Luxury market in vietnam an emerging mar

45 In the first part of this paper, a comparison of Vietnamese luxury market has been carried out with an overview and consumption habits analysis of the South East Asia markets which ar

Luxury Market in Vietnam

An emerging market in prospect

MBA PART TIME: LUXURY BRANDS MARKETING AND MANAGEMENT

ISC Paris Session of 2010- 2011

Authored by: Hai Anh TO NGUYEN THI Advised by: Mr Michel CHEVALIER

Table of Contents

I EXECUTIVE SUMMARY 4

II INTRODUCTION 8

III WHERE IS VIETNAM LUXURY MARKET’S POSITION AMONG SOUTH EAST ASIA COUNTRIES 9

South East Asia markets overview 9

A growing zone 10

Luxury consumers of South East Asia countries 10

Potentiality, Opportunities, Threats by market 12

1 Indonesia: An economy in stabilizing stage 12

2 Malaysia: An attractive destination for luxuries 13

3 Singapore: Switzerland of Asia 14

4 Thailand 14

5 Brunei 15

6 Vietnam 16

Markets Mapping 17

IV VIETNAM LUXURY MARKET OVERVIEW 1

Economic Overview 1

1 High annual growth rate 1

2 An internationally open economy 2

3 Increasing numbers of Private Enterprise 4

4 Foreign Direct Investment (FDI) is surging 4

5 Highest Inflation rate in Asia 5

7 Corruption 7

8 Other Rankings 8

Demographic: 9

1 A young and active population 9

2 Urbanization trend 10

SWOT Analysis of Vietnam Luxury Market 13

V IS VIETNAM A PROPRITARY / POTENTIAL MARKET? 14

Emergence of new wealthy class in sufficient number to constitute a sustainable market 14

Consolidation of middle class (monthly income of more than US$ 435) and emergence of wealthy class 14

Emergence in demands for luxury goods: Establishment of a society of consumption and

effervescence of luxury market 15

1 The fancy for luxury goods of young people 16

2 A new trend : The demand for more sophisticated products 16

Vietnamese Luxury Consumers: 17

Profile of Vietnamese luxury goods consumers : 18

The conspicuous mode of consumption (or Status Consumption) 19

VI HOW TO DEVELOP LUXURY MARKET IN VIETNAM 20

Luxury market outlook by sector 20

1 Cosmetics and Perfume 20

2 Prêt-a-porter, Lingerie 23

3 Leather and Accessories 24

4 Jewelry, Watch 25

5 Home equipment and Real Estate 26

6 Entertainment (Golf, Spa) 26

Distribution 26

1 General characteristics of luxury goods distribution in Vietnam 26

2 Chosing the right distribution system 28

3 Rapid development of distributors/ importers 29

4 Insufficient commercial surfaces adapted for luxury distribution 30

5 Locations in Ho Chi Minh City and Hanoi for luxury retailing 31

6 Retail Market Updates for 2011 35

7 Renting price of a corner or a boutique 38

Marketing and Communication 39

1 Magazines 39

2 Advertising, Media 39

Constraints 40

1 Counterfeit market 40

2 Uncompetitive price due to heavy taxes and tariffs 41

VII RECOMMENDATIONS 41

Products: 41

Place: 42

Promotions: 42

VIII REFERENCES 43

 45

In the first part of this paper, a comparison of Vietnamese luxury market has been carried out with

an overview and consumption habits analysis of the South East Asia markets which are geographically near to Vietnam Today’s luxury landscape in Asia has changed significantly with the emerging of new potentialities Being the late comers behind the mature market such as Japan,

South Korea and China, South East Asian countries present promising opportunites for luxury

brands with the rapid economic growth

Despite the low GDP per capita compared to other developed countries, the living standards in those countries are improving dramatically with a client limited but elitist with different demand from mature luxury markets to satisty The studied countries in this report (Indonesia, Malaysia,

Singapore, Brunei, Thailand, and Vietnam), although being geographically closed, the markets are

different in term of maturity, culture, and customer behaviors. The dynamism of each market

differs depending on the stage of development However, there is a clear evidence of long-term potentiality for luxury in both local markets that need heavy initial investment but low payback, and

in travel retail zones

Luxury consumers of South East Asia countries have always been avid for luxury goods and they are having increasing disposed income to satisfy their needs Regarding consumption habits, it is common in those markets that the purchasing of luxuries is not only a lifestyle but more importantly,

is a way to demonstrate the social status As the result, seeking for a conspicuous aspect still is an

undeniable stimulator in purchasing decision What distinguishes Asian luxury customers from Westerns’ is a different hierarchy of needs The Western counterparts want to feel good about themselves, hence, they seeks for brands whose products make them feel at ease and comfortable

On the other hand, the highest need in Asian culture is status Although some behaviors may

differ from one country to another, the status seeking is particularly important

With a modern consumption trend, the consumers in emerging countries are becoming highly

selective Higher price used to be allocated with higher quality but consumers are now spending

wiser with more requirements for specialty and uniqueness They are also more knowledgeable with all the information available for brand comparison, those affluent consumers are now demanding

Among South East Asia countries, Vietnam luxury market is the newest The pionner in the region was Singapore Being late compared to Hong Kong, Singapore discovered real luxury

consumption International luxury brands penetrated the market since the 70s and most of the

important names have already implanted Luxury in Malaysia made its first steps during the years of

1980 in the big commercial galleries in luxury hotels but the market took it real first motion at the middle of the 1990s Analysts believe that the Malaysian market presents a strong potentiality for

both local and tourist consumptions Next was Thailand, the luxury market made it first steps during

the 1980s with the arrival of Louis Vuitton the luxury market not only depends on the economic growth but also the politic stability the country often experiences politics crisis that causes the slowdowns in luxury market over the whole country The first luxury products appeared in Jakarta –

Indonesia in the early 1990s, when the development of the sector was very difficult due to products from contraband market Indonesia is a developing country where the population which is tempted

by the consumption is becoming more important The luxury market of Brunei is still limited du to

the small population but the amount spent on luxuries are substantials Even if some luxury brands

have entered the Vietnamese market since years but the real trend of luxury products consumption is

extremely recent, started from 2006 Since then, the luxury market enjoys outstanding development with the introduction of numerous brands

The second part tempts to analayze different dimensions of luxury market in Vietnam based on its economy development and demographic factors Vietnam is the Asian country that is considered one

of the fastest growing economies in the world, after China and even greater than India For the period of 1998 - 2003, its average GDP has progressed around 6.8% and increased up to 8% during 2004-2007 with slight slowing from 2008 to now

