Nielsen provides insights into Vietnam's economic outlook and retail backdrop.
Vietnam plays a significant part of in Asia’s success story. Thanks to the great effort from government in making significant changes in trade rules to attract foreign investment and being more open to the global economy, Vietnam stands out for future potential and the role it can play in fuelling business growth.
Vietnam’s overall GDP growth for 2016 was an impressive 6.2 percent following a strong Q4 performance of 6.8 percent growth. The industry and service sectors underpinned the economy, growing 7.6 percent and 7 percent respectively during the year. Meanwhile, unfavourable conditions including droughts and salinity issues dampened agricultural growth, which only increased 1.4 percent.
Consumer confidence increased five points to 112 in Q4 2016, its highest result in three years. It also meant Vietnam ended the year with the fifth most optimistic consumers globally. Almost one in two consumers believe that now is the time to buy the things they need or want considering living expenses and their personal finances. These confident consumers are looking beyond basic commodities to seek better quality of life for themselves and their families.
The Vietnamese population is still in its golden age with 25 percent of the population between 10 and 24 and the median age of 29. There are roughly seven people of working age for each “pensioner” meaning a favourable ratio participating in the workforce compared to dependence. Furthermore, Vietnam has the fastest-growing aspiring middle class in Southeast Asia. New provincial pockets of affluence are being seen beyond the key and traditional centres of Hanoi and Ho Chi Minh City. Vietnamese towns are now full of tech-savvy, brand-conscious shoppers egged on by sophisticated marketing techniques. Middle class (and aspiring middle-class) parents are investing heavily in their children’s education, with proficiency in English seen as indispensable in climbing the social ladder. There is an appetite for increasingly sophisticated lifestyles reflected by a substantial rise in purchases of financial services, smartphones, cars and electronics as well as spending on tourism and travel.
Today, over 60 percent of Vietnam’s population live in rural areas and this is forecast to continue in the next 10 years. Rural Vietnam will continue to be a source of excellent opportunities for companies as rural consumers have rising incomes and greater access to product information than ever before through internet access adoption of smartphones. Traditional trade will remain a vital channel to reach these shoppers. While there are 1.3 million traditional trade stores in Vietnam, 30 percent of them account for 80 percent of sales. Understanding these “golden stores” is pivotal to success in this channel. Retailers play a vital role in Vietnam, especially in Traditional trade, as two out of three shoppers will follow the retailer’s product recommendation. It is up to manufacturers to engage retailers to deliver the optimal brand experience to consumers.
Success in the future means taking a step back to basics: the right products visible and available in the right stores; educating both retailers and shoppers about the impact your product can have on their lives.
Sources: All population and urbanisation figures come from United Nations Urbanisation Prospects 2015.