DEMYSTIFYING RURAL VIETNAM: HOW WELL DO YOU KNOW VIETNAM’S RURAL CONSUMERS?
As one of the largest and fastest-growing markets in Southeast Asia, Vietnam’s outlook in the years ahead is bright. The country’s average GDP growth forecast between 2014 and 2018 is 5.4 percent, exports are tipped to rise by around 20 percent, and foreign direct investment is strong with international manufacturers and investors attracted to Vietnam’s low-cost labor pool and large domestic market.
As the nation’s growth continues, there is increasing interest from the local and multinational business community alike around Vietnam’s rural consumers. The rural community in Vietnam accounts for 68 percent of the country’s 90 million people, is investing in their education, and is enjoying income growth of around 44 percent. Yet this high-potential group remains largely unknown to many businesses.
WHO IS THE VIETNAM RURAL CONSUMER?
While many sub-sets exist within Vietnam’s rural community, there are a number of common themes linking their attitudes and behaviours as a whole. These include optimism, a commitment to improve their lives and the lives of their children, a sense of community, emphasis on authenticity and the need to feel reassured in their decisions.
Optimistic about the future
Consumers in Vietnam are optimistic about the future, ranking in the top 20 countries globally according to Nielsen’s Q1 2014 Global Consumer Confidence Survey, and this optimism is consistent within the rural community. As their incomes increase, many are taking steps to improve their lives, and the lives of their children. These steps include undertaking home improvements, developing their careers and making first-time purchases of major whitegoods and appliances such as refrigerators and washing machines. Many rural consumers are investing in their childrens’ future, particularly in areas such as education. And as their lives become more ‘connected’ as a result of their investment in devices such as mobile phones, they are developing a healthy curiosity and desire to explore new things.
The ties that bind
Rural Vietnamese consumers have a strong sense of community. Family and community bonding is a high priority, and they listen to and value advice from those around them. As a result, their decisions are often driven by others, and they are heavily influenced by the opinions and recommendations of people they know. In fact, nearly three quarters of rural consumers in Vietnam are concerned about what people think and more than eight in 10 (81%) say they value the opinions and recommendations of others, compared to just 46 percent of urban consumers. A further 70 percent of rural consumers are affected by others’ recommendations in their purchasing decisions.
The importance of trust
Although their wealth and affluence is expanding, consumers in rural Vietnam remain frugal in their spending and look for products which provide reassurance and low risk. Product fakes and copies are rife in Vietnam (1 in 4 rural consumers have experienced faked/low quality products) and as a result consumers are cautious with their purchases. Earning their trust by providing proof of authenticity, quality and origin are critical product factors. Conveying trust levels generated amongst the community is also important – 95 percent look for popular products which are trusted by other consumers as one of the top three factors influencing their purchasing decisions.
UNDERSTANDING THE SHOPPING HABITS AND PURCHASE DRIVERS OF RURAL CONSUMERS
In terms of where rural consumers shop, while the number of modern trade stores throughout rural regions is increasing, traditional trade channels continue to play a pivotal role.
Old versus new – Vietnam’s highly diverse rural retail landscape
Wet markets are the most frequently visited retail channel in rural Vietnam (16 visits per month), followed by fair markets (14 visits per month) and sales trolleys (9 visits per month). Modern trade outlets such as grocery stores experience between six to nine visits per month on average, while supermarkets trail well-below at just one visit every two months. Traditional trade also accounts for the lion’s share of retail spending in rural Vietnam – VND655,200 (US$31.08) is the average monthly spend per shopper in traditional trade outlets compared to VND175,000 (US$8.30) per shopper per month in modern trade outlets. Shoppers are most likely to purchase items such as personal and household care, beverages, seasoning and dairy products from modern trade outlets and fresh foods, seasonings and some household items from traditional trade outlets.
Retailers are powerful brand ambassadors
In addition to valuing the opinions and recommendations of family and friends, consumers in rural Vietnam also respond positively to recommendations from retailers. Nine in 10 (90%) retailers recommend products to their shoppers, achieving on average a one in three hit rate (31% of shoppers buy products that are recommended by retailers). With up to 27.5 million shoppers visiting retail stores every day, retailer recommendations can be a power form of brand endorsement.
Opportunities abound for categories which appeal to consumers’ aspirations and life goals
With rural consumers’ aspirational outlook and fascination with urban lifestyles, there are opportunities for growth in categories which appeal to the desire for progression and lifestyle changes, in particular health and beauty and household cleaning products. Rural consumers also show a thirst for new products – 77 percent want to try new products and 95 percent appreciate having a wide range of products to choose from. But with a highly diversified retail sector, ensuring products are reachable and available are critical elements for success.
REACHING THE VIETNAM RURAL CONSUMER
When it comes to identifying marketing channels to reach and connect with rural consumers, television remains key. Television reach in rural communities is at saturation point, with 99 percent watching television on a regular basis, which is on par with their urban counterparts, and television viewing accounts for 88 percent of total media consumption. Print media is not so strong (25% weekly reach in rural communities compared to 74% for urban), while digital also has some way to go (11% weekly reach for rural compared to 55% for urban).
Rural consumers view television as a reliable source of product information, with 69 percent claiming to obtain product information via television. Conversely, word of mouth plays a key role in influencing product purchasing decision – 69 percent of rural consumers claim word of mouth affects their brand purchase decisions and is a trustworthy source of information.
While internet penetration remains relatively low, digital usage is on the rise among younger consumers. More than half (59%) use the internet more frequently than they did a year ago, and internet penetration for 18 to 24 year olds stands at 30 percent.
STRATEGIES FOR SUCCESS IN RURAL VIETNAM
As the rural Vietnamese community takes centre stage as a key group for businesses, understanding who they are, where, how and what they buy, and their most effective touch points will be critical strategies for success.
Know who they are
Embrace the values of rural consumers, address their need for product authenticity and reassurance by meeting brand promises, and share their sense of optimism and community spirit.
Know where and how they shop
Develop channel diversity and assortment tactics which meet the demands of curious rural consumers, deliver real value, and grow categories by linking them to consumers’ aspirations and lifestyle progression goals.
Know how to reach them
Connect with and nurture your brand’s fans to leverage the power of word of mouth, leverage retailers as brand ambassadors, and tap into the power of television for mass reach whilst keeping digital channels in the mix for connecting with younger consumers.
Insights contained in this article are taken from the 2014 Nielsen Vietnam Rural Study. For further information contact your Nielsen representative, or download the complete report now.
 OECD, 2014
 HSBC, January 2014