Economy & Business > Business > Market Trend

Growing GDP and higher consumption rate

Source: International Financial Statistics
Vietnam’s healthily growing economy is leading to higher consumption rate across the country. Companies should take advantage of this trend by entering the Vietnamese markets at this stage of rapid consumption rate growth.

Growing Market Potential

Untapped rural market
Source: TNS Worldpanel Vietnam 2008
The rural market in Vietnam remains an untapped segment with high potential. Companies could attempt to reap the benefits of this market by targeting at this rural segment.

Burgeoning youth market

Title Text.
Source: TNS Worldpanel Vietnam 2008

Changing Consumer Behavior

Overwhelming Majority in Vietnam Believe - Money Equals Happiness

Thanks to the country’s remarkable economic development over the last decade, the Vietnamese have much higher incomes than they have had in a long time. A Grey Group’s survey conducted in 16 countries in the Pacific region in 2007 revealed that 96% of Vietnamese believe that they would be happier and feel more optimistic if they had enough money; the average percentage in Asia as a whole is 87%. This attitude drives Vietnamese workers to work harder, especially younger workers who have a lot of ambition.


Although the Vietnamese economy experienced 16.3% inflation in 2007, its economic growth rate is still high and the economy should continue to grow in the next few years. The Vietnamese are optimistic about the future after finally experiencing a better standard of living because they have more money.


Younger Vietnamese are enjoying life and, unlike previous generations, highly value money and the material good it brings.

With more money, the Vietnamese are buying houses and high-standard apartments in new areas such as Phu My Hung, Nam Thang Long, Nam Long and Phu My. Many projects to build new residential villas and luxury apartments have been approved by the government and offered on the market. These new residential areas have good infrastructure and lots of trees and parks and set a higher standard of living, particularly when contrasted with older areas, which tend to be very crowded and polluted. As a result housing prices in newer neighbourhoods are significantly higher than in older areas. However, despite higher prices, the supply has not yet filled demand. The Vietnamese real estate market in 2007 was vibrant and house and land prices rose.

People with more disposable income have also started to use cars instead of motorbikes. Cars are more comfortable in all weather conditions, and, thanks to higher incomes, cars in Vietnam are now seen as more necessity than luxury. The demand for cars in Vietnam has been very high in recent years. The Vietnam Automobile Manufacturer Association (VAMA) estimates that 49,240 cars were bought in the first nine months of 2007, an increase of 83% from the same period in 2006. In October 2007, there were approximately 730,000 cars in Vietnam; this number is expected to increase to 1,000,000. Vietnam is a promising market for automobile makers.

With more income, Vietnamese are also enhancing their lives by replacing traditional CRT TVs with new LCD TVs. In the past, LCD TVs were luxury goods that only those with very high incomes could afford. Now, between higher incomes and decreasing prices, many more Vietnamese consumers are purchasing LCD TVs to replace their traditional CRT TVs. According to statistics from the Samsung Vina Corporation, LCD TV purchases increased by more than 300% in 2007. This growth rate has encouraged LCD TV makers in Vietnam to invest more money in these product lines. For instance, Samsung Vina Corporation, already a popular brand in Vietnam, is planning to invest more than USD2.2 billion in 2008 to build up a new production line to produce 46- and 52-inch LCD TVs.

Finally, more disposable income means more Vietnamese travel for leisure, something that used to be a luxury reserved for the few. Demand for domestic as well as foreign travel has increased. It is estimated that nearly 1,200,000 Vietnamese travellers went abroad via Tan Son Nhat International Airport in 2007, an increase of approximately 20% over 2006. In recent years popular Vietnamese outbound tourist destinations have included Singapore, Thailand, Hong Kong, China and Malaysia. Meanwhile, domestic travel has grown continuously. There were an estimated 20.5 million domestic trips in 2007, 17.6% more than in 2006. Such increasing demand has attracted more players to join the travel and tourism industry in Vietnam. Existing tour operators have created more tour products, offer many promotional programmes, increase the quality of their tours and organise health treatments and Meeting-Incentive-Conference and Exhibition (MICE) tours.

