The Reality of Retailing & Luxury

Ralf Matthaes
Regional Managing Director

Agenda
Present consumer reality and confidence
spend
Areas of spend / areas of saving
Confidence
Consumer
Modern retail not growing very fast due to
What and where consumers spend
The growth of Modern vs traditional trade
Drivers of growth
Hindrances of growth
Luxury myth
% whom have bought luxury items
Definition of luxury
Consumer misperception of luxury

Consumer Confidence 2011-2012

2008 2012 Consumer Confidence Index

110
100
80

89
78

60

79
68

64

40
20
0
2008

2009

2010

2011

2012

Index has fallen drastically due to poor Vietnamese economic performance

4
Source: TNS CCIP 2008 2012 urban only

Consumer overview of Vietnam's next 12 months

Q: In the next 12 months would you think that the following will be better, the same or worse than they are now?

Value of the
Vietnamese dong

51

Employment
The cost of living

My personal standard
of living

34

44

20
13
Worse

26

41

30

35

32

34
38
48

Same

57

15

30

29

Vietnam's economy
Foreign investment

2011 = 79

2012 = 68

39

16

20

42

36

21

43

36

13

35

25

27
42
43

58
41
51

Better

Confidence has dropped substantially in the past 12 months

Source: TNS CCIP 2011 2012 urban only

Job Security is Falling

Do you think your present job is safe, or do you think theres a chance you may become unemployed?

Mid 2012

Early 2011

68

20

76

12

17

Present job is safe

Chance of unemployment
Don't know

Job security is falling, driving consumer caution

6
Source: TNS CCIP 2011 2012 urban only

Employment Concerns
Will unemployment rise or fall in 2012 in Vietnam?

Mid 2012

Early 2011

25

30

69

54

16

Will see a fall in unemployment

Will see a rise in unemployment
Same/ Don't know

An additional 15% of the population believe unemployment will

increase in 2012
7
Source: TNS CCIP 2011 2012 urban only

Consumers savings
Roughly how much of your monthly income do you save?

++
Mid 2012

32

Early 2011

26

55

Up to 5%

5% - 10%

23

18

10% - 20%

18

14

13

More than 20%

Not only savings but the percentage consumer are saving has risen sharply
8
Source: TNS CCIP 2011 2012 urban only

Consumers spending in the near future?

Given the economic situation, will you be spending, less, the same, or more on each of the following items?

Education

47

Health care products/services

46

46

Food & beverages products

43

37

12

55

Personal care products

32

52

15

Household utilities

32

54

14

House hold care products

27

Entertainment & dining out

25

Mobile, Laptop, Devices

25

Home appliances
Transportation
Communications

56
52

16
23

58

24

55

24

17
21

59

20

17

65
More

15

Same

Less

Some sectors continue to see growth, whilst other continue to decline

9
Source: TNS CCIP 2011 2012 urban only

Modern retail in
Vietnam

Monthly household spend

Travel/ holidays
Healthcare
Investment
3%
3%
2%
Groceries
Entertainment
Eat / drink
4%
Total
Housing
4%
Groceries
Toiletries
32%
5%

out

= 32%
= 15%
= 47%

Communications
5%
Utilities
8%
Transportation
9%
Education
10%

Eating/drinking out
15%

47% of all spend is still spent on Food

What is the mix of food versus other items at modern retailers?

2011 TNS

Source: TNS VietCycle 2011.

Most frequented Modern retail outlets

HCM City
67

Ha Noi

65

38

35
20

20

16
4

Co-op Mart

Big C

Metro

Maximark

7
0

Lotte Mart

2
Citimart

10

2 3
Parkson

Vincom

Fivimart

Nationally Big C followed by Metro are the most frequented outlets

Note low penetration of high end venues
Source: VietCycle 2011
Base: HCMC & Hanoi

Value Growth of Modern vs other trade channels

2008-09

2009-10

2010-11

2011-12 1st half

13

The Luxury Myth

Who is Vietnams luxury consumer?

