Vietnamese domestic products losing battle to foreign competition
There is a new shift in behavior of Vietnamese consumers in the last year
With the fast GDP growth of the country, and increase in purchasing power, Vietnam’s consumers started developing new shopping needs and patterns in the last decade. The best way to describe this change is MasterCard’s Index of Consumer Confidence which describes Vietnamese as one of the most optimistic consumers in the Southeast Asian region. Vietnam is ranked 2nd, only behind Cambodia.
In theory, this would be great news for any company operating in Vietnam’s market, both domestic and foreign. However, recent data shows that foreign companies and brands might have the edge.
According to a survey released by the High Quality Vietnamese Goods Business Association, ‘Made in Vietnam’ brands are losing their position in the market. One of the main reason is based on the fear of trade fraud (e.g. fraud allegations such as those filed against the renowned high-end brand Khaisilk last October have hit consumer confidence hard), as well as lack of transparency.
The data from the survey shows that only 51% of more than 17,000 surveyed consumers say they prefer Vietnamese products over foreign, a drop of astonishing 27% compared to 2017.
Further issues for domestic brands lay in the fact that foreign competitors, following Vietnam’s fast development, are making a strong market entry. Companies from Japan, South Korea and Thailand are leading the way. According to survey’s coordinator Nguyen Van Phuong, once the foreign companies penetrate the retail market (e.g. supermarket chains from Thailand – Big C and Mega Market, and convenience stores such Japanese Family Mart), it is easy for them to put products from their countries on the shelves.
BDG insights
If Vietnam manages the keep its strong development track in the years to come (which many economists argue it will, at least in the medium-term), we can only expect to see more foreign companies and brands entering the market. It is up to local brands to find new ways to win back the local customers’ trust, and maintain profitability. One of the latest moves in that directions is the creation of own brands by local supermarkets, which are targeting the price-sensitive shoppers.
With the increase of competition, the ultimate winners could be the local consumers, who will enjoy more product variety at a lower cost.