Vietnam is capturing the attention of investors. This dynamic country boasts rapid economic advancement and offers a gateway to an expansive regional market, making it an enticing option for brands looking to expand their global footprint. 

The critical role of detailed market research cannot be overstated in successfully navigating the complexities of market entry into Vietnam, ensuring international brands can make informed decisions and adapt strategies to thrive in Vietnam’s vibrant economy.

Understanding the Vietnamese Market

Why Vietnam?

Vietnam’s market is growing, presenting several attractive features for investors worldwide.

  • Strategic Location: Nestled in the heart of the Mekong Region, which encompasses Vietnam, Thailand, Cambodia, Laos, Myanmar, and the southern provinces of China, Vietnam offers unparalleled access to a combined market of over 300 million people. This advantage is further enhanced by its membership in the Association of Southeast Asian Nations (ASEAN) and its prime positioning along the Eastern Sea, making it a central hub with existing transportation routes that link directly to global markets.
  • Fast-Growing Economy: Vietnam is celebrated as one of the fastest-growing economies in Asia and globally. The official estimate for Vietnam’s GDP is USD 470 billion in 2024.
  • Integration into the Global Economy: Vietnam has recently significantly boosted its investment inflows by actively participating in several Free Trade Agreements (FTAs). These agreements anchor Vietnam within a multilateral, rules-based trading system and have been instrumental in fueling the country’s exports, showcasing Vietnam’s commitment to and successful integration within the global economy.

Demographic Insights

  • Population Size, Age Distribution, and Urbanization Trends: With a population exceeding 97 million, Vietnam boasts a youthful demographic, with a significant portion under 30. This youthful demographic and rapid urbanization are reshaping consumer markets, economic priorities, and the workforce.
  • Middle-Class Growth and Its Impact on Consumer Behavior: The expanding Vietnamese middle class, projected to continue growing in size and purchasing power, is driving changes in consumption patterns. Increased disposable income has increased demand for quality, branded goods and services, including education, healthcare, and leisure activities, reflecting broader economic and social shifts.

Cultural Considerations

  • Social Norms and Values Influencing Consumer Preferences: Traditional values, such as community, family, and respect for authority, coexist with a growing openness to global trends and digital engagement. This blend of traditional and modern influences shapes consumer behavior, brand loyalty, and product preferences in the Vietnamese market.
  • Case Studies of Brands Successfully Adapted to Vietnam’s Culture: Several international brands have effectively navigated Vietnam’s cultural landscape by tailoring their marketing strategies and product offerings. For instance, global fast-food chains have incorporated local flavors into their menus, while tech companies have offered localized apps and services. These adaptations respect local tastes and norms and significantly contribute to their success in the Vietnamese market.

Key Sectors Driving the Vietnamese Economy

  • Manufacturing and Exports: The manufacturing sector, particularly electronics and textiles, has seen rapid growth, supported by Vietnam’s participation in numerous free trade agreements. These agreements have opened up markets and reduced trade barriers, enabling Vietnam to become a manufacturing hub for international brands and significantly boosting its export economy.
  • Agriculture: Traditionally a cornerstone of the Vietnamese economy, the agriculture sector continues to play a significant role, employing a large portion of the population and contributing to domestic consumption and exports. Coffee, rice, and seafood are among the key products that have found a global market, reinforcing Vietnam’s position in these industries.
  • Services and Tourism: The services sector, including travel and tourism, has witnessed significant expansion, contributing to economic diversification. Vietnam’s rich cultural heritage, natural beauty, and government initiatives to promote tourism have attracted visitors from around the globe, generating revenue and creating jobs.
  • Technology and Innovation: In recent years, Vietnam has emerged as a growing center for technology and innovation, attracting startups and investments in tech. The government’s focus on digital economy transformation and support for the tech industry has fostered an environment conducive to growth in IT services, software development, and digital content.
  • Real Estate and Construction: Fueled by urbanization, rising incomes, and increasing foreign investment, the real estate and construction sectors have also seen significant growth. Developing residential, commercial, and industrial properties has been key to the country’s economic expansion.

