Vietnam’s growing luxury market, one of the most dynamic worldwide
Robb Report Vietnam recently organized Asia Luxury Summit, an event gathering major players from Asia’s luxury market, with a focus on Vietnam. Published by Indochine Media, Robb Report’s Publisher, Michael von Schlippe has exclusively shared with CPP-LUXURY.COM some of his insights into Vietnam’s luxury market and some of the conclusions of the Asia Luxury Summit.
Which have been the most dynamic luxury sectors in Vietnam in the past three years?
Fashion definitively has seen the fastest growth. There are just 5-6 major distributors in this segment, but almost all of them have added at least one or two international fashion brands to their portfolio in the last 2 years. Among those brands are: Etro, Canali, Christian Louboutin, Valentino, Chanel, Hugo Boss, Coach, Loewe, Givenchy. Other brands have announced their entry this year, among them Ralph Lauren, Dior, Ermenegildo Zegna, and Bottega Veneta.
What are the luxury sectors least developed which present opportunities for development?
I would say jewelry and yachting. Except Bulgari and Cartier there is no international jewelry brand on the market. And the yacht industry has not entered Vietnam at all yet. Of course the latter depends on an existing infrastructure such as marinas and ports, which largely don’t exist in Vietnam. But the potential is huge, just take a look at the coast line of Vietnam with over 3000 kilometers of beautiful beaches and islands.
Which are the top 5 luxury brands in Vietnam in terms of advertising spending?
I don’t think there is reliable information on that. My guess would be it’s the car industry that spends most. The brands most active on the market are Audi, and Mercedes Benz. Another big spender (relative of course) is DAFC, distributor of Salvatore Ferragamo, Burberry, Polo Ralph Lauren, Cartier, Chanel, Tumi, Bally, etc.
How is Robb Report positioned among publications which feature major luxury brands on Vietnam’s publishing market?
Robb Report targets the most affluent readers on the market. It is distributed via subscriptions to almost 8.000 VIP clients of major international and local banks who subscribe their Private and/or Priority banking clients to Robb Report. We print abroad, since the quality of print and the paper available for glossy magazines in Vietnam is still too low for an upscale publication. The content is produced by a team of Vietnamese and international editors based in Ho Chi Minh City who work with expert journalists from all over the world in researching and producing articles and features for the Vietnam edition. Thus, we position Robb Report as the most qualitative and authoritative publication about the luxury lifestyle on the market.
What is your view of print versus online, when it comes to effectiveness in reaching out to wealthy Vietnamese consumers of luxury?
The internet in Vietnam is overflowing with allegedly low priced offers for luxury goods. Street vendors and even regular boutiques and large shopping malls carry fake products and advertise them on the web. Most consumers of luxury goods don’t have much trust in the internet and are suspicious of products they see there.
Please provide a summary of the most important conclusions of your recent event, The Asia Luxury Summit held in Ho Chi Minh, Vietnam
There were several important points speakers emphasized when analyzing the luxury business in SE Asia and Vietnam in particular.
- High brand focus of local consumers, little brand loyalty.
- Consumers in Vietnam still hungry for anything new and open to try out brands they don’t yet know
- Brands need to speak to consumers in their language and take local mentality into consideration when promoting their products.
- High appreciation for quality, image, and heritage. Customers of luxury brands appreciate a “good story”, about the background of a brand and its history, about who has been associated with it and what successes it had in the past.
- Consumers in Vietnam pay much attention to the amiability of a brand and whether it is perceived as friendly (as opposed to alien, brash for example).
- Patience a virtue when doing business in Asia and in Vietnam
- Vietnam following in the footsteps of China in many ways when speaking about the development of the luxury business
- Even if China’s growth should slow, Vietnam and other SE Asian countries would be profiting, since focus would shift to them.
- Investors and brands will be paying more attention to the smaller markets in Asia once China slows down.
- The share of domestic consumption is growing. For example the luxury hotels in Vietnam have seen the share of local guests growing at high rates as compared to international guests. Also, Vietnamese guests’ average bill is considerable higher than that of international guests.
- Local guests focus more on the hotel and its facilities such as restaurants and spa’s than on outdoor activities such as sports or excursions
Laurent Genet, General Director AUDI Vietnam, one of the keynote speakers at Asia Luxury Summit organized by Robb Report provided CPP-LUXURY.COM an exclusive interview following the event, with his expert insights into Vietnam’s luxury market, highlighting the luxury auto sector.
How has Audi performed in Vietnam in the past year and what is your current market share in comparison with your direct competitors? – you may also mention a ranking
Audi started only four years ago in Vietnam in Ho Chi Minh City as the official CBU (Customer Built-Up) cars importer End of 2008 when Vietnam joined World Trade Organization. From 2009 onward, Audi CBU imports have been doubling two years in a row. In 2011, Audi deliveries to customers increased by 65% compared to 2010 to reach 355 cars.
Regarding competitors, Mercedes-Benz has been imported for a long time in Vietnam then opened in Ho Chi Minh City their own assembly plant in 1995. As the only luxury car manufacturer assembling cars in Vietnam, Mercedes-Benz is the only player in the locally-assembled premium car market which represent half off the volume.
BMW which used to assemble CKD in Vietnam stopped and changed their CBU importer in 2008. BMW leads the premium import CBU market with the 3-Series representing sizeable sales volume. Audi CBU overtook Mercedes-Benz to reach the second position since 2010 in imported luxury CBU and enjoys the stronger growth since then.
