We find out how local demand for luxury brands is turning Vietnam into a powerhouse market
Named by Goldman Sachs as one of the 11 countries having the highest potential of becoming the world’s largest economies in the 21st century, Vietnam is quickly outgrowing its “Tiny Dragon of Asia” moniker. Experts predict that Vietnam’s economic growth rate will exceed that of its Southeast Asian neighbors by as early as 2016. With this newfound prosperity comes the inevitable appetite for luxury goods. That was the subject of the 2012 Asia Luxury Summit, organized by luxury lifestyle magazine, Robb Report Vietnam. Its publisher, Michael von Schlippe, observed that Vietnam is well on its way to “following in the footsteps of China” whose own luxury market is described as robust after seven years of vigorous growth. The summit also advised brands “to speak to consumers in their language” taking local mentality into consideration when marketing their products in Vietnam. Experts concluded that while Vietnamese consumers have high brand awareness, they have little brand loyalty, instead focusing on a label’s “amiability” and image.
In truth, the luxury goods market is relatively new in Vietnam, with Mercedes Benz being one of the first brands to launch in 1995, followed by Louis Vuitton in 1997, both early investors in the growing potential many were only beginning to suspect would emerge. These luxury giants opened the door for other brands to establish a presence in Vietnam such as Chanel, Givenchy, Bulgari and BMW. In 2013 the industry continues to grow, a developed and lucrative business consisting of five to six major distributors in the retail sector alone, supporting sought after names like Marc by Marc Jacobs, Emporio Armani, Bally and Gucci. As our Luxe List shows, there is a market out there for US$114,000 diamond and gold phones and US$35,000 motorcycles. But a mid-day trip to Vincom Center A, the mecca of eye candy in Ho Chi Minh City, where salespeople seemingly outnumber customers three to one, might have people wondering exactly who’s buying (or buying into) these ultra-luxe products? Paul Nguyen, Dealer Principal of Vietnam Star Automobile, one of three licensed distributors of Mercedes Benz in Vietnam, talks about a unique market comprised of a growing number of young wealthy Vietnamese, with the average Mercedes client aged 37, compared to 45-46 years of age in the US.
A Drop in Standards
The Guardian quoted Jean-François Palus, Managing Director of the French luxury group that owns YSL, Bottega Veneta and Gucci, as saying that even if Chinese consumption slows down, “rapid growth in [new] countries [like Vietnam] will fuel growth for a long time.” In fact, the latest figures available show that the Asia Pacific region has actually overtaken Europe as the single largest market for luxury goods companies. Industry insiders point to consumers of luxury goods as being more financially insulated than the average customer, which explains why the luxury sector bounced back more quickly after the world economic recession in comparison to many average retailers.
Paul has also found that despite an expected dip in sales in the last financial year due to factors including an industrywide slowdown and the standard 200 per cent tax bill for getting the vehicles into the country, business is good with an estimated 3,000 passenger models and a further 2,000 commercial vehicles already on the road, as well as 13 Mercedes Benz sold during a recent event. An intangible but very real draw of luxury goods is the implied standard of quality behind the names. Tuan Anh, Fashion Editor of Dep magazine, notes that distributors of luxury fashion labels must often work with one foot in Vietnam and the other in their brand’s country of origin in order to uphold the long tradition of quality these brands have taken a lifetime to build. In other words, a customer’s experience of buying a Hermes belt in Vincom Center A should be no different to strolling into one of their boutiques in Paris.
Paul cites similar strict standards, saying that Mercedes Benz Vietnam inspectors will even go as far as measuring the height of the waiting room tables and chairs and ensuring the correct number of computer terminals for customers to browse at while sipping cappuccino. After all, he explains, “a drop in standards out here in Vietnam can have far reaching implications back on Wall Street.” With an estimated (and growing) 17 million available consumers who can afford branded products, out of which roughly 1.3 million can truly afford high end goods, it seems as Asia’s Tiny Dragon is now proudly sporting a Hermes scarf , Prada shoes and clutching an LV bag.
Images by Quinn Ryan Mattingly
