The root cause of the problem is source goods from the B2B channel has been trading in the market.
After determining what central problem is, I proceed in depth to find out why there are so many retail prices of Lock & Lock electric home appliances in the market. According to Lock&Lock’s customers, I conducted a survey of market information such as Cho Lon electronic supermarket and e-commerce websites such as Lazada and Shopee, Electronic home appliance products of Lock&Lock are obviously there is a big gap between the prices comparing to retail price of Lock&Lock.
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Image 1. Recorded at the Cho Lon Electronic Supermarkets, the price of Lock&Lock electric cooker induction is 1,200,000 while Lock&Lock’s retail price is 1,800,000 VND
Image 2. Recorded at Lazada e-commerce website, the price of Lock & Lock glass kettle is 600,000 VND while Lock & Lock’s retail price is 790,000 VND
When interviewing sales diretor about the cause, Mr. Kim Young Woong confirms:
Normally, the company’s products are listed price uniformly between retail channels, Lock&Lock has a contract that requires distribution channels to officially sell at the retail price offered by the supplier and only get a discount by percent on retail price in a few promotions. There are stores where they make their own promotions to
26 clear stock or or they adjust prices themselves, we still accept this because this does not cause much retail price difference. However, about Lock&Lock electric home aplliences in the market with the price difference is up to millions VND, I think this sources is from B2B channel or fake products, not genuine and no Lock&Lock genuine warranty.
Mr. Nguyen Anh Tu, Sales Manager of MESA - Enterprise authorized to distribute household appliances of Lock&Lock brand in Vietnam, shared that:
When buying products provided by MESA, consumers may incur a higher price but in return, they will enjoy genuine warranty and after sales service. Besides, we also provide replacement parts provided by Lock & Lock. All MESA products distributed have CO/CQ certificates. However, in recent years, our revenue has hardly increased because the taste of Vietnamese consumers is finding cheap products, regardless of whether the quality is guaranteed or not.
Interviewing with Ms. Nguyen Thi Huyen Trinh, B2B Sales Manager, she said that:
The revenue of our big channel accounts for more than 50% of the company’s total revenue. We supply large quantities to big customers like Samsung or Heineken with the purpose of making gifts. However, on how goods of Lock & Lock of B2B channel go in the market with the purpose of trading, we cannot control.
Thus, it can be seen that, the cause of retail price heterogeneity in the market can come from 3 reasons: the first, from imitation and counterfeit goods, the second, from the self-adjustment of retail prices of retail stores and the last, from B2B channel, but the root cause of the problem is source goods from the B2B channel has been trading in the market, causing price disorder situation in the market, which has significantly affected the company’s channel revenue and reputation.
4.2. Consequences
Josh Neblett, CEO of Etailz, is currently one of the leading businesses and e- commerce consulting in the US said that when unreliable retailers that appear on your list of suppliers on online sales sites arbitrarily changing the content of the product introduction, offering a strong discount compared to the official dealer, as well as providing low quality customer service, all of these behaviors will create many negative customer
27 reviews for your company image (6). When customers realize they are cheated, they will respond directly to the supermarket channel, where they go shopping every day. This will make them switch to other brands instead of Lock&Lock. Therefore, retail price heterogeneous in the market, the poor management in prices and dumping, not only makes the Lock&Lock sales of the supermarket channel decrease, but also affects the image of Lock&Lock brand in the eyes of consumers. Thus, the revenue of supermarket channels cannot keep pace with the development of supermarket systems in Vietnam, the company will face difficulties in today’s fiercely competitive market and the company cannot reach the goal: annual growth rate of all channels must be more than 20% and become the world’s leading company in household appliances industry in 2020.
After applying many theories and interview results to support to determine central problems and the root cause of the problem, along with the result that Lock & lock will face if not solve that problem, captured off is the updated cause-effect map below.
Sales growth rate of Electric
Household Appliances of Supermarket Channel is lower than expectation
Retail prices heterogeneity and disorder
in the market Reputation
and image of Lock&Lock
will be ruined Poor management
in prices Goods of B2B
channel go in the market
with the purpose of
trading