Navigating the Vietnamese Market

Legal and Regulatory Framework

Navigating the legal and regulatory landscape is crucial for any foreign business considering entering the Vietnamese market. This section overviews the business registration processes, outlines key regulations affecting foreign businesses, and explains the protection of intellectual property rights in Vietnam.

Overview of Business Registration Processes and Timelines

  • Business Registration Process: Foreign investors looking to establish a presence in Vietnam must go through a multi-step process that typically involves obtaining an Investment Registration Certificate (IRC) and a Business Registration Certificate (BRC). This process starts with selecting a business type (e.g., 100% foreign-owned, joint venture, representative office). It includes preparing a comprehensive dossier to submit to the Department of Planning and Investment (DPI).

Key Regulations Affecting Foreign Companies

  • Import Tariffs: Vietnam’s integration into the global economy through various Free Trade Agreements (FTAs) has significantly impacted import tariffs. Depending on the product and originating country, tariffs can vary, with many reductions or eliminations implemented for FTA partners. However, understanding the specific tariff structure applicable to one’s products is essential for cost-effective business planning.
  • Local Partnership Requirements: Certain sectors in Vietnam require foreign investors to enter the market through joint ventures with local partners. These partnerships often have specific equity caps, necessitating thorough market research and due diligence to identify and vet potential local partners.
  • Sector-Specific Regulations: Beyond general investment laws, foreign businesses must navigate regulations specific to their sector, such as banking, telecommunications, and energy. These regulations can affect market entry strategies, operational scope, and partnership structures.

Intellectual Property Rights Protection in Vietnam

  • Regulatory Framework: Vietnam has significantly strengthened its intellectual property (IP) laws and enforcement mechanisms. As a member of the World Trade Organization (WTO) and signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Vietnam is committed to upholding international IP standards.
  • IP Registration: Registering IP (patents, trademarks, industrial designs) in Vietnam is critical for protecting one’s assets. The National Office of Intellectual Property (NOIP) oversees IP registrations, with the process typically taking from 12 to 18 months for trademarks and longer for patents.
  • Enforcement: While challenges remain in IP enforcement, recent efforts have improved the situation. Foreign companies are advised to develop comprehensive IP protection strategies, including registration, monitoring the market for infringements, and being prepared to take legal action if necessary.

The Competitive Landscape in Vietnam 

Overview of Key Players and Industry Competition

  • Manufacturing and Electronics: Samsung and LG are significant foreign investors with extensive manufacturing operations in Vietnam. Domestic companies such as VinGroup have also entered the electronics sector, launching their lines of smartphones and tech products.
  • Retail and E-commerce: The retail sector sees a mix of local giants like VinMart, Co.op Mart, and international players such as AEON, EMart, Big C and Lotte Mart. In e-commerce, Shopee, Lazada, and Tiki dominate, with the latter being a successful local competitor.
  • Food and Beverage: This sector is highly competitive, with global brands like KFC, Starbucks, and McDonald’s competing alongside popular local chains such as Pho 24 and Highlands Coffee.
  • Telecommunications: Viettel, owned by the Vietnamese military, is the largest telecom provider, followed by Vinaphone and Mobifone. These companies dominate the market, offering a range of telecom and internet services.

Analysis of Market Gaps and Opportunities for New Entrants

  • Sustainable and Organic Products: Growing environmental awareness among Vietnamese consumers has created a demand for sustainable, eco-friendly products, from organic foods to biodegradable goods. Our recent research findings, published in a comprehensive report, “The Green Brand,” show that 72%  strongly agree businesses are responsible for engaging in sustainable practices. 
  • Health and Wellness: The health and wellness sector, including nutritional supplements, fitness, and wellness services, is expanding, driven by rising health consciousness.
  • Tech and Innovation: Opportunities abound in fintech, edtech, and healthtech, where technological innovations can address unmet needs in finance, education, and healthcare services.
  • Premium and Luxury Goods: Increasing disposable incomes and a growing middle class have fueled demand for premium and luxury products, offering entry points for high-end brands in fashion, beauty, and lifestyle.