Motorbikes provide every-day transport in Vietnam

Many of the brand name motorbikes sold in Vietnam are either made in Vietnam by foreign-invested companies such as Honda or Suzuki or by domestic producers such as Kimco or Sufat. Others are imported, often from China, Japan or Italy.

The Vietnamese public transportation system is underdeveloped. Most Vietnamese people do not want to take buses to go to work and, thanks to higher incomes, motorbikes have become affordable. In recent years, motorbikes have become the main form of transportation.


While transportation demand in Vietnam is high and the infrastructure is poor, the Vietnamese automobile industry is far from developed. The number of motorbikes in Vietnam has increased significantly, and they now cause serious traffic problems. Still, it is impossible for Vietnamese to give up their motorbikes. The motorbike market is expected to continue to grow and motorbike producers predict that one in six people will have a motorbike by 2010.


Vietnam is a profitable market for motorbike producers and dealers. In 2005, there were around 13 million motorbikes in use. Vietnam is estimated to be the fourth largest motorbike market in the world. However, supply has not met the high Vietnamese demand. The Vietnamese government aims to make Vietnam a hub for motorbike production in Asia by 2015, and motorbike producers continue to expand their production capacity and diversify their models to attract more customers. In 2007, Honda Vietnam, the largest motorbike manufacture in Vietnam, invested over US$65 million to build a second factory to increase its production capacity to 1.5 million motorbikes per year by the end of 2008. Furthermore, in 2007 Yamaha, the second largest motorbike manufacturer in Vietnam, announced plans to invest more than US$46 million to open a second factory to increase its capacity by 50% to 700,000 motorbikes per year.

In addition to domestically made motorbikes, more dealers have imported motorbikes not only because some Vietnamese consumers prefer foreign brands but also in order to meet the high domestic demand. According to the General Statistics Office in Vietnam, some 25,000 motorbikes were imported in the first two months of 2007, an increase of 274.7% from the same period the previous year. This was despite the fact that imported motorbikes such as Piaggio and SH are much more expensive than domestic made ones. For instance, the price of a SHi 150 cc is US$7,400-7,800, the price of a SH 300 cc is US$11,500, and the prices of a Piaggio LX 125 and LX 150 are US$5,180 and US$5,580. Meanwhile, the most popular domestically made motorbikes – such as the Air Blade produced by Honda Vietnam, the Havate 125 cc produced by Suzuki or the Attila Elizabeth produced by SYM, all of which are considered premium lines – are sold for around VND30-35 million (US$2,000-2,500). Despite the difference in costs between imported and domestic motorbikes, there have not been enough imported motorbikes to meet demand in Vietnam.

Vietnamese prefer dining out after work

Most of Vietnamese do not normally separate their business relationships from private relationships. In some cases, private relationships may help them win business deals. Private relationships are built and maintained as much for personal reasons as for their business potential.

To build and maintain these relationships, Vietnamese usually invite to each other out after working. It is not their main meal, since they still have dinner with their families later. They just invite their friends, business partners and colleagues to restaurants, foods shops, pubs or bars to eat something, drink and talk together. Often these informal after-work gatherings are used to sign contracts and finalise business deals.


In recent years, it has not been necessary for Vietnamese working in foreign companies to cultivate private relationships with bosses or managers in order to win promotion. As long as they can do the jobs well, their performances are noticed by the bosses or managers. However, it is different in domestic and public companies, where in order to build careers Vietnamese workers have to set up and maintain private relationships with their bosses or managers.

As a result, the habit of eating out and drinking after work is still an important Vietnamese culture, though the habit is being undermined by foreign companies.


For better or for worse, Vietnamese business practices have made the market for eating out grow significantly. From big cities to small towns and rural areas, there are many snack shops, restaurants and pubs opening to meet the demand and such places are usually very crowded.

