[Source: Xinhua, January 10, 2007], In 2002, Tran Dinh Thanh Lam of the Inter Press Service wrote: "Up until recently, economists saw no great difference in individual incomes in Vietnam as could be expected in a socialist country. Women are seeking out niche cosmetics and skin care products, such as those made by the Korean brand Isa Knox. Van's indulgences are modest compared to those of Vietnam's super elite, who tool around in the ultimate status symbols: a shiny BMW or Mercedes-Benz. Reuters reported: "Children selling newspapers, postcards or chewing gum, shining shoes, and begging are common sights in Hanoi and Ho Chi Minh City. The government may still be communist but a growing middle class is hungry for everything from Western fashion to beauty products and plasma TVs, say market watchers now rating the emerging economy as a goldmine. They are willing to pay premium prices to get quality, and they assert their individuality, spending more for a brand that reflects their values and aligns with their self-perception. Companies must clearly understand the income-consumption curves for their products: Do these curves remain stable as household incomes increase, rise steeply as incomes grow, or increase and then plateau at a certain point? Vietnam took just 11 years (from 1995 to 2006) to double its per capita GDP from USD 1,300 to USD 2,600 (according to McKinsey & Co, 2014). An ever-faster lifestyle is also reflected in the rise of new consumer goods, with instant coffee and tea bags growing by over 30 percent last year and slowly replacing the traditional drip coffee and slowly brewed tea. All that protects them from the elements is a narrow plastic roof. "Tram, tram, tram, tram!'' A disproportionate number of the poor also belong to ethnic minorities. The classifications are updated each year on July 1 and are based on the GNI per capita of the previous year (2021). Plenty of the regions nouveau riche spend ostentatiously. The distinction is important because the young upper middle class represents the most promising part of the segment. But in Myanmar and Vietnam, it comprises only the established middle-class and affluent segments. But the luxury market is booming in Vietnam, where Ho Chi Minh's communist revolution exalted equality and the common man just a generation ago. Copyright 1997 VnExpress.net. But economists remark that the growth could be better if the gains had been shared more evenly across different groups in the population and geographical regions of the country. It is crucial that companies understand the income-consumption curve for every one of their products and then match each products price ladder to that curve. Young men did the driving, he said, and sometimes their elegant girlfriends would sit on the back, hugging them tightly as they tore up the road. The stereotype of affluent Southeast Asian consumers showing off their wealth with designer labels is badly outdated. ////, "Everybody around here is very angry about the racing,'' Quang said. They wore western style clothes, were among the first Vietnamese to have cell phones and drove around on $3,000 motorcycles. "What we have done here is not genius, and it's not expensive," said Ahmad, whose project cost 150,000 dollars and half a year to set up, using know-how from Singapore's Nanyang Technological University. When consumers crossed that threshold, they purchased certain productssuch as smartphones, cosmetics, branded liquor, and frozen yogurtfor the first time. The World Banks LMIC poverty rate ($3.20/day 2011PPP) dropped from 16.8 to 5 percent, and over 10 million people were lifted out of poverty. ////, AFP reported from Hanoi: "Over a generation, urban Vietnam has emerged from post-war austerity into a fast growing consumer society, a trend set to speed up as WTO membership attracts more foreign companies, analysts say. Vietnam has seen annual economic growth of 7-8 percent in recent years but the scrapping of state subsidies and farm cooperatives has widened the wealth gap and sent poor rural families and lone children to cities looking for work. Sometimes people come in here with $400,000 in a suitcase." In those parts, sewage is still dumped straight into the water, so it stills flows through parts of the city. "Individualism is destroying our cultural identity. SDS leaders opposed the war because they felt it was unjust and feared being drafted. The biggest problem, Mr Ly says, is finding the money to compensate the slum-swellers for the land. Measuring the new wealth of the middle classes is difficult because Vietnam is largely a cash economy and the personal income tax-collecting system is in its infancy. Mass-affluent consumers tend to see products as a means to differentiate themselves, and they therefore seek out goods and services that are unique. TNS research showed that in an average household in the city most still call by its old name, Saigon, people spent 2.5 to seven times more than they said they earned. "And that's good." Vietnams per capita income is expected