Vietnam discovers the consumer society

Vietnam began to liberalize its economy in the 1980s, when the country’s leaders launched doi moi (or “renovation”). It was only after President Clinton lifted the US trade embargo in 1994, though, that multinationals began to pile in. Since then, Vietnam has taken off. In 2007, it joined the World Trade Organization (WTO)—just in time for the global financial crisis. The country weathered the storm well, posting 5 percent growth in 2009. This year should be even better.

For retailers and consumer goods companies, Vietnam is an attractive market: the economy is growing briskly and sustainably, and the population is adding a million people a year. Even more important, the country’s middle class is growing fast: from 7 million households in 2003 to an estimated 25 million in 2013. Vietnam’s literacy rate is 92.5 percent, and from 2003 to 2008 the number of college and university students nearly doubled. The cities, though mostly small, are expanding rapidly. Six of them—Can Tho, Da Nang, Haiphong, Hanoi, Ho Chi Minh City, and Nha Trang—account for 40 percent of the country’s sales, according to AC Nielsen estimates from 2007.

The Vietnamese government estimates that retail sales reached $39.1 billion in 2009—almost twice as high as five years earlier. And the country has room to grow: per capita retail sales, at $450, are among the lowest in Asia. Setting up shop in Vietnam, however, isn’t easy. The market is fragmented and difficult to reach, and although 100 percent foreign-owned retailers can register for an operating license, they are generally allowed to open only one outlet. To expand further, they must pass an “economic needs test,” in which the government analyzes a new project’s economic impact.

Vietnamese consumers want the same things others do—good, reliable products that enhance their daily lives. What makes Vietnam distinctive, though, is how quickly consumers are moving up the ladder—“leapfrogging". Vietnam is one of the world’s fastest-growing economies, and there’s no reason to believe it will slow down. Its infrastructure is improving, and modern trade has made significant inroads. Asia’s youngest population and the rapid adoption of modern technology make Vietnam an exciting market. But it is by no means an easy one.

(Source: McKinsey Quarterly)

Category Management

It’s been described as one of the most scientific approaches to decision-making in retailing because of its reliance on data. Grocery retailers across the world were the earliest to adopt it, but over the last few years retailers in all categories have looked at it as a tool for seeking sustainable competitive differentiation and advantage. The ‘it’ here is category management. And for the retailer striving to bring greater focus to the store and improve its management and measurement processes, category management is most often the answer.

So, just what is category management? Quite simply category management involves organising and managing promotions, merchandising and distribution activity around the way consumers view and buy a product. A more formal definition would be ‘Category management is a retailer-supplier process of managing categories as strategic business units (SBUs), producing enhanced results by focusing on delivering consumer value’. Which then brings us to the question – what is a category?

A ‘category’ is a distinct, manageable group of products or services that consumers perceive to be inter- related and\or substitutable. It must be noted here that the focus of both the category and category management is the consumer and providing her with a range of products and services that offer more value. Category management must not be run contrary to the will and interests of the consumer and should favour the consumer if need be: This is the Holy Grail of this aspect of retail management. Thus, the aims of category management are to:

• Satisfy the consumer
• Grow the category
(Image source: Dezeen.com)