From 1986, the Vietnamese economy benefices from a new politic of “Doi Moi” (Renewal), leading

to continuous movements of opening and liberation This allowed the country to integrate progressively to international exchanges and to develop an economy sorely internationalized degree

of openness of 168% in 2007 After joining WTO, powerful economic development and improved

standards of living have changed the consumption trend among Vietnamese people Numerous of luxury brands that could not enter to the market just some years ago due to the lack of adequate distribution channels are now available in the market, offering the consumers with larger product

choices The embrace of private enterprise increase favor the apparition of many entrepreneurs,

benefit from the rapid growth of the country to become nouveaux riches Similar to China,

investment is crucial for driving the economic growth performance Foreign Direct Investment

poured into Vietnam is not as high as China but higher in most of other neighboring countries However, the country is facing an accelerating inflation has forced the government to apply tightened monetary policy that causes difficulties to businesses After joining WTO, the Vietnamese government has significantly decreased the imported custom tariff for many product categories

However, the barrier of entry for luxury goods into the Vietnam market is still very high Besides,

the Ministry of Industry and Trade activated on the 16 May 2011 new restrictions on the import of certain luxury goods The high level of custom duty, especially for luxury goods, continues to favor the development of contraband with neighbor countries of Vietnam

From a demographic point of view, the luxury potentiality in Vietnam relies on a very young

population with a median age of just 25 The young society is promising for a long-term investment

as people are open to change and often quite entrepreneurially minded The high percentage of young consumers would be a critical factor helping Vietnam to stand out among emerging retail market, including China, India, or Russia Vietnamese consumers can have greater access to

international brands information research thanks to its openness to foreign influence and good

English proficiency, and are more receptive to foreign brands’ communications messages The enrichment of the country benefits firstly the citizens and the high-income groups A clear urbanization trend is noticed with an increasing apparition of wealthy class in major cities who are the main consumers for luxuries

In 2010, Vietnam has imported $5.7 billion of luxury goods, illustrating an emergence in demands for luxury goods and The penetration of foreign brands into the Vietnamese market is relatively recent and making a fast-developed market Nouveaux riches are showing their desire to expose their new social status with demand for more sophisticated products: the qualification of luxuries is

no longer based only on price

Vietnamese consumers, particularly those who belong to middle and upper classes, are modifying

their habits Their profile can be described as well educated, updated to the technology, prudent

and respectful to the traditional, optimistic, and festive Promising opportunities for foreign companies are clearly shown offering luxury products to Vietnamese market since high level of Status Consumption is displayed

The third part concentrates on the question for foreign brands of how to successfully enter market by using proper distribution channels and communication strategies An outlook of market by sector gives a general understanding of the current development state of different sectors in Vietnam The

cosmetics sector in Vietnam is still developing and the main difficulty of luxury cosmetics brands

in Vietnam is the competition of a wide range of uncontrolled fake, mislabeled, and smuggled

products The demands for luxury reade-to-wear used to be very limited in Vietnam Thanks to

the development of adapted commercial surface, as well as the apparition of leisure activities (clubs,

bars, opera…) consumers started to spend more for luxury clothes Leather sector is in full

expansion with numerous distributors who chose to invest for luxury accessories However, shoes

market stay undevelloped for both males and females The vietnamese jewelry is still remain very traditional in both fabrication and design Luxury home decoration sector in Vietnam face a real

concurrence with local brands

There is an actual revolution of distribution in Vietnam The distribution sector started to be completely open to foreign investors, who can own 100% capital of their boutique, or any

distribution structure , logistic is certainly one of the most delicate problem in Vietnam, notably in

land transportation From 2006, the acceleration of luxury brands’ implantation to Vietnam is clearly seen. The retailing sector is going through a period with tremendous changes with the apparition of a luxury market Most of foreign brands choose to firstly enter the market via a local distributor or importers The number of enterprises active in the luxury sectors has been increased considerably in the period of 2005-2006, notably in the fashion-related fields

There is a lack of adapted commercial surface for luxury distribution The Vietnamese real estate market is actually characterized by a profound shortage of offerings, the undertaken of numerous construction site and the extremely high prices Prime retail rents in Vietnam is quite high compared

to South East Asia neighbours, even higher than Malina and Bangkok According to the international real estate service provider Savills Vietnam, the high rent in the city center is a big challenge for current and future retailers

Luxury brands have a large choice of communication means to to communicate their brand images Nowardays, the apparition of Vietnamese version of internation high-end fashion magazines such as Elle, Harper’s Bazaar and other lifestyle magazines such as Cosmopolitan, Her World have greatly improve the dynamism of communication channels Used to be practically inexistent at the early 1990s in Vietnam advertising means are also more diversified, covering all the Media types,

including television, radio, press, displays, and Internet Only some weaknesses still exist in urban displays, which is still low-structured

Finally, the two main constraints of the luxury market in Vietnam were counterfeit products and uncompetitive price due to heavy tariffs and taxes

Vietnam has experienced a tormented history, with war and territorial conflicts – some remain unsolved, like the recent conflicts about South East Asia Sea with China However, the extraordinary dynamism of

the country is again writing a history

This country is well known about its beautiful landscapes, the historical monuments dated from the imperial periods, and the architecture inherited from French colonization But nowadays, Vietnam distinguishes itself by one of the country having the fastest economy growth rate after China and even greater than India And the luxury market, as a result benefit from a strong growing demands with the expanding of population who has high disposal income

According to CPP Luxury Industry Management Consultants, Vietnam is among the fastest growing luxury markets worldwide Vietnam has become a country of records: record of young population (50%

of the population are under 22 years old), and most importantly, the record of the growth rate with the GDP of more than +7.5% over the last decade Also, the FDI (Foreign Direct Investment) is in

exponential increase (14 billion Euros in 2007) and the exportation rate is (+22.6% in 2007) (Ubifrance,

2010)

This is clearly a tangible sign, not only from a voluntary of a nation to come out of the poverty, but also

a political voluntary affirmed the integration to the world’s development In a country where just 20 years ago, people still walked on flip-flops cut from old tires, a Gucci beach sandals of $365 can come

as a shock Displays of wealth used to be frowned in Vietnam when the government wanted to take the assets of the wealthy to redistribute to the poor Since the late 1980s with the introduction of free market, foreign investors started to come to Vietnam bringing with them a Western styles and attitudes, making a growing market in every sector, including luxury goods How can Louis Vuitton market a

$3,500 handbag in a nation where the annual per capita income is just over $800? This paper is going to analyze the luxury market in Vietnam in details by considering different dimensions in order to evaluate whether promising opportunities and forsesable prospect are truly present in the market

