The richest and most successful businessmen in the past were mostly Chinese. TNS market researchers found that annual per capita gross domestic product in Ho Chi Minh City households was about $2,400, three times the official nationwide figure of $720 for this year. As the mass-affluent class replaces the middle class as the driver of growth, the dynamics of Southeast Asias consumer market will fundamentally change. 2020 in this case). "Their children now dont know hunger. The mass affluent are frequent travelers and globally connected. Vietnam has its sights set on becoming a developing, upper-middle-income country with modern industry by 2030, when it celebrates the 100th anniversary of the founding of the Communist Party of Vietnam. Media accounts portrayed two of the young men as loafers who spent their time spending their parents' money. (In using the Gini coefficient, zero represents perfect equality and 1 perfect inequality.) They are well educated and theres a general sense of optimism because of that," he said. Beneath the club's flash veneer though lurks the slightly troubling question of how people in their 20s and early 30s can afford such extravagance in one of the world's poorest countries. The assessed value of the land per square meter in front of the Ben Thanh Market, in the center of Ho Chi Minh City, was 200,000 dollars, or 21.7 million yen, in 2006--more than the 19 million yen the same-sized piece of land would cost in Tokyo's ritzy Ginza 2-chome. In contrast, in the remote regions - central and northern highlands, Mekong and Red River deltas - official efforts are geared more toward developing off-farm activities and convincing people to adopt hygienic practices." For some basic products, such as toothpaste, shampoo, and instant noodles, spending by Southeast Asian households remains very stable as incomes rise. Within the ASEAN region, Vietnam was predicted to have the highest CAGR in terms of middle income population with 10.1 percent from 2016 to 2021. Most of them were scarce and of very poor quality. But the water is still badly polluted. Upper-middle-income economies have GNI per capita of $4,046 to $12,535. Newly affluent consumers are significantly affected by famous fashion bloggers and public social media, but those who are more experienced pay more attention to trusted online circles and tend to purchase through private channels, such as a closed adidas group on Facebook or private WhatsApp groups. In the past year it has persecuted dissidents, restricted public gatherings, controlled access to the Internet and prohibited all free press and independent labor unions. growth of middle income population The distinction is important because the young upper middle class represents the most promising part of the segment. Vietnam's government and its foreign donors are aware of the growing urban-rural divide, a problem common to much of Asia. "A $50,000 car is nothing for this family,'' said Truong Thi Cao Cac, 38, who lives next door to Mai Dang Khoa, a 25-year-old racer who worked in his parents' textile business. "You are not allowed to talk to these people.". Its portfolio in Vietnam, for instance, starts with budget brands (such as Tiger Beer priced at about 50 cents a can) and extends to high-end beers (such as Heineken and Affligem, costing $1 to $2 per bottle) with other brands at key price points in between. Beyond the Crazy Rich Within the ASEAN region, Vietnam was predicted to have the highest CAGR in terms of middle income population with 10.1 percent from 2016 to 2021. As we stare at the papers heaped in the driveway." A fashion shop in Hanoi. This site contains copyrighted material the use of which has not always been authorized by the copyright owner. This is a major change for Vietnam: in 2000 less than 10% of the population spent more than 11 USD per day whereas today, this number reaches 40% and is expected to reach 75% by 2030. Klaus Rohland, who is due to leave his World Bank post in Hanoi this month to take up his new position as country director for the Russian Federation, says in an online video interview that 35-year-old Vietnamese employees in his office all faced the reality of hunger in the 1980s. Instead, they prefer to show off areas where the slums have been cleared. Progress in poverty reduction was set back but did not reverse in 2020. "Here, you pay all at once, in cash. The tariffs will be lowered gradually to a maximum of 70 percent now that Vietnam is in the WTO. The government may still be communist but a growing middle class is hungry for everything from Western fashion to beauty products and plasma TVs, say market watchers now rating the emerging economy as a goldmine. The roundup campaigns aim "to remove street children, beggars and vagrants from the street and out of view of international visitors," said the group. Vietnam expected to add 36 million middle class people in com, Vietnam National Administration of Tourism, CIA World Factbook, Comptons Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, Fox News and various websites, books and other publications identified in the text. But she lives in fear that her father, a college professor, will learn about her five Louis Vuitton handbags. In the current context of worsening air pollution, electric vehicles (EVs) are becoming an inevitable trend in the global automobile industry, and Vietnam is no exception. The