The population that is no longer poor, but also not economically secure or middle class, is about 13.6 million. Access to new knowledge and innovations, including application of appropriate digital technologies, would support productivity growth by substituting for labor intensity. Now, the mass-affluent class is growing faster than any other income segment in the regionand the pace is projected to accelerate. HANOI In a recent survey by the Boston Consulting Group (BCG), Vietnam was found to have the fastest growing middle class in Southeast Asia. Economists further point out that places with better human development indicators can only benefit more from economic growth. Asian Development Bank president Haruhiko Kuroda, at a Hanoi conference this year, warned that in Asia, "although absolute poverty is being significantly reduced, the gap between the poor and the rich is rising". Vietnams per capita income is expected to increase to US$3,000 by 2020 from its current level of US$1,960. In Indonesia, for example, the affluent already account for a significant amount of all spending on restaurants (42%); leisure and travel (46%); watches, jewelry, and eyewear (49%); and cars (53%). The World Bank assigns the worlds economies [1] to four income groupslow, lower-middle, upper-middle, and high income. Its important to clarify what we mean by mass affluent. The sensational case offered a vivid glimpse into the lives of Vietnam's nouveau riche, whose sometimes decadent habits are as unfamiliar to ordinary Vietnamese as the leather upholstery of the bright yellow Mercedes one of the young men was driving. (Photo In the early 1990s, 45 percent of the children in Vietnam were regarded as malnourished and 51 percent of the population ate less than the World Bank's 2,100 calorie a day subsistence level. "You are first-class citizens if you go to work in a car," Do Thanh Trung, manager of a small import-export firm, said proudly after spending $29,000 on a second-hand Mercedes C200. According to Vietnamese press accounts, Cuong earned his nickname when he was just 11 years old by paying exclusively with U.S. dollars, which are circulated widely in Vietnam. We arent referring only to an income level. However, children are dealt the hardest blow in divorce cases. This sentiment was especially true among those who are experienced-affluent consumers. ////, "It was Cuong who tried to give us $400,'' said Thuyet, whose $140 monthly salary is the highest in his department. This has taken place even as Vietnam was posting strong economic growth in the past decade. She recently bought Cuong a home in Saigon worth about $350,000, according to a story on VN Express, a Vietnamese Web newspaper. The poverty and equity agenda is no longer only about raising minimum living standards and tackling chronic poverty; it is also about creating new and sustainable economic pathways for a more aspirational population. A model developed by BCGs Center for Customer Insight segments the populations of countries into five groups on the basis of monthly household income, census data, and purchasing behavior. Vietnam's gross domestic product grew by an estimated 8.2 percent this year, second only to China. The canal stinks, with a sickly smell of human waste and rotting vegetation. Offer some form of exclusivity. They can show this by pursuing sustainable, local sourcing of materials; creating jobs by manufacturing products locally; and supporting social programs in the communities in which they operate. Fading as the most important economic sector in Vietnam. And they shun tourist traps and seek out niche retail outlets instead. Categories such as passenger cars, cosmetics, and restaurant dining will become hot growth segments, replacing categories such as household appliances, baby products, and ready-to-eat foods; similar shifts occurred when China experienced a comparable demographic shift. In the analysis process, these six social classes are grouped into three social strata: the upper stratum (including upper and upper-middle classes), the middle stratum (consisting of the middle and lower-middle classes), and lower stratum (comprising of the upper-lower and lower classes). If you disable this cookie, we will not be able to save your preferences. Although they are starting to buy luxury goods, many are still in the process of trading up to premium products in categories such as personal care, food and beverage, and footwear. With a total of 56 million middle-class people by 2030, Vietnam is set to leap up eight places from the current 26th position to 18th in the global ranking of 30 economies with the largest middle-class populations. One of the ten children of a peasant, he formed a joint venture with a Hong King investment firm in 1990 which grew into a $20 million conglomerate by the late 1990s controlling distribution of John Deere farm equipment, Mercedes and Honda cars, and Johnson and Johnson baby products. "Families that don't have the money to pay for school fees and supplies are