III WHERE IS VIETNAM LUXURY MARKET’S POSITION

AMONG SOUTH EAST ASIA COUNTRIES

South East Asia markets overview

Consumers in Asia have always been avid to luxury

goods In early years, it was the image of Tokyo’s

Ginza district, Hong Kong’s Causeway bay or

Singapore’s Orchard Road Today’s luxury

landscape in Asia has changed dramatically, with

the development of new emerging paradises Being

left behind for a long time with the success of

luxury markets in Japan, South Korea, China, and

India, the South East Asia countries evoke

nowadays-strong desire for luxuries If the

countries studied in this report (Indonesia,

Malaysia, Singapore, Brunei, Thailand and Vietnam) cannot compare with the two giant emerging Asian markets China and India in term of market size, those countries however, offer interesting opportunities for luxury products Although the market is not as mature as some countries to the others, the growth rates are significant, giving the opportunities to grasp in all the countries in the area China is not the only country enjoying rapid economic growth: The World Bank raised its 2010 growth forecast for the South East Asia countries by from 7.3% to 8.9% from 2009, showing a strong potentiality of the market

 An area with more than 400 million of inhabitants and a luxury market estimated of one billion euros (2007)

 Although being geographically closed, the studied countries’ markets are different in market maturity, culture, and customer behaviors The dynamism of each market differs depending on the

stage of development

 The luxury markets are currently concentrated to only the capitals: Kuala Lumpur, Jakarta, Singapore, and Bangkok Exceptionally, in Vietnam with two big cities, whereas Ho Chi Minh City being the commercial center enjoys a greater market development and opportunity compared to the capital – administrative center

 According to professional in the sector, Malaysia and Vietnam would represent the most important growth rate for luxury products in the next five years (Ubifrance, 2007)

A growing zone

There is an important potentiality in South East Asia countries Despite a low GDP per capita, which is increasing dramatically, the market is potential with a targeted customer more limited, elitist and with different demands from mature markets This market would clearly offer a long-term potentiality in both local market that need heavy initial investment but low payback, and in travel retail zones

Indonesia Malaysia Singapore Brunei Philippine Thailand Vietnam GDP per capita 2010 4,394 14,670 56,522 48,892 3,737 9,187 3,134

Income share held by highest 10% (2007) 29% 38% 33% 34.2% 34% 30%

Luxury consumers of South East Asia countries

 The consumers are the more and more disposed to purchase luxury goods

 They are largely sensible to luxury by the numerous marketing and advertising campaigns, the

word-of-mouth plays also a fundamental role It is essential for consumers to be the firsts to

purchase one product, or to have the minimum of what their entourage has

 The high-income habitats travel the more and more and purchase luxury goods in other countries There are in-Asia travels to do shopping in Thailand and Singapore, and out-Asia travels to shop in

Western countries

 Consumption of luxuries is not only a lifestyle but more importantly, is a way to distinguish

themselves with others, and to create a countenance Also, seeking for a conspicuous aspect still is

an undeniable stimulator in purchasing decision

-4 -2 0 2 4 6 8 10

2004 2005 2006 2007 2008 2009 2010

Vietnam Singapore Brunei Thailand Malaysia Indonesia Philippine

Growth rate

 The female consumers stay the most powerful with the increasing purchasing power It is important

to note that the potentiality in customers who are wife of wealthy men who are willing to spend

considerable amount

 The idea pre-established of the country of origin are still being printed in consumers’ mind, even

the most informed and experienced ones The quality is generally associated with the country of origin more than the brand name itself: watches from Switzerland, leather goods from Italy, cars

from Germany and perfumes from France

According to Oliver Petcu, the Director at CPP Luxury Industry Management Consultants (LCC), the consumers in emerging markets are becoming increasingly selective in how they allocate their spending budgets They spend less and are highly aware of the price/quality ratio As luxury goods show the status of Asians consumers, they would be more careful and picky There is an increased awareness of raw materials, standard of processing They are also more knowledgeable with all the information available for brand comparison, those affluent consumers are now demanding Gone are the days of people bulk buying luxury items, the brand names of which they could barely pronounce Instead, Asia

is entering an era of unparalleled product and brand awareness

A passion for luxury

Today’s affluent consumers in South East Asia countries are already avid brand loyalists, with little difference from their counterparts in Western countries or North America They connect to the media

24 hours a day, travel frequently; thus, they are well informed and opened to sample what is new and different They always symbolize Western brands with quality, even though some of them are largely manufactured in Asia They would cheerfully pay a premium to demonstrate, through beautifully designed packaging, that their purchases were made in a leading department store in the city instead of a normal store where they could have bought exactly the same items at a considerable savings

Differences from Western customers:

What distinguishes Asian luxury customers from Westerns’ is a different hierarchy of needs The Western counterparts want to feel good about themselves, hence, they seeks for brands whose products make them feel at ease and comfortable They would rather choose Range Roger SUV (Sport Utility Vehicles) over a Lamborghini Reventon even though they have the ability to purchase

On the other hand, the highest need in Asian culture is status Although some behaviors may differ from one country to another, the status seeking is particularly important in all Asian countries, including South East Asia The brands like Hermes, Johnnie Walker, or Hennessy are extraordinarily popular in Asia for both personal purchases and gift purchases for others

Asians pay extreme care when buying gifts for their friends, colleagues, or business partners Choosing a luxury brand not only shows the wealth of the giver, but also expresses a respect and appreciation

toward the receiver They may even be willing to pay more for a gift then a personal purchase, which is not the case in western countries

One might argue with the democratization, luxuries are more affordable as consumers are becoming more accustomed to higher standard of living, and status seeking will diminish in importance for Asians

In countries like Japan and Korea, which has been developed for decades, the luxury markets just exhibits a greater degree of sophistication facing the democratization trend The same would be applied

for the future of South East Asia countries, leading by Singapore

The emergence of Shopping Tourism

Few decades ago, it was quite preposterous that people travel around the world just for shopping purpose The Japanese changed it all They are the pioneer who, with their high level of disposable income, started looking for finer things in life oversea The rest of the world soon adopted this trend as

a social behavior, and a new retail industry was soon born to cater to the special requirements for the shopping tourist

Asian customers want to find a very special luxury items, or a limited-edition bag for their status boosting, which is not available in their countries Another reason with shopping oversea is to avoid fake products that lure the unsuspecting buyers at home, as consumers are becoming more and more vigilant Numerous transactions on the Champs Elysees or Fifth Avenue have been recorded with a South-East Asia banks Shopping tourism, appeared primarily as a phenomenon in Japan, Korea, and China, and quick became a normal treats that South East Asians gave themselves with the dramatic economy growth rate

