Date published: 3 Aug 2007
Vietnam, with a booming economy and fashion-conscious youth market, is Asia-Pacific's lesser-hyped beauty market prospect.
At €388 million (VND7.9 trillion), Vietnam is among Asia-Pacific's more modest cosmetics and toiletries markets, but with sales growth averaging 14% per annum between 2001-2006, it is also one of its most dynamic. Behind this growth is a strongly performing economy driven by rapid FDI inflows, which has lifted many Vietnamese out of poverty.
Yet, this does not tell the whole story. Vietnamese consumers' readiness to adopt Western beauty trends and craving for pricier foreign brands also explains why value growth is outstripping volume, and higher unit prices due to rising inflation is not a put-off in this market. Behind all this is Vietnam's youth population.
Demand comes from the under-25s
The under-25s make up 50% of Vietnam's population of 84 million. This group is exposed to international media, through television, magazines and increasingly the internet, and as a result is more image-conscious than earlier generations. Brought up amongst greater affluence too, the under-25s are more prepared to spend on non-essentials and premium labels. It is this demographic that is driving uptake of newer, generally more expensive, beauty products.
At €11 million (VND221 billion), colour cosmetics account for just 3% of the total market, yet they topped growth in 2006, increasing by 20%. Anti-agers, which remain a fledgling niche in Vietnam, also grew by 20% last year. Other non-essential beauty sectors achieving double-digit gains include sun care, fragrances and deodorants. Even young men are becoming aware of the importance of good grooming and the men's category totalled €15 million (VND294 billion) in 2006.
Retail modernisation to broaden the competitive landscape
Despite the attractive prospects, any company with aspirations in Vietnam will meet with stiff competition. Just three manufacturers, Unilever, Procter & Gamble and Colgate-Palmolive, account for over half of the total market. Fifteenth-ranked Saigon Cosmetics is the only local player in any position to challenge foreign rivals. Not even other multinationals, including L'Oréal and Johnson & Johnson with 4% and 3% market shares respectively, can be said to occupy anything more than niche positions, with their presence restricted to one or two, often minor, sectors.
The modernisation of Vietnam's retail environment, however, might just prove the key to opening up the beauty market to wider competition. At present, over 40% of all cosmetics and toiletries value sales are made at outdoor markets but this is changing fast and the channel lost more than 10 percentage points in share over 2001-2006 alone. Supermarkets, specialists and department stores are expanding in the country's major urban centres, providing the upmarket environment and one-to-one advice that could tempt consumers to experiment with new brand names. Direct sellers, including Oriflame and Avon, are recent entrants to the market, and are also helping to diversify Vietnam's competitive landscape, reaching out to rural communities and providing affordable luxuries.
In a country with 11 million internet users, on-line retailing also offers important opportunities, particularly for those looking to tap into its youth market. Through the internet, consumers can shop around and read reviews and advice. On-line retailing also gives manufacturers a competitive advantage, enabling them to build brand loyalty through social networks and on-line promotions. Those already exploring internet selling in Vietnam include Unilever, Procter & Gamble and Oriflame and local retailers such as Saigon Coop Mart and Golmart.
Author: Diana Dobson
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