Those who eat out after work sometimes eat very little but drink a lot. This is very important to the alcoholic beverage market. It is estimated that Vietnamese people spend around VND6,000 billion annually on beers and wines, which is very high considering that most people have very little disposable income. Most international beer brands are available in Vietnam, including Heineken, Tiger, Foster, 333 and Saigon. A study by the Institute of Strategy and Policy of Ministry of Health has shown that the rate of drinking alcohol in Vietnam is very high – around 6.4 glasses per day or 26.1 glasses per week. Vietnam is estimated to produce 1.2 billion litres of beer and 350 million litres of liquor every year and the estimated annual growth rate is 8-10%. Most beers and liquors consumed in Vietnam are locally made and foreign brands account only for a small share due to their high prices. Around 50% of foreign liquor sold in Vietnam is fake.

Most restaurants or food shops in Vietnam are small and they usually sell Vietnamese food. Some of them may be located in houses and some sell food on the streets. However, many foreign cuisines have been imported to Vietnam to meet the demands of foreigners. For instance, a Korean food chain called “Korean Hotpot” has adapted Korean food to local tastes and has been quite successful in Vietnam.

Changing consumer spending behavior

Spending on Clothing and Footwear

Clothing and footwear are necessary goods. However, because they are necessary goods, the growth rate of spending on them is usually slower than that of luxury goods. It is the same story with Vietnam: spending on clothing and footwear in 2007 was estimated at VND24,278.5 billion, an increase of 19.4% from 2000.

Vietnam as a country has an advantage in textiles and garments, making the prices of domestically-made clothing and footwear quite low. However, domestic manufacturers have to cope with cheap clothing and footwear imported from China. Moreover, with increasing incomes, Vietnamese consumers have started to spend money on more expensive brands of clothing and footwear.


In order to save time for customers in an ever-busier society, ready-made clothing and footwear are always available to replace tailor-made products. In recent years, the number of sewing shops has decreased while the number of shops selling ready-made clothes and footwear has increased significantly.

With low prices for clothing and footwear and increasing incomes, Vietnamese consumers now rarely go to sewing shops or shoe shops to ask for repairs. They now buy new products to replace their damaged ones. Nowadays, customers seem to not pay much attention to durability – only to the fashion style and the models of clothing and footwear. As a result, producers change models of clothing and footwear regularly.

Spending on Housing

The Vietnamese population is large and growing, and young couples now want to set up their own homes after marriage. This has increased the demand for housing in Vietnam. As a result, spending for housing in Vietnam has increased too. Spending on housing in Vietnam was an estimated VND28,249.1 billion in 2007, an increase of 59.2% from 2000.

Vietnamese people traditionally must own their homes and they are encouraged to buy houses. The population is increasing and demand for housing is increasing but the land in the country is unchanged. This has caused a housing shortage in Vietnam in recent years. Additionally, the Vietnamese government has projected the country’s land use in recent years. As a consequence, housing speculation in Vietnam has been rising in recent years because speculators know that housing is a safe market in Vietnam. The prices of houses in Vietnam have increased sharply in recent years as a result.


When the government turns land into industrial zones, citizens have to move to other places. However, the amount of money given by the government as compensation to buy a new houses is not enough. Meanwhile, so-called “houses for low-income people” provided by the government are too expensive due to speculation and normal citizens cannot afford to buy them. As a result, government projects have made some of the population homeless and increased the demand for house rentals.

Spending on Household Goods and Services

Due to increasing income, houses are not only places for people to reside but also places for them to relax after work. Therefore Vietnamese now pay more attention on decorating their houses as beautifully as possible. As a result, spending on household goods and services has increased 69.1% from 2000 to 2007 to reach VND60,658.5 billion in 2007.

The largest segment of household goods is household appliances. Although Vietnamese households now often eat out to save time, meals with families are still very important, and most Vietnamese households have many kinds of appliances for cooking. Moreover, thanks to AFTA implementation, tariffs on imported household appliances from other ASEAN countries have reduced and, combined with store promotions, the prices of products such as washing machines, refrigerators, ovens and vacuum cleaners have decreased. This has encouraged Vietnamese people spend more on household appliances.


Dealers of household and electrical appliances have cooperated with manufacturers to offer the best prices to customers. In addition, they also have cooperated with banks to offer loan programs with 0% interest rates to increase consumer purchasing power. As a result, the household goods market is strong.