to increase to US$3,000 by 2020 from its current level of US$1,960. In the Philippines, these households have monthly incomes exceeding $465, in Thailand $442, and in Vietnam $660. Rice is the most important crop. Even active online shoppers, though, still enjoy shopping in conventional, brick-and-mortar outlets. The nation boasts enviable, consistent growth rates which has attracted foreign direct investment,encouraged exports, and strengthened the country from within, spurring domestic demand and spawning a rising middle and upper class. She and a friend visit Bangkok every two or three months, and they buy a suitcase of stuff.. Officials did not allow the BBC to interview slum-dwellers or their helpers in the worst slum areas, like the one around the Thi Nghe canal. This is a major change for Vietnam: in 2000 less than 10% of the population spent more than 11 USD per day whereas today, this number reaches 40% and is expected to reach 75% by 2030. She said poverty in Vietnam was reduced from an estimated 70 percent of the population to 20 percent over two decades of shedding centrally planned economic policies. Build a social license to operate. Yet spending on cars, restaurant dining, travel, and spirits dramatically accelerates as consumers enter the ranks of the affluentand keeps rising in step with increases in income. HANOI In a recent survey by the Boston Consulting Group (BCG), Vietnam was found to have the fastest growing middle class in Southeast Asia. The mother of Trinh Sam Mau, the alleged race organizer, called her son's sentence "completely unfair.'' Exclusive events can be particularly useful for local retailers that have little control over the products they sell. In that time more than 25 million people escaped poverty. Using consumption patterns and household income as a gauge, we found that about 5% to 10% of the population in each Southeast Asian nation is affluent. Consumption patterns become evident by graphing income-consumption curves. Associated Press reported from Ho Chi Minh City: "In a country whose peasant army once marched on flip-flops cut from old tires, Gucci beach sandals priced at $365 can come as a shock. Poverty levels in Vietnam have dropped from around 70 percent of the population to less than 20 percent in the past 15 years, according to the World Bank. This is a major change for Vietnam: in 2000 less than 10% of the population spent more than 11 USD per day whereas today, this number reaches 40% and is expected to reach 75% by 2030. "However, ask a cyclo driver outside and you get a wry smile and a mumbled comment about rampant corruption in the party and the government. Phong says he survives on less than 100 dollars a year. Middle-class families, for example, tend to sharply increase their spending on indulgences, such as snack foods and beverages, as their incomes rise. One of the ten children of a peasant, he formed a joint venture with a Hong King investment firm in 1990 which grew into a $20 million conglomerate by the late 1990s controlling distribution of John Deere farm equipment, Mercedes and Honda cars, and Johnson and Johnson baby products. Vietnam's government and its foreign donors are aware of the growing urban-rural divide, a problem common to much of Asia. WebThe middle class earning USD 714 a month or more in Vietnam will double to 33 million people, about a third of the population, between 2014 and 2020, according to Boston Consulting Group. Some brands offer cultural training for staff in key global shopping cities and hire speakers of Southeast Asian languages. A forum on opportunities for Vietnamese handicraft products has taken place as part of the MIDA Florence International Crafts Fair 2023, which runs in Italy from April 25 to May 1. In 1998 Reuters reported: "Vietnam Premier Phan Van Khai has called for swift action from local authorities to tackle the growing numbers of street children in the country, local media reported. Cindy, a former marketer in her mid-40s and a mother of three children, told us that when she was younger, she was a hoarder of luxury brands because it was fun and exciting and a way to connect with the group. Now, she says that it can be really embarrassing to go to a party and see someone else carrying the same designer purse. Companies must prepare not only to meet exploding demand in new product categories but also to shift to masstige and premium products in other categories. Diageo is opening experiential, invitation-only retail stores for connoisseurs to sample and learn about rare and reserve Johnnie Walker whiskeys. Reaching the ambitious goal of upper-middle-income status would require Vietnam to grow at least 7 percent per year, raising the average income level to over $7,000 or $18,000 in purchasing-power parity terms by 2035, compared with $2,052 or $5,370 in PPP terms in 2014. The World Bank assigns the worlds economies to four income groupslow, lower-middle, upper-middle, and high-income countries. Beyond the poor, a more diverse share of the population is economically