Speaking to friends back home, they are often very surprised to hear about Việt Nam’s explosive growth. China tends to dominate people’s thinking about Asian economies and frankly many have a very outmoded view of Việt Nam. Few appreciate that this beautiful country is one of Southeast Asia’s fastest growing consumer markets, and that rapid change is being driven by the expanding middle and affluent classes.
Far better informed is the luxury goods sector, which is showing itself increasingly keen to stake a claim to the Vietnamese market. These companies know the conditions exist for rapid expansion: stunning, sustained GDP growth; a young, well-educated population; rising living standards and discretionary spending sit alongside a general taste for conspicuous consumption that must have luxury goods firms taking urgent steps to ensure they do not miss out. Of course, no one living here could have missed the country’s growing appetite for luxury goods. The glittering glass frontage of the five-storey Takashimaya department store in HCM City is the perfect emblem of it, but high-end shopping facilities have been springing up there and in Hà Nội for several years (Đà Nẵng is another hotspot). The booming retail sector has enjoyed double-digit growth and it is predicted that consumer spending will have swollen by 37 per cent between 2015 and 2020. At the same time, it is predicted that Việt Nam will be home to over 30,000 High Net Worth Individuals by 2025 – around two and a half times the number today. One can imagine those figures being eagerly pored over in boardrooms all over the world.
The opportunity is particularly compelling for European luxury goods firms, firstly because of the superior brand prestige these hold on the world stage; although the Vietnamese are spending more, they are still known to be responsible spenders who cherish quality.
Second, of course, is the EU – Việt Nam Free Trade Agreement (EVFTA), which is set to see most tariffs on EU goods removed in a decade or so. Many European brands have revived their fortunes off the back of Asian growth and Việt Nam is predicted to grow faster than both China and India. What’s more, research indicates that half of wealthy Vietnamese are set to increase their luxury goods consumption going forward. European prestige brands are understandably vying to plant their flags here to tap this demand. Tourism provides another facet to the luxury goods story, as well as being a major part of the country’s growth generally. Việt Nam continues to fly high in the rankings of countries Western tourists most want to visit. One can imagine their delight to find the likes of Dolce & Gabbana – which has launched a flagship store in HCM City – offering high-end retail therapy as a break from their travels. We could see Việt Nam becoming a shopping destination as much as it is a place to delight in culture, scenery and food.
Of course, I take an interest in all this that goes way beyond fashion (and how high my future credit card bills might be!). As ever, what I see is the investment – and diversification – opportunity a luxury goods boom represents for my clients here. Investors can be wary of investing in foreign companies, but when these super-brands become something they can see, touch and enjoy themselves, their minds rapidly change.
Warren Buffet advises to only ever invest in things that you understand, and for those with their eyes open it will become abundantly clear which luxury goods companies have got their Vietnamese strategies right. Pay attention to the beribboned shopping bags you see carried about in our cities and which brands youngsters are clamouring for, and don’t be too late to capitalise on the luxury trend in your own investment portfolios. There’s never been a better excuse to go shopping!
By Brian Spence
Read more at Vietnam News.
