It is the perpetual head-scratcher for countless foreign residents – how can Louis Vuitton market a $3,500 handbag in a nation where the annual per capita income is just over $800?
While much of the rural population hovers above or below the poverty line, a whole new world has sprung up in Hanoi and Ho Chi Minh City. Even the most casual of observers will have noticed that Hanoi and Ho Chi Minh City are now home to major international brands that you would normally associate with London, Paris or New York. It goes without saying that these brand names come with hefty price tags. But it seems there is no shortage of customers as annual turnovers of Giordano, Bossini, Valentino, Denti, Mango in Vietnam are growing by 20 to 30 per cent.
Such material extravagance must seem quite surreal to older, thriftier generations. Less than a generation ago, people queued up for rice and clothes. Now today’s nouveaux riche are snapping up Gucci shoes, Louis Vuitton handbags and Cartier watches. With the sudden emergence of a wealthy business sector thanks to Vietnam being Asia’s most rapidly growing economies in recent times, perhaps it’s inevitable.
Following Nguyen Hai Dang, a 35 year old director of Hai Dang joint stock company, I take a tour of the capital city’s fanciest retail outlets in town as he searches for clothes for the summer. Browsing through the shops in Pacific Palace, Vincom Tower and finally the recently opened Parkson Viet Tower, I can’t help but marvel squint at the zeros on some of the price tags and wonder if there’s been some mistake – $1,200 for a pair of shoes?
In the past Hanoians would have had to travel abroad to purchase such products, but since 2006, the luxury market has taken off in the capital city. Luxury retail outlets aren’t just opening up in Hoan kiem district either. The Malaysian group Parkson has recently opened a mall on Thai Ha street stocking Giorgo Armani, Aigner and Evita Peroni products, while one of the most exclusive shopping venues is the Luxury Mall at 1 Dao Duy Anh street near Thong Nhat park, where you can find more than 30 fashion and accessory boutiques offering brands such as Gianfranco Ferre, Versace, Just Cavalli, GF Ferre and D&G.
In a bid to woo Vietnamese customers as well as tourists and traveling businesspeople often brands anchor down in luxury hotels or serviced apartments, such as Sofitel Metropole Hotel and Pacific Place serviced apartments, where you can find Louis Vuitton and Salvatore Ferragamo outlets for example. While we browse the shops Hai Dang explains why he doesn’t think twice about picking up a Maison Segaro shirt for $400, an Alain Delon pair of shoes for $1,000 or a Louis Vuitton case for $3,500. “You don’t need the label to be seen, if you wear a brand name, as other businessmen will know what it is.
Looking at your clothes, I know where you come from, how much money you have, and how prestigious you are,” he says. In the business circles Dang operates, appearance is clearly everything though not surprisingly women working in the corporate sector are a large driving force behind the boom in spending on luxury goods in Vietnam. Thuy, who works as marketing executive for Vinaconex, admits she hummed and hawed over two Furla bags that each cost $800. But that’s only because she didn’t know which one she preferred. “If I can afford to buy something nice, it makes me feel proud,” she explains. “It shows people your style and taste.” “I prefer luxury bags, shoes and glasses to clothes and watches,” she continues.
“I often discard old items of clothing quite quickly but the durability of shoes and bags is higher so they are worth the money.” Dang admits amongst his business associates there’s an element of one-upmanship. “Sure some guys I know want the most expensive or unique suit, shoes, pen, leather briefcase or wallet,” he admits. After just an hour’s shopping he has splashed out roughly $6,000 for a pair of summer shoes, a couple of shirts, some sportswear and sunglasses.
As I stand waiting for him in the Roberto Cavalli shop I’m not surprised when Huong Ly, the super stylish young sales assistant, says she just sold a $4,000 leather jacket. “I’m amazed that a lot of middle-aged Vietnamese wear luxury items like in South Korea and Japan,” says California Wow Experience’s Chairman Eric Levine. But perhaps no one should be surprised as this trend in Vietnam is part of a wider trend seen in Asia, which now accounts for 50 per cent of the annual 80 billion dollar market for luxury brands.
As Radha Chadha the co-author The Cult of the Luxury Brand, told AP news agency recently, “The reason why Asians buy so many luxury brands is that in Asia you are what you wear. A luxury brand is a symbol that defines who you are and your social status.” But Vietnam also has certain benefits for retail groups looking to cash in on this brand-hungry market. “Most of our Vietnamese ‘shopaholics‘ are young people who work for multinational corporations but still live rent-free with their parents,” says Do Thanh Loc from Golden Summer Fashion Company, distributor of Furla and Geox brands in Vietnam.
“Others work for powerful state-owned companies and many have made a fortune in Vietnam’s small but booming private sector. These are the people who want everyone to know that they are high-class,” says Loc. As the market grows the main distribution companies in Vietnam such as Danh Gia, Phuong Phat, C.T Group, Duy Anh, Thanh Bac Indochina, Golden Summer Fashion, won’t be shy about bringing more leading brand names to Vietnam to meet this seemingly insatiable demand.
The chief executive of Lousi Vuitton Yves Carcelle recently told the Financial Times that revenues in Vietnam for his company grew more than 300 per cent last year. Parkson Hanoi’s general director, Tham Tuck Choy, said “Vietnam is a potential retail market. Riding on the success of our stores in Ho Chi Minh city, Haiphong and now Hanoi, we will open more Parkson centers in Vietnam in the next years. It is a new era of modern and premium shopping.”
In a country where flaunting excessive wealth was frowned upon just over a decade ago, young people are now growing up in a whole new world. “Five years ago, owing a VND2 million mobile phone was a luxury. But it is different today,” says 28-year-old Tran Minh Hoang, the director of Gia Tue Investment, a property company which is building villas in Da Lat to the tune of $2.8 million a unit. “Now you can see Vertu phones that cost $5,000 to $50,000 and there is no shortage of people in Vietnam owning one.”