vulnerable. BMI also takes a limited number of accredited institutions on chauffeured visits to top-rated private high schools in Bangkok, Hanoi, HCMC and Jakarta and to meet top high school counsellors at the Vietnam Internation School Workshop & Forum. However, to guarantee that brands maintain an exclusive cachet, companies should still control accesssuch as by allowing only certain products to be purchased onlineand create an integrated experience with physical stores. In the 1990s there were an estimated 20,000 street kinds in Ho Chi Minh City alone. Media accounts portrayed two of the young men as loafers who spent their time spending their parents' money. The mass-affluent class is also particularly resilient during difficult economic times. The regions economic transition is a major reason for the expansion of the mass-affluent class. The share of agriculture in gross domestic product has fallen from 25 percent to 20 percent between 2000 and 2006, by which time industry was contributing 48.1 percent and services 38.1 percent. High-protein grass has been planted for the cows to feed on in enclosures increasing cattle yield, converting manure into organic fertiliser, and preventing the animals from destroying other plants. The sensational case offered a vivid glimpse into the lives of Vietnam's nouveau riche, whose sometimes decadent habits are as unfamiliar to ordinary Vietnamese as the leather upholstery of the bright yellow Mercedes one of the young men was driving. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. It energizes and rejuvenates him. HANOI Vietnam is expected to add 36 million people to its middle class by 2030, according to a recent report by McKinsey. The income-consumption curve for other products is more linear: spending on laptops, cosmetics, and beer, for example, increases steadily as household incomes rise. At the time, it intends exiting from its "low income" country status by attaining a per capita income of US$1,050 to US$1,100. "There's a vast disparity between Vietnam's rural and urban areas," said Hassan Ahmad, whose Singapore-based group Lien Aid has launched an anti-poverty project here, funded by the city-state's Ian Ferguson Foundation. They also said that they usually post in private chat groups. But they also realize that the varying circumstances from province to province mean fashioning different policy approaches for each area. Vietnams per capita income is expected to increase to US$3,000 by 2020 from its current level of US$1,960. By 2020, the country is expected to have 30 million middle class and rich consumers. So these consumers are relevant not only for luxury brands, such as Chanel and Diageo, but also for companies such as Johnson & Johnson, P&G, Heineken, and adidas. Communist Vietnam is now on track to raise average per capita GDP to 1,000 dollars a year by 2010, moving the country of 84 million to middle-income status. A report released by the U.K.-based analytical NGO and data refinery enterprise World Data Lab forecasts that Indonesia will have the worlds fastest-growing middle class population with 75.8 million, followed by Pakistan (59.5 million) and Bangladesh (52.4 million). Some companies are also customizing products or increasing exclusivity through access. But the new report says that Vietnam's Gini coefficient has risen from 0.350 in 1995 to 0.410 today, just above the level of China, which has a Gini coefficient of 0.404. This website uses cookies so that we can provide you with the best user experience possible. Companies that take into account the common values and behaviors among the affluentand use digital and travel channels to reach these consumerswill greatly increase their ability to succeed in what promises to be one of the greatest growth opportunities in Southeast Asias economy. We arent referring only to an income level. Vietnamese consumers enter the middle class and put midsize cities on the radar Asia is the worlds consumption growth engine: miss Asia and you could miss half the global picturea $10 trillion consumption growth opportunity over the next decade, according to recent McKinsey Global Institute research. We know each other in our closed group, and people trust you in the fan club.. The Asian upper middle class can be viewed as two subsegments: those below 35 and those above it. Still employs almost half of the population and is highly labour-intensive in Vietnam; much ploughing is still done by water buffalo. Over half the country lived in absolute poverty, compared to 9 percent in China and 15 percent in the Philippines and four million children under the age of five suffer from malnourishment. In particular, Vietnam is considered a high-potential market for electric cars in the near future. No more bad smell!" Lai Hai Nhu, a 21-year-old university student, said the young men seemed to have squandered the opportunities their wealth had given them. Saigon's economic boom has raised land prices to record highs. The main online channels are mostly official brand websites