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, signalling 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 urbanisation 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%, presents hurdles to Vietnam’s economic stability. Despite these challenges, Vietnamese consumers remain optimistic about their economic prospects, with more than 70% 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 behaviours, emphasising value and frugality in consumer choices.
The socioeconomic fabric of Vietnam is undergoing profound shifts. Urban migration and declining birth rates have fueled the rise of a burgeoning middle class characterised 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 favourite 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%.
Vietnam’s consumers are undergoing a transformation marked by four key trends.
Trend 1: Value-conscious Consumption
Value-conscious consumers are prioritising 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:
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:
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:
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:
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.
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.
Utilise Vietnam’s Manufacturing Gains:
Free trade agreements abound for Vietnam. Vietnam leads the charts on global trade interconnectivity.
Cater to Rising Retail Goods and Services Consumption:
Retail sales in the country grew by US$1 billion in 2022.
Target the Domestic Tourism Market:
Domestic tourism has replenished the international void since the pandemic. Only 3% of tourists were international in 2022.
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.
Address the Needs of Rising Household Affluence:
Capitalise on Financial Ecosystems for E-commerce and Entrepreneurship:
Navigate Vietnam’s Political Stability and Geopolitical Management:
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 behaviours within their existing customer segments.
Here are some critical capabilities for foreign brands entering the Vietnamese market:
Suggested reading: What makes Vietnam an attractive destination for foreign investment?
Contact Kadence International, which is equipped with an office in Vietnam, to capitalise 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.