IFM COVID 19 vietnam behavior change track from a behavioral science lens sharedbyworldlinetechnology

IFM CONSUMER CONFIDENCE INDEX – COVID-19 TRACKER – Behavioral Science Insights Introduction: Infocus Mekong Research IFM has been running the Vietnam Consumer Confidence Index annuall

Prepared for:

COVID-19 IMPACTRACK – Consumer Behavioral Change

Tracking Report- through the Lens of Behavioral Science

Prepared by:

Infocus Mekong Research SandRock Consultancy

IFM CONSUMER CONFIDENCE INDEX – COVID-19 TRACKER – Behavioral Science Insights

Introduction:

Infocus Mekong Research (IFM) has

been running the Vietnam

Consumer Confidence Index

annually since 2012, across a

nationally representative sample of

Vietnam’s population

With the impact of COVID-19 on

consumer behavior over the past

months, IFM has continued to track

consumer confidence and

behavioral changes, in an effort to

help businesses better understand

the evolution of consumerism and

what might become the “new

normal” of consumption behavior

in Vietnam

Contents:

This report covers key indices such as: Consumer confidence, future Economic Outlook,

Purchase Growth of both Product and service sectors, Fears and reservation shifts, Shopping behavior, COVID-19 Impact on employment,

consumer financing and the impact of COVId-19 on business / employment prospects

Dates and sample:

The study consists of 5 waves conducted between January

2019 to May 2020 and will be conducted again in June of

2020 The sample consists of a total over 9,000 Vietnamese consumers nationally, including Rural Vietnam

Data was collected via IFM Mobile panel

Behavioral Science Lens

This report includes commentary and analysis from a Behavioral Science lens by Jim Sailor – Director, Sandrock Consultancy and sheds light on the consumer psyche from a unique perspective in

terms of Choice architecture and Risk perceptions

Contents

Opportunities & Behavioral Science Insights 11

Section 2: Purchasing behavior 22

Big Ticket Item Product / Service Impact 17

COVID-19 business / employment prospects 36

CONTENT

Demographics

▪ Quantitative – Self-completion by end consumers

▪ Using IFM Mobile Panel via smartphones data collection

Binh Duong / Dong Nai 50

Other (Rural / sub-urban)

Household Income Personal Income

64%

36%

WITH KIDS UNDER 16 YEARS OLD

INCOME & MARITAL STATUS

Demographics are reflective of Vietnamese aged 18 plus, whom own a smartphone, which is over 90% in Urban Vietnam and around80% in Rural Vietnam

Urban Rural

Full-time employed but have

reduced hours / pay

EMPLOYMENT STATUS

EMPLOYMENT STATUS

Prior to COVID -19, 82% of respondents were employed full time, while in May only 63% were employed full-time,

with 9% unemployed and 28% working Part-time or on reduced hours and pay

Before COVID-19 After COVID-19

16% for under old people while over

40-year-old is only 8%

42% are under 24 years old

11% are over 50 years old

28% have monthly household income under 20 mil

It is interesting that 19% actually lost income in May Obviously that would likely prime them to

be pessimistic and bias them towards a more negative outlook Maybe more interesting is that this also means that 81% did not lose income, but still show overall results that appear to be perceiving risks (especially economic risks) to be at a high level.

Top-line Summary

VIETNAM’S PROSPECTS

In a recent Politico overview of Global Coronavirus Pandemic, Vietnam was seen as the most successful country in the world in

managing and controlling the spread of the Virus A major coup for Vietnam, driven by early intervention such as closing down

schools and borders and quarantining potential high risk cases and its amazing tracing efforts to root out infection With only 328 cases and no deaths, Vietnam is ready to open, if and when the rest of the world is safe to reconnect with

Reasons for optimism

As Vietnam has so far avoided major calamity, there

are some key positives for the near future…

▪ Global image boost provided by containment,

breeding potential investor confidence

▪ 2019 GDP growth of 6.8%, one of the highest

globally, and even higher than China 6.1%

▪ On-going China Plus one potential of Vietnam

▪ A resilient population and stable administration

Reasons for concern

Inversely, not all is rosy and Vietnam, like the rest of the world - will struggle

▪ Vietnam, as part of the global economy, will be negatively impacted much more than previously by global economic impact

▪ Vietnam has no benchmarks in dealing with this type of crisis, so there will be many unknowns

▪ Unemployment, wage lose and a critical loss of consumer confidence

This report outlines key consumer behavioral changes brought on by the pandemic, and analyzes which of these behaviors are

temporary, permanent and how Marketers can start to respond to these changes

KEY SUMMARY

Sector

Pre COVID Jan 2020 Sector

Post COVID May 2020

F&B 56% Household Utilities 28%

Sector

Pre COVID Jan 2020 Sector

Post COVID May 2020

Home Appliance 26% Entertainment /dining out -61%

Household Utilities 33% Personal electronics -26%

Index Pre COVID Jan 2020 Post COVID May 2020

Biggest fear for 2020 Environmental Pollution

26%

COVID negative impact on Business

25%

Key economic indices impacted by COVID-19 - based in Pre COVID vs Post COVID sentiment

