Exploring Asia’s youngest consumer market: Why Vietnam, now?
Curious about bringing your brand or business to Vietnam? Get to know what makes this booming Southeast Asian economy tick…
Take a look at the chart below. Before COVID-19 turned the world upside down, you can see that Vietnam was the country with the highest growth rate in Southeast Asia.
Now have a look at this one, which shows downsides for ASEAN countries post COVID-19:
Even as the GDPs of neighbouring Southeast Asian nations dramatically contracted in Q1 and Q2, Vietnam still experienced growth — albeit a diminished 0.36%. According to the World Bank, “Thanks to its strong fundamentals…the Vietnamese economy should rebound in 2021.”
So what was inducing Vietnam’s rapid development and keeps it well positioned post COVID-19?
FDI (Foreign Direct Investment) flows in manufacturing activities and exports, and the US-China trade war opened up chances for Vietnamese goods to replace Chinese equivalents in the US market. Not to mention the growth of domestic brands in this vast country of 96 million people.
After years of doing content marketing for brands and businesses in Vietnam, we have come to know the consumer market. And now we’re eager to share with you our observations. Vietnam is raring to get back to the way it was before the pandemic. We hope its exemplary response will mean “business as usual” quicker than other countries in the region.
This is still a great place to do business, and getting to know the big spenders will help your brand or business play here.
What’s the consumer profile?
Vietnam’s population reached 96 million in 2019.
37% of the population is living in urban areas. Hanoi is the capital city with 7.5 million residents, while the economy hub — Ho Chi Minh City — is home to 8.6 million.
The population of Vietnam is considered young as more than 45% of the population is between the age of 25–54 years old. Gen X and Millennials are the majority of the workforce and consumer market.
Meanwhile, there are more than 29 million Gen Z-ers in Vietnam, who make up 30% of the population. They will be the next wave of influencers and consumers.
Vietnamese consumers are generally ethnocentric. They support local brands and products, with 71% believing that local products are of high quality.
Some of the largest Vietnamese corporations are Vin Group (real estate, technology, automobiles etc.), Masan Group (F&B) and VietJet Air (Airlines). Even Starbucks has been struggling in this $1B coffee market, and McDonalds is said to have flopped in Vietnam.
Spending behaviour
Annual disposable income of Vietnamese people is on the rise along with consumerism. According to Kantar’s WorldPanel Insight Handbook 2019, key areas of expenditures are fresh food & FMCG, education, eating and drinking out, entertainment and travelling, etc.
Vietnamese’s spending on housing and household utilities makes up for 11% of their monthly spending. This is relatively low compared to that of an Indonesian, which is 25.3%; equal to that of a Thai; and a bit higher than a Philippine’s. Thanks to this, the Vietnamese enjoy an abundant percentage of disposable income.
Changes are also happening within each industry as Vietnamese consumers are moving up Maslow’s hierarchy of needs. They look for convenience in each product/service. The following five changes are also noted in the same handbook by Kantar’s WorldPanel:
Consumer trends
As Vietnam integrates into the global market, drastic changes are happening. So what are the trends leading the changes?
Convenience stores
In recent years, convenience stores have made their way to every corner in Vietnam, taking market shares from local traditional markets.
VinMart & VinMart+ top the game with 1100+ stores nationwide. Circle K, Family Mart, B’s Mart are also developing their ecosystem.
Penetration of mini marts and convenience stores reached 53% by 2018. This isn’t surprising as 76% of Vietnamese choose a store because it’s near their home. And like 7 Eleven in Thailand, this new breed of stores in Vietnam are popping up one street at a time and rapidly.
Purchasing experiences
Earlier generations spent their money on gathering assets, possessions and savings. Now, it’s about experiences, such as vacations, trips or idol concerts. Spending on education is increasing rapidly, especially for extra classes, private schools and studying abroad.
The tourism sector has grown rapidly too, and Vietnamese now spend more money on holiday trips. More than 1 million Vietnamese tourists visited Thailand in 2018, which is double the number of 2012.
Health and Wellness
Various cases of food poisoning and reports of restaurants using unqualified and toxic materials have caused consumers to be extra careful. Now they need to be informed about the origin of the food and drinks that they are consuming. Supermarkets and mini marts are taking this as their competitive advantage over traditional markets.
Fitness and wellness are also trending among Vietnamese people. They are following diets that help reduce weight and avoid diseases while exercising to keep them fit and healthy.
Digital landscape
Vietnam has been officially connected to the internet since 1997. Ever since it has kept up with global digital innovations. But how are Vietnamese people using the internet? And what you should know about the digital landscape here?
Digital use
According to Digital 2020 Vietnam, the country is highly connected to the internet, with 70% penetration. Whether it is rural or urban, you will find people using smartphones all the time. It’s no surprise that digital marketing is booming.
In the same report last year, it was reported that 91% of users on mobile messenger, 95% of users watching videos on mobile, 84% of users playing games, 50% of users with mobile banking and 80% of users using mobile map services.
So, it’s worth considering using messenger marketing, video marketing, display ads, mobile banking and connecting your business on Google to increase the chances of finding potential customers.
Read more: Which are the popular social media sites in Vietnam?
E-commerce
Despite negative turnover for years, e-commerce sites keep investing more and more. The competition goes up as Tiki, Shopee, Lazada, etc. are fighting for every per cent of the market share. The e-commerce boom is undeniable with 35% growth per year — 2.5 times faster in Vietnam compared to Japan.
2018’s Black Friday in Vietnam generated a 61% increase in traffic and a 149% increase in revenue for the E-commerce market. E-commerce businesses have spent billions of VND on advertising for the year end’s sales season. Five out of 10 people in Vietnam say they wouldn’t miss Black Friday.
Mobile wallets
Zero maintenance fees, cinema tickets, gasoline, restaurants and drinks giveaways are the main promotions E-wallets use to attract new users. 80–90% of the market share belongs to Payoo, Momo, SenPay, Moca and AirPay.
E-wallets are currently accepted at more than 100,000 points of sale. They also make up to 19% of purchases online through e-commerce sites. Despite the rapid expansion, e-wallets are still relatively new to Vietnamese people and will make-up for less than 10% of payments by the end of 2020.
Ride-hailing services
Competition is fierce in this new sector. Currently Grab is everywhere. And while Go-Jek is struggling to keep GoViet running in Vietnam, local start-up Be broke through with much lower price point than that of their competitors. Now is still keeping their position as one of the top-of-minds for food delivery. Newcomers like Baemin or Lala seem to be facing huge challenges to penetrate the market.
Ride-hailing has quickly become the new norm for Vietnamese consumers. The market is estimated to be worth $1.1 billion in 2019.
On average every day, Grab fulfils 300,000 food orders and 800,000 rides in Vietnam. They have paired up with Moca e-wallet to increase the number of rides with discounts.
Conclusion
Rising consumerism and digitalization in Vietnam open up whole lots of opportunities for businesses.
People earn more, they spend more.
And while some other countries are facing problems with workforce and social issues, Vietnam is enjoying its steady development.
Vietnamese society holds both traditional and modern values. There’s a balance between the old and the new but make sure you know your audience, what they do and what they like.
Then doing business in an exciting APAC market such as Vietnam can be extremely rewarding.
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Originally published at https://wecreatecontent.asia on January 27, 2021.
