Vietnam buys into the label culture

17:13' 01/07/2007 (GMT+7)

VietNamNet Bridge - One of the most noticeable changes over the last five years is a visible move from self denial to self indulgence.With GDP growth in 2006 at around 7.8 per cent, Vietnam is regarded as the second fastest growing economy after China. The country is often thought of as the third most attractive destination to invest in retail, after India and China. However, the 2006 AT Kearney report positioned Vietnam in third place on its Global Retail Destination Index (GRDI), behind Russia and India. But, remember that this report came out before Vietnam’s accession to WTO in January 2007 which laid out regulations on foreign retailing. Foreign direct investment (FDI) amounted to approximately $10 billion of which 12 per cent found its way into real estate. Tourism shows signs of strong growth with Vietnam welcoming 3.6 million visitors in 2006. Most markets are showing more than 20 per cent growth in 2007 which bodes well for retail and its tourist dollars. Fortunately, a large percentage of tourists find their way to Ho Chi Minh City or Hanoi, where they will find the lion’s share of exciting shopping options. Ben Thanh market in Ho Chi Minh City is high on the tourist list of things to see and do. This is reflected in a Reuters article in 2006 that reported retail rentals in Ben Thanh market to be the most expensive in the world. One significant aspect that global retailers have their eye on is Vietnam’s relatively large population of more than 83 million people. This is growing at 1.4 per cent, adding an additional one million people a year to the potential consumer base. In addition, a large proportion of the population (as much as 50 to 60 per cent) is under 30 years old. Although the national per capital income is only $550 per person per year, this is still growing by more than 20 per cent, year-on-year. Incomes are much higher in the urban areas by three or four times the national average. The Consumer Market Vietnam is changing rapidly. One of the most noticeable changes over the last five years is a visible move from self denial to self indulgence. Its effects are seen everywhere; from wet markets to shopping malls, from bicycles to scooters, from drab coloured, loose clothing to designer brand names. Among the urban economic classes, households earning between $600 and $1,000 per month are the fastest growing segment followed by those households earning above $1,000 per month. With the advent of a rising aspirational leisure class, sports (particularly golf and tennis) have become popular. Vietnam’s café culture has caught the eye of many of the world’s coffee brands, with Gloria Jeans from Australia recently opening up in Ho Chi Minh City and Hanoi. More international coffee brands are likely to follow. Nightclubs are popular among all ages, particularly with young people. It is common to see a small table of affluent young males nursing a bottle of XO brandy, regarding it as more of a status symbol than a mere drink. Vietnamese are now travelling and enjoying hotels and resorts in their own country as well as venturing to Thailand, Singapore or Malaysia on budget tours. Shopping appears to be a national weekend pastime, especially if those shopping destinations include food and beverage and entertainment options. Ho Chi Minh City and Hanoi have long been devoid of anything to do for young people who now accept new retail developments and international branded fashion merchandise with open arms. The constant increasing supply in the number of gyms, kindergartens, multiplex cinemas, spars, satellite TV stations, internet and mobile phone users, are all indicators of a strong consumer market. Consumer confidence sky high Consumer confidence is high in Vietnam. Regarded as one of the world’s happiest nations and certainly one of the safest destinations, the few supermarkets, hypermarkets and cash and carry stores that do exist are generally packed at the weekend. Although the country only has about 250 supermarkets, they are growing at a rate of 25 per cent per year. Department stores and shopping centres are growing at a rate of 60 per cent, per year. They are quickly gaining a market share in the urban areas, although in the rural areas the wet markets and ‘mum and pop’ stores are still dominating the market and account for more than 80 per cent of all retail sales. Product availability is a visible factor that affects consumer spending. Most international brands advertised in foreign lifestyle magazines can be found on the shelves of a downtown Hanoi or Ho Chi Minh City department store or upgraded shop house. Expensive items will these days be purchased with a credit or debit card or with cash drawn from one the many ATMs that have sprung up. All this new found wealth and consumer spending has resulted in what appears to be complete chaos on the roads. Developers of new shopping centres will succeed if they pay attention to building access and parking. Car ownership will grow, but until the new roads systems and mass rapid transports systems are in place, the preferred mode of travel will be motorbike. And you can only go so far and get so much on the back of a motorbike. (Source: Viet Nam Net)