In the past, Vietnamese households usually made households textiles such as pillow cases, bed clothes and curtains themselves. However, Vietnamese people tend to give more time to their work than to home handicrafts. They normally buy ready-made household linens in stores, outlets or in supermarkets. In recent years, there have also been some brands imported from places such as China, Korea and the US to meet the demand of high-income consumers.

Vietnamese women have become less traditional and more involved in life outside their homes – they are well-educated and work outside the home rather than do all the housework. Therefore the amount of time Vietnamese workers have to spend on their homes has decreased and they need domestic help. With the current rise of dual-income families, the demand for household and domestic services has increased significantly.

Spending on Health Goods and Medical Services

Most Vietnamese people do not care much about their health or use medical services. A small part of the population is health conscious and they may visit the hospital to have a regular check-up, or go to a doctor when they feel sick. Most Vietnamese, though, never have health checks, and, when they feel it is needed, will only buy non-prescription medicine. However, thanks to rising incomes, the Vietnamese are now starting to pay more attention to their health. It is estimated that spending on health goods and medical services increased 115.8% from 2000 to 2007 and accounted for around 5% GDP.

However, the fact that spending on health products and medical services has increased at a remarkable growth rate does not mean that the Vietnamese are paying much more attention to their health. Increased spending is mainly the result of the sharp increase in the price of medicine. Pharmaceutical producers and distributors have to pay high commissions to salesmen as well as to drugstores, doctors and pharmacists. These costs, combined with the costs of advertising, have driven the price of medicine sold in the market up above their real price.


The Vietnamese government has failed to control the pharmaceutical market in recent years, so the price of medicine has increased sharply. The pharmaceutical market is a profitable one for producers because patients have no choice but to buy the products.

The Vietnamese usually buy medicine from drugstores and private clinics. When patients go to private clinics for treatment, doctors can sell medicine to them. However, most Vietnamese people do not usually go to clinics but administer self-treatment. It is very easy to buy and sell medicine in Vietnam; medicine can be bought from drugstores without a doctor’s prescriptions.

The most popular channels to sell OTC products are pharmacies or drugstores. The drugstores sell all health related goods, however, some supermarkets have also started to sell OTC products, including contraceptives such as condoms, lubricants, dressings such as band-aids and skin care products.
Spending on Transport

As the economy and the population have grown, transportation demand has increased. People need to travel to do business and to transport goods from one place to another. Spending on transportation in Vietnam has grown 120.5% from 2000 to 2007 to reach VND93,662.7 billion in 2007.

Currently, motorbike producers have increased their production capacity to meet increasing demand. In addition to motorbikes produced by Honda, Yamaha, SYM, Suzuki and Kimco, Vietnamese customers also buy imported motorbikes from other countries. The Vietnamese especially like Japanese brands, of which Honda is the best.

In recent years, scooters have become fashionable in Vietnam and the demand for scooters has increased significantly. Most motorbike producers in Vietnam have added scooters to their production portfolios. The domestic scooter market has been diversified by imported ones such as Piaggo, Dylan, SH and SCR.

Furthermore, Chinese motorbikes have appeared on the Vietnamese motorbike market. The Vietnamese Ministry of Industry has allowed the import of motorbikes from China, which are very cheap but of low quality. It is estimated that the prices of Chinese motorbikes is around one third or half that of domestically-made motorbikes. However, the cheap Chinese motorbikes are more affordable for many Vietnamese people and as a result, the number of motorbikes in Vietnam has increased significantly.

More Vietnamese people have also been buying cars. Some high-income Vietnamese consumers have bought major brand name cars such as Lexus and Rolls-Royce.

In total, spending on cars, motorcycles and other vehicles increased 187.5% between 2000 and 2007.


The Vietnamese motorbike market has become profitable due to the poor public transportation system in Vietnam. Everyone in the country needs a motorbike to go to work since they cannot take a bus or go by bicycles. As a result the motorbike industry has been fast-growing in Vietnam for many years.

