2021 turned out to be a very different year than expected, for Vietnam.\u00a0 Having recorded the region\u2019s strongest economic performance in 2020, many expected a surge to 6% growth or more.\u00a0 It was not to be.\u00a0 The Delta variant hit hard, with tough \u201czero Covid\u201d lockdowns and supply-chain disruptions hurting production and depressing the economy which, in Q3, actually contracted for the first time since 2000.\u00a0 Around 1.8 million lost their jobs, pushing unemployment up from 2.73 to 3.98.\u00a0 Despite this, GDP was still up nearly 2.6% for the year overall.\u00a0 As Vietnam\u2019s doors slowly re-open, her government forecasts growth to climb to 6.0-6.5% in the next 12 months, and foreign investors are optimistic.<\/p>\n\n\n\n
It\u2019s in that context that personal luxury goods revenues reached $976 million last year \u2013 obviously less than those of China and Japan (China\u2019s revenues in this sector are about 50 times greater), and not even particularly high in per-person terms yet, but significant nevertheless and outpacing GDP growth.\u00a0 Why is this?<\/p>\n\n\n\n
FROM \"COMMAND ECONOMY\" TO NEW \"DOLLAR BILLIONAIRS\"<\/strong><\/p>\n\n\n\n Since 1986, Vietnam has been leaving behind its former \u201ccommand economy\u201d model, and transitioning into a \u201csocialist market economy\u201d, through economic reforms known as \u0110\u1ed5i M\u1edbi (\u201crenovation\u201d, \u201cinnovation\u201d).\u00a0 Most of the nation\u2019s young population, median age 32.5, have known only the \u0110\u1ed5i M\u1edbi era.<\/p>\n\n\n\n As such, a good proportion of Vietnam\u2019s workforce are not only employed in highly productive manufacturing and service jobs, but they are also keen to improve their living standards, and aspire to own and enjoy the trappings of an affluent lifestyle.\u00a0 In fact, some of these young, adult, earner-consumers will have parents who also fit this broad category too, making them the second generation. \u00a0<\/p>\n\n\n\n Young, educated earners are, the drivers of future luxury consumption.\u00a0 Before the pandemic, market research firm Nielsen estimated that the number of middle-class Vietnamese would reach 44 million by 2020.\u00a0 Furthermore, at the \u201ctop end\u201d of the income spectrum, Frank Knight now estimates that the number of people with net worth of $1-30m will jump 32% to more than 25,800 by 2025.\u00a0 Zero \u201cdollar billionaires\u201d were evident recently as 2012 \u2013 last year The Economist reported that there are \u201cprobably\u201d six.\u00a0 As a powerful emblem of these changes, just a few months ago Oxford University\u2019s Linacre College announced that it will be renamed after Nguyen Thi Phuong Thao, chairwoman of Vietnamese holding firm Sovico, following a $207m donation to that seat of graduate learning.<\/p>\n\n\n\n LUXURY - A CHANGING SCENE<\/strong><\/p>\n\n\n\n In a recent article, Luxury specialists Jing Daily noted \u201chigh demand\u201d for luxury goods in Vietnam, especially true since now \u201cconsumers are confined at home and cannot travel to Singapore or Greater China\u201d.\u00a0 In Hanoi and Ho Chi Minh City, consumers now feel confident showing off the signs of their wealth, and they are increasingly seeking out more than just internationally recognised brand names \u2013 an increasingly discerning wealthy class is seeking out quality, personalisation, craftsmanship, and the bespoke.\u00a0<\/p>\n\n\n\n Whereas the last couple of years have been challenging ones for many other areas of international trade, with a new protectionism becoming evident across the globe, Vietnam is benefitting from new tariff-cutting trade agreements including: ASEAN Free Trade Area membership; agreements with other key Asian nations including China and Japan; recent FTAs with the EU and the UK.\u00a0 An FTA with the EFTA countries of Norway, Iceland, Lichtenstein and Switzerland is under negotiation.\u00a0 Many of these agreements are making luxury goods even more accessible to Vietnam\u2019s consumers.<\/p>\n\n\n\n The prospects for luxury brands in Vietnam look very healthy overall, for those who can rise to the challenge and adapt well to local needs and requirements.\u00a0\u00a0\u00a0<\/p>\n\n\n\n