Sep 17, 2019

New opportunities in 'star-performer' Vietnam

The fastest-growing economy in ASEAN is driving rapid evolution in consumer behaviour.

Ho Chi Minh City (Shutterstock)
Ho Chi Minh City (Shutterstock)


Over the past 30 years, Vietnam has had a remarkable record of development and its economy continues to show fundamental strength, supported by robust domestic demand and export-oriented manufacturing.

The economy will be one of the region’s star performers this year and is forecasted to expand 6.7%, according to Focus Economics, in 2019 and 6.5% in 2020, buttressed by strong tourism, exports and industrial output. However, given the economy’s open nature, growth will be hampered somewhat by weaker global momentum. Trade tensions are a source of uncertainty; while they will dent global economic activity, trade tensions could also divert more investment from China to Vietnam, according to World Bank. Recent indicators suggest the Vietnam economy had a bright start to the third quarter, after likely growing faster than any other large ASEAN economy in the second quarter, and consumers feel these changes too. A recent Nielsen report showcased consumers’ sentiment towards their evolving financial situations over the last five years and how it has affected their attitudes to spending: Vietnamese consumers are the most positive globally, with 86% feeling better off now than they were five years ago.

Urbanization, internet connectivity and smartphone penetration are opening up new unexplored opportunities to consumers. The convenience they bring to everyday routines is moving consumers to a new comfort zone they have never had before and when it comes to spending, it gives them the ability to treat themselves with purchasing small items, even ones that might be considered as “basics” in developed markets. Opportunities abound for manufacturers and retailers to provide Vietnamese consumers with a whole new array of choice and assortment which, less than a generation ago, would have been impossible. Vietnamese consumers are curious and seek new and innovative products—within food and beverage categories, new product launches account for up to 40% of growth and companies which invest in understanding the local needs and tastes in Vietnam to drive their product innovation efforts will enjoy long term gains.

Consumer behavior in Vietnam continues to evolve, in particular around openness to trying new products and brands. Nearly half (46%) of Vietnamese consumers state that they are more likely to try new brands now compared to five years ago, and while price reductions and promotions are an influencer of switching (35% indicate they would switch to a different product or brand due to promotion or price reduction), they play second fiddle to factors such as utility and ease of use (44%), proposal from a well-known trusted brand (41%) and added benefits like health attributes/ multipurpose functions (41%). Highly connected Vietnamese consumers are also increasingly heading online to shop — for 43% of consumers, availability of a product online influences them to try new products and brands.

While Vietnam’s large urban centers have historically been the key focus for brands, the nation’s largely untapped rural areas are becoming increasingly important growth areas, with large multinationals and local giants alike battling it out to win the hearts and wallets of rural consumers. With vast retail development in Vietnam, consumers are adapting to the modern trade, which is growing at 19% as of Q2 2019. Ecommerce is also growing rapidly, up 18.5% in 2018 as compared to previous year, and with the speed and readiness with which the Vietnamese have accepted the changing retail landscape, this growth is expected to continue over the coming years.


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