classifications are updated each year on July 1 and are based on the GNI per capita of the previous year (2021). "There's a vast disparity between Vietnam's rural and urban areas," said Hassan Ahmad, whose Singapore-based group Lien Aid has launched an anti-poverty project here, funded by the city-state's Ian Ferguson Foundation. When asked which channels they use to share recommendations, about half of the affluent respondents said that they use messaging apps, such as Microsoft Messenger and WhatsApp, or social media sites. However, considering peoples awareness, 96 percent of Vietnamese think their incomes are high enough to be among the middle class. When they visit Japan, her son likes to buy special samurai trousers and jeans that mold to his body shape. No more bad smell!" Despite the regions immense cultural and economic diversity, we found that the mass affluent have strikingly similar views on lifestyle topics and attitudes toward work. We estimate that 57 million people in this dynamic region have gained affluencethe purchasing power and intent to sharply increase their acquisition of a wide variety of premium and luxury goods and services. About 60% of respondents said that official brand websites are among the top sources that inform their purchasing decisions the most, followed by online shopping marketplaces, such as Amazon and Lazada, and recommendations on social networking sites. We may become richer but lose our soul." The figure is comparable to that in China, a country facing its own problems with inequality, where about 33 percent of the country's wealth is held by the rich. The mass-affluent class is also particularly resilient during difficult economic times. These similarities are fostered by their use of social media (where they keep one another abreast of new products and fashion trends and share opinions) and their travel experiences. upper class in Vietnam Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Vietnamtourism. Human Rights Watch said none of the children they spoke to were told why they were rounded up or what rights they had in detention, and that no efforts were made to reunite them with their families afterwards. Target travelers. Its such an integral part of the brand experience and what the brand means.. A number of experiential factors are important in order for a company to establish a brand or product as premium or luxury among these consumers. An additional difference is that newly affluent consumers increase their spending on items such as skin care products, cosmetics, and international travel. Premium and luxury brandssuch as MiuMiu, Fendi, and the Makeup Store, for exampleare opening pop-up stores in key locations near Singapores Orchard Road to demonstrate their brand stories. The middle class earning USD 714 a month or more in Vietnam will double to 33 million people, about a third of the population, between 2014 and 2020, according to Boston Consulting Group. In the Mekong Delta provinces, for instance, a majority of the population have seen an increase in their incomes in the past several years, while keeping the gap between rich and poor there at a minimum. Questions or comments, e-mail [email protected]. Join these events in Vietnam to recruit students directly via our fairs and attend our peer-to-peer events to build connections with high school counsellors and recruitment agents. faces of the Vietnamese consumer Companies can convey this by restricting availabilitymanufacturing a limited edition of a product, for example, or crafting a product by hand. New World Bank country classifications by income level: 2022-2023 -, "Clearing Saigon's slums is a huge project, and the city is setting an example for the country as a whole. Managing Director & Senior Partner; Global Leader, Technology, Media, & Telecommunications Practice. Hold 15 meetings and network with school leaders who advise teenagers and their parents on the next steps in their academic careers. WebRICH, POOR AND MIDDLE CLASS IN VIETNAM DISPARITY OF INCOME IN VIETNAM Vietnam remains a poor country, with most people earning about $1,500 a year, but it has made tremendous strides since opening its doors up to capitalism in the mid-1980s. It should be who I am. She said that she bought her latest purse in a Barcelona boutique because it is elegant and not dull, but also not flashy.. Improving the relevance and quality of tertiary education curriculum and staffing can help reduce skill gaps and alleviate difficulties in recruiting for certain skills. It is easy to see the attraction. In 2006, the income of 20 percent of Vietnamese richest households was 8.4 times higher than that of 20 percent of the poorest households, up from 8.3 times in 2004, according to the newspaper Vietnam News. WebThe middle class earning USD 714 a month or more in Vietnam will double to 33 million people, about a third of the population, between 2014 and 2020, according to Boston Consulting Group. Economic policies to sustain growth must be complemented by strategies to protect households from falling back into poverty. Traveling Frequently. Movement (Photo courtesy of McKinsey), Vietnams civil registration system sees great improvements: official, Nursing home market nascent in Vietnam: Savills, Vietnams economy to slow as population ages: WB report, Vietnam a bright spot for foreign investors: experts, Flag-raising ceremony