VIETNAM: Market analysis

Confidence is high in Vietnam with habits and preferences shifting. As Nielsen explores in this market analysis, the country is undergoing fundamental changes which present golden opportunities

Despite some economic headwinds, Vietnamese consumers are young and have money to spend. Tech-savvy is a must for brands looking to reach the country’s optimistic population.

With its young population of around 90 million people and one of Southeast Asia’s fastest-growing economies, Vietnam holds the enviable and strategically important role of gateway to the Greater Mekong Region including Thailand, Cambodia, Laos, Myanmar and the southern provinces of China.  The Vietnamese economy, which is largely driven by local organisations, started 2015 on a strong note. The GDP growth rate increased 6.0 per cent year-on-year in the first quarter of 2015, the highest level seen for more than six years.

This positive result can primarily be attributed to the expanding manufacturing and construction sectors combined with increased consumption and private investment. Despite its solid performance and outlook, a number of factors have the ability to hold back Vietnam’s further growth, such as lower oil prices affecting budget balance and investment for development, decreased global commodity prices and declining export growth, especially in the foreign invested sector (see Ho Chi Minh City Knowledge Report, Colliers International).

Vietnam’s consumer price index (CPI) declined 0.05 per cent in February 2015 versus the previous month. This is the first time Vietnam’s CPI has decreased during the Lunar New Year holidays, the country’s peak annual shopping season. The negative CPI growth was the result of price decreases in transportation, housing and building materials, and telecommunications. Two declines in fuel prices, the first by US$0.68 and the second by US$0.88 per litre, were a major catalyst for the decline in CPI, contributing to the weakest rate of consumer price inflation in the last decade.

While Vietnam faces some economic headwinds, this is having minimal impact on consumer sentiment and confidence in the future. According to Nielsen Global Survey of Consumer Confidence, Q1 2015, Vietnam’s Consumer Confidence Index (CCI) continues to increase, recording its third consecutive quarter of growth in the first quarter of 2015 to a score of 112, up six points quarter-on-quarter and the highest score recorded since Q2 2010. This optimism is inspired by Vietnam’s young and optimistic population - 57 per cent of the population is under 35 years old, and the number of Vietnamese graduating from university has increased 60 per cent in the last decade. Further, rising average household incomes means the average Vietnamese consumer has more money to spend on improving their lifestyles.

Vietnamese shopping habits and preferences are shifting, particularly within the grocery retail sector where there is a continued rise in the popularity of modern trade store formats such as hypermarkets and supermarkets over traditional wet markets (34 per cent of Vietnamese consumers report shopping at hypermarkets more often and 29 per cent buy their groceries in a supermarket more often than they did 12 months ago). The growing importance of convenience stores as a new channel for food and groceries is another significant trend and 22 per cent of Vietnamese consumers shopped for food and groceries at a convenience store more often in the past 12 months. Thanks to Vietnam’s relatively high internet penetration, online shopping for home delivery is also a prevailing trend, which represents a key opportunity for tech-savvy retailers to have good digital strategy that allows interaction with customers along the purchase journey.

More broadly, overall media consumption habits in Vietnam are undergoing a fundamental change. Although television maintains its foothold as the media platform of choice for Vietnamese consumers, low-cost internet packages and competitive handset pricing has seen use of connected devices such as computers, tablets and mobile devices increase significantly in recent years. Demand for ‘always-on’ connectivity is high as consumers look to keep up to date with the latest news, and engagement and interaction via social media platforms is expanding rapidly. As connected device ownership continues to expand, the prevalence of dual-screening in Vietnam is among the highest in the world - more than three quarters of Vietnamese (76 per cent) browse the internet while watching TV, as detailed in the Nielsen Global Digital Landscape Report, 2014. This new media landscape in Vietnam is presenting more opportunities for media owners, agencies, and advertisers to reach and engage viewers.