Percent of Consumer who noted spending more or less on sectors in 2020 versus 2019 and versus Post COVID-19

COVID-19 has become a major reality check for consumers Prior to the outbreak consumer confidence, though not as high as in

2019, was still strong at 84, which has now dipped to 22, lowest in the last 25 years Consumer economic outlook also plummeted from 70% with a positive outlook for 2020, to only 6% in May, a mere 4 months later, partially spawned by 19% having either lost their livelihood or having had a reduction in income Some sectors actually grew during the pandemic, such as Online shopping, E-wallet payments, while other sectors were almost wiped out; Tourism, entertainment and bars / restaurant businesses

KEY BEHAVIORAL CHANGES

COVID-19 has impacted movement of consumers, hence impacting their actions such as shopping and entertainment behavior However, it has also created fear and uncertainty, which impacts and creates risk aversion, hence reduced spending

Note: The % decline is not as critical as the underlying trends, which will be further tested in Wave 2, June, 2020

Opportunities

&

Behavioral Science Insights

COVID-19 Impact

The Coronavirus is the first major calamity of this nature in over a Century

Baring World War II, and specifically The American War in Vietnam and its

collective aftermath, nothing has impacted Vietnam as much as this crisis

There are no benchmarks, nor precedence, to use as a guideline

As we face a potential “New Normal”, previous consumer behavior

benchmarks / data norms no longer apply, as behavior is shifting, not just

due to economic hardship, but driven by the shift in human behavior,

brought on by avoiding contagion and discovering new alternatives means

of daily activities such as shopping, eating and having fun

THE SHIFTING TIDES OF VIETNAM CONSUMER BEHAVIOR

Consumer Confidence

Consumer confidence in Vietnam is at an all-time low, driven by unemployment,

reduced wages and ultimately a lack of certainty, reducing consumer spend With

Tourism shut down, supply chains broken and most service industry businesses feeling

the pinch, confidence will not return to the market until; the country reopens safely,

unemployment heads back to Pre-COVID levels and consumers feel safe, secure and risk

adverse and willing to open out their wallets Hence, for most consumers, "a wait and

see mentality" will curtail spending across most sectors for the next few months

22

Jan 2019 Jan 2020 May 2020

Consumer Confidence Index

Key Consumer Confidence Indicators

With full-time employment in decline, Vietnamese are

negative about the future Prior to COVID-19, Environmental

pollution dominated fears (26%), now taken over by the

negative impact of the Virus on their businesses (25%)

Essentials

Essentials such as Food and Beverages and Healthcare products

/ services are seeing a decline in spend, but at a much lower

rate than most other items As health is paramount and Food

and Drink are the essence of life, these will be the quickest to

rebound, with an emphasis on more health-related platforms

and categories will be the quickest to rebound, with above all

else preventative measures, introducing more longitudinal

views of maintaining health and immunities

Opportunity

New opportunities will emerge which highlight safety,

cleanliness and longevity in terms of benefits for consumers

"Security" may become a major buzzword as consumers sense

of mortality may have been jolted into reality This bodes well

for products and services that can offer piece of mind and

assurances

Spending behavior

Outside of digital services such

as E-commerce and E-wallet, almost every consumable product or service measured is experiencing a mild to severe decline, due to our present uncertain times

Positive Economic outlook 70% 6%

Increasing Behavior More Decreasing behavior On-line shopping Shared office space Eat - Cook at Home Electronic device purchases In-Home entertainment Traditional shopping Alternative Health options Reduced Travel of all kinds Secure Financial Future Eat-out of home Electronic payments Purchase of Big ticket items Less

Consumer Behavior shifts

Roughly half of all consumers are considering or definitely holding off on non-essential purchases, such as cars, homes, and

holidays, until the future is more certain and clear Every single measured item declined by more than half of its previous purchase intent

Opportunity

These “Big Ticket” purchase items need to espouse securing

the future as an investment for family and achieving a sense

of control of their environment with a personalized tone

Maslow’s Hierarchical Need States

Over the past 5 years, especially in urban Vietnam, consumers have been steadily climbing

Maslow’s Need States, specifically towards Esteem, driven by the need to succeed and

the prestige and accolades that accompany success With COVID-19’s impact, some

consumers will certainly be looking down the ladder and back to the more primal

need state of Safety, Security and belonging their lives This potential shift

needs to be explored in some detail, as there is substantial opportunity

providing safety and belonging / tribalism for both products and

services by nudging consumers to new considerations

and alternative choices

Insurance Education Diversified

investment

Sector Impact

Most sectors have seen a major decline in spend Some of these will not likely recover to the same levels as previously enjoyed,while others will flourish But Human nature dictates that change is only achieved by doing and not just thinking As many of the changes have been forced, many typical behaviors will resurface Hence, the key is to gain a better understanding of what drivesthese new behaviors and how to sway consumerism in the medium to longer term benefits of your brands

