Vietnam's Emerging Luxury Market:
Lessons from the Mekong
When people imagine the Mekong Delta the first thing that usually comes to mind is the beautiful natural environment. Every year travelers from around the globe venture down to southern Vietnam to get a glimpse at the natural scenery.
A boat travels through the canals in the Mekong Delta
Still, there is much more than picturesque boat rides to be found along the Mekong.
Vietnam's openness to global investment has helped bring high-end development to its rural communities. Foreign direct investment (FDI) is likely to continue flowing into Vietnam which will accelerate the industrialization and development of the SE Asia nation.
COVID-19 has made it difficult for outside investors to get an inside look at the preferences of Vietnam's emerging rural elite. Thankfully, due to Vietnam's largely successful containment of the virus, I was able to travel from Saigon to cities around the Mekong to explore this question.
Here I'll share some of my findings with a particular focus on Soc Trang. While most people outside Vietnam have not yet heard of Soc Trang, the city is famous in southern Vietnam for its beautiful and diverse temples.
Som Rong Buddhist Temple in Soc Trang
Modern luxury development was recently brought to Soc Trang by VinCorp, a large Vietnamese corporation that owns many of Vietnam's high-end malls.
Vincom Plaza Soc Trang is the city's first luxury mall. What might be a surprise to some people not familiar with the Vietnamese market is the design of the mall. Similar to the Vincom luxury mall in Can Tho (the largest city in the Mekong Delta), Vincom Plaza Soc Trang features European-inspired architecture.
Vincom Plaza Soc Trang in Soc Trang city
The design attracts many young people to come and take photos in and around the building. They are attracted to both the building itself and the well-known brands inside it.
With Vietnam's development still in its early stages, high-end European fashion brands are not yet a staple in many of Vietnam's malls. Instead, Nike and Adidas stores better meet the local market demand as the brands both have a strong international reputation and are more affordable compared to alternatives such as Gucci or Prada.
Luxury shops adjacent to Vincom Plaza Soc Trang
Importantly, while locals often enjoy Western architecture and brands, Asian cooking typically dominates the luxury restaurant industry.
Using Vincom Plaza Soc Trang as an example, nearly all the restaurants inside are exclusively of East Asia origin.
The mall features three upscale East Asian restaurants including Taiwanese hotpot, Korean BBQ, and Japanese. The only Western-style restaurant is Jollibee, a Filipino fast food joint that vaguely resembles KFC.
GoGi House Vietnam. An upscale Korean BBQ restaurant in Soc Trang's luxury Vincom Mall
When I visited on a Sunday evening, all the restaurants were filled with customers.
The price of the food comes at a stark difference from what is available outside of the mall. At a normal street corner restaurant eaters can expect to pay around 35,000 VND (~$1.50 USD) for a simple dish. Here, combination offers can go as high as 519,000 VND (~$22.50 USD). That's a big price tag considering the average person may only make around 2 or 3 million VND (~$86 - $129 USD) a month.
Restaurant-goers come to the mall because they want to enjoy a luxury experience. It's important to remember many Vietnamese people, even those with means, typically still enjoy eating at local eateries. It wouldn't be unusual for someone to eat at a local restaurant for lunch and then come with their family or friends to the luxury mall for dinner.
Conclusion:
As Vietnam's economy continues to open and grow, the opportunity to capitalize on Vietnam's luxury market continues to grow with it. Investors should carefully evaluate the preferences of Vietnam's emerging middle class in order to best meet local market preferences.
About the author:
Alexander is a lecturer at Hoa Sen University in Saigon, Vietnam. He is a member of the AmCham Vietnam Capital Markets and Financial Services Committee. He graduated with his LLM in International Relations from Peking University in Beijing, China. Before moving to Asia, he worked in US politics and studied Political Science at Portland State University.