While Covid-19 has caused financial hardship for many, it has not hurt the wealthy, who are still buying luxury items but not at the same level as they did before the pandemic.
A luxury shop located at a 5-star hotel in the central area of Hanoi displays handbags priced at thousands of dollars, which are out of reach for most consumers except for the wealthy.
Compared to other regional countries, however, consumer demand has been relatively stable in Vietnam, though the number of foreign travelers has dropped sharply. That is why luxury brands are still flocking to Vietnam despite Covid-19.
Vietnam is considered one of the fastest growing consumer markets in Southeast Asia and has favorable conditions to develop a luxury goods industry.
The middle class in Vietnam has been expanding rapidly with GDP per capita of $3,000, which shows the great potential of the domestic market.
Many Vietnamese in recent years have been willing to spend big money on luxury items. After a tour last year, two watch models called ‘The Bird Repeater’ and ‘The Charming Bird’ found owners in Vietnam, who bought them at VND13 billion and VND11 billion, respectively, according to a representative of the distributor for Swiss Jaquet Droz.
Wealthy Vietnamese no longer have to go to Singapore, Europe or the US to buy luxury goods since many brands are sold in the country.
Louis Vuitton and Christian Dior are planning to open shops in Hanoi. Louis Vuitton is among the top luxury brands in the world. Its most expensive bag sold for over VND3 billion. Christian Dior is a luxury fashion brand in France.
Many luxury brands are already present in Hanoi, including Prada, Hermès, Gucci, Patek Philippe, Hublot, Christian Louboutin, Mont Blanc, Cartier, Hugo Boss, Bottega, Kenzo and Valentino.
IPP Group is reported to hold 70 percent of the branded goods distribution market share in Vietnam. IPP distributes branded fashion products through its three subsidiaries DAFC, ACFC and CMFC.
|Vietnam is considered one of the fastest growing consumer markets in Southeast Asia and has favorable conditions to develop a luxury goods industry.|
Of these, DAFC is the distributor of Rolex, Bvlgary, Armani Exchange, Burberry and Cartier.
In 2011, Johnathan Hanh Nguyen of IPP began setting up a series of luxury shops on Nguyen Hue Boulevard in HCM City.
And now he is known as the ‘King of Branded Goods’ as he and his wife have brought 96 top brands, from high-end to mid-end, in fashion, footwear, handbags, cosmetics, watches and jewelry, to Vietnam.
Tam Son is another major figure in the branded goods distribution sector in Vietnam, distributing products of Hermes, Patek Philippe, Chopard, Bottega Veneta and Boss. In 2017, Tam Son established Tam Son Yachting to distribute yachts in Vietnam.
Besides Johnathan Hanh Nguyen of IPP and Doan Viet Dai Tu of Tam Son, Vietnam has other well known distributors, including Do Ngoc Minh, CEO of Luala and the son in law of Dao Hong Tuyen, known as the ‘Lord of Tuan Chau Island’, and Ly Nha Ky, a businesswoman.
Covid-19, however, has caused luxury sales in Vietnam to drop significantly because the number of buyers has fallen and goods cannot arrive in Vietnam due to travel restrictions.
Some international brands had to postpone their plans to launch products, especially in HCM City.
The sharp decline in number of foreign travelers has had the biggest impact on the luxury retail market, while domestic spending has decreased as consumers have tightened their purse strings. In the pandemic, non-essential goods and entertainment services have suffered the most.
McKinsey predicts that luxury sales globally in 2020 will drop by 35-39 percent from last year.
The departure of Leflair, a website specializing in distributing branded goods, shows that not everyone can succeed in Vietnam. Founded in 2015 in Vietnam by two individuals who had worked for Lazada, Leflair tried to become an address for middle-class consumers to buy original branded goods.
It successfully called for $12 million worth of capital and its website attracted more than one million visits a month. But it had to leave the Vietnamese market because of ‘difficulties in seeking capital’, as reported.
In the luxury car distribution sector, Rolls-Royce Motor Cars Hanoi, the distributor of Rolls-Royce products, had to close down. The price of each Rolls-Royce vehicle surged by VND13-30 billion because of changes in tax policies, which made it difficult for Vietnamese customers.
However, Vietnam is still a promising market and luxury brands have high hopes for a bright future. McKinsey believes that customers may come back soon as they did after the financial crisis in 2008 with a predicted growth rate of 1-4 percent by 2021.
Leasing flagship stores of Louis Vuitton and Christian Dior show stronger sentiment towards luxury brands in Vietnam.
Chopard, a luxury watch brand from Switzerland, has chosen Vietnamese haute-lacquer house Hanoia to design three unique models based on Hanoi.
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