By 2030, the population of middle-class people in Vietnam will be 56 million making it the 18th country with the largest middle-class population. The rising middle class with a larger income to dispense along with the country’s fast-growing economy are a few reasons why luxury goods brands are flocking to Vietnam. According to Statista, the sector is expected to grow by 35.7%, therefore reaching a worth of USD 912 million by 2030. Over the next five years, it is expected to rise by 3.3% each year, as reported by VNexpress.
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By 2025, speculators project luxury goods in Vietnam will cross the USD 1 billion mark. Luxury segments that will receive the greatest impetus will be leather goods, fragrances, cosmetics and fashion.
Reasons for growth in Vietnam’s Luxury Goods Market
A hike in the salaries of the members of the middle-class is one of the key factors contributing to the growth of Vietnam’s luxury market. Between the years 2002 and 2020, Vietnam’s GDP per capita has increased 2.7 times amounting to almost USD 2,800. According to the World Bank’s 2016 report, the country is expected to acquire upper-middle-income status by 2035, with a per capita pay equal to USD 7,000.
By 2025, speculators project luxury goods in Vietnam will cross the USD 1 billion mark.
The number of the country’s high earners, ultra-wealthy, and not-yet-rich individuals is also increasing rampantly. The country is expected to witness a 32% increase in the number of people whose worth will be anywhere between USD 1 to 30 million by the end of the year 2025.
As per Statista, in the year 2021, revenue from Vietnam’s personal luxury goods market reached USD 976 million which will increase at the rate of 6.67% each year from 2021 to 2025.
There is a high demand for luxury goods amongst the opulent class. Luxury consumption has only increased during the pandemic. Moreover, the rising middle-class values the uniqueness, quality, and craftsmanship that high-end brands have to offer.
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Further, the EU-Vietnam trade agreement has benefitted the luxury market a lot. The investment protection agreement in 2019 eliminated 99% of all taxes and reduced several regulatory obstructions thereby providing a boost to the luxury goods sector. As luxury items become more readily available, more customers are likely to spend on them.
Today many renowned brands have established their foothold in the country. Porsche has come up with its second outlet in the Southeast Asian region by building a studio in Hanoi. Similarly, in March 2021, Bvlgari opened its first store in Ho Chi Minh City, according to a report by Vietnamplus.
Luxury Categories, Growing the most in Vietnam
Today’s luxury landscape in Asia has changed significantly with the emergence of new potentialities. The Vietnamese market has been home to luxury brands such as Louis Vuitton, Gucci, Burberry, and others for years. A few prominent categories of luxury goods have enjoyed significant development in Vietnam.
Luxury Cars
People in Vietnam are increasingly buying luxury cars. As a result, automobile firms are pivoting towards domestic production while still importing high-end vehicles. Most high-end car brands have converged on the Vietnamese market, including Mercedes Benz, Jaguar, BMW, Maserati, Bentley, Audi, Rolls-Royce, Land Rover, Porsche, and Ferrari.
In addition, the automobile market has been consistently expanding in 2022. Luxury brands are inclined toward the Vietnamese market because consumers are buying more expensive cars than ever before.
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According to a Thaco spokesperson, the company plans to establish fifteen BMW agents in Ho Chi Minh City, Hanoi, and other big Vietnamese cities this year in order to expand its market share.
Luxury Fashion
Many luxury fashion brands see Vietnam as a promising market. Living proof of this is the success of the flagship store of Salvatore Ferragamo’s in Vietnam’s capital since 2006. In order to expand into one of the most promising luxury goods markets in the world, the brand has also opened its fifth store. The country has three Louis Vuitton stores, one in Hô Chi Minh and two in Hanoi, while Burberry has four and Gucci has two. Following the opening of its first outlet in Hô Chi Minh, Emernegildo Zegna plans to open a second outlet in Hanoi soon.
Over the years, the city has seen a proliferation of luxury hotels and shopping centers, as it has become a major tourist attraction for wealthy Asians and Westerners alike. A distinctive advantage of Vietnam over India and other emerging luxury markets is that there are no customs barriers, and with new free trade agremments that are cutting tarrifs, its making it a very attractive country for people looking to shop.
Luxury Watches & Jewelry
In terms of fabrication and design, Vietnamese jewelry remains very traditional. Diamond and jade-set classic designs are highly favored by consumers. Bringing prestigious international brands to the market is often difficult for distributors and importers as import taxes are high. Foreign brands’ methods of imposing a minimum quantity of pieces are seen as risky by importing agents. There are fewer jewelers in the Vietnamese market than in the past, but the situation has improved significantly since 2007 and new brands have begun to enter the market.
The upscale and luxury watch market in Vietnam is primarily dominated by Swiss watchmakers, such as Longines, Rado, Rolex, Tag Heuer, Chopard, and Piaget.
Comparison with neighboring countries
In high-growth markets like Greater China, Japan, Singapore, and South Korea, the luxury industry has seen massive growth. However, luxury brands have not been that successful in employing the same efforts to establish themselves in the markets of the fast-developing countries of the region.
For instance in Vietnam, the demand for luxury products has soared in the last few years. As compared to China or Japan, the luxury goods market in Vietnam is smaller with its revenue amounting to 976 million in 2021. In contrast, China’s luxury market generated revenue worth USD 43.5 billion in 2021. On the basis of per person revenues, Vietnam performed exceptionally well as it reached USD 9.94 in 2021.
In 2020, Vietnam outperformed China by rising to the top position in Asia with respect to its economy. As per the government records, the country’s economy witnessed a 2.9% increase in 2020. On the other hand, China’s economy rose only by 2.3% in 2020.
Owing to the emergent middle-class population, Vietnam’s prospects of economic growth look very promising. As per Nielsen’s speculation, the middle-class population will rise up to 95 million by 2030. Moreover, the country boasts of a comparatively younger population, with the median age being 32.5 years. A young educated urban population only indicates a rise in the earning potential of the population which bodes well for the fast-spreading luxury goods market.
Prospects of Luxury Goods in the Market
The COVID-19 pandemic has severely affected luxury markets worldwide. Euromonitor International’s report Luxury Goods 2021 indicates a 15% decline in value for the global luxury goods market in 2020.
However, the luxury goods market is expected to generate revenues worth USD 911.50 million in 2022. In the same year, luxury fashion, the largest segment in the luxury goods market, is also expected to witness a spike worth USD 274.60 million. Moreover, the luxury goods market is forecasted to grow annually by 3.52%( CAGR 2022-2027).
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