Potentiality, Opportunities, Threats by market

1 Indonesia: An economy in stabilizing stage

 Capital: Jakarta

 Politics System: Democratic Republic

 Geography: 2 017 000 km2 with 13 677 islands

 Population: 4,553,009 (2010) 3% of the population speaks Chinese, representing the most prospect

group of the country, constituting the important engine for the economy

 Economy: The macroeconomic stabilization of the country is proven by the growth rate in 2007 exceed 5% for the 4th consecutive year The government seems to control the inflation rate around

6%

 GDP per capita was $1,640 USD and the purchasing power was $ 4,323 USD/ capita

The market is difficult to conquer but there is a real potentiality to grasp The first luxury products appeared in Jakarta in the early 1990s, when the development of the sector was very difficult due to products from contraband market In Indonesia, Jakarta is the capital for luxury industries People from other cities and regions who wish to offer themselves a luxury treat would come to Jakarta or would purchase from oversea Thus, the best location for luxury selling is in the South Center of Jakarta Being geographically near to Singapore together with the customers’ preference of buying luxury from travel, the brands implanted locally should remain competitive in order to attract Indonesians to the domestic market

From the beginning of 2000, the commercial centers developed noticeably, and more luxurious Indonesia is a developing country where the population which is tempted by the consumption is becoming more important

2 Malaysia: An attractive destination for luxuries

 Capital : Kuka Lumpur

 Politic system: Constitutional Monarchy

 Economy : The dynamism of the country is still being dependent on foreign investments Despite a dramatic decline after the Asian crisis 1997, FDI continue to plays an important roles and foreign-capital enterprises ensure the essential of exportations of manufactured products

Very traditionalist, Malaysia is opening the more and more to international comers.The market shows potentiality for both local customers and tourists Luxury in Malaysia made its first steps during the years of 1980 in the big commercial galleries in luxury hotels but the market took it real first motion at the middle of the 1990s, with notably the opening of the commercial center Starhill even if the sales dropped after the Asian economic crisis by 1997 If secondary cities of Malaysia are favorable for products of mass consumption, luxury resides principally resides in Kuala Lumpur

There is no fabrication of luxury goods in the country except some local names such as pewter items of Royal Selangor, bags made by crocodile skin of Porosus some creations of designers Bonia or Ikartini The luxury market centers at the accessories such as leather items, jewelry, watch

Analysts believe that the market presents a strong potentiality for both local and tourist consumptions The market for tourists is nourished by the frequentation of people from the Middle East One of the main strength of the country is the detention of operational infrastructure

3 Singapore: Switzerland of Asia

 Since its independence on 1965, the country enjoys an exceptional succes: An average growth rate of 8% per yer and the standars of living have reached the same of developped and modern countries

 Capital: Singapore

 Politic System: Ancient britan colony, the democratics system remain very strict in some extents, notably the freedom of press which is still strictly controlled

 Geography: A strategic position of South East Asia , 699,4 km2

 Population: In the last 30 years, Singaporean population has been more than doubled up, from 2 millions to 4,5 millions people with 76% Chineses, 14% Malaysians, and 9% Indians

 Economic: The country benefits of a prosper economy with a stable legal framework The economy has notably resisted the crisis of Asia Financial situation remains excellent and leads the country to become an important investor, all by continuing to carry out an open and attractive politic, focused

on added-value activities

Being late compared to Hong Kong, Singapore discovered real luxury consumption International luxury brands penetrated the market since the 70s and most of the important names have already implanted This small but nearly mature market plays the role of the regional capital of shopping despite the concurrence of Malaysia and Thailand Conscious of the small market size, the Tourist Office of Singapore has applied a politic to attract wealthy tourist to increase the revenues for the island

4 Thailand

 Capital: Bangkok

 Politcal system: constitutional monarchy since 1932 with a lot of temporary unstability that slowdowns the consumption in many sectors

 Geography: 513 115 km2, the country benefit from a location at the heart of South East Asia

 Population: 65.1 million On the contrary with other Asian countries, chinese immigrants have well integrated to the Thai population Sino-Thai people who came from industrial conglomerates play an imporant role in the country’s economy Around 80% of the big groups are controlled by the families of origin Chines and it is estimated that 19/20 of the wealthiest families of the country are sino-thais

 Economy: the asian country the most affected by the financial crisis of 1997, the country has profoundly restructured its economy and has successfully overcame the crisis to be one of the

outstanding emerging countries with a growth rate of more than 6% in the period of 2002-2004 Even during the hard period of 2005 when the country has to face both internal and external difficulties (increasing essence costs, slowdown of growth of its partners, movements in the South, tsunami and opposing climat conditions…), the growth rate still scored 4.5%

The luxury market made it first steps during the 1980s with the arrival of Louis Vuitton which possesses nowarday 3 stores in Bangkok The economic growth of Thailand is accompanied by the occidental and japanese influences on the way of living and consumption habit Thai consumers, especially young people are very sensible to trends Luxury items, reflection of their social status, enjoyed a formidable success in country In the other hands, the is also the influences on buyer behaviors from provinces where prices remains the first criteria for purchasing decision

In Thailand, the luxury market is concentrated in Banglok, as the consequence, it is almost unesscarry for brands to open additional stores outside the capitals In fact, wealthy inhabitats of Phuket or Chiang Mai are willing to travel to shop in Bangkok The development of Pattaya and Phuket is attracting a lot

of “pharang” (westerners) and it is risky to bet on the prospect of luxury markets in those cities

As Thai people love to expose their social status, the introduction of a well-known brand is the clef to succcess but foreign brands have to face strong concurrence from local brands However, the luxury market not only depends on the economic growth but also the politic stability The country often experiences politics crisis that causes the slowdowns in luxury market over the whole country

5 Brunei

 Capital: Bandar Seri Begawan

 Geography: 5 765km2, situated in island of Borneo, Brunei shares same frontier with Malaysia

 Population: 365 251, Malaysian 67%, Chinese 15%, Others 18% (3 500 Gurkhas)

Former Britain protectorate independent since 1984, Brunei is a domineering monarchy, run by the Sultan Hassanal Bolkiah Economy of the country relies in its richness of hydrocarbon Per capita income is the highest in ASEAN after Singapore

Having endured the financial crisis in Asia in 1997, Brunei subsequently suffered the failure of Amadeo group, controlled by Prince Jefri (brother of Sultan, then minister of finance and president of agency in charge of reserves management of state, the Brunei Investment Agency), which has strongly contributed

in sinking the economy during recession After long procrastination, the government has announced, in