In CKD luxury, Mercedes-Benz is the only player assembling C-Class, E-Class and GLK. Removing then CKD volume, to answer your question about market share, we need to compare Audi official imports with other official imports. On that basis, Audi overtook Mercedes-Benz two years ago. BMW is still ahead – BMW used to assemble CKD in Vietnam – but Audi enjoys a stronger growth.
Our situation in Vietnam – when you exclude CKD for which we have no product offer – is comparable to Audi situation worldwide where Audi overtook Mercedes-Benz and BMW is still ahead:
As Vietnam is an emerging country, it is important to stress that until official importers came to Vietnam, all car imports – new and used CBU – were handled by grey importers –traders – selling cars with limited if any service and unable to deliver any manufacturer warranty. Indeed the cars had never been validated for Vietnam road and fuel conditions by the manufacturers. When Audi and other official importers started, Vietnam Authorities realized the benefits brought by official importers for consumers on the long run… Mid 2011 for the first time, Vietnam Customs stopped clearing new cars imported by importers without an official importer contract from the car manufacturer.
So most grey importers moved away from the new car import market and went massively into used cars imports especially Lexus as there was no official importer, and Audi because of the strong brand appeal and CBU service know-how we have been creating for the Audi brand here.
Vietnam automotive market in the best year – 2009 was incidentally the worst year in automotive worldwide – peaked at 200,000 vehicles half being commercial vehicles. Vietnam automotive market size is about a third of Malaysia and a fifth of Thailand. Like Thailand and Malaysia, the market is heavily taxed. Out of the 100,000 passenger cars market, two thirds are locally assembled CKD to benefit from a lower import tax at about 25% to 30% and one third is imported CBU with import taxes ranging now from 68% to 78%. In the luxury car market when you take into account new CBU imported via grey importers, CBU tend to exceed CKD volume since 2007. Since 2011 there is a shift with Lexus not being imported new anymore.
Which are the most popular Audi models in Vietnam? Why do you think so?
Audi’s product mix is in the higher segments unlike BMW which enjoys a large sales volume in the 3-Series segment. For Audi, Vietnam is the country in Asia with the highest C and D segments sales. Unlike most other countries where Audi sales will benefit from a sizeable volume in entry segments like A1, A3 and A4, our sales in Vietnam concentrate on Q5, Q7, A6/A7 and A8. Most probably because of the road conditions and flooding, any Audi model with quattro permanent all-wheel drive has been successful. In 2011 41% of AUDI AG worldwide production had quattro whereas in Vietnam, 85% of the cars we sell have quattro.
How do Vietnamese HNWI perceive luxury cars? How often do they change their car and what are the most important features they look for ? – design, technology etc
Vietnamese luxury customers are very well informed via their personal network and internet. You might be surprised with the vast Vietnamese diaspora worldwide. Any new product launched anywhere in the world spreads in almost real time. So a brand offering progressive design together with luxury and a sporty dimension such as Audi generates interest. Luxury cars are a status symbol and the beauty of CBU unlike CKD is that you have three times more body color to choose from making your car a more personal statement. Luxury buying in Vietnam could sometimes look like a fashionable purchase. Most wealthy car buyers own actually more than one car. You need to realise that because of the traffic – over 30 million bikes in Vietnam – and the lack of car park, people need to use a driver. Thus the luxury market tends to be a chauffeur-driven market. So luxury Vietnamese customers will check the amenities in the back seats and may not be as interested as European car buyers with self-driven characteristics. Comfort and visually pleasing design are essential to customers in Vietnam. Vietnamese luxury customers tend to be younger than in established countries. Our younger customers are twenty five years old. As such they value individuality and progressive values intrinsic to Audi.
To what extent a luxury car is a status symbol for the wealthy Vietnamese customer?
Because of the various taxes – import tax, special consumption tax, VAT – the price for cars in Vietnam is two to three times higher than in Europe. Since 2012 the registration tax represents an additional 15% to 20% of the car value respectively in Saigon and Hanoi. Luxury cars do represent a sizeable investment. Depending on whether wealthy customers are traditional, flamboyant or progressive they will prefer a brand with a star, a propeller or four rings…
What is the number of new Audi cars sold in Vietnam in 2011 and what are your expectations in 2012?
Audi delivered 355 cars to customers in 2011. In 2012 we expect to increase this performance. Year to date, Audi Vietnam sold 16% more cars vs 2011 in a market situation at -40% for CBU imports. We are expecting to sell over 400 cars in 2012.
Please outline your most important initiatives in 2012 for Vietnam (product launches, events etc)
In 2012 Audi Vietnam already launched the new Audi A5 Sportback 2.0 TFSI quattro and the new Audi Q3 2.0 TFSI quattro. Now we will ahve to aunch the Audi A4.
We have been very actively lobbying with other importers to be able to join the national motorshow previously restricted only to CKD assemblers in Vietnam. So we are looking forward to exhibit End of September in Hanoi. We will also launch our new Audi Hanoi premises – showroom, spare parts and service on 3,000 sqm in a prime area. We are also investing in IT with a sizeable Dealer Management System.
Audi supported the first Sound festival in Vietnam last April which gathered over 35,000 people. We will invite in November all customers taking delivery of their Audi between May 25th and Juy 25th to Audi Driving Experience on the latest race track in Taiwan. Finally we are looking forward to take part in the exclusive “Best of the best” event organised by Robb Report in Saigon at the end of the year…