more likely to take girls out of school than boys," she said. Vietnam is expected to add 36 million people to its middle class by 2030, according to a recent report by McKinsey. WebThe middle class earning USD 714 a month or more in Vietnam will double to 33 million people, about a third of the population, between 2014 and 2020, according to Boston Consulting Group. Relishing Immersive Experiences. A forum on opportunities for Vietnamese handicraft products has taken place as part of the MIDA Florence International Crafts Fair 2023, which runs in Italy from April 25 to May 1. "I think five is enough." This site uses cookies to optimize functionality and give you the best possible experience. Several buyers in Ho Chi Minh City were interested in the car but Khai offered the highest price which was, however, not disclosed. "Our customers want people to know that they are high-class." Vietjet will increase the frequency of flights between Ho Chi Minh City and Melbourne and Sydney (Australia) to respond to the big demand for visiting relatives, traveling and studying abroad of people and tourists. International Business, The figure is comparable to that in China, a country facing its own problems with inequality, where about 33 percent of the country's wealth is held by the rich. ***. To reach these consumers, companies must appeal to their desire for better, more distinctive products that speak to their new, higher status. In addition to the current situation, Vietnam will add 36 million people to its middle class by 2030 . They are sometimes called "cadre kids" -- sons and daughters of couples connected to the elite ruling group or of businessmen whose entrepreneurial skills in the new economy have completely transformed the lifestyle of their extended families. Van's indulgences are modest compared to those of Vietnam's super elite, who tool around in the ultimate status symbols: a shiny BMW or Mercedes-Benz. Using Digital Media. About 60% of respondents said that official brand websites are among the top sources that inform their purchasing decisions the most, followed by online shopping marketplaces, such as Amazon and Lazada, and recommendations on social networking sites. Heineken provides an example. Whoever they are, they have influence or at least high-ranking sponsors who have allowed the club to use the premises of the neighbouring National Library as a carpark for their Mercedes-driving patrons. Progress in poverty reduction was set back but did not reverse in 2020. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful. According to the CIA World Factbook Household income or consumption by percentage share: lowest 10 percent: 3.2 percent; highest 10 percent: 30.2 percent (2008). [Source: Thomas A. Bass, The New Yorker, May 23, 2005 ////], "We kick off our shoes and enter the large room that used to serve as Ans office and library, as well as the reception and dining room. A report released by the U.K.-based analytical NGO and data refinery enterprise World Data Lab forecasts that Indonesia will have the worlds fastest-growing middle class population with 75.8 million, followed by Pakistan (59.5 million) and Bangladesh (52.4 million). The broad based growth in Vietnam in the 1990s and 2000s contributed to rapid poverty reduction across all regions of the country. The war generation wasted nothing and always saved for the future, convinced that catastrophe lurked around every corner. The seventh -- a high school student accused of organizing the race -- was sent to jail for three years. And then they got nabbed -- in Vietnam's first drag-racing bust. Vietnamese consumers enter the middle class and put midsize cities on the radar Asia is the worlds consumption growth engine: miss Asia and you could miss half the global picturea $10 trillion consumption growth opportunity over the next decade, according to recent McKinsey Global Institute research. It will take many years. In Vietnam, for example, 16% of the population will be affluent by 2030, compared with 5% now; this proportion is projected to jump from 9% to 21% in Indonesia. We project that by 2030, 47% of mass-affluent consumers will have held that status for more than a decade, compared with only 31% now. A few doors down is the furniture business Cuong's mother helped him set up. Reaching the ambitious goal of upper-middle-income status would require Vietnam to grow at least 7 percent per year, raising the average income level to over $7,000 or $18,000 in purchasing-power parity terms by 2035, compared with $2,052 or $5,370 in PPP terms in 2014. There are a bunch of people like me, explained Jaydren, 40, a self-described adidas fan and a project manager for a construction company. Van, for example, enjoys pampering herself at the salon with massages and manicures. (Photo "However, in a communist state where GDP per capita hovers around a paltry 400 dollars a year, the contrasting lifestyles enjoyed by those inside the multi-levelled club and those on the outside are extreme. The young men