Vietnam’s luxury market has witnessed significant growth in recent years thanks to the growing middle class and the increasing number of high-net-worth individuals. Luxury brands have started to expand their presence in retail outlets where Vietnamese clients are underserved as they seek to make a profit from the country’s strong economic growth and bourgeois.
Reasons for Growth in Vietnam’s Luxury Goods Market
The key factor contributing to Vietnam’s growth in the luxury market is a rise in middle-class salaries. Vietnam’s GDP per head has increased by 2.7 times between 2002 and 2020 to nearly USD 2,800. Vietnam is predicted to be on track to attain upper-middle income status by 2035 with a per-capita pay of USD 7,000.
Speculators predict luxury goods in Vietnam to reach USD 1 billion by 2025. It is also growing rapidly in the number of high-earners, ultra-wealthy and not-yet-rich individuals. By 2025, the country will see a 32% rise in the number of people whose net worth is between USD 1 and 30 million.
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.
Luxury brands see Great Potential in Vietnam
As the country expects to see the highest rates of growth in Southeast Asia this year at 6.5 percent and then 6.7 percent next, the growth potential for luxury brands is still bright.
The luxury goods market in Vietnam is expected to grow by 35.7% from last year to US$ 912 million this year. This follows a strong recovery from Covid-19. It is also expected to grow by 3.3% per year over the next five years and reach US$ 1 billion by 2025.
The biggest luxury segments would be automobiles, fashion, wine, watches & jewelry, cosmetics, and fragrances.
Automobiles
Luxury car manufacturers are injecting their investments into Vietnam. Lamborghini, an Italian luxury car brand, announced its return to Vietnam this month after a year of inactivity. The Porsche Center Saigon, which opened in District 7 in Ho Chi Minh City last year, considers Vietnam to be one of the fastest-growing markets within Asia Pacific.
Last year, the company launched the second Porsche Studio in Southeast Asia in Hanoi. The CEO of Porsche Asia Pacific attributed the vibrant young population of Hanoi to the store’s presence while noting that Vietnam has the youngest market of all the company’s markets.
The future is also bright for VinFast, the Vietnamese automaker, which has begun delivering its battery-electric SUV – the VF-31- to customers in its home market. This will set the trend for the car market in Vietnam as other electric vehicle models have also launched in the Vietnamese market in the first half of 2022 such as the Kia EV6, Mercedes Benz EQB, Mercedes Benz EQE, and Mercedes Benz EQS.
Wine
Vietnam is already the third-largest ASEAN wine consumer market. While beer is still the most consumed alcoholic beverage in Vietnam, the country’s growing middle classes are beginning to crave more premium wine.
Vietnam also consumed 15.3 million liters of wine in 2020. The World’s Top Exports data shows that wine consumption has increased 173.6 percent between 2018 and 2019.
Vietnam’s high spenders choose premium, expensive wines mostly from France, Italy, Chile, the US, and Australia with French wines representing 35 percent of the market share.
Fashion
Fashion is valued as the biggest luxury segment, followed by leather goods, cosmetics, and fragrances.
Many luxury brands are looking to expand or enter Vietnam because of its growing retail market and low rental rates compared to other Asian countries like Singapore and Hong Kong. Vietnam’s middle class is expected to grow to 56 million people by 2030. This puts it eight places above its 26th place in the global ranking of 30 countries with the highest middle-class population.
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, Ermenegildo Zegna plans to open a second outlet in Hanoi soon.
Luxury Watches & Jewelry
Vietnamese jewelry is very traditional in terms of design and fabrication. Consumers love classic jade-set designs in diamond and jade. Distributors and importers often have difficulty bringing prestigious international brands onto the market due to high import taxes. Import agents view foreign brands’ strategies of limiting the number of pieces they can import as dangerous. Although there are fewer jewelers in the Vietnamese market today than in the past it has seen a significant improvement in the last few years and new brands have started to enter the market.
The upscale and luxury watch market in Vietnam is primarily dominated by Swiss watchmakers, such as Longines, Hublot, Rolex, Tag Heuer, Chopard, and Piaget.
Distributors of Luxury Brands in Vietnam seem to be doing well
Duy Anh Fashion and Cosmetics saw a 171 percent year-on-year increase in sales during the quarter that ended in December 2013.
Two new fashion brands, Tiffany & Co. and Montblanc, were brought to Vietnam by the company last year. They opened their first stores in Hanoi and Ho Chi Minh City. In January, Christian Louboutin’s footwear and accessories brand was also introduced to HCMC. The first District 1 store opened in January.
Vietnamese consumers are shopping more now that the Covid-19 restrictions have been lifted in the past two years.
Prospects of Luxury Goods in the Market
The Vietnam luxury goods market is expected to generate revenues worth USD 1025 million in 2025. Luxury fashion, which is the largest segment of the luxury goods market, will also see a surge worth USD 274.60 million. The luxury goods market is expected to grow by 3.52% annually ( CAGR 2022-2027). In conclusion, there are many opportunities available in the luxury market industry for investors considering the country’s growing middle class, robust economic growth, and appetite for luxury goods. With a large and growing consumer base, both domestic and international companies have significant opportunities to succeed in this market, but also face intense competition and a complex regulatory environment. As such, companies looking to enter or expand their presence in Vietnam’s luxury market must be attuned to the trends and drivers, and adopt effective strategies to differentiate themselves and capture market share. Learn more about Marketing Strategies for Luxury Brands in Vietnam with us!
We specialize in digital marketing strategies for international luxury brands who want to launch their business in Vietnam. Contact us!