2001, an ambitious program of reform economic structures, in order to reduce its dependence in its petroleum resources, but few of concrete progress has been effectively achieved

Economic evolution depends strictly in the performance of hydrocarbon sector Ongoing delicate negociations with the Malaysia which demand an agreement in sharing the petroleum recipes The ball

is in Brunei’s camp, which presents itself as not very pugnacious, even when the future of economic is at stake The Sultant is also the 4th biggest liquid gas producing company in the world The State is actively involved in every stage of petroleum field through BRUNEI PETROLEUM who regulates the sector and manage Sultanat assets The company is also shareholder in parity with SHELL in BRUNEI SHELL PETROLEUM (BSP), 1st producer

The luxury market of Brunei is still limited du to the small population but the amount spent on luxuries are substantials The royal family is the most important consumers of luxury products in the country It

is estimated that around 2000 people purchase regularly

6 Vietnam

 Capital: Hanoi

 Political system: Vietnamese Communist party is the leading force of State and society

 Geography: with a surface of 331 690 km2, Vietnam shares frontiers with China, Laos and Cambodia

 Demography: Vietnam counts 87 million people (2010) which of half are under 25 year sold The demographic growth is at 1,33% per year, represents an slight increase of population of more than one million of people each year In Ho Chi Minh City, the 15-49 year old represents 68% of the population at below 15 year old, 24% Vietnam learned a vast movement of rural depopulation While in 2006, less than 30% of the population lives in the urban aread, this proportion reached 45% today

 Economy: the country continue to constitute an examplary case of mastery development Five-years plans encourage an average growth rate of more than 7% since the 1990s The growth rate is assured

by the exceptional foreign trade with high exportation growth rate and the country stays at the center

of foreign investments Vietnam is the asian country that enjoys the highest economic growth rate just after China The vietnamese economy is in developing phrase, which can explain the spectaculary growth rate

 Wealth repartition is very inequal, especially between rural and urban areas with the concentration of wealth in Ho Chi Minh City and Hanoi

Even if some luxury brands have entered the market since years but the real trend of luxury products consumption is extremely recent, started from 2006 Since then, the luxury market enjoys outstanding development with the introduction of numerous brands The fashion accessories have been in vogue since the beginning of 2000s and continue to experience higher demands

The vietnamese qualification for luxury brands used to be almost exclusively based on price, the new consumption habits of modern customers now start with new notions of quality, uniqueness and originality The potential market is at the present desired by many international brands and there are limited chances for them to conquer

The adhesion of the country to WTO in 2007 was an important encouragement for luxury brands to penetrate to the market Also, stock-exchange market has high impact on the luxury sector

Professionals of the sector believe that Vietnam represents amonng the 3-4 big asian market for luxury consumption, which create an enormous potentialy

- Distribution channels of luxury products

are developing with the apparition of luxury commercial centers

- A population that travel more and more,

thus being exposed to foreign brands and fashions

- Dynamic market with great perspectives

- Markets highly concentrated in capital cities

- Important counterfeit market

- Strong international concurrence (China, India…)

- Bargaining is a regional habit

- Lack of distinct seasons (always hot and humid weather of equatorial climate): Brands have to adjust their collections

Indonesia - Stable economic and politic system

- Consumers passionate for luxuries, a

noticeable sensibility to brands

- Reducing number of luxury importers: Difficult for brands and exporters to find a

local partner with adequate objectives

- High level of corruption, lack of transparency

- Indonesians prefers to buy luxuries from

oversea

Malaysia -Increasing tourists from Middle East and

Russia with high purchasing power

- Development of distribution

infrastructures

-Despite its politic of positive discrimination, the country is one of the non-egalitarian in Asia

Singapore -No customs duty

-An economy highly opened to outside

-Consumers very Occidentalized

-Mature market playing excellent

show-case role for Asia

- Low availability of new commercial sites -Affluent customers but difficult to develop loyalty

Brunei -Restrained number of luxury customers

but are willing to spend a lot

-A small market essentially dedicated to the royal family

Thailand -Market developing and becoming mature

-A modern airport with favorable

environment for luxury sales

-Unstable politic system, affecting economics

Vietnam -Recent adhesion to OCM proving a

voluntary of open to outside markets and

-A lack of infrastructure adapted to the luxury products distribution

1

foreign brands

-New luxury consumers with strong

increase of the high-income class in the

population

-Foreseeable multiplication of luxury

brands under impulse of big leader brands

-High corruption level -Market lusts after and strongly linked to stock market

Economic Overview

1 High annual growth rate

Vietnam is the Asian country that is considered one of the fastest growing economies in the world, after China and even greater than India For the period of 1998 - 2003, its average GDP has progressed around 6.8% and increased up to 8% during 2004-2007 with slight slowing from 2008 to now Even at the difficult time within Asian financial crisis (1997), the growth rate has maintained positive (+3.5% by 1998) Vietnam continued to perform well during the world economic crisis 2009 with the GDP growth rate of 5.3%

GDP per capita – Purchasing power parity (PPP) is an indicator of the economy’s efficiency, showing how the citizens would benefit from their country’s increased economic production A raising trend of GDP per capita signifies the national economic growth, and the increasing of purchasing power of the population as the standard of living is improving

The outstanding economic growth of Vietnam has allowed a strong decrease

in poverty: 14.75% of the population was living under poverty in 2007, as opposed to 28% in 1993 The reforms have succeeded in the improvement of the standard of living of the inhabitants The GDP per capita went from USD $220 in 1994 to more than USD $1,200 today The percentage of the population living on less than a dollar per day has declined in a significant way and it

is now lower than China, India, or the Philippines

The continuous trend of high growth rate illustrate an economy with gradual development and highly potential Vietnamese consumers can be very optimistic about the country’s future

The same growth league as India and China

As mentioned earlier, Vietnam’s growth rate averaging 7.4% for the period 2000-2006, compared to China’s 9.5% and India’s 6.7% On the other hand, GDP per capita of Vietnam by 2006 ($715) is close

to India’s ($765) and less than haft of China It means, Vietnam is as poor as India but is growing at

almost the same speed as China According to Deutsch Bank Research which forecasts GDP growth of more than 30 emerging countries until 2020, Vietnam is likely to growth as quick as India and China in the next 15 years Hence, in 2010, Vietnam’s GDP will reach the same level as China’s today

2 An internationally open economy

Liberalization of the economy

From 1986, the Vietnamese economy benefices from a new politic of “Doi Moi” (Renewal), leading to continuous movements of opening and liberation This allowed the country to integrate progressively to

