It’s no secret that the middle class carries the economic stability of a country more than any other demographic. The recent growth of exactly this group of consumers, who have left the constraints of poverty and have reached a new quality of life, is a very good sign for all businesses in the country. Simply put, the growing middle class is the motor of Vietnam’s rapidly growing economy.
According to the Boston Consulting Group (BCG), the “Middle and Affluent Class” (MAC) is experiencing a significant increase from 12 million people as of 2014, up to a projected 33 million people three years from now. This will be around a third of the country’s total population, which is forecast to reach 97 million by 2020.
A member of the middle class is defined by a monthly income of VND 15 million or more, which gives them significant purchasing power. Keep in mind, however, that these numbers should be taken with a grain of salt. According to the Singapore-based Institute of Southeast Asian Studies, reliable data is difficult to obtain, since the discrepancy between a worker’s official salary and their unofficial income can be quite significant.
The Implications of Change
The influence of the growing middle class can be seen in many fields already, from restaurant businesses to office buildings and nice apartments; another good sign of increased purchasing power is the high quality of imported goods flowing into the country.
The change is evident everywhere and the Vietnamese are optimistic about their wealth increasing in the future.
According to the BCG, a staggering 92 percent of Vietnamese believe that they live a better life than their parents, and 93 percent believe that their own children will live in better conditions than they do now. This optimism contributes to the stable economic growth Vietnam is experiencing at the moment.
It’s not all good, however. One problem with the rapid development is the lack of consumer goods and distribution channels. While the real estate sector can easily keep up with the trend, shopping for suitable goods is sometimes a pain. The retail environment is simply not ready for the changing consumer behaviour, which creates occasional price and quality problems.
Resourceful business owners like Carey Zesinger of Havang prefer to see this problem as an opportunity to tap into the market.
Technology plays a part in this story as well. Vietnamese are avid internet users – a whopping 43 percent of members of the MAC are using the web on a daily basis; however, just 16 percent shop online. This may be due to a significant lack of trust and the low quality of many available online stores.
On the other hand, many businesses already know how to attract customers: by offering deals and discounts! There are few countries in the world where people are more actively hunting for deals than in Vietnam. Income class does not matter in this case: everybody loves a discount.
Trending to the Future
Of course, economic status doesn’t just affect retail businesses. Middle class families are also tending to invest in proper education for their children, which will in return increase their children’s chances of finding quality, good-paying jobs. This will help them support their own middle class family in the future. Moreover, good education increases awareness of social and health issues, which will in turn lead to responsible consumer behaviour. It’s a good cycle to start.
The demand for healthy food and high-quality, affordable goods and services ultimately drives our economy. Vietnam’s movers and shakers are beginning to realise that producing goods and services in the country will more effectively tap into the increased mass purchasing power. This, in turn, will create more and better jobs. We’re experiencing a period of economic transition in Vietnam, and this is driven in large part by the rising middle class.
When it comes to business, the window of opportunity is wide open. Of course, it comes with obstacles, risks and drawbacks. The competition is huge from both foreign investors and Vietnamese entrepreneurs. But there is rarely an opportunity without risk, so we wish you Chuc mung nam moi! May you dare and grab the rooster by the neck!