Luxury brands struggle to find their voice

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Báo Đầu Tư English - 35 month(s) ago 33 readings

Luxury brands struggle to find their voice

An emerging wealthy class with sufficient disposable income was enough to attract international luxury brands and premium shopping malls sprouting up throughout key cities in Vietnam, all vying for a piece of the golden pie.


While sporting the latest brands may signify success, there are different definitions of
taste throughout the country

There is no question Vietnam is fast becoming an attractive destination for luxury brands. However, international luxury brands entering the Vietnamese market are struggling to gain resonance despite this emerging affluent class of Vietnamese consumers. According to TNS VietCycle, a consumer lifestyle study carried out every 18 months among 20-65 year olds in Ho Chi Minh City, Hanoi, Danang and Can Tho, the number of consumers who purchased goods at more than VND10 million increased from 2009, but remained low at 14 per cent in 2011. With such a large emphasis being placed on luxury and the emerging affluent segment, international brand owners coming into the country ought to understand the meaning and relevance of luxury for Vietnamese consumers.

Louis what?

When luxury purchasers were asked to list as many luxury brands as they can think of, responses were clearly not what one might expect to hear in western or developed markets. The top four most mentioned brands were iPhone (Apple) – 16 per cent, Sony – 14 per cent, Toyota – 14 per cent and Honda – 11 per cent. Meanwhile, almost one in three Ho Chi Minh City luxury buyers were unable to think of one luxury brand. Thinking of the brands occupying Vincom centre and the Rex Arcade in Ho Chi Minh City that carry the claim of luxury, many failed to cut through to consumers. Versace (2 per cent), Chanel (5 per cent), Louis Vuitton (6 per cent) and Gucci (8 per cent) were the most mentioned. When asked what brands luxury buyers aspire to own, responses painted a very similar picture. iPhone was the number one brand consumers most aspire to own in Hanoi, while in Ho Chi Minh City 41 per cent of luxury buyers did not aspire to own any brand.

What is luxury?

The results above can be explained by looking into the definition of luxury from the Vietnamese perspective. When luxury buyers were asked to define what luxury means to them, two major themes emerged - luxury is premium price and premium quality. Other attributes often attributed to luxury such as limited edition, exclusivity, hard to find, country of origin or celebrity endorsement were not at all strongly attributed to luxury. Brands such as iPhone, Sony and Toyota are by no means exclusive or hard to find – but they are indeed perceived to be of premium price and quality – the iPhone4 was priced at around VND32 million in its first week on Vietnamese shelves. The implication here is that luxury brands that are most likely to resonate with Vietnamese consumers in the short term are brands that belong to categories that have high consumer involvement. Meanwhile, going for exclusivity over familiarity is not recommended. In fact, when asked their level of agreement to the statement “Only those brands known and appreciated by the minority can be considered as luxury goods”, less than one in three luxury buyers agreed.

Functionality or practicality also appears to play a key role in luxury goods. When given the statement “If I owned some luxury goods, I would be reluctant to use them because they are too expensive”, almost eight out 10 luxury buyers disagreed. Clearly, the functional benefits of luxury goods are strongly sought-after.

Conformity or individualism?

Luxury purchasers were asked about their motivations for purchasing luxury goods with the results revealing some fascinating differences between southern and northern luxury buyers. Southerners tend to be motivated by necessity, expectations or the desire to ‘fit in’, while northerners expressed more of a desire to ‘stand out’ and show discernment from others. Southern responses were skewed towards “Because of work necessities”, “For important/formal occasions” and “In order to fit in social circles”. Meanwhile, northern responses were more skewed to “To bring myself confidence”, “To reflect special taste and discernment” and “To stand out from the mass”. This is a strong reflection of Hanoians’ overall desire for status and face, and luxury can be seen as a vehicle that helps drive this desire.

Strong differences between north and south also emerged when luxury purchasers were asked to define the type of person that uses or owns luxury brands. While consumers from both regions strongly agreed that people who use luxury brands “have a successful life”, northern responses were skewed to “have good taste” and “enjoy high quality life” – much aligned with the idea of discernment and differentiation. Meanwhile, southerners took a more practical view of luxury owners with “showing off”, “superficial” and “wasting money” as some of their key descriptions. These are but a few of the key regional differences that international brands owners need to be aware of before launching their product in the Vietnamese market.

Potential for growth

While incidence of goods purchased over VND10 million remained at 9 per cent in Ho Chi Minh City from 2009 to 2011, the Hanoi market has increased significantly with almost one in five making a luxury purchase in the past 12 months, indicating stronger potential for luxury in this region. Furthermore, there certainly seems to be very little anxiety towards purchasing luxury goods with only 25 per cent of consumers agreeing to the statement “I don’t like to show off, so I would not buy any luxury goods”. When asked what categories luxury buyers would be willing to pay a premium for, technology came out way ahead with almost six in 10 stating they would be willing to pay a premium for technology items. Other categories that showed strong potential for premium spending were household items, cars and clothing.

Technology brands are likely to continue to rule the luxury arena given Vietnamese people’s strong desire to be engaged with the category. However, as consumer needs continue to change and evolve, luxury brands from other categories are likely to be more prevalent. The problem is that where practicality is such a strong driving force, international luxury brands are lacking relevance with many Vietnamese consumers. The challenge for luxury brand owners looking to appeal to luxury buyers will be trying to convey the message through the framework of how Vietnamese perceive luxury. Luxury in the eyes of Vietnamese is more about price point and quality and is required to meet functional needs. However, in Hanoi, the trapping of luxury as separating the wheat from the chafe is starting to gain some traction.

To learn more about VietCycle 2011, kindly email matthew.erickson@tnsglobal.com or ralf.matthaes@tnsglobal.com” or search for VietCycle 2011 on Facebook.

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