Retailers flock to Vietnam as consumer spending soars
In 2014, Vietnamese were the most economical consumers in South East Asia in a Nielsen survey. However, their spending habits have changed.
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In the 2014 survey, 74% of Vietnamese said they would save money after covering essential living expenses. In the 2017 survey, after paying for essential living expenses, 38% of Vietnamese were willing to spend money on tourism, 36% on new clothes, 31% on hi-tech technology products, 30% on home repair and 29% on entertainment services.
In particular, for the first time, the report shows that 23% of Vietnamese consumers take premium health insurance policies.
The jump in 2017
Vietnam jumped to the sixth position, surpassing Singapore, Hong Kong and Indonesia, in A.T. Kearney’s Retail Development Index.
Vietnam is considered an attractive market for retailers thanks to the low saturation level and the high growth potential. The saturation levels in Hanoi and HCM City, the two largest cities, are lower than in other Southeast Asian cities such as Jakarta, Kuala Lumpur and Bangkok.
In the last few years the country has welcomed international brands from many different business fields, from fashion and food to entertainment.
The massive arrival of foreign retailers has heated up the retail premises market. Lotte and Aeon have acquired land plots on advantageous positions to develop shopping malls.
Many well-known investors and investment funds are seeking to enter the market through notable acquisitions: Lotte and Aeon have acquired land for a future commercial center in Hanoi, while Blue Investment Fund has invested US$2.5 million in Beta Media. Central Group has spent US$500 million on their expansion projects.
How great is the potential in Vietnam?
With a population of 90 million, of which 40% are under 25 years old, and 45% are aged 25-54, Vietnam is a market with great potential.
With a growth rate of 30% every two years in income per capita (GSO 2016), 33 million people are expected to belong to the middle class by 2020 (BCG 2013).
Meanwhile, Vietnam’s Consumer Confidence Index increased to a 5-year high in 2017, now ranked fifth in the world, according to Nielsen.
Sixty-three percent of Vietnamese chose to save their idle money, or 13% lower than the year before, which means Vietnamese are now willing to spend more on non-essential expenses.
IGD Research has predicted that Vietnam will be leading the Asian convenience store market by 2021 with a CAGR of 37.4%.
