The Evolution of the Vietnamese Consumer in 2024.

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.

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.

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.

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.