marks National Reunification Day, Top legislator concludes official visits to Cuba, Argentina, Uruguay, Second int'l hot-air balloon festival opens in Tuyen Quang, Top Vietnamese, Uruguayan legislative leaders hold talks, HCM City unlocks resources for development, Vietjet increases frequency of flights on routes to Australia, Green growth - inevitable choice towards prosperity, Ha Long-Cam Pha coastal road puts into operation, Ministry supports 50% cut on auto registration fees. In Vietnam, for example, brands heavily promote returning expatriates, who are known as Viet Kus, as Instagram personalities to influence online buyers. By using the BMI GlobalEd website you agree to our use of cookies as described in our cookie policy. Seeking Exclusivity. middle class in Vietnam The sensational case offered a vivid glimpse into the lives of Vietnam's nouveau riche, whose sometimes decadent habits are as unfamiliar to ordinary Vietnamese as the leather upholstery of the bright yellow Mercedes one of the young men was driving. The sudden emergence of COVID-19 at the end of the decade halted wage growth, and improvements in job quality. "In America, you pay in installments," said Nguyen Hoang Trieu, luxury car dealer in Ho Chi Minh City, the former Saigon. Rice is the most important crop. -, "Le Hung Vong, a journalist from the English-language newspaper Vietnam News, explained that the new housing was now linked to a modern sewage system. Rice grows in small paddies but the hills are denuded from erosion caused by slash-and-burn farming and felling of trees by villagers to sell for timber. Companies can also restrict access to goods by holding private events for select clients. Within the ASEAN region, Vietnam was predicted to have the highest CAGR in terms of middle income population with 10.1 percent from 2016 to 2021. At Vine, the chef, Donald Berger, said the clientele is "only 30 percent Vietnamese, but they're the biggest spenders." According to these experts, while the growth has benefitted rich and poor alike, those who were well off to begin with ended up with more gains. SDS leaders opposed the war because they felt it was unjust and feared being drafted. Later, I discover what happened to Ans office when he and I walk past the family altar and out through the kitchen into the driveway at the back of the house. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful. "The middle-class suburb also houses the imposing National Convention Center that has been built over the last two years for the APEC gathering at a cost of at least $260 million. Capitalist role models Not so long ago, extravagant displays of wealth were frowned upon in Vietnam, where the Communist government used to demonize businessmen as exploiters of the working class. The classifications are updated each year on July 1 and are based on the GNI per capita of the previous year (2021). TNS research showed that in an average household in the city most still call by its old name, Saigon, people spent 2.5 to seven times more than they said they earned. Online channels and physical stores are also increasingly deploying digital technologies, such as augmented and virtual reality. "Urban Vietnam has a middle class and, when a country has a middle class, it means it is able to sustain itself for the future," he added. The country's economy grew by 8 percent in 2006, and average per capita income has increased to $723 in 2006 from $485 in 2003. Many of the customers are tourists. Vietnams per capita income is expected to increase to US$3,000 by 2020 from its current level of US$1,960. Though Do La and his friends are refusing to discuss their lavish lifestyle or anything else about their case, their recklessness has enraged many of their less affluent fellow citizens, who seem embarrassed that such a thing could happen in Vietnam. And pay cash. upper class in Vietnam The youngest, 18 years old, is still in high school. faces of the Vietnamese consumer This constitutes 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. :/, Reporting from Dalat, Stanley Karnow wrote in Smithsonian magazine, Peasants labored in paddy fields, protected at intervals by gleaming white statues of Phat Ba Quan Am, a Buddhist goddess of compassion. 1 GBP = 30,669.45 VND Other major crops are sugarcane, cassava (manioc), corn (maize), sweet potatoes, nuts, banana, coconut, mango, jackfruit, citrus, coffee and tea. Jasmine, a tax consultant and university lecturer in her early 30s who is married with no children, explained that she visits branded stores when buying a luxury product because they make you feel special: sales agents are so soft-spoken, sensitive, and knowledgeableunlike in a department store. Michael, a Singaporean in his mid-40s who is in the telecommunications infrastructure business, described himself as passionate about Burberry: The store visits take me someplace else. RICH, POOR AND MIDDLE CLASS IN VIETNAM The hectic lifestyles they undertake produce many problems. The corresponding chart tracks USD-VND values from March 2014 to March 2019. To understand the mass-affluent market in the ten-member states of the Association of Southeast Asian Nations (ASEAN)Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnamits important to set aside the typical Asian stereotypes: high-net-worth individuals who inherited their wealth or won windfalls in property and security trades