3

international exchanges and to develop an economy sorely internationalized degree of openness of 168%

in 2007

Joined trading organizations:

In addition, Vietnam is one of the Asian economies most open to international trade, which represents more than 100% of the GDP, more than twice the Chinese rate and more than 4 times the Indian rate The country has demonstrated its strong commitment to trade liberalization in the recent years:

- Association of Southeast Asian Nation (ASEAN – 1995) with the Free Trade Agreement (FTAs) , which helped elevate the economy status drastically

- Asia-Pacific Economic Cooperation Forum (APEC – 1998)

- US-Vietnam Bilateral Trade Agreement (2001) : exports rose 900% from 2001-2007

- Vietnam also has a corporation agreement with the EU

- Adhesion to WTO (World Trade Organization - 2006) has significantly changed the economy landscape, making an opened Vietnamese market to most of economic sectors

- After January 1, 2009, Vietnam has wholly opened its retails market under the WTO commitments, bringing new signs of optimism about the future of the retail sector

Vietnamese trade is characterized by a strong geographic inequality: the country shows a trade surplus with western countries and a growing deficit with its Asian neighbor

Economic expansion and the opening policy of the country leaded to a strong dynamism of foreign trade The exportation revenue was $71.6 billion in 2010 (+25.5% from 2009) However, the importation rate, generated mostly by the private sectors and foreign enterprises, has exceeded export with the turnover of $84 billion, causing a deficit in commercial balance of $12.4 billion This figure is causing a risk of stabilizing the Viet Nam Dong, making the government to take recent measurement which makes it difficult to import luxury goods to the country This problem with be discussed later in the next sections

The change in consumption habits

After joining WTO, powerful economic development and improved standards of living have changed the consumption trend among Vietnamese people

 Modern shopping habits (at supermarkets, shopping malls, Internet) increased from 9% in 2005

to 14% in 2007 and were expected to reach 24% in 2010

 Increasing shopping value with higher spending on tourism, health and body cares in both men and women

 Increasing number of young consumers and high-income people promotes the development of high-class retail shops

The changes in consumption habits has led to a dynamic trend of the Vietnamese retail market : the cooperation of local retailers to enforce professionalism, build up long-term development strategies to be able to compete with the foreign comers, making the market turbulent more than ever Numerous of luxury brands that could not enter to the market just some years ago due to the lack of adequate distribution channels are now available in the market, offering the consumers with larger product choices

3 Increasing numbers of Private Enterprise

The reforms allowed a large privatization of Vietnamese economy: the number of 100% State-owned enterprises has decreased from 12 000 (1990) to 2 400 (2006) whereas the private firms increased to more than 90 000 The embrace of private enterprise increase favor the apparition of many entrepreneurs, benefit from the rapid growth of the country to become nouveaux riches

4 Foreign Direct Investment (FDI) is surging

Similar to China, investment is crucial for driving the economic growth performance FDI poured into Vietnam is not as high as China but higher in most of other neighboring countries FDI was relatively tiny at the beginning of the 1990s and even 2000s The average annual foreign investment commitment

has risen sharply since foreign investment was authorized in 1988, although the global economic crisis affected FDI in 2009

Early investors claimed that the main obstacles to set up shops in Vietnam were a missing supplier base and the high operating costs Thanks to the continuous improvement of infrastructure, the costs

5

have come down quite significantly

5 Highest Inflation rate in Asia

Benefiting from a high growth rate, the Vietnamese economy is facing an accelerating inflation, driven

by surging food and oil prices This is a common trend across Asia countries and the governments realize that inflation would not go away quickly Actions are being taken to curb inflation and to deal

with the threats to economic growth

Inflation rate has reached a peak with an index of price of consumption of 27%, which is clearly higher than the growth rate, causing by:

- The politic of the government to keep the VND low to encourage export

- The important inflow of foreign currencies due to FDI and transfers

- Global conjuncture and the general tension inflationist (increasing price of raw materials, petrol and alimentation…)

The continuous increase in inflation rate has forced the government to take some recent measurement However, during this very hard time, the consumption power of the high-income class seemed not to be really affected Quarter 1 of 2011 saw the Vietnamese Government shift focus from a growth enhanced policy to an inflationary control policy (CBRE, 2011) when the inflation rate reached the highest at 12.8% by applying the tightened monetary policy

6 High Tariff and Taxes for luxury products

After joining WTO, the Vietnamese government has significantly decreased the imported custom tariff for many product categories However, the barrier of entry for luxury goods into the Vietnam market is still very high

Tariffs rate applied for luxury goods imported into Vietnam can be divided into 4 categories, depending

to the source country and its relationship with Vietnam

- Privilege import tariff : From countries that have Most Favored Nation (MFN) status with Vietnam

- Special privilege import tariff: From ASEAN countries

- General Tariff : All other non-MFN countries – 50% higher

Import Tariff Taxes

Special Consumption Taxes

Special Consumption Taxes:

To control the high inflation rate and trade deficit, the Ministry of Industry and Trade activated on the

16 May 2011 new restrictions on the import of certain luxury goods including for cars, mobile phones, cosmetics, spirits and wines, applicable for the period of 2011 - 2020 Those precuts still have been flocking to Vietnam in big quantities despite the effort of the ministry to curb the trade deficit

7

According to the Ministry, in the first quarter of 2011, the total trade deficit value amounted to more than 3 billion dollars, of which luxuries accounted for nearly 40%

Officials believe their controls will curb the trade deficit at less than 18% in 2011 (Howarthdtl, 2011)

and protect the consumers from poor quality and counterfeit imports An expert from Trade Research Institute explained that Vietnamese consumers usually follow the crowd when making purchases decision A large portion of people who spent for luxury goods are not high-income earners Therefore, this tax increase will considerably restrict the demand for some luxury goods

However, business owners and diplomats claimed that these attempts to restrict import might be a violation of international trade rules Being an export-dependent country, Vietnam is trying to negotiate

a free-trade agreement with the European Union and US This restriction is obviously a barrier for luxury goods from Europe and US to enter the Vietnam market, making life very difficult for business owners The EU wrote to Mr Vu Huy Hoang trade minister of Vietnam, warning that the restriction

will “cause considerable disruption in our export patterns and major trade losses for EU exporters of

these products representing millions of Euros in value” EU wants a 3-months suspension and remind

that this restriction “raises serious concern” about the Vietnam’s desire to apply WTO commitments and

is “at odds with our common wish to engage in a free-trade agreement”

According to Mr Dinh Anh, a well-known economist, though Vietnam is not encouraging the import of luxury goods, it cannot be totally prohibited because of the WTO’s commitments If there are demands, there will be supplies Higher tariff can only partially reduce the demand of wealthy people

It is still doubtful whether the new restriction will have real impact on the trade deficit (Financial Times, 2011) On the other hand, foreign investors fear that the import controls would worsen the corruption at customs, which is already endemic in Vietnam The high level of custom duty, especially for luxury goods, continues to favor the development of contraband with neighbor countries of Vietnam (China, Laos, and Cambodia) Those products that are excluded from all type of taxation constitute a source of supplying non-negligible for small businesses and counterfeits Some governmental organisms are trying

to take actions against those practices but are still lack of capital and human resources as well as necessary knowledge to obtain really significant results

7 Corruption

Corruption Perception Index: 2.7 (ranked 116 out of 178 - Index units: 0=most corrupt; 10=least

corrupt.)