Strategies for Differentiation and Gaining Competitive Advantage

  • Localization: Tailoring products and marketing strategies to fit local tastes, values, and cultural nuances can significantly enhance appeal to Vietnamese consumers.
  • Innovation: Offering innovative products or services that fill existing market gaps can set a company apart. This requires a deep understanding of consumer needs and market trends.
  • Partnerships and Collaborations: Collaborating with local companies can provide valuable market insights, access to established distribution networks, and enhanced credibility among local consumers.
  • Quality and Value: Ensuring high product quality and providing excellent customer service at competitive prices can help build a loyal customer base and differentiate from competitors.
  • Digital Engagement: Investing in a strong digital presence, leveraging social media, and engaging with consumers online can boost brand visibility and drive sales, particularly among the tech-savvy younger demographic.
9-fashion-buyer-personas

Market Entry Strategies In Vietnam

Successfully entering the Vietnamese market requires a strategic approach tailored to its unique opportunities and challenges. Here, we explore four key market entry strategies brands can utilize for successful market entry into Vietnam.

Direct Exporting

  • Pros: Direct exporting allows companies to maintain control over their products and brands, directly reach customers, and maximize profits without intermediaries. It’s an effective way to test market receptivity with minimal investment.
  • Cons: The main challenges include navigating Vietnam’s complex regulatory environment, understanding and complying with import tariffs and customs procedures, and managing logistics and distribution networks. Building brand awareness and trust without a local presence can also be difficult.
  • Focus on Regulatory Hurdles and Market Access: Successfully exporting to Vietnam requires thorough knowledge of the country’s trade regulations, product standards, and certification requirements. Companies must also adapt their products and marketing strategies to fit local consumer preferences and comply with national standards and regulations.

Franchising and Licensing

Vietnam has become an attractive destination for international franchisors due to its growing economy, expanding middle class, and openness to Western brands. The country has seen successful franchises in various sectors, including food and beverage, education, and retail.

Brands like KFC, Starbucks, and 7-Eleven have successfully entered the Vietnamese market through franchising, adapting their business models to local tastes and consumer behavior while leveraging their parent companies’ brand recognition and business support systems.

Joint Ventures and Partnerships

Engaging in joint ventures or forming partnerships with local companies offers foreign brands valuable insights into the Vietnamese market, easier navigation through regulatory landscapes, and access to established distribution networks. Local partners can provide on-the-ground knowledge and facilitate smoother integration into the market.

A notable example is the partnership between Vinamilk, Vietnam’s largest dairy company, and Chr. Hansen of Denmark aimed to develop probiotic dairy products tailored to the Vietnamese market. This partnership leveraged Chr. Hansen’s technological expertise and Vinamilk’s market dominance.

E-commerce and Digital Market Entry

With a rapidly increasing internet penetration rate and a young, tech-savvy population, Vietnam’s e-commerce sector has witnessed exponential growth. Online marketplaces like Shopee, Lazada, and Tiki are becoming increasingly popular for local and international brands.

To capitalize on this trend, companies should consider launching on established e-commerce platforms to gain instant access to a wide customer base. Developing a strong online presence through social media and digital marketing, offering online-exclusive products, and providing excellent customer service are key strategies to succeed in Vietnam’s e-commerce landscape.

Risk Management for Brands Entering Vietnam

Identifying and Mitigating Potential Risks in Market Entry

  • Market Research and Due Diligence: Comprehensive market research and due diligence are foundational to identifying potential risks. This includes understanding the regulatory environment, competitive landscape, consumer behavior, and potential barriers to entry. Companies should also assess the legal and financial aspects of entering the Vietnamese market to avoid unexpected challenges.
  • Compliance with Local Laws and Regulations: Navigating legalities requires a thorough understanding of local laws, including business registration, taxation, employment, and industry-specific regulations. Engaging local legal experts can help ensure compliance and mitigate legal risks.
  • Supply Chain and Operational Risks: Evaluating the reliability and stability of local supply chains, infrastructure, and logistics is crucial. Companies can mitigate these risks by diversifying suppliers, considering alternative distribution channels, and investing in supply chain resilience.