The Vietnamese automobile industry has been protected by the government for years in the hope that it could develop a domestic automobile industry through investment by foreign producers. However, foreign automobile manufacturers have not increased manufacturing in Vietnam as promised. Instead they just import the parts and assemble them in Vietnam. Due to the government protection, car prices in Vietnam are three times higher than in other countries, however, demand for cars is high and the Vietnamese have been willing to pay high prices. As a result, many cars have been sold and automobile manufacturers can profit from the industry.

Spending on Communications

Communication methods have changed significantly in Vietnam. The development of digital technological has allowed people to communicate with each other more easily. Mobile phones were previously only used by the wealthy. But over the last ten years, more and more Vietnamese now use mobile phones, email and the internet for work, study and even entertainment. For example, from 2000 to 2007, consumer expenditure on postal services and telecommunications equipment and services increased by over 44%, 71% and 68% respectively. Although the growth rate of expenditure per capita on communications in this period time was high at 91.2%, it was still lower than the average of CLIFE countries (111.9%).


For some people, particularly those who live in urban areas, mobile phones and the internet have become necessary things in their daily lives. The traditional methods of communication, such as postal mail and landlines, have been replaced. The benefits of the internet are extensive and its use is increasing. Government policies aim to take the internet to the rural areas where there is a potential market. However, the main objective of farmers when using internet is to find information on prices, agricultural technologies or health practices that help them avoid other expensive incremental services. It is difficult for private firms to make high profits in the short term. That is a reason why the government plays an important role in the development of the internet in rural areas.

The use of mobile phones is different between people living in urban and rural areas. City-dwellers with high incomes are willing to pay a large amount of money to buy the latest model of mobile phones and change their phones often. The same is not true for Vietnamese people in rural areas who still are not in the habit of using mobile phones. When they need to communicate they usually go to the community post office and use landlines. Consequently, the mobile phone market has not been developed in rural areas yet.

Spending on Leisure and Recreation

Vietnamese people usually save money for the future. However, economic development has allowed them to spend more on leisure and recreation.

Overall, from 2000 to 2007, consumer expenditure on leisure and recreation increased significantly. The growth rate of expenditure on all surveyed items such as audio-visual, photographic, information processing equipment, other major recreational durables, cultural services and package holidays in this period was over 90%. On newspapers, magazines, books and stationery it was about 57%. Moreover, the growth rate per capita was considerable at 118.2% and it is larger than average for the CLIFE countries at 76.5%.

Although the growth rate is very high, per capita expenditure on leisure and recreation in US dollars in Vietnam is less than average for the CLIFE countries. In 2007, each Vietnamese person spent US$6.45 on leisure and recreation while it was $921.21 in the CLIFE countries.


In Vietnam there are currently enough entertainment centres for people. In big cities, there are one or two parks that are large and of high quality such as Dam Sen Park, Suoi Tien Amusement Park, or Vinpearl land Amusement park.. However, Vietnam does not yet have an international park like Disneyland. People say that there is no place for them to play together or relax at weekends except coffee shops, karaoke rooms or bars.

It is easy to see that the demand for leisure and recreation in Vietnam, especially in large cities, is high. In addition, Vietnam is considered a beautiful country, and there is a great potential for the tourism industry to be profitable.

Spending on Miscellaneous Goods and Services

Spending on miscellaneous goods and services, such as cosmetics, personal hygiene and grooming products and toiletries, is done mostly via retail shops. Overall, consumers increased their spending by more than 75% on these products between 2000 and 2007. Due to an increase in disposal income, consumers are spending more on these goods and services.

In the past, people used to go to traditional markets where buyers met sellers face to face. However, the number of retailers has increased rapidly. For instance, in every residential quarter of wards or communes, there are not only traditional markets but also many retail stores which sell a wide range of products. According to several reports, in 2008, Vietnam became the top investment destination for the emerging retail market.


The scale of retail markets increased in recent years largely as a result of the increase in foreign investment. The number of retail stores has also increased, and this has led to a greater demand for retail workers, such as shop-assistants, security personnel and distributors.