Written by John Guzman
Vietnam’s consumer spending is on the rise and businesses across different industries are realizing the opportunity to increase revenue from the local market. From aviation to retail industry and banking, economic activities are buoyant on the back of consumer-driven Vietnamese market.
According to The New York Times, Vietnam Airlines used to dominate the local market until Vietjet Air entered the market in late 2011. As of late last year, Vietjet Air accounted for about 25% of domestic flights, compared with 63% for Vietnam Airlines and 12% for Jetstar Pacific, according to the CAPA-Center for Aviation, an aerospace consulting firm.
According to Viet Nam News, the airline transported 14.7 million passengers, of which nearly 8.8 million were local, an increase of 17% on their original targets. The stiff rise in the local passenger ridership suggests that more Vietnamese are willing to spend on travels.
The increased competition in the aviation sector gives customers more choices especially the power to choose lower fares. The Vietjet Air having such a strong competition with the national airline is planning to increase the number of routes. Moreover, the company recently placed an order of up to 100 Airbus jets.
Competition in the retail industry is bound to increase. Foreign firms are eyeing the lucrative market the country offers. According to Viet Nam News, foreign firms are set to intensify competition in the industry. From January 11, 2015, Vietnam will allow establishment of wholly foreign owned retail businesses. At present, foreign firms are limited to forming joint venture with local partners or franchising. According to the Association of Vietnam Retailers (AVR), Vietnam has an aggregate 130 trading centers, 700 supermarkets and over 1,000 convenient stores. A report by Vietnamnet indicated that Vietnamese particularly spend high on beer and instant noodles.
The retail industry will attract more potential as the public has increased consumer spending and likely to continue over the years. However, the government should take caution in regulating foreign firms in the industry. The report noted that current state regulations favor foreign firms over domestic ones. Difficulty of land development for business was cited by domestic firms.
Retail banking sector of the country also demonstrates an untapped opportunity for the industry. The retail banking market in Vietnam has been extremely competitive among more than 100 credit institutions, as reported by VietnamPlus. While the average income of the population remains low, relatively normal for a developing country. Therefore, banks can now invest on this lucrative sector as this will only grow over the next decade. It is a challenge but also an opportunity for those who are willing to invest, the report noted.
Vietnamese are also known as the most sparing among ASEAN citizens according to a study from Nielsen. This should make banks confident to lend capital for those willing to take the risk of opening a business or purchase houses using loans.
Overall, the consumer-driven Vietnamese market is an excellent opportunity for investors. Investments poured by the government in spurring employment, especially in hi-tech parks elevates the citizens’ standard of living, which consequently increase their spending.
–Edited by Mohamed P.Hassan