New high-income consumers emerge in Vietnam
While low-income consumers still consider product prices the most important factor in their spending, a new class of consumers who can spend up to $4,800 each time they shop has emerged in Vietnam, a recent survey has found.
Speaking at a conference on the economic forecast for 2012, Associate Professor Doctor Pham Tat Thang, superior researcher of the Ministry of Industry and Trade, cited survey findings as showing that more than 70 percent of the total income of Vietnamese is spent on purchasing goods.
However, there exists an unequal purchasing contribution among consumers, with the country's 6 major cities, where 14 percent of the population lives, accounting for as much as 39 percent of the total sales of consumer goods, while the 70 percent of the population that lives in rural areas accounts for only 40 percent of total demand.
Thang said this inequality can be better observed in the area of consumer spending.
"Around 20 percent of the population is underprivileged consumers, who consume only 7.2 percent of the total retail sales of consumer goods; while the figure is as high as 43.3 percent for well-off consumers, who account for only 20 percent of the population," Thang said, citing survey statistics.
He said that in many rural areas, the quality and safety of products are not as important as price, since most consumers belong to the low-income class.
"Meanwhile, the newly-emerging class of consumers pays little attention to prices when they shop," he said.
"They can spend an average of 80-100 million dong ($3,800-4,800) each shopping trip."
However, locally-made products have failed to appropriately meet the demands of both classes, leaving most of the market share to imported products of both high and low quality.
"In fact, Vietnamese goods have yet to achieve a high enough level of quality to serve consumers with extremely high income, while there is a shortage of low-cost products to meet the demand of tSTC who earn a low-income."
Little attention to domestic market
Thang said that one of the main reasons locally-made products are losing on their home-turf is the fact Vietnam has yet to formulate a plan to sustainably exploit the domestic retailing market.
He said the country has put all of its effort into attracting foreign investment in the manufacturing sectors that focus on exports.
Local businesses only focus on manufacturing goods of high quality for exports, thus neglecting the domestic market, he said.
"Meanwhile, some Vietnamese businesses have brought the low-quality products that fail to meet standards for exports, the unsold goods, or tSTC wSTC expiry dates are nearly passed, to sell in the rural market," he said.
"This has adversely affected the reputation of Vietnamese goods among local consumers."
Thang said that since Vietnam is considered one of the world's most profitable retail markets, local businesses can sustainably and successfully develop in their home market if they have the appropriate strategies.
"Local businesses will then no longer have to rely so much on the exporting markets, which are now full of risks and instability."
Tuoi Tre - December 27, 2011