The degree to which corruption is perceived to exist in the misuse of public power for private benefit among public officials and politicians (Transparency International, 2010)

8 Other Rankings

Ease of Doing Business Rankings: 78 out of 183 – the higher the more favorable environment for

conducting business in the world: Measures of business relations and their enforcement across countries

by measuring specific regulatory obstacles such as protection of investors, protection of property rights,

employment issues… (World Bank 2011)

Vietnam ranked among the average business-friendly environment in the world However, thanks to the recent adapted regulations to encourage foreign investment, Vietnam has very quickly improved it business ease The table below illustrates how the business regulatory environment has changed in Vietnam from 2006 to 2011 Instead of showing which economies currently have the most business-friendly environment, this approach highlight the extent to which the Vietnam’s economy regulatory for business has changed compared to 5 years ago

Global Services Location Index: 5.69 (ranked 8 out of 50) – (0 -10: less to most favorable for off

shoring ((A.T Kearney 2011): measure the viability of Vietnam as a potential offshore destination for

9

services based on the financial attractiveness, people and skills viability and business environment The highest ranked country is the most attractive off shoring destination

Country Risk Rating: B – Political and economic uncertainties and an occasionally difficult business

environment can affect corporate payment behavior Corporate default probability is appreciable

Business Climate Rating: C - The business environment is difficult Corporate finance information is often unavailable and when available often unreliable Debt collection is unpredictable The institutional framework has many troublesome weaknesses Intercompany transaction run major risks in the difficult environments

Demographic:

1 A young and active population

In 2010, the population of Vietnam was over 87 million

The population is very young, with a median age of just 25,

which is about the same as India has and compare very

favorably with China’s 33 The economy enjoys a growing

working age population while China’s is decreasing The

working population of 15-64 years old represents main

current and potential consumers of luxury goods, accounts

for 69.4% The young society is potential for a long-term

investment as people are open to change and often quite

entrepreneurially minded Also, the post-war generation

(born after 1975) is positively inclined towards foreign cultures, which are used to favor foreign trends and lifestyle

The director of PwC Thailand (advisory services firm) pointed out that the high percentage of young consumers would be a critical factor helping Vietnam to stand out among emerging retail market, including China, India, or Russia Vietnam topped the list of world’s most attractive emerging retail

market in 2008 (Eurocharm) Young consumers, growing up in peace, enjoying from better social and

economic conditions compared to the old generations They are able to earn more money with more disposals income, making good fundamentals for the further growth of luxury retail sector Although the modern retail sector, including for luxury goods was in its infancy, it is growing fast at around 20% (2009)

Good English proficiency

Thanks to its openness to foreign influence and reliance on trade, the

workforce with high level of English proficiency compares favorably

with many of its Asian neighbor Together with the increasing number

of internet usage rate (nearly 28% in 2010 compared to 31% of China),

Vietnamese consumers can have greater access to international brands

information research, and are more receptive to foreign brands’

communications messages Brand awareness can be created easily in

Vietnam with proper-targeted message On the other hands, with a

greater exposure to information and choices, the consumers are

becoming wiser and more demanding

Female labor force participation

Vietnam scores relatively well in the participation of women into the workplace The country benefits from a broad range of human resources and women are thus more educated, independent and may even earn greater income than man It is not rare that in some family, the higher-income source come from the wives Women also represent the majority of luxury customers compares to men

A part of two big metropolises, there are some secondary big cities which account for more than one million of people each Those cities, following Ho Chi Minh and Ha Noi still being not strongly urbanized, start to upgrade the standard of living and consumption power They also progressively create new territories for luxury brands with great opportunities Those cities include Hai Phong, Da Nang, Hue, and Can Tho

11

North Cities Centre South Cities

Ha Noi intra-muros

Hai Phong Da Nang Ho Chi Minh

City muros

The enrichment of the country benefits firstly the citizens and the high-income groups

According to Mr Fabrica Carrasco, director of TNS Worldpanel institute, there was an emergent growth

in major cities of middle-class whose monthly income was 190-405 $USD, accounted for more than 50% of the citizens by 2008 In additional, the increasing apparition of wealthy class which has monthly income more than $500 USD, representing 20% of the population by 2009

Although there is a general improvement in standard of living in the whole country and an important recession of poverty, the historic dichotomy between the two urban and rural worlds is getting worse Still, most of workers still earn just $1-2 USD per day toiling in the farm fields and “the money spend on

a small Vuitton bag can buy several cows for a farmer’s family and lift them out of poverty”(NY Times)

The repartition of wealth is very unequal between urban and rural zones Agriculture sector regroups 2/3

of the population but represents only ¼ of GDP In 2007, GDP per capita in urban zone was 6 times more than rural’s and citizens of Ho Chi Minh City- the wealthiest local community could reach a GDP

8 times better than the most deprived of the country This number was 825 USD while GPD/ capita of HCMC was $2,180, urban was $1,300 and rural was only 220

In 2010, GDP per capita at Ho Chi Minh City was $3,130 compared to less than $1,200 of the country This figure for the city is expected to reach $4,800 by 2015 for HCMC, which will gradually increase the gap with the average of the rural areas This number illustrate why HCMC concentrates most of the majority of luxury brands in Vietnam, whereas Hanoi is the capital

Conscious about the social and political risks of this unbalance, the government has set a priority to reduce the inequality between the different regions in the country by building new economic zones in the center area The plan enjoyed some recent success, making Da Nang, the biggest city in the center of Vietnam to enjoy an extreme rapid growth rate It is foreseeable that the city with become the third important market of luxury products in the near future