raced along a one-mile straightaway at speeds of up to 70 mph, whipped around a traffic circle and then headed back toward downtown. When it comes to very premium products, the affluent prefer to shop online through trusted circles rather than public marketplaces. On one side you have rich entrepreneurs . Their combined economies would currently rank as the 7. Global retail outlets should cater to these consumers by having staff that speak their native languages and ensuring that purchases can be made through their local payment platforms. The seven boys are the children of successful private entrepreneurs, including a Central Highlands lumber tycoon and a Saigon textile magnate. In the Philippines, for example, we project that the affluent will control 64% of household wealth by 2030. -, "Le Hung Vong, a journalist from the English-language newspaper Vietnam News, explained that the new housing was now linked to a modern sewage system. A disproportionate number of the poor also belong to ethnic minorities. One of the few villagers who has made the trip is Vi Van Phong, 31, who travelled to the capital for the first time this year, to visit the museum of Vietnam's first president Ho Chi Minh. They are also spurning designer labels and choosing tailor-made or made-to-order brands, such as bespoke Gyunel and Ong Shunmugam dresses. Today it is US$620 and by 2010, it could reach US$1,000." It is easy to see the attraction. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. Indeed, we found that those who have been affluent for more than ten years have grown more accustomed to their status and gained experience as consumers. Boston Consulting Group is an Equal Opportunity Employer. The report concludes with policy suggestions following the Last Mile to Next Mile framework. "Their children now dont know hunger. The affluent also tend to live in urban centers more than the members of other income groups do. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact. As there is no private land ownership in Vietnam, trade in land-use rights is roaring, creating a housing bubble in the country. More-experienced-affluent consumers search for tangible proof of value, such as workmanship, the use of advanced technologies, or the use of special or sustainably sourced materials. Efforts to clear them began 15 years ago, but up to quarter of a million people still live in them. This is in contrast to the term lower middle class, which is used for the group at the opposite end of the middle-class stratum, and to the broader term middle class. ++. Ordinary Vietnamese such as Le Binh Thuan were awed by newspaper accounts of the racers' wealth. Inside the huts old men and women sit or lie still on narrow bunks. (Photo courtesy of McKinsey), Vietnams civil registration system sees great improvements: official, Nursing home market nascent in Vietnam: Savills, Vietnams economy to slow as population ages: WB report, Vietnam a bright spot for foreign investors: experts, Flag-raising ceremony marks National Reunification Day, Top legislator concludes official visits to Cuba, Argentina, Uruguay, Second int'l hot-air balloon festival opens in Tuyen Quang, Top Vietnamese, Uruguayan legislative leaders hold talks, HCM City unlocks resources for development, Vietjet increases frequency of flights on routes to Australia, Green growth - inevitable choice towards prosperity, Ha Long-Cam Pha coastal road puts into operation, Ministry supports 50% cut on auto registration fees. "On Friday and Saturday nights it is very busy and many of the people are extremely rich and literally scatter money, giving us tips for lighting their cigarettes or showing them to the toilet," said one waiter who asked to remain anonymous. This rather linear price ladder makes it easy for consumers to upgrade as they gain affluence, and it has helped establish Vietnam as Heinekens second-biggest market worldwide. ////, Ben Rowse of Agence France Presse wrote: "Loud, glitzy and ostentatious, Hanoi's hottest nightspot, the New Century Discotheque, is a magnet for Vietnam's small legion of pop stars, models, and scions of government officials. "Children reported that Dong Dau staff members slap, punch and beat children with rubber truncheons for violations of rules, which sometimes have not been clarified with the children," said the 88-page report. The decor is as stylish as the hippest clubs in London or New York and artists from the southern boomtown of Ho Chi Minh City are regularly flown up to perform their latest hits. In truth, while the urban population has enjoyed consistent economic growth since 1998, farmers' incomes have been greatly affected by continuous natural calamities and price fluctuations. In the cities, Matthaes said, eight out of 10 households now have DVD players and other expensive purchases set for mass growth include plasma and flat screen TVs and modern banking services. They already know which stores they will visit during an upcoming trip to the US. The New York-based group said it had