail industry that the initial group of agents is holding an inventory of approximately 60,000 iPhone 14 units, which is worth a large sum of money in VND. If this issue is not addressed promptly, it may significantly impact the cash flow of the businesses involved, and of course the whole industry.