and the lavish-spending ultrarich who are depicted in the movie Crazy Rich Asians. Its important to clarify what we mean by mass affluent. [Source: Frank Zeller, Agence France Presse, November 12, 2006 ^^], "Communist Vietnam has stepped up its campaign against "social evils" ahead of the gathering, its largest ever international conference, that will bring to Hanoi the leaders of 21 economies also including China, Russia and Japan. New York tends to have the best prices, according to survey respondents, while Hong Kong, London, Paris, and Shanghai are preferred for convenience, the availability of luxury goods, and being family friendly. Milan, Seoul, and Tokyo, by contrast, have reputations for being the best one-stop shops, having authentic products, and the latest trendy products. Erni, a 39-year-old Indonesian, said that when her family of five travels to a place such as Bangkok, they just do some quick planning and hop on a plane. However, considering peoples awareness, 96 percent of Vietnamese think their incomes are high enough to be among the middle class. These are natural branches of the Saigon river, whose waters rise and fall with the rains. ^^, In 2007, AFP reported from Na Lia, a poor village in northwest Vietnam, "Vietnam's cities are being transformed by rapid economic growth which has brought fashion boutiques, fast food and traffic jams, but most people in this remote northern village wouldn't know. Average income levels in Vietnam in 1993 were less than 20 percent of the level in Papua New Guinea at the time, but PNGs poor performance since then has meant that Vietnam has moved ahead with the margin likely to widen during the rest of this decade. By 2020, the country is expected to have 30 million middle class and rich consumers. This website uses cookies so that we can provide you with the best user experience possible. [Source: Brian Gomez, The National, March 24, 2007 =], "Vietnam is one of the best performing developing economies in the world," the World Bank affiliate, the International Development Association, says. Back in the one-room house he shares with his mother, he says what most impressed him about Hanoi was electricity, but otherwise he didn't really like the big city. Vietnam This would require Vietnam to grow at least 7% per year, raising the average income level to over USD 7,000 (or USD 18,000 in purchasing-power parity terms) by 2035 (compared with USD 2,052 or USD 5,370 in PPP terms in 2014). Like other villagers here, Phong says he runs out of rice for several months each year so must switch to corn and cassava. income They are well fed. For example, middle-class consumers may upgrade their refrigerator from a basic two-door model to one with four doors and an icemaker. (See Exhibit 3. "If I can afford to buy something nice, it makes me feel proud," said Van, who works at Siemens and also consults for a Vietnamese import company. The type of travel changes as affluent Southeast Asians become more experienced consumers. Vietnam's nouveau riche have made their money through tourism, real estate, trade, corruption, manufacturing and joint ventures with foreign companies. Vietnam has seen annual economic growth of 7-8 percent in recent years but the scrapping of state subsidies and farm cooperatives has widened the wealth gap and sent poor rural families and lone children to cities looking for work. Hanoi's once-sleepy streets are now choked with scooters and, increasingly, the luxury cars of the new rich, including several Humvees. Education completion varies with household characteristics, especially ethnicity and economic status. The mass affluent account for up to 40% of household wealth in major Southeast Asian markets and more than half of the total spending in premium and luxury categories. Fiscal policy can support the development of a prosperous and inclusive middle-class society. A Chinese landscape painting hangs above a green upholstered sofa and chairs. The nation boasts enviable, consistent growth rates which has attracted foreign direct investment,encouraged exports, and strengthened the country from within, spurring domestic demand and spawning a rising middle and upper class. For luxury goods and services to command premium prices, they must connote exclusivity. Even so, the respondents broadly concurred that they dont purchase luxury brands just because such products are part of their lifestyle. The higher human development is, the less severe is inequality." Saigon's economic boom has raised land prices to record highs. To improve the participation of ethnic minorities in the labor market, laws protecting the rights of ethnic minorities can be further strengthened. When it comes to very premium products, the affluent prefer to shop online through trusted circles rather than public marketplaces. The roar of engines and blaring stereos awoke Nguyen Van Quang, who sleeps inside the tiny bar where he works. According to the World Bank the number of poor households decreased from 58 percent in 1993 to below 20 percent in 2004. Now the Vietnamese government intends keeping a steady hand on government spending, aiming to keep its national budget at around 22 percent of GDP, according to the ADB. The buying propensity of the mass affluent also tends to be more stable than that of the middle class during times of economic volatility. But they also realize that the varying