Political, Economic, and Social Factors to Consider

  • Political Factors: While Vietnam offers a stable political environment, it’s important to monitor policy changes that could affect business operations, such as changes in foreign investment laws, trade policies, and diplomatic relations. Establishing strong relationships with local authorities and staying informed on political developments can be helpful. 
  • Economic Factors: Economic fluctuations, inflation rates, and currency volatility are important considerations. Companies can manage these risks by conducting regular economic assessments, employing financial hedging strategies, and adapting pricing and financial models to local market conditions.
  • Social Factors: Understanding and respecting Vietnam’s cultural norms and social values are crucial for market entry success. Social risks, including labor practices, consumer activism, and social media reputation, require careful management. Brands can mitigate these risks by engaging in socially responsible practices, fostering positive community relations, and maintaining an active and positive online presence.

Additional Risk Management Strategies

  • Crisis Management Planning: Develop a comprehensive crisis management plan that includes scenarios specific to the Vietnamese market, such as natural disasters, supply chain disruptions, or political unrest. This plan should outline communication strategies, response teams, and recovery plans.
  • Adaptability and Local Engagement: Building a flexible business model that can quickly adapt to market changes and engaging with local communities and stakeholders can enhance resilience. Listening to local consumer feedback and being responsive to market trends can also help mitigate risks associated with consumer behavior changes.
  • Technology and Cybersecurity: As digital transformation accelerates, protecting against cyberthreats and ensuring data privacy in compliance with local regulations are increasingly important. Investing in robust cybersecurity measures and technology infrastructure can safeguard operations and sensitive information.

Navigating the vibrant yet complex Vietnamese market requires a strategic approach, from understanding the economic landscape and legal frameworks to crafting entry strategies and managing risks effectively. With the right market research team, insights, and local expertise, brands can unlock significant opportunities in this fast-growing market.

To learn more about how we can assist your brand in achieving success in Vietnam and other regions by providing market insights and strategic guidance, contact us today. With our presence in ten countries, we are a global company that offers localized services. Let us help you connect the dots to make informed decisions and turn the market entry challenges into stepping stones for success.

Vietnam is experiencing the peak of its demographic dividend, boasting a sizable youthful population —the driving force behind its consumer class. McKinsey & Company forecasts an additional 36 million individuals joining the consuming class by 2030, signaling a surge in disposable income and purchasing power.

Projections indicate that more than half of Vietnam’s population will join the global middle class by 2035, which promises to stimulate consumer spending.

In recent times, Vietnamese consumers have demonstrated an acute sense of value and a deepening connection to digital platforms. Various factors propel this shift, notably the nation’s robust economic growth, mounting income levels, and escalating urbanization rates. And what stands out is the discernible rise in sophistication among Vietnamese consumers.

However, as Vietnam experiences economic growth, it is also grappling with challenges that may affect its population’s spending capacity. Decreased demand from key markets such as the United States and the European Union, coupled with inflation hovering around 3.8 percent, presents hurdles to Vietnam’s economic stability. Despite these challenges, Vietnamese consumers remain optimistic about their economic prospects, with more than 70 percent planning to maintain or increase their spending in various categories.

Despite the economic disruptions, consumer confidence remains resilient, as many national survey results indicate optimism regarding the country’s economic rebound. However, amidst this optimism lies a growing sense of financial consciousness, with most consumers anticipating financial strains due to inflationary pressures and rising costs. This heightened awareness drives a shift toward more discerning shopping behaviors, emphasizing value and frugality in consumer choices.

Vietnamese Consumers: A Snapshot

The socioeconomic fabric of Vietnam is undergoing profound shifts. Urban migration and declining birth rates have fueled the rise of a burgeoning middle class characterized by smaller yet wealthier households. 

The widespread adoption of smartphones and internet access, with 97% of adults owning a smartphone and 79% having internet connectivity, has ushered in a new era of digital transformation and innovation. This digital revolution can be seen in the internet economy’s substantial contribution of 5.7% of GDP in 2022. 