learned the arrests of street children "were intensifying in the lead-up" to the November 18-19 APEC summit here, to be attended by US President George W. Bush. [Source: Stanley Karnow, Smithsonian magazine, August 2005], Grant McCool and Nguyen Nhat Lam of Reuters wrote: "The middle classes of the Socialist Republic of Vietnam, as it is formally named, have taken quite well to capitalism. For companies that already consider Southeast Asia to be a major market, the best growth opportunities will be in mass prestige (or masstige) products, which convey luxury but are priced more affordably. When they visit Japan, her son likes to buy special samurai trousers and jeans that mold to his body shape. Many of the customers are tourists. Graduating to high-income status requires higher labor productivity. Cuong and his pals were convicted of disturbing the public order Sept. 8, four months after their midnight thrill ride. These considerations far outweighed respondents concerns that the brand had a reputation for being very expensive and for not offering discounts. To encourage people to pay more attention to children, the Vietnam Committee for Child Care and Protection is organizing programs to prepare for National Family Day on June 28 which will be celebrated every year. And according to World Bank estimates, poverty levels in certain pockets of Vietnam - specifically in ethnic minority highland areas - are falling far more slowly than in the rest of the country. By using the BMI GlobalEd website you agree to our use of cookies as described in our cookie policy. Companies must use the shape of the curve for each product to plan their own price laddersincluding the right premium and luxury price pointsin order to make upgrades accessible to their customers. WebIn sociology, the upper middle class is the social group constituted by higher status members of the middle class. In addition, companies must master newways to market productsways that appeal to a consumer psyche that is dramatically different from that of the middle class. Some of the kids listen to tourists a bit to understand where you are from then speak your language. [Source: William Horsley, BBC News, October 24, 2004 -], But there is frenzied activity in its alleys. In 2020, they accounted for 20 percent of that groups consumer spending and this will rise to nearly 25 percent in 2030. These sentiments suggest that the affluent want a luxury lifestylebut one that they define themselves. Build a social license to operate. There was significant progress in poverty reduction from 2010-2020, but Last Mile challenges in tackling poverty remain. While most consumers tighten their budgets during economic slowdowns, the spending of these consumers tends to remain steady or continue to increase. Its portfolio in Vietnam, for instance, starts with budget brands (such as Tiger Beer priced at about 50 cents a can) and extends to high-end beers (such as Heineken and Affligem, costing $1 to $2 per bottle) with other brands at key price points in between. A typical table might drop between $1,000 and $2,000, he said. This will require greater overall spending while consolidating the currently fragmented mix of programs to achieve greater efficiency. [Source: Brian Gomez, The National, March 24, 2007 =], "Vietnam is one of the best performing developing economies in the world," the World Bank affiliate, the International Development Association, says. These behaviors were also particularly strong when it came to premium items, such as watches, alcohol, skin care products, and jewelry. This is a major change for Vietnam: in 2000 less than 10% of the population spent more than 11 USD per day whereas today, this number reaches 40% and is expected to reach 75% by 2030. ++, "Still, they are better off than those living in less developed provinces such as highland provinces of Kon Tum in the center, and Lai Chau and Lao Cai in the north. 1 CAD = 17,471.74 VND Young female teenagers hired in from the countryside are commonly found working as domestic servants in wealthy households in return for food and little or no pay. He would think that I was completely irresponsible." Beneath the club's flash veneer though lurks the slightly troubling question of how people in their 20s and early 30s can afford such extravagance in one of the world's poorest countries. The corresponding chart tracks USD-VND values from March 2014 to March 2019. The tariffs will be lowered gradually to a maximum of 70 percent now that Vietnam is in the WTO. She says she misses her children back home, but added: "At least now I can send them to school." Guerlain and Loewe seek to assure consumers that their products follow responsible sourcing practices and have established ethical and sustainable procurement guidelines for animal skin. The poorest had to spend over 50 percent of their income on food, while the richest roughly 44 percent. The World Banks digital platform for live-streaming, Environmental and Social Policies for Projects, International Development Association (IDA). Distribution of family income: Gini index: 37.6 (2008), country comparison to the world: 75; Improving the relevance and quality of tertiary education curriculum and staffing can help reduce skill gaps and alleviate difficulties in recruiting for certain skills. Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Vietnamtourism. Companies that take into account the common values and behaviors among the affluentand use digital and travel channels to reach these consumerswill greatly increase their ability to succeed in what promises to be one of the greatest growth opportunities in Southeast Asias economy. "The rich are getting richer, and the rest of us are struggling to make ends meet," said Dao Quang Hung, a Hanoi taxi driver. All rights reserved. Managing Director & Senior Partner; Global Leader, Technology, Media, & Telecommunications Practice. All that protects them from the elements is a narrow plastic roof. Even active online shoppers, though, still enjoy shopping in conventional, brick-and-mortar outlets. The member states of ASEAN had a combined 2017 GDP of $6.5 trillion, making Southeast Asia the equivalent of the fourth-largest economy worldwide behind the US, China, and India. Huge crowds overrun beaches as long holiday break begins, Hollywood actress feared crossing roads in Vietnam, My boyfriend thinks that paying for sex is a normal thing, Foreign tourist numbers reach nearly half of full-year target, Wives resent insecure husbands controlling their clothes, Airlines buying planes for more intl flights, Mothers love brings son from overweight to over-wow, Vandals spray graffiti again on Saigon metro train, Foreign tourists explore historical sites during holiday break. Women are busy cutting bamboo sticks for sale, minding small stalls of fruit, and gutting fish from plastic buckets on the ground. In 2020, about 23 percent of ethnic minorities were working in manufacturing, nearly the same rate as the Kinh majority at the start of the decade. Even in Hanoi, hardy women in conical straw hats are still seen walking all over the city balancing two heavy baskets of cheap fruit and vegetables from a pole hoisted on a shoulder. The others, Anh said, were worn by film star Nicole Kidman and Victoria Beckham, the former Spice Girl. ^^, In 2007, AFP reported from Na Lia, a poor village in northwest Vietnam, "Vietnam's cities are being transformed by rapid economic growth which has brought fashion boutiques, fast food and traffic jams, but most people in this remote northern village wouldn't know. A Thai households average spending per trip leaps nearly ninefold when the family graduates from the middle class to the affluent class. Big C is in a new Hanoi suburb with rows of Singapore-style apartment towers, designer stores, trendy bars and restaurants. As of a 2016 report from the General Statistics Office of Vietnam (GSO), median wages sit just below 6 million VND a month. Mass-affluent consumers tend to see products as a means to differentiate themselves, and they therefore seek out goods and services that are unique. Growth has been driven by rising foreign direct investment, vigorous export growth, strengthening agriculture, and robust domestic demand. A rice farming hamlet of about 400 Tay ethnic minority people without telephones, television or even electricity, Na Lia is part of another Vietnam, the rural hinterland that is struggling to catch up with the boom. To learn more about cookies, click here. [Source: The Associated Press - September 22, 2007 :/], "Members of the new generation want to enjoy life and pamper themselves with luxurious things," said Nguyen Thi Cam Van, 39, who has purchased five $1,000 handbags at Louis Vuitton. They actively use digital media, but they also enjoy immersive purchasing experiences and make a disproportionately high share of their purchases while traveling abroad. The distinction is important because the young upper middle class represents the most promising part of the segment. Meanwhile, market research firm Nielsen has estimated that the number of middle class Vietnamese will reach 44 million by 2020 and 95 million by 2030. But in Myanmar and Vietnam, it comprises only the established middle-class and affluent segments. However, the gap between rich and poor has grown since economic reforms were introduced. For the cost of a bottle of whisky -- ranging from a mere 65 dollars up to a staggering 180 dollars -- one of the multitude of cyclo or rickshaw drivers waiting outside could put their feet up for a couple of months, But in Vietnam's deeply traditional Confucian society, where maintaining face is all important, there are few better places in the capital to flaunt one's financial prowess than the New Century. In Vietnam, 50 percent of population would be listed as middle class with income of $5,000-35,000 a year. To meet this demand for exclusivity, luxury brands are launching more limited or special editions.

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