and online marketplaces, followed by social media groups and other specialty websites. But as countries GDPs have continued to rise, this large middle class has started to graduate to the affluent class. These considerations far outweighed respondents concerns that the brand had a reputation for being very expensive and for not offering discounts. But a government survey found that the wealthiest individuals earned 12.5 times more than the poorest, who mostly live in rural, remote areas and depend on agricultural production. He pulled a $10,000 wad from his pocket, police say, and offered four $100 bills to the cops, hoping the cash would wash his problems away. The bird is mimicking the voice of Ans grandson, who lives here along with Ans three grown sons. Experienced-affluent consumers want more than just a luxury brand. As of 1 March 2019: 1 USD = 23,196.66 VND Human Rights Watch said a 2003-2006 study had found that homeless children detained in a notorious center outside Hanoi had been "subject to routine beatings, verbal abuse and mistreatment by staff or other detainees." With 23.2 million people joining the demographic by 2030, Vietnam is ranked seventh among nine nations with fastest growing middle class populations in the coming decade. Specifically, these consumers are embracing premiumization, searching for quality and value, seeking exclusivity, relishing immersive experiences, using digital media, and traveling frequently. [Source: Bojana Stoparic, Women's e-news, February 15, 2007]. WebDemocratic president Lyndon Johnsons escalation of the Vietnam War in 1965 gave SDS a cause of its own, as well as a recruiting boost. However, the mass affluent are far more accessible than most companies realize. Questions or comments, e-mail ajhays98@yahoo.com. Meanwhile, market research firm Nielsen has estimated that the number of middle class Vietnamese will reach 44 million by 2020 and 95 million by 2030. Efforts to clear them began 15 years ago, but up to quarter of a million people still live in them. SDS leaders opposed the war because they felt it was unjust and feared being drafted. By its own estimates, the most affluent 20 percent of the population is seven times better off than the poorest two percent. At that time people slept on the zoo grounds. According to the World Bank the number of poor households decreased from 58 percent in 1993 to below 20 percent in 2004. 1 JPY = 207.33 VND Its portfolio in Vietnam, for instance, starts with budget brands (such as Tiger Beer priced at about 50 cents a can) and extends to high-end beers (such as Heineken and Affligem, costing $1 to $2 per bottle) with other brands at key price points in between. In Vietnam, 50 percent of population would be listed as middle class with income of $5,000-35,000 a year. This will require greater overall spending while consolidating the currently fragmented mix of programs to achieve greater efficiency. He proposed new measures that included stopping adults from carrying babies while begging, preventing children from working in mines or other hazardous jobs and strengthening implementation of Vietnam's code that outlaws child labor. Surveys conducted by the General Statistics Office in 1993 and 1998, using expenditure data, showed that during this period, the Gini coefficient increased slowly and modestly from 0.330 to 0.357. The canal water often breaks its banks and floods this area, especially during the summer rainy season, leaving a layer of mud that breeds disease. The World Bank assigns the worlds economies to four income groupslow, lower-middle, upper-middle, and high-income countries. [Source: Agence France Presse, November 8, 2007 ], In 2006, Reuters reported: "World Bank senior poverty economist Carrie Turk said the rate at which poverty was being reduced in Vietnam was "almost globally unprecedented" and the benefits widely shared. They survive by selling newspapers and lottery tickets, shining shoes and begging. When asked which channels they use to share recommendations, about half of the affluent respondents said that they use messaging apps, such as Microsoft Messenger and WhatsApp, or social media sites. They snake through the city towards the west and north. Closing the countrys widening skills gap is key to remaining attractive to foreign investors and sustaining growth. Making a difference isn't always easy, but neither is it impossible, said Ahmad, speaking at the opening of a new primary school and library here, built as part of his group's first rural development project in Vietnam. -, "Clearing Saigon's slums is a huge project, and the city is setting an example for the country as a whole. Instead, they prefer to show off areas where the slums have been cleared. The number of newly established enterprises in Vietnam in 2017 hit a record high of 126,859 and was up by 15.2% from 2016. The World Bank assigns the worlds economies [1] to four income groupslow, lower-middle, upper-middle, and high income. :/, Vietnam's older generation, shaped by the hardships of war, finds itself at odds with younger Vietnamese over the new consumerism. The heavy security presence, which, according to several waiters, includes undercover, gun-carrying guards hired from police ranks, appear keen to keep observers guessing. Relishing Immersive Experiences. By 2020, the country is expected to have 30 million middle class and rich consumers. Consumer product companies should ensure that they have a strong public digital presence that goes far beyond their own websites. ////, But in recent years, as it has opened up the economy, the government has been portraying capitalism as a force for social improvement -- a way of generating jobs and income in a developing country yearning to raise its standard of living. Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. Even so, the respondents broadly concurred that they dont purchase luxury brands just because such products are part of their lifestyle. "He received three years in prison. Offer some form of exclusivity. "In the past, having a bicycle was a dream already, let alone a motorcycle now even farmers go to the field on motorbikes," said To Vinh from Thai Binh province in the northeast as he shopped for a Honda for his son, a first-year Hanoi university student. Most of them were scarce and of very poor quality. In a cross-country fiscal incidence comparison, Vietnams fiscal policy is about average among LMIC economies in helping contribute to inequality reduction. For the cost of a bottle of whisky -- ranging from a mere 65 dollars up to a staggering 180 dollars -- one of the multitude of cyclo or rickshaw drivers waiting outside could put their feet up for a couple of months, But in Vietnam's deeply traditional Confucian society, where maintaining face is all important, there are few better places in the capital to flaunt one's financial prowess than the New Century. The poverty and equity agenda is no longer only about raising minimum living standards and tackling chronic poverty; it is also about creating new and sustainable economic pathways for a more aspirational population. "You are first-class citizens if you go to work in a car," Do Thanh Trung, manager of a small import-export firm, said proudly after spending $29,000 on a second-hand Mercedes C200. Luxury brands are addressing this desire for craftsmanship, functionality, and quality ingredients. Because affluent consumers are comfortable with digital channels, they make a significant percentage of their purchases online. "A number of things are very striking, including the rate of change, the rate of acceptance and of an understanding of new goods and services," said Chris Morley, managing director of market research company ACNielsen Vietnam. Some men, with families to feed, scrape a living as pedicab drivers. The young men raced along a one-mile straightaway at speeds of up to 70 mph, whipped around a traffic circle and then headed back toward downtown. A typical table might drop between $1,000 and $2,000, he said. This site contains copyrighted material the use of which has not always been authorized by the copyright owner. While most consumers tighten their budgets during economic slowdowns, the spending of these consumers tends to remain steady or continue to increase. As the war continued to escalate, so did the militancy of anti-war students. The wealth gap is more noticeable between urban and rural areas, as well as between major cities and remote towns. Because the region is highly diversified and covers a wide area, Southeast Asias affluent population may appear to be a collection of niche markets. They are sometimes called "cadre kids" -- sons and daughters of couples connected to the elite ruling group or of businessmen whose entrepreneurial skills in the new economy have completely transformed the lifestyle of their extended families. Graph, map and compare more than 1,000 time series indicators from the World Development Indicators. There was no access to medical treatment or rehabilitation or educational activities. Updated country income classifications are available here. Vietnam's nouveau riche have made their money through tourism, real estate, trade, corruption, manufacturing and joint ventures with foreign companies. 2020 in this case). Instead of focusing on famous tourist spotswhats known as the checklist circuitthey seek out destinations that offer authentic local culture and immersive experiences. But big-ticket sales are also growing in a country where household incomes may be larger than previously thought because many people are thought to under-report what they earn to both the tax man and their own families. Winning brands are deploying a variety of strategies to create immersive experiences. Bojana Stoparic wrote in Women's e-news, "On the surface, these policies look successful. Today, these individuals constitute up to only 10% of the population in the regions biggest economies, but by 2030, the ranks of the mass affluent are expected to reach 136 million and represent 21% of the population. Their teenage son