Vietnam is forging its way as one of Southeast Asia’s fastest-growing e-commerce hotspots. Online shopping has exploded in just a few years, grabbing a bigger slice of the retail pie. E-commerce giants Shopee and Lazada are leading the charge, but don’t count out local shops. They’re making a name for themselves, especially in consumer electronics and tech gadgets. And there’s a new player in town: social commerce. It’s quickly becoming the next big thing, with Vietnamese shoppers eager to click, share, and buy their favorite social platforms. The future of shopping in Vietnam? It’s online, social, and more exciting than ever.

Vietnam’s e-commerce scene recently saw its highest spending in the electronics category, hitting a peak of $4.52 billion. Fashion purchases weren’t far behind, with spending crossing the $2 billion mark, while toys also made a significant splash at $1.78 billion. Interestingly, the food sector outpaced them all in growth, with e-commerce spending on groceries surging by over 18%.

Four Key Consumer Trends

Vietnam’s consumers are undergoing a transformation marked by four key trends.

Trend 1: Value-conscious Consumption
Value-conscious consumers are prioritizing some goods while being frugal with others. Inflation and the shift to premium brands drive higher spending in specific categories while lower spending is observed in others.

Brands can adapt to these shifts by doing the following:

  • Offer value bundles: Provide bundled deals with savings on essential items and premium products. For example, a grocery store can offer a package deal with necessities like rice and cooking oil alongside premium sauces or spices.
  • Introduce affordable luxury options: Create premium products priced competitively to cater to the desire for quality without breaking the bank. For instance, a skincare brand can develop a line of high-quality facial creams at a reasonable price point.
  • Implement loyalty programs: Reward customers for their purchases to encourage repeat business. For instance, a coffee shop brand can offer a loyalty card where every 5th cup of coffee is free, incentivizing customers to return regularly.

Trend 2: Omnichannel Shopping
Omnichannel shopping is thriving, with consumers using alternatives to in-store shopping. Technology is contributing to the prevalence of omnichannel platforms.

Here are some strategies brands can employ to reach their audiences:

  • Invest in e-commerce platforms: Develop user-friendly websites and mobile apps to facilitate online shopping. Ensure seamless integration with brick-and-mortar stores for click-and-collect options. For example, a fashion retailer can offer online shopping with in-store pickup options for added convenience.
  • Collaborate with tech companies: Partner with technology firms to enhance the online shopping experience through features like virtual try-ons or personalized recommendations. For instance, a furniture store can collaborate with augmented reality companies to allow customers to visualize how furniture will look in their homes before purchasing.
  • Utilize social media channels: Leverage popular social media platforms for advertising and selling products directly. Engage with customers through interactive content and influencer partnerships. For example, a cosmetics brand can collaborate with beauty influencers to showcase products and offer exclusive discounts to their followers.
9-fashion-buyer-personas

Trend 3: Low Brand Loyalty
Vietnamese consumers exhibit little brand or store loyalty, with most switching stores or brands, making them among the least loyal in the Asia-Pacific region.

Brands can retain customers and boost loyalty by doing the following:

  • Focus on product differentiation: Offer unique features or benefits that set your brand apart. Highlight these differences in marketing campaigns to attract new customers. For example, a snack company can emphasize its use of locally sourced ingredients or unique flavor combinations.
  • Provide exceptional customer service: Prioritize customer satisfaction by offering responsive customer support and hassle-free return policies. Build trust and loyalty by addressing customer concerns promptly and effectively.
  • Foster emotional connections: Create memorable brand experiences that resonate with consumers on a personal level. For instance, a clothing brand can sponsor community events or initiatives that align with its values, fostering a sense of belonging among customers.

Trend 4: Sustainable, purpose-driven purchases
Vietnamese consumers seek purpose in their purchases and make healthier, more sustainable, and local choices, although environmental concerns rank lower in priority.