Although this development is promising in a short-term, nevertheless, it is still obvious that the country’s concentration of prosperity remains in Ho Chi Minh City and Hanoi Other macro-economic indicators also show the same trend, particularly the increasing industrial production and the FDI illustrates the concentration of luxury consumers in the two cities In 2005 those two zones welcomed 78% of FDI (53% for HCM city and 25% for Hanoi) and about the same distribution applied for the last years, even with the increase of FDI in quantity, worsened the gap between the rich and the poor It means that, the GDP per capita only explains a growing trend of consumption power among Vietnamese people, but we cannot fully rely only on the statistical number as the medium and high-income class only account for a small number in the population

The table shows the gap between the GDP growth rate and GDP per capita between Hanoi – the capital and the average of the country While much of the rural population hovers above or below the poverty line, a completely new world has sprung up in Hanoi and Ho Chi Minh City Even the most casual of

observers will have noticed that Hanoi and Ho Chi Minh City are now home to major international brands that you would normally associate with London, Paris, or New York It goes without saying that these brand names come with hefty price tags

13

SWOT Analysis of Vietnam Luxury Market

- Positive economic prospects growth, despite

the global crisis

- Continued strong economic growth + half of

the population are under 30  dynamic and

quickly evolving commercial environment

- Increasing GDP, with disposable income

levels in major cities 4 to 5 times this level

 fast emerging market for luxuries

- Certain social-political stability

- A government committed to liberalizing the

economy and to introducing reforms based

on free market

-

- Lack of transparency, uniformity and consistency

in Government policies and decisions on commercial projects

- Corruption and administrative red tape within the government  difficult for foreign firms to enter the market without good lobbying

- Very high import tariffs  uncompetitive price, favoring counterfeit and contraband

- Infrastructure adapted to luxury standards is still developing: high start-up cost, shortage of skilled personnel

- Young population: People on working age

has the ability to work and spend on luxury

goods

- Active and open to changes, the consumers

are early adopters of trends from the world :

Brands awareness of can be created with the

V IS VIETNAM A PROPRITARY / POTENTIAL MARKET?

Emergence of new wealthy class in sufficient number to constitute a sustainable market

Household income or consumption by percentage

The 20% of highest income people generates

already 45.39% of the country’s total income This

figure clearly shows the wealth of high-income

classes They only account for a small percentage of

the population but represent the main driving force

of the economy with growing power

Consolidation of middle class (monthly income of more than US$ 435) and emergence of wealthy class

While the super-rich represent only 1% of the population, the number of upper middle class luxury consumers is growing at a staggering rate This portion of this class is estimated about 17% of the

population (2007) and has reached 25% by 2009 (PwC Thailand, 2009) It is really difficult to estimate the real percentage of this class as Vietnamese tend to keep private cash at home "In America, you pay

in installments," said Nguyen Hoang Trieu, a luxury car dealer in Ho Chi Minh City "Here, you pay all

at once, in cash Sometimes people come in here with $400,000 in a suitcase." They are becoming

increasingly open about showing their status and are willing to spend larger amount of their income to

non-essential consumption, including luxury goods

15

With the success from the economic and social reforms two decades ago, Vietnam benefited from a remarkable reversal of fortune Not only the poverty has been decreased by half, but also growing FDI and export levels contribute to a steep rise in consumer confidence and spending with the apparition of new wealthy class, who are private entrepreneur, executives of foreign firms… They represent a social class that make fast money with the doubled of GDP per capita compared to 10 years ago, and are more willing to spend

Thus, the lifestyle and consumption trends have changed accordingly About 1.5 – 2 million of Vietnamese travel oversea each year, mostly to Asian countries and also to the US and Europe Motors and scooters still remain the main transportation means but car ownership is increasing dramatically despite de poor roads quality About 5% of the population own a car, and mainly concentrated in luxury sector

Emergence in demands for luxury goods: Establishment of a society

of consumption and effervescence of luxury market

In 2010, Vietnam has imported $5.7 billion of luxury goods, increased of 14.2% from 2009 (Ministry of Industry and Trade) Vietnam is following India and China in becoming a new booming market for luxuries High-end brands such as Louis Vuitton, Prada, Bulgari, Dolce & Gabbana, Cartier, Mercedes- Benz, have built a visible presence in Vietnam’s major cities, and together they’re spending millions of marketing dollars (billions of Dong) to capture the attention of Vietnam’s nouveaux riches

The penetration of foreign brands into the Vietnamese market is relatively recent (American embargo was only stopped in the 1990s) and making a fast-developed market, especially for advanced technology equipment (Smart phones, Flat screen TVs…) and luxury products (cosmetics, perfumes, clothes )

It is important to notice that Vietnamese people are very sensitive with foreign products as they

believe the origin of products is synonym to quality Cosmetics and prêt-a-porter products are highly demanded and also the case for foreign agro-alimentation The presence of foreign restaurants, more remarkable in the South, is greatly making the Vietnamese to be more interested to the international cuisine

The luxury market is the principal beneficiary of the concentration of wealthy population in the urban area, which represents in a short-term an important potentiality of development

The needs of luxury consumers are increasing and diversifying dramatically, but are actually

unsatisfied, meaning there still be a strong gaps between luxury demand and supply However, since the beginning of 2006, there was a rapid take-off of luxury sectors and the consumptions habits have changed profoundly with the opening of numerous adapted shopping malls in just a short period The commercial surface dedicated to upscale product will strongly increase in the very near future with the numbers of ongoing projects of opening noteworthy of luxury department stores

1 The fancy for luxury goods of young people

The wealthy class show their desire to expose their new social status Luxury goods are considered as a symbol of succes and are widely recognized among the population

% of the

population

Total Classification socio – economic : High to low monthly income

Class A (+$1000)

Class B ($500-

$1000)

Class C ($300-$500)

Class D ($150-$300)

Class E/F (< $150)

I want to own products from brands to attest my success Totally agree 36.4 48.1 35.9 35.1 35.8 33.4

2 A new trend : The demand for more sophisticated products

If the vietnamese qualification of a luxury product is almost exclusively based on the price, there is a new criteria started to appear more important for the wealthy consumers: the critera of quality, uniqueness and originality of luxury goods

Also, a large proportion of consumers are willing to spent for a higher amount to obtain a product of a best quality brand

% of the

population

Total Classification socio – economic : High to low monthly income

Class A (+$1000)

Class B ($500-$1000)

Class C ($300-$500)

Class D ($150-$300)

Class E/F (< $150)

I am willing to pay for the high-quality brands Totally agree 54.8 60.6 58.1 55.1 52.6 46.1

Agree 23.9 21.9 24 23.2 28 21.9

Indifferent 10.3 10.3 9 10.3 8.9 16