The surging economy of Vietnam is not only beneficial for the upper class. More and more families experience an increase in wealth and therefore standard.
Saigon Skyline | photo: Frank Fox (cc-by-sa)
It is no secret that the middle class is carrying the economic stability of a country more than anyone else. The recent growth of exactly this group of consumers who leave the constraints of poverty to rise to a new level is a very good sign for all businesses in the country. The growing middle class is the actual motor of Vietnam's equally growing economy.
According to the Boston Consulting Group, the "Middle And Affluent Class" or abbreviated MAC is experiencing a significant increase from 12 million people as of 2014, up to 33 million people by 2020, which is around a third of the countries total population which is forecast to reach 97 million by 2020.
"Class" is actually a word not very popular in Vietnam due to the Socialist background which refuses a categorisation into classes. However for the sake of this article we use the term nonetheless.
Pink Limousine for Attention and Brand Development | photo: (cc-by-sa) Frank Fox
This group of consumers is defined by a monthly income of 15 million VND or more, which gives them a significant purchasing power. Reliable data according to ISEAS is difficult to obtain, since the discrepancy between the official salary of a person and their unofficial income can be quite significant.
The influence of the growing middle class is visible in many fields already, from restaurant businesses to office buildings and nice apartments. Also the import of quality consumer goods is a sign of increased purchase power.
The change is evident everywhere and the Vietnamese are most optimistic about the increasing wealth. According to surveys undertaken by the BCG, 92% of the Vietnamese believe that they live a better life than their parents. 93% believe that their children will live in better conditions than them. This optimism contributes a lot to the stable economic growth we are experiencing in Vietnam at the moment.
Real Estate Development in Thu Thiem, District 2 | photo: (cc-by-sa) Frank Fox
One problem of the rapid development is the lack of consumer goods and distribution channels. While the real estate sector, as mentioned in the dedicated article over here, easily can keep up with the trend, shopping for suitable goods is sometimes a pain. The retail is simply not ready for the changing consumer behaviour, which creates occasional price and quality problems.
Resourceful business owners see exactly this problem as an opportunity to tap into the market.
While many international groups start to battle for market shares in Vietnam, it is not that easy for them to find customers among the general population. The Vietnamese are price sensitive when it comes to their daily spending habits and while being seen at an international chain of coffee shops may count as a status symbol for many, most people prefer local chains for their daily cup(s) with friends and coworkers.
Apart from price sensitivity, the rising group of well educated people is also increasingly quality sensitive. High-End restaurants and coffee shops experience an increase in Vietnamese customers who value an excellent product higher than cheap alternatives.
Shin Coffee provides a top quality coffee experience | photo: (cc-by-sa) Frank Fox
The Vietnamese are avid internet users, a whopping 43 percent of members of the MAC are using the web on a daily basis, however just 16 percent shop online. This may be due to a significant lack of trust and quality online stores. On the other hand many businesses already know how to attract customers: By offering deals and discounts! There are few countries in the world where people are more actively hunting for deals than in Vietnam. Income class does not matter in this case, everybody loves a discount.
Taking a look at the main distribution channels of imported goods in Ho Chi Minh City we recognize a gap between cheap wares and luxury that has to be filled to satisfy the growing demand.
Saigon Evening Skyline | photo: (cc-by-sa) Frank Fox
Middle class families invest in proper education of their children, which in return increases their chance at finding quality jobs to found their own middle class family in the future. Good education increases awareness for social and health issues, which in turn leads to responsible consumer behaviour. The demand for healthy food, good travel experience, better education and many other quality and affordable goods and services drives our economy to a point when Vietnam starts to realise that producing proper goods and services in the country is better suited to tap the increased mass purchasing power, which in turn creates more and better jobs.
When it comes to business, the window of opportunity is right here and now. Of course it comes with obstacles, risks and drawbacks. The competition is huge from both foreign investments and Vietnamese entrepreneurs. But there is rarely an opportunity without risk, so we wish you Chúc Mừng Năm Mới!
May you dare and grab the rooster by the neck!
Rooster | photo: (cc-by-sa) Frank Fox
More From Vietnam