According to our latest study, 46% in Vietnam strongly agree they will select a product or service based on its environmental credentials.
– The Green Brand – A Comprehensive Report for Sustainable Trends Reshaping Brands by Kadence International

To sway purpose-driven consumers, brands must show their commitment to sustainability by:

  • Emphasizing sustainability: Showcase environmentally-friendly practices such as using recycled materials or supporting ethical sourcing. For example, a skincare brand can promote its commitment to cruelty-free testing and eco-friendly packaging.
  • Support local communities: Partner with local artisans or producers to offer products that celebrate Vietnamese culture and heritage. For instance, a food company can collaborate with local farmers to source ingredients for specialty dishes.
  • Align with social causes: Demonstrate commitment to social responsibility by donating a portion of sales to charitable organizations or supporting community initiatives. For example, a clothing brand can launch a collection where proceeds go towards education programs for underprivileged children.

Other Strategies for Brands Entering the Vietnamese Market

As Vietnamese consumers evolve, companies must adapt their strategies to stay competitive and meet changing demands. Some critical factors for brands must build capabilities in when entering the Vietnamese market are:

Leverage the Working Age Population and High Labor Participation:

The working population is 62% of the total in 2022. Half of the working population is aged 20 to 39 years.  

  • Focus on workforce-related products and services such as workwear, office supplies, and professional development tools.
  • Offer flexible employment options and benefits to cater to the workforce’s diverse needs, including remote work solutions and family-friendly policies.

Tap into Vietnam’s Consistent GDP Growth:

The Vietnamese economy grew 8% in 2022, attracting a healthy trade surplus, a continued rise in foreign direct investment disbursements, and 1.7 million new jobs. 

  • Invest in industries that align with the country’s economic growth trajectory, such as technology, manufacturing, and infrastructure development.
  • Tailor product offerings to match the evolving needs and purchasing power of consumers as the economy expands.

Utilize Vietnam’s Manufacturing Gains:

Free trade agreements abound for Vietnam. Vietnam leads the charts on global trade interconnectivity. 

  • Establish partnerships with local manufacturers to streamline production processes and ensure product quality.
  • Invest in research and development to stay ahead of technological advancements and meet increasing consumer demands for innovative products.

Cater to Rising Retail Goods and Services Consumption:

Retail sales in the country grew by US$1 billion in 2022. 

  • Enhance the shopping experience by offering convenient and personalized services like home delivery, virtual shopping assistants, and loyalty programs.
  • Invest in sustainable practices to appeal to environmentally-conscious consumers and differentiate your brand in a crowded marketplace.

Target the Domestic Tourism Market:

Domestic tourism has replenished the international void since the pandemic.  Only 3% of tourists were international in 2022. 

  • Develop tourism-related products and experiences highlighting Vietnam’s cultural heritage and natural beauty.
  • Collaborate with local travel agencies and influencers to promote domestic tourism destinations and activities.

Harness the Power of the Internet Economy:

There were 77.93 million internet users in Vietnam at the start of 2023, when internet penetration stood at 79.1%. Vietnam was home to 70 million social media users in January 2023, 71% of the total population.

  • Expand digital marketing efforts to reach the growing online consumer base, including social media advertising, influencer partnerships, and targeted email campaigns.
  • Develop e-commerce platforms optimized for mobile devices to capitalize on the widespread smartphone usage in Vietnam.

Address the Needs of Rising Household Affluence:

  • Offer premium products and services tailored to the preferences of affluent consumers, including luxury goods, gourmet foods, and personalized experiences.
  • Provide financial planning and investment services to help households manage and grow their wealth effectively.
global-dining-trends

Capitalize on Financial Ecosystems for E-commerce and Entrepreneurship:

  • Partner with fintech companies to offer innovative payment solutions and financial services tailored to the needs of online shoppers and entrepreneurs.
  • Develop user-friendly digital banking platforms to facilitate seamless transactions and empower customers to manage their finances effectively.

Navigate Vietnam’s Political Stability and Geopolitical Management:

  • Build strong relationships with local government officials and regulatory bodies to ensure compliance and minimize risks associated with political instability.
  • Monitor geopolitical developments and adapt business strategies accordingly to maintain resilience and competitiveness in the market.

