Business  » Property

With the rapid growth of the country’s economy, Vietnamese are finding themselves with more and more disposable income. Increasingly, they’re choosing to spend it on high-end consumer products, a trend that international and domestic retailers hope to ride all the way to the bank.

Bling it on: Fashionable scooters are one sign of the growing affluence of Vietnam’s middle-class

After years of hard work for a foreign company, 28-year-old Bui Mai Quyen was finally able to purchase her dream bike, an Italian-made Piaggio ET8 scooter. Quyen proudly shows off her Vespa any chance she gets.
Born in the southern agricultural province of Vinh Long, Quyen first became enthralled with the bike when she saw it zipping through the streets of Ho Chi Minh City. But it took some time before she could afford the $4,900 sticker price. It has been well worth the wait, she said.
“When I ride a Piaggio, I feel more confident,” Quyen said.
Hip consumers like Quyen have become the target demographic for distributors like the Xuan Cau Company, whose outlets in Hanoi and Ho Chi Minh City sell Piaggio scooters at up to $5,800 a pop.
In a country that was ravaged by wars, and where the annual per capita income is a paltry $550, it might seem that Xuan Cau would have a tough time selling such high-end products here. With the emergence of a new wealthy consumer class, though, international brands like Piaggio are having a field day in Vietnam.
Xuan Cau is one of three Piaggio distributors in Vietnam. The company’s director, To Dung, said the company recently opened its first outlet in Ho Chi Minh City and is in the process of launching its fourth shop in Hanoi. “We hope to sell nearly 1,000 scooters per year,” he said.
Dung claimed he is not simply selling a motorbike – he is selling a lifestyle.
He has set up maintenance centres in every shop to provide original spare parts imported from Italy, ensuring that his customers continue to come back.
“The young do not only buy a scooter. Those in Ho Chi Minh City in particular are very discerning about after-sales services,” including upgrades and maintenance, he said.

Status symbols
To some extent, the motorbike market is a microcosm for high-end product consumption trends in Vietnam. In the early 1990s, people were proud of owning a basic Honda Dream motorbike, but attitudes have changed in recent years. With the emergence of higher end Honda models like the @ and the Dylan, the sturdy Dream has become rather ordinary.
Among the young, the @ is seen as the princess to the Dylan’s prince, with the latter fetching an astounding $7,200 per unit. But even the Dylan is in danger of losing the throne: when the $8,600 SH scooter was aggressively marketed last year, it quickly became the king of high-end bikes.
In Hanoi and Ho Chi Minh City, the young want showy and trendy products, not a bargain. Expensive products and leisure activities such as name-brand clothes, golf, cosmetics, spas and cars are becoming more popular among a small set Vietnamese consumers, although the volume of these sales has remained low.
Large TV screens that cost up to $7,000 were once used only in public places like bars and restaurants, but electronics makers such as LG, Samsung, Pasasonic and Sharp are launching new products for home use.
Space in shopping centres in Hanoi and Ho Chi Minh City are nearly full, fetching average rents of $30 to $36 a square metre per month, respectively, in each city. New shops are opening every month, altering Hanoi’s retail landscape.
Marc Townsend, managing director of consulting company CB Richard Ellis, said international retailers were now coming to Hanoi, a city once considered a retail graveyard because of its residents’ reputation for being frugal.
After setting up its first shop in the second city, Dai A Trading Company opened two outlets in the capital city to sell United Colours of Benetton, whose $70 pullovers are eight times more expensive than comparable products.
Louis Vuitton, Cartier and Mont Blanc are opening outlets in the new Sofitel Metropole Hotel arcade in Hanoi, while other international brands such as Aubade and Carita are gaining footholds in the market.
Three storeys of the Ocean Park Building are being converted into the largest high-end retail outlet in the country, selling fashion brands such as Giordano and Valentino.

Pleasure seeking
As young people’s taste for the good – and expensive – life is growing, entertainment companies are offering new choices to meet demand. An American company has rented 4,000sqm in the Vincom City Towers to open an eight-screen cinema.
Analysts predict that the younger generation in Vietnam will continue to demand more consumption options as they gain exposure of what is available in the rest of the world. Although Vietnam is still fighting poverty in remote and mountainous areas, the country’s 7 per cent economic growth rate over the last few years and foreign remittances of over $3 billion per year are sure to create a burgeoning middle-class in big cities.
Vietnamese are also opting for expensive leisure activities such as spas and golf, which were previously the exclusive domain of foreigners. Lieu Tuan Thinh, managing director of Viet Artical, said most customers at his Qi Shiseido Salon and Spa outlets in Hanoi and Ho Chi Minh City were Vietnamese.
Another striking example of these new trends in consumption is the car market. When the government raised taxes on cars last year, industry analysts predicted a 25 per cent slump in sales. However, 11 foreign-invested car assemblers in the country ended the year with 42,000 units sold, almost equivalent to their sales from the previous year.
Although the car market is expected to face difficult times ahead because of higher taxes and higher prices, Honda Vietnam hopes to take advantage of growing demand with its entry into the domestic auto market, a development it announced two weeks ago.
Traditional living arrangements have also been altered by the emergence of wealth among the young. Kids are ignoring the tradition of living with their parents, opting instead to move into the high-rise apartment complexes booming in urban areas. They tend to opt for the latest trends in furniture and interior designs for their new luxury digs.

Class of their own
“There is a new class in Vietnam who are stylish and have high incomes, and they are covetous of high-end products,” said Pham Dinh Doan, general director of Phu Thai, the country’s largest distributor of consumer products.
Doan said people of this class are often aged between 25 to 45, and they are going overseas to Hong Kong, Singapore and Thailand to shop for luxury brands that Hanoi and Ho Chi Minh City don’t have.
“Vietnam still does not have any high-end shopping centres of international scale in terms of both investment and sales strategy,” he said.
The distributor said it was the right time to set up international-standard shopping centres in Hanoi and Ho Chi Minh City, which would succeed because of high local demand and growing tourist numbers. Vietnam drew in more than 2.9 million foreign visitors last year, and tourism authorities predict an annual increase of 11 per cent in foreign arrivals in the coming years. However, the number of high-end shopping centres remains limited, with the exception of Diamond Plaza and Zen Plaza, currently in operation in the second city.
Doan said the expected tourist influx, particularly from Japan, was an opportunity to boost high-end product sales in Hanoi and Ho Chi Minh City, because the Japanese are known for being fond of shopping.
Changes in the retail environment are spurring developers’ interest. New malls are popping up to meet the tastes of those with increased wealth.
Bitexco is due to complete the $32 million The Garden Shopping Complex next year, a facility the company hopes will “redefine the art of shopping” for Vietnamese.
Ciputra is about to begin building a 130,000sqm shopping complex in Hanoi, while a Kinh Do department store is expected to open next year.
The good times for Vietnam’s retail scene, it seems, are just beginning.