Our Vietnam Office Experiment Failed

On July 6, the landlord in Ho Chi Minh City signed the lease termination. I watched him sign over a video call, then turned off the camera.

The Vietnam office, open a year and a half, is closed. How much was lost, and where we went wrong: this piece lays it out. Failures do not get hidden.

Why We Went

At the end of 2020, we judged that Southeast Asian demand for used equipment was about to rise. That year we had over forty inquiries from Vietnam and closed only two. Customers always asked the same thing: do you have anyone in Vietnam? Can we inspect locally?

Three meetings later, the more we talked the more we felt we had to go. Two of our peers had already planted a flag in Thailand, and we were anxious.

That November I made a comparison table: Vietnam, Thailand, Indonesia. Vietnam ranked first: close by, many ethnic Chinese, hot infrastructure. Looking back, not one of those three reasons had anything to do with sourcing prices.

In March 2021 we rented a 60-square-meter office in District 7, Ho Chi Minh City, at US$1,100 a month, and hired two local staff, one for sales, one for admin. Registration, fit-out, permits: over US$60,000 in the first three months.

The plan was that I would fly over every quarter for two weeks, meet customers, inspect the warehouse. I had even looked up the flights: Guangzhou to Ho Chi Minh City, 4,200 yuan round trip.

Not Being Able to Get There Was the Biggest Problem

The plan was finished; the pandemic was not. In April 2021 Vietnam tightened entry, then locked down itself. Flights were suspended under circuit-breaker rules; visas stopped being issued.

I never made it once. A year and a half, not once.

At the most expensive point, a one-way Guangzhou-Ho Chi Minh ticket cost 12,000 yuan, plus quarantine in a third country first. One trip would have cost two months of office rent. I could not bring myself to spend it, and neither could the company.

Management ran on video. Nine a.m. meetings, counting heads through a screen. The sales hire went three months without a deal. I wanted to take him around to customers; from two thousand kilometers away, you cannot. After nine months he quit; we hired again, and got someone even greener.

Remote inspection could not get traction either. The loaders Vietnamese customers wanted were in Panyu, Guangzhou. I would hold up my phone for a video inspection, the signal would stutter, the customer could not see the mast clearly, and he would say let's wait until someone can come look. That wait lasted a year.

The worst was the samples. Two demo machines shipped to Ho Chi Minh City in March, a small loader and a forklift, meant for local display. With nobody able to go, the machines sat in the rented warehouse for fourteen months, batteries dead.

The Market Call Was Wrong Too

In hindsight, even without the pandemic, this office was a long shot.

Vietnam's used construction machinery mainly flows through local traders in Hanoi and Haiphong. They source from Japan and Korea, channels built over a dozen years, with repair crews trained as part of the package. Our sourcing is in China; after freight and duties, our landed price ran eight to twelve percent above local spot.

There was one statistic I had not looked at: Vietnam customs data showed sixty percent of used excavator imports came from Japan. Their machines come in good condition with transparent histories; our sourcing could not compete. That data was sitting there in 2020. I never checked it.

I thought what customers lacked was local service. What they actually wanted was cheap stock on hand. Both calls were wrong.

In a year and a half, the Vietnam office closed seven deals, under US$190,000 total. The gross profit did not cover the office rent.

What the Year and a Half Cost

I pulled the detail. Rent plus deposit: US$26,000. Salaries and social insurance for two staff: US$38,000. Registration and fit-out: US$62,000. Sample shipping and sundries: US$19,000. Total US$145,000, about 930,000 yuan at the rates of the time.

Gross profit on the seven deals: US$34,000. Net loss: over US$110,000, more than 700,000 yuan.

This May, management met three times. Chen Guodong argued for holding on another year; the pandemic was nearly over. I argued to close. One reason only: even once we could fly, the price disadvantage would still be there. That was not a pandemic problem; it was a model problem. On May 31, the decision: close.

How We Wound It Down

Early lease termination: two months' deposit forfeited, US$2,200. The two employees were compensated per local labor law, one month's salary each, plus an extra half month. They had been with us a year and a half.

The two demo machines were sold at a discount to a local customer, thirty percent below cost, plus another US$800 for new batteries. The day they were sold, the young admin woman returned the office keys to the landlord and sent me a photo: the room empty but for two desks.

What We Learned

Two things. Before setting up a point somewhere, sell into that country for three straight years first, then talk about landing. You can run a warehouse remotely; you cannot run a market remotely.

We are still doing business with Vietnamese customers; cargo ships from Guangzhou, inspections happen over video. Just last month we shipped a road roller to Haiphong. The office is gone. The business is not.