Final Thoughts

Vietnam’s vibrant consumer markets have enjoyed robust momentum for some time and are currently undergoing increased complexity. The consumer base is expanding across various geographical, social, demographic, and technological dimensions. With consumers becoming more diverse and discerning, brands aiming to cater to them must fine-tune their strategies to consider income levels, emerging channels, marketing approaches, and shifting behaviors within their existing customer segments.

Here are some critical capabilities for foreign brands entering the Vietnamese market:

  • Localize global products innovatively, tapping into local preferences and subsegments while optimizing hero SKUs.
  • Master revenue growth management, balancing affordability and “premiumization” to maximize revenue growth.
  • Invest in conscious spending areas, especially in an inflationary context.
  • Adjust the operating model, striking the right balance between ownership and agility to produce innovative products.

Suggested reading: What makes Vietnam an attractive destination for foreign investment?

Contact Kadence International, which is equipped with an office in Vietnam, to capitalize on this lucrative market. Our expertise and local presence empower brands to navigate the complexities and unlock the full potential of Vietnam’s dynamic consumer market. Reach out today and embark on your journey toward success in one of Southeast Asia’s most promising markets.

Leverage new business models like retail-media-network capabilities or digital ecosystems to create additional value in a demanding and connected consumer market.

From one of the world’s poorest and most isolated nations, Vietnam has emerged as a force to reckon with for international investors. Now a middle-income country with a young population, Vietnam provides a wealth of opportunities for brands entering the country.

Owing to a rising middle class and a boost in manufacturing and exports, an increasing number of brands are eager to make an entry into Vietnam. 

It was announced yesterday that Apple is in the process of relocating Apple Watch and Mac production to Vietnam as part of a broader push to diversify its supply chain.

In recent years, Vietnam has shown immense resilience. At the peak of the pandemic in 2020,  when most other countries were derailed economically, Vietnam was one of the few countries to post GDP growth. In 2021, the country had a rough year, but the economy is expected to rebound to 5.5 percent in 2022.

Stay ahead

Get regular insights

Keep up to date with the latest insights from our research as well as all our company news in our free monthly newsletter.

The government provides various incentives to attract international companies looking to establish local production and distribution of their products. 

This rapid growth and a consumer-driven modern lifestyle have set the stage for foreign investment. There have been shifts in consumer spending and behaviors, and an understanding of these changes and the cultural nuances of the local population are critical to successful market entry in Vietnam. 

So how can international investors and brands tap into this lucrative market?

Brands can conduct thorough market research to understand the market, culture, consumer behavior, and economic and socio-political conditions to map out a successful market entry roadmap and strategy. 

Setting up and registering a company in Vietnam.

Setting up a company in Vietnam is a straightforward process, but knowing the options available and the specific guidelines and rules for foreign organizations is critical to success. The two most common forms of foreign-owned companies or legal entities are a Limited Liability Company (LLC) and a Join-stock Company (JSC).

Vietnam is easy to enter and carry out business in as it also offers 100 percent ownership of a company in most industries. Industries that have restrictions on foreign ownership require companies to enter into a joint venture with a local Vietnamese company.

As long as the business covers the expenses and can sustain itself, there are no minimum capital requirements for investing in most businesses and industries. All companies in Vietnam need a physical office address and at least one resident director with a local residential address. 

In some cases, you don’t need to set up a company in Vietnam as there are alternative ways, such as having a representative office or having an employer of record —a third-party service provider that recruits and manages employees on behalf of your company. 

Vietnam’s stable political climate and socio-economic conditions

A country’s political climate is an important consideration when weighing the opportunities and challenges of entering an international market. 

Vietnam is a unitary single-party state, which means there is only one political party; and the formation of other political parties is forbidden. This makes the political environment stable. 

Political stability is one of the most critical considerations in entering a new market. Protests and civil unrest are rare, with occasional demonstrations.

On the 2022 economic freedom index, with a financial freedom score is 60, and out of 39 countries, Vietnam is ranked 18th in the Asia Pacific region.

Hiring in Vietnam

Another important aspect of setting up a company in an international market is understanding the labor market —its laws, guidelines, and policies. 

Vietnam provides a labor force at a relatively lower cost. The Mekong Region, which includes Laos, Thailand, Myanmar, Cambodia, and some Chinese provinces provides, puts foreign brands in front of a vast, affluent population. 