During this extraordinary period, consumer behavior has seen unprecedented change driven by risk perception

and disruptions in choice architecture While many of these changes are undoubtedly temporary, it is possible

that some of these behavioral changes will be adopted in the long term

Marketing Implications - through a Behavioral Science Lens

Choice architecture

One of the primary focuses of behavioral-driven marketing is to design “choice

architecture” - processes and communication that changes consumer behavior by

nudging people in the direction of the marketer’s products or services It is difficult

to achieve and usually happens gradually over time However, in the Covid-19

pandemic government action and societal pressure has drastically disrupted and

rapidly transformed choice architecture almost overnight by taking some choices

off the board (air travel, drinking in a bar) while promoting and even requiring

other choices to be taken (using masks, cooking at home) It will be important to

understand which behaviors will shift back to normal over time and which are

likely to become part of longer term behavioral change That will be partly driven

by the perceived utility of new behavior (I really like e-payments now!) and also by

the perception of risk

Risk perception

Risk perception is subjective and changes over time based as much on emotion as on actual facts Decision making under a state of risk is invariably different than in normal times and generally leans toward making decisions that avoid loss rather than pursue gains The Vietnam data shows a consumer population under the heavy influence of perceived economic and health risks Health risk

perception has been and likely will continue to influence decisions about public activities such as travel and in-person shopping, but may shift back to normal levels if Vietnam continues its success in managing the virus threat Economic risks perception is influencing spending on big ticket items and may also change investment behavior as consumers become more risk averse and try to be better prepared for possible future calamity The timescale of economic risk perception is not easy to predict as it will also be influenced by global and regional economic impacts and will also be felt very differently depending on social and income demographics

Consumer Confidence

35 6%

16%

70%

85%

35 12%

22%

22%

11%

35 82%

Better Same Worse

VIETNAM CONSUMERS

VIETNAM ECONOMIC OUTLOOK FOR 2020 – POST CORONA OUTBREAK

3,567 2,964 502 1,023 1,000

As expected COVID-19 has had a hugely negative impact on consumers economic outlook for 2020, falling from 70%

positive in January 2020 to only 6% in May of 2020

8,056

51

22

2012 2014 2016 2018 2019 2020 Jan 2020 May 2020 June

IFM CONSUMER CONFIDENCE INDEX

2020 CONSUMER CONFIDENCE

Index: The index is based on 11 spend categories in terms of

spending more – same – less than previous year

(More + Same) Minus (less of 11 Categories average) = Index

Coming June 2020

Before COVID-19 Outbreak

Post COVID-19 Outbreak

Consumer Confidence has dropped to its lowest levels in over 20 years, from January 2020 pre-COVID, 84 Index to only 22 Index in May

of 2020, indicating a slow recovery, as Consumers spend cautiously

Coming June 2020

Post COVID-19 OutbreakFEARS / RESERVATIONS

BIGGEST FEARS / RESERVATIONS 2019 – 2020 – PRE – DURING - POST CORONA

Prior to COVID-19, consumers major fears surrounded Environmental pollution and inflation, which have been replaced by the negative impact of COVID on Business and Infection and fears of unemployment

Negative impact of COVID on my business

Being infected by Corona Infection

Unemployment

Vietnam economic slow down

Global economic down turn

Lose by business / Bankruptcy

Increased Inflation

Environmental pollution

▪ 20% aged under 30 #1 worry = unemployment

▪ 29% aged 30 – 40 #1 worry = negative impact of COVID on business

▪ 26% aged 40 plus #1 worry = being infected by COVID-19

Negative impact of COVID

Being infected by Corona Infection 26%

TOP THREE FEARS - MAY 2020

Increased Interest rates Global economic slowdown

Slow down of Vietnam

economy

Although economic worries are dominant, 22%

choosing infection as their #1 worry is still very high –especially when you consider that in Jan 19 and Jan

20 other than environment, no other risks were above 16%

These measures are critical to track to determine future behavior , specifically from a broader, society level fears to very personal/visceral fears In January, only Unemployment (11%) was really a personal fear In May, only economic slowdown (9%) was not a more personal fear This tracks with the behavioral changes seen in the other data In times of relatively low risk, we have the luxury of worrying about the bigger picture When fear/risk perception becomes personal and real for

me as a person, then it will be much more likely to change my decisions and behavior So, perhaps market opportunities for those able to help address risk/fears at the most personal level

Purchase behavior