As an important emerging economy Vietnam is now being recognized as a destination offering great potential for investment. For the cosmetics industry one of the most enticing aspects of Vietnam’s market is the significant growth in teenage and young adult demographics.
Although Vietnam’s younger generation has demonstrated an increased propensity to purchase consumer goods especially cosmetics and personal care products, loyalty and preference to specific brands hasn’t been cultivated.
Data from Mintel, a global market research & market insight group, indicates retail of cosmetic and personal care segment was 1.7billion in 2016, and is estimated to reach 2.35 billion dollars in 2017. Statistics from International Trade Center and World Bank shows that from 2011 to 2016, the value of imported cosmetics rose from 500 million dollars to 1.1 billion dollars. The value is estimated to double in 2020. In this article, the advantages of exporting cosmetics to Vietnam will be analyzed and the current promotion methods adopted by overseas enterprises will be introduced.
Status Quo of Vietnam Cosmetic Market
1. Regional differences
Due to the unbalanced economic development in Vietnam, the cosmetic market is stratified based on socioeconomic differences. In general, Vietnam cosmetic market can be divided into three regions:
1), southern part of Vietnam, less developed; most consumers consider price as most important in purchasing decisions
2), cross country tourism: most tourists are willing to accept a higher price for good quality goods
3), northern part of Vietnam (Hanoi, the capital city), where consumers pursue premium quality higher priced goods. This region is the main target for most overseas cosmetic companies
2. Immaturity of domestic cosmetic industry
Vietnam local cosmetics brands show an immature operation mode characterized by a small scale of production, basic product formulation and ingredient selection, limited product variation/differentiation, lack of distribution, plain packages, etc. Although local products sell at a low price they offer little competitive advantage to be feasible for exportation to global markets.
3. Free trade treaty
In addition to having little competition, overseas cosmetic enterprises also benefit from a free trade (no or low import tariffs) in Vietnam.
4. Market share by country
Statistic from Ho Chi Minh City Society of Cosmetics Chemists indicates that in Vietnam, overseas brands occupy 90% of the market; of this 90% Korean brands occupy the largest share of 30%...
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