Organizations that ensure equity and fair compensation and benefits attract high-quality talent. Brands should understand legal compliance and H.R. policies and even partner with local H.R. consultants to handle hiring, payroll, and other such functions. 

The role of Foreign Direct Investment in the growth of Vietnam

Foreign direct investment has played a pivotal role in transforming Vietnam from one of the poorest countries in East Asia to one of the fastest growing with a rising middle class. Vietnam’s massive untapped potential, a relatively cheap workforce, and abundant natural resources draw foreign investors to the country. 

The government’s strategy is to attract high-tech companies to the country, with a focus on four primary sectors, namely, manufacturing, agriculture, travel, and services. 

Furthermore, the government’s efforts to boost trade and investment through free-trade agreements make Vietnam an attractive market for foreign investors. 

Challenges and competition from other ASEAN countries

Second, only to Singapore, Vietnam was the most attractive destination for foreign investors among ASEAN nations in 2016 —a significant uptick in its rankings in World Bank’s 2018 “Ease of Doing Business” report from 82 to 68 out of 190 from just one year ago. 

Vietnam lags behind Singapore in most aspects, reflecting the need for more progress to become the region’s most attractive foreign investment destination. 

Some other risks associated with doing business in Vietnam include a weak banking sector and the boom in private sector investments.

The economy is poised to grow at a faster pace next year. According to a World Bank economic update from August 2022, Vietnam’s economic recovery sped up over the last six months. The strong rebound in services and manufacturing is driving this growth. GDP growth is forecast to surge from an estimated 2.6 percent in 2021 to 7.5 percent in 2022, which is even better news for International brands that have an eye on the ASEAN market. 

In Vietnam, face-to-face is the dominant form of market research. This is surprising given that almost everyone in Vietnam – from those in their teens to those in their forties – owns a smartphone, and this is the case regardless of where they live. Vietnamese consumers spend hours of their time online – on Facebook, YouTube, messaging apps, for online shopping and for online deliveries. What’s more, as in other developing markets across Asia, the network connection in Vietnam is good and Wi-Fi is free at almost every café and restaurant. 

This represents real potential for online research in Vietnam – an area that we’ve tapped into here at Kadence. We are one of the pioneers of online market research in Vietnam. We initiated our online market research service with our own panels and platform in 2015 and now, we have the biggest direct panel in Vietnam – with 500,000 consumers. 

Blog_Image

We conduct over 100 online market research studies annually but not every organization has embraced this approach. In Vietnam, many marketers have tended to favour traditional, face-to-face methods. But why is this? And is the situation changing?

One factor is the cost competitiveness of traditional approaches. Unlike Europe, the US or Japan, the labor cost in Vietnam is very affordable, meaning that online hasn’t offered a substantial enough pricing advantage to drive rapid adoption. Another factor at play in an assumption that online panels can only reach certain audiences. This couldn’t be further from the truth for us at Kadence. By providing dynamic incentives and recruiting respondents using both online and offline methods, we’ve built a panel of over half a million consumers, with wide coverage of age, areas and social incomes. 

Stay ahead

Get regular insights

Keep up to date with the latest insights from our research as well as all our company news in our free monthly newsletter.

But whilst marketers in Vietnam have tended to be quite conservative when it comes to their approach to market research, we are seeing a wind of change. Marketers are realizing the benefits online research has for providing market understanding quickly and efficiently, and that it can be used as a complement to, rather than a replacement of traditional research. COVID-19 has also played a role. Whilst, the impact of the virus in Vietnam has been less disruptive than in other countries, the demand for online market research shot up while offline research was restricted. As a result of this, many marketers have experienced first-hand the benefits online research can bring in terms of speed, cost, quality and flexible real-time analysis of data. 

Consumers are ready. The infrastructure is ready. Now with ever more local marketers starting to embrace online methods, the door is well and truly open for online market research in Vietnam.

How to conduct online market research in Asia: The Go-To Guide
Interested in understanding how to approach online research across other Asian countries? Download the guide here