Gender

52% Male

Living in

Hanoi = 36% - HCMC = 19%

Age between

35 54 = 49%

Monthly Income 8.5 Mil. vnd plus = 67%

18
Source: TNS VietCycle 2011 Urban only

% of populations which have bought luxury items

in last 12 months
*Luxury item here is defined as valued over VND 10,000,000

2008

10

2011

14

Slow growth indicates that luxury is still well out of

reach for most consumers
19

Source: TNS VietCycle 2011 Urban only

Urban Declared monthly household income

41,000,000 VND Plus

15,000,001 40,000,000

13,500,001 15,500,000

B
9%

C
31%

VND 8,500,001 13,500,000

SEC A+ SEF F
1%
3% less than VND 2,500,000
A
9%
E
22%

2,500,001 5,500,000

D
25%

5,500,001 8,500,000

Urban luxury market is estimated to be about 19% of urban population

Source: TNS VietCycle 2011 Urban only

Vietnam National annual household income

Wealthy 1.5%
1.3 mil
Affluent
9.5%
8.2 mi

A1
A
B

Middle
26%
22 mil

BOP
63%
54 mil

1.5%

3.9%

5.6%

11%

15%

29%

34%

2/3rds of Vietnamese are still eking out a day to day existence

Source: TNS Vietnam

What does Luxury mean to Vietnamese consumers

Q: Which of the following statements describe what is luxury to you?

60

Premium price

56

Premium quality

36

Unique design

32

Used by famous people

26

Hard to find

23

Country of origin

18

Limited edition
Exclusive

14

Vietnam Luxury = Price & Quality,

Western World Luxury = Exclusive & Country of origin
22

Source: TNS VietCycle 2011 Urban only

How we define luxury?

Q:

Which of the following activities do you consider to be luxury?

2008

65

60

58

2011

57

52
45

42

44

44
39

35
27

26
21

Dining out at 5-star

restaurants/hotels

Travelling for
pleasure abroad

Playing golf

Shopping at
boutique venues

Living in a high-end
apartment

Staying at 5-star
hotels/resorts

Having membership
to VIP club

Until end of 2011 boutique shopping & overseas leisure

travel were on the rise as luxury past-times
23

Source: TNS VietCycle 2011 Urban only

The luxurious difference

between Hanoi & HCMC

HCMC

Hanoi
82

63
46

22

18

13

Having a
successful life

Showing off
Flashy

Enjoy high
quality life

With good
taste
13
2011 TNS

PREPARED FOR DIAGEO

Source: TNS VietCycle 2011 Urban only

Hanoi versus HCMC, Luxury is.

HCMC

Hanoi
61

56

52
44

26
21

Premium
quality

Premium
price

Country
of origin

For Hanoians luxury perceptions are much higher than in HCMC ,

except for Quality
10
2011 TNS

PREPARED FOR DIAGEO

Source: TNS VietCycle 2011 Urban only

Technology the top of the luxury food chain

58

Categories I would be willing to pay a premium for

Top-2-box agreement (%)

35
29

27

24
20

18

15

Tech item
laptop, Household
LCD TV,
items
camera

Cars

Clothes

Jewelry

Furniture

13

Accessories Cosmetics/
Alcohol
footwear
Perfume

Almost 2 in 3 luxury buyers willing to pay a premium for tech items.

21
2011 TNS

PREPARED FOR DIAGEO

Source: TNS VietCycle 2011 Urban only

Premium brands

PREPARED FOR DIAGEO

Most desired luxury brands

Top 5 most desired luxury brands

iPhone /
Apple

Toyota

Sony

Honda

Gucci

Technology & vehicles rule the luxury roost

24
2011 TNS

PREPARED FOR DIAGEO

Source: TNS VietCycle 2011 Urban only

I Brands willing to pay a premium for

Which brand would you be most willing to pay a big premium for in this category?

23%

22%

22%

14%

13%

13%

11%

10%

10%

8%

4%

9%

7%

4%

5%

25
2011 TNS

PREPARED FOR DIAGEO

Source: TNS VietCycle 2011 Urban only

Retail Synopsis
Due to the below factors, retailing is not what it is
supposed to be.
NAT is limiting value/volume retail from opening up

Lack of prime space

Low consumer confidence

High Inflation
High rents
High product cost restrictive to consumers
Wrong mix of retail outlets all premium and not in line with
consumer affordability

30
PREPARED FOR DIAGEO

Retail Solution

Many products under one roof at affordable prices

Must offer reasonable prices to entice consumers
Must offer right mix of consumer basket needs
Must offer grocery / food & beverage outlets
Location - Location - Location
www.tnsglobal.com www.tnsvietnam.vn
31
PREPARED FOR DIAGEO