A series of the Republic of Korea's cosmetics brands have arrived in Vietnam in recent years. The Face Shop, Ohui and Laneige have been opening shops in many cities and provinces. Their business has been prospering as the RoK's products have high quality and reasonable prices.
Meanwhile, European brands such as Vichy, Lancome and L’Oréal, which have been cementing their positions in the domestic market, have been launching new products and running sale promotions to lure customers.
Dominic OH, director of INTEX, said INTEX plans to organize a cosmetics international exhibition – Mekong Beauty Show - in June. He said Vietnam is an emerging promising market because it has a high 6% GDP growth rate and increasing interest in beauty products and services.
Regarding the market scale, a report from Nielsen said Vietnam’s population has nearly reached 100 million, and 60% of them are aged below 35. The income per capita has been increasing rapidly recently, reaching US$2,385, a rise of US$170 compared with 2016.
The market analysis firm cited a report as showing that the cosmetics import/export turnover has soared from US$3 billion in 2016 to US$6 billion in 2017. At least 95% are smuggled products.
The Vietnamese cosmetics market is becoming busier than ever as Vietnam, as a member of FTAs, has slashed the import tariff on many items to 0-5%.
The fate of domestically made products
While foreign investors rush to scale up their production and expand distribution networks in Vietnam, domestic manufacturers have seen their market share shrink.
According to Nguyen Van Minh, chair of the Essential Oil, Flavors, Cosmetics Association, of the US$6 billion worth of cosmetics import/export turnover in 2017, only 5% belonged to domestic companies.
Minh said Vietnam is rich in herbs, the input materials of many organic cosmetics products. However, domestic enterprises can only produce raw materials and cannot create high-end products.
Only a few Vietnamese cosmetics still can exist in the market, such as Thorakao and Miss Sai Gon, but they mostly target the low-cost market segment.
Minh said the association has asked agencies to help set up a R&D center to make organic products and take advantage of Vietnam’s rich herb treasure. However, nothing has happened.
Vietnam enterprises find it difficult to compete with foreign brands because of small production scale, low technology and limited investment capital.