Hung sat at a makeshift desk in a corner, learning English on a computer. As the action in Southeast Asias enormous consumer market shifts from the middle class to the affluent class, there will be profound implications for virtually every provider of consumer goods and services. As the mass-affluent class replaces the middle class as the driver of growth, the dynamics of Southeast Asias consumer market will fundamentally change. It should be who I am. She said that she bought her latest purse in a Barcelona boutique because it is elegant and not dull, but also not flashy.. Lining the far wall are the glass-faced shelves that hold his books. However, as these consumers mature, they increasingly prefer goods that few others have and seek out exclusive and niche, harder-to-find brands. In the current context of worsening air pollution, electric vehicles (EVs) are becoming an inevitable trend in the global automobile industry, and Vietnam is no exception. "Families that don't have the money to pay for school fees and supplies are more likely to take girls out of school than boys," she said. The roundup campaigns aim "to remove street children, beggars and vagrants from the street and out of view of international visitors," said the group. A blue Indian mynah with a yellow bill announces, in Vietnamese, "Grandfather, telephone call for you!" The poorest had to spend over 50 percent of their income on food, while the richest roughly 44 percent. They have also worked for their wealth. However, households in Southeast Asian countries often significantly underreport their incomes. The country's economy grew by 8 percent in 2006, and average per capita income has increased to $723 in 2006 from $485 in 2003. However, the gap between rich and poor has grown since economic reforms were introduced. We face big challenges to help the worlds poorest people and ensure that everyone sees benefits from economic growth. But now a report released by the National Center for Social Sciences and Humanities (NCSSH), in cooperation with the United Nations Development Program (UNDP), says there is a fast-growing gap between haves and have-nots in Vietnam. They are mostly young, independent, and confident in their choices of brands and in their self-earned wealth. As we strolled around the meticulous, one-acre plot, he told me that he cultivates chrysanthemums that wholesale for 7 or 8 cents each. But they will not upgrade again as their incomes increase, even if brands add incremental features and frills. Working and studying to fulfill their ambitions leave almost no time for them to take care of each other and their children, she added. Business owners constitute the second-biggest cohort. These sentiments suggest that the affluent want a luxury lifestylebut one that they define themselves. At the same time, the rich have become less shy about displaying their money. Research conducted by The Boston Consulting Groups Center for Customer Insight, including a survey of about 6,000 affluent consumers and extensive ethnographic qualitative research in six major Southeast Asian countries, found that the majority of mass-affluent consumers are young and savvy. "There's a new wave, a new income bracket," one restauranteur told the New York Times. They plan to soon buy a single bull to genetically improve the local livestock. WebThe middle class earning USD 714 a month or more in Vietnam will double to 33 million people, about a third of the population, between 2014 and 2020, according to Boston Consulting Group. An additional difference is that newly affluent consumers increase their spending on items such as skin care products, cosmetics, and international travel. \^/, "As a result, many more couples have separated after having children. Over the next decade, 36 million more consumers may join Vietnams middle class, defined as consumers who spend at least 11 USD a day in purchasing power parity terms. Herms, for example, tightly limits access to VIP events, and the product selection depends on customers status with the brand. HANOI Vietnam is expected to add 36 million people to its middle class by 2030, according to a recent report by McKinsey. And when he travels, James says, It is all about dining and shopping. He reads blogs to stay abreast of trends in destinations, food, and luxury brands, and he conveys his discoveries to friends who share his passions. The mass affluent already constitute a critical market. Its so small that it cant even hold my mobile, she said. Brands should identify key international travel hubs and establish a presence so as to engage travelers early in their journey. One is the Nhieu Loc canal district, on the road used by visitors arriving in Saigon from Tan Son Nhat airport. WebRICH, POOR AND MIDDLE CLASS IN VIETNAM DISPARITY OF INCOME IN VIETNAM Vietnam remains a poor country, with most people earning about $1,500 a year, but it has made tremendous strides since opening its doors up to capitalism in the mid-1980s.
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