circumstances from province to province mean fashioning different policy approaches for each area. "What we have done here is not genius, and it's not expensive," said Ahmad, whose project cost 150,000 dollars and half a year to set up, using know-how from Singapore's Nanyang Technological University. Photo by VnExpress/Phuong Anh. Companies must prepare not only to meet exploding demand in new product categories but also to shift to masstige and premium products in other categories. This may further widen gaps in human capital formation. In 2020, about 23 percent of ethnic minorities were working in manufacturing, nearly the same rate as the Kinh majority at the start of the decade. Movement "On Friday and Saturday nights it is very busy and many of the people are extremely rich and literally scatter money, giving us tips for lighting their cigarettes or showing them to the toilet," said one waiter who asked to remain anonymous. The right mix of fiscal policy can help finance the investments needed for the country and its workers to become more productive and higher earners, such as modernization of agriculture, improved skills and higher-quality education, a more robust digital backbone, and accompanying services. Access to new knowledge and innovations, including application of appropriate digital technologies, would support productivity growth by substituting for labor intensity. Vietnam Vietnam expected to add 36 million middle class people in ////, "Everybody around here is very angry about the racing,'' Quang said. However, to guarantee that brands maintain an exclusive cachet, companies should still control accesssuch as by allowing only certain products to be purchased onlineand create an integrated experience with physical stores. Economic growth averaged 9 percent a year in the five years to 1997, the year of the Asian economic crisis. The distinction is important because the young upper middle class represents the most promising part of the segment. "In light of the regional crisis, the impact of the economic slowdown on marginalised groups such as these will be felt even more strongly,'' the statement said. At the new Gucci shop in Ho Chi Minh City, the flip-flops are among the economy items. "If they can buy something luxurious, it proves they have money," Anh said. Reaching Next Mile aspirations:The millions who have escaped poverty over the last decade now need to continue climbing up to higher economic classes. Indeed, many members of the affluent class would not be regarded as particularly rich by the standards of a developed economy. Households are exposed to a range of shocks that can be costly, and for the poor can be poverty traps. "And a sign of this wealth is to go out to restaurants." A few doors down is the furniture business Cuong's mother helped him set up. Even though members of the affluent class will remain a minority of the regions population, they will become an increasingly meaningful share of the target market for a wide variety of products. Because these consumers are frequent travelers and heavy users of digital media, a remarkably high number of them across Southeast Asias markets share similar sets of values regarding what and how they buy. "The rise in consumption is nothing short of shocking." Web2022 Vietnam Poverty and Equity Assessment From the Last Mile to the Next Mile. "People are buying premium brands," Morley said. Companies need a robust online presence to enable consumers to discover their products in both official and unofficial channels, but it is also critical that brands maintain some level of exclusivity to protect their image. Experienced-affluent consumers want more than just a luxury brand. Vietnamese consumers are now punching above their weight." These consumers spend an average of 40% more than older members of the segment. As middle-class families enter the ranks of the affluent, they greatly accelerate their consumption of premium and luxury goods and services, such as cars, liquor, restaurant dining, and travel. "You are first-class citizens if you go to work in a car," Do Thanh Trung, manager of a small import-export firm, said proudly after spending $29,000 on a second-hand Mercedes C200. High-protein grass has been planted for the cows to feed on in enclosures increasing cattle yield, converting manure into organic fertiliser, and preventing the animals from destroying other plants. ::: "The children of the middle class increasingly eat Western food, use mobile phones and the Internet and enrol at international schools that until a few years ago catered almost exclusively to expatriates. Vietnamese policy-makers now think that by promoting both economic development and human development, they will gradually narrow the gap between rich and poor. "He received three years in prison. These sentiments suggest that the affluent want a luxury lifestylebut one that they define themselves. I bought some real estate after obtaining some useful information and sold it on. A report released by the U.K.-based analytical NGO and data refinery enterprise World Data Lab forecasts that Indonesia will have the worlds fastest-growing middle class population with 75.8 million, followed by Pakistan (59.5 million) and Bangladesh (52.4 million). We have identified six behaviors that are exhibited by the majority of affluent Southeast Asians and that are extremely relevant for marketers.