Businesses eye rural market

The 2014 Nielsen Vietnam Rural Study of 700 rural consumers nation-wide said the rural community, which accounts for 68% of the country's 90 million population, is investing in education and enjoying similar income growth as its urban counterpart.

Vaughan Ryan, managing director of Nielsen Vietnam, said there is increasing interest from the local and multinational business community alike around Vietnam's rural consumers.

Rural consumers account for half of the domestic spending on Fast-Moving Consumer Goods (FMCG) – products that are sold quickly and at relatively low cost goods, yet they are not just purchasing the cheapest offering but looking for value for money, he said.

The rural consumer wants more and wants it fast, he said, adding that they want their kids to live a better life than they did and they aspire for them to have more choices. They see education as a key vehicle to making this happen as more of them have regular incomes

The study found that traditional channels continue to play a pivotal role in rural regions though the number of modern retail outlets is increasing.

Wet markets are the most popular retail channel in rural Vietnam with a person making 16 visits per month on average, followed by fairs and street vendors.

Modern outlets such as grocery stores experience between six and nine visits a month on average, while supermarkets trail below at just one visit every two months.

A shopper spends VND655,200 (US$31.2) a month on average at traditional outlets and only VND175,000 ($8.3) at modern outlets.

Shoppers tend to buy items such as personal and household care products, beverages, seasoning, and dairy products from modern trade outlets and fresh foods, seasoning, and some household items from traditional outlets.

The study also found that retailers' recommendations are a powerful brand endorsement as 90% of retailers recommend products to shoppers and 31% of the latter follow the recommendations.

With rural consumers' aspirational outlook and fascination with urban lifestyles, there is opportunity for growth in categories that appeal to the desire for progress and lifestyle changes, in particular health and beauty and household cleaning products, according to the study.

Rural consumers also show a thirst for new products – 77% want to try new products and 95% appreciate having a wide range of products to choose from.

The study also pointed out that television is key to reaching and connecting with rural consumers as 99% watch TV on a regular basis and 69% claim to obtain product information from this source.

Television viewing accounts for 88% of total media consumption. Vaughan said more and more consumers were willing to buy Vietnamese-made and -owned products. The perception of quality remained for certain internationally made products, but even this was changing, he said.

Fakes and copies are rife in Vietnam, with one in four rural consumers having experienced fake and low-quality products, and as a result being cautious about their purchases.

The study, carried out from January 1 to 18 this year, aims to provide an overall picture of Vietnam's rural areas for firms who have been or are going there, research consuming habits, and measure the purchasing capacity of people there. It used qualitative (interview) quantitative (questionnaire) and retail methods (watch on retail market at rural areas).