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SEA Insights

Beauty in the eyes of Vietnam

Fabrice Carrasco

Managing Director - Vietnam and Philippines

Shopper 28.02.2017 / 06:00

Girl in mirror make up 2 col

Premium cosmetics and skincare products are in demand as income levels rise

The beauty market is most often seen as highly complex and competitive to manufacturers in any part of the world: Diverse and high consumer expectations, thousands of opponents, varied consumer touchpoints and plethora of retail channels.

The Vietnamese market is no exception. Half of FMCG purchases online in four key urban cities* are for beauty products**, in which make-up and facial care earn the top picks. While significant, how much should companies offering beauty consumer goods invest to attract consumers in Vietnam – whose expenditure is only 40% of their Thai neighbours and incomparable to the Japanese or Koreans?

Tough as it may sound, fortune always favours the bold. The under-development of the market holds opportunities for anyone to grab a piece of the pie, and the greatest rewards will go to the one who can lead market trends and educate consumers.

 

The target consumer

Vietnamese consumers are gaining greater awareness and knowledge of beauty products. Here, we are referring to a potential base of approximately 20 million females between the ages 15 and 39, who make up 40% of the female population in Vietnam.

This group of consumers is more educated, and has access to varied sources to learn about the latest beauty products. They are also driven by the sophistication of beauty products, influenced by celebrities and beauty bloggers, and emphasised at beauty salons and cosmetic shops.

More are joining the workforce and yielding greater disposable incomes. They also care a lot more about appearances, seek indulgence over necessity, and are more inclined to pay for premium and convenient products.

According to Kantar Worldpanel’s latest beauty report on China and South Korea, there is a strong correlation between both household income level and working women in urban households, and the amount of beauty products they include in their daily regimes.

In 2016, we saw the rapid adoption of sophisticated beauty products such as make-up, cosmetic removers, toners/astringents, and sun protection. Despite a drop in food and home care categories, premium beauty products such as higher-priced hair conditioners, skin care, and make-up gained a foothold over lower-tiered products. Beyond consumer goods, there was also a rising demand for beauty services at spas, clinics and salons – across all price levels and expertise.

 

What market leaders and smaller players can do

Manufacturers will need to consider if it’s time to stop focusing excessively on their core portfolios, and to shift attention towards anticipating changes and sophisticated needs in the future. This shift of attention will require planning and strategies to boost innovation immediately.

Both market leaders and smaller players can contribute to the growth of young and scattered categories such as cosmetics. Market leaders can educate consumers on the needs and knowledge of proper personal care routines, especially from an early age. Consumer panel data has revealed that new beauty products are often purchased by female consumers less than 20 years of age, and facial cleaners are their first purchases. Hence, companies can consider reaching out to teenagers through samples, promotions in schools, cinemas, cafeterias, or relevant event sponsorships.

Targeting more mature consumer groups will require reviewing current portfolios and expanding new categories to capture the full regime of consumers. Brands can look into the categories women in Vietnam desire and benefits currently missing in their portfolios. What kind of new formulas or convenient formats can you create to excite consumers and set the trends?

On the flipside, smaller players can focus on one or a few key products that consolidate their biggest strengths and competitive edge – such as unique treatments, ingredients or formula. This can either add products onto current user regimes or draw the attention of market observers seeking niche or exceptional offerings.

Besides thinking about consumer expectations and market complexities, another point companies can deliberate about is a marketing strategy that allows products to stand out in a landscape of thousand scattered brands. Competitor products are everywhere: from international and local brands; branded and unbranded items; and ‘pure’ natural products replacing commoditised ones.

Additionally, the battle is heating up as foreign trade agreements (FTAs) such as the Trans-Pacific Partnership (TPP) within ASEAN and with Japan and South Korea begin to come into effect. Lower import tariffs will ease barriers for more international companies to enter Vietnam, and foreign beauty products are already favoured in the minds of consumers due to a wider presence and better pricing. Local beauty brands with strengths in high trade discounts, claims of natural ingredients and quick effects are also gaining favour among both retailers and consumers.

 

How can current manufacturers become more competitive?

  1. Emphasise quality and safety: Consumers are growing cautious and paying more attention to product labels and origins, due to growing health concerns and scandals of counterfeit products and harmful ingredients. A brand can leverage that by sharpening communications on branded quality and safety guarantees, especially applicable to long-established and reputable brands in the market.
     
  2. Don’t ignore the natural fad: Part of your communications or innovation plan needs to consider ‘natural ingredients’, which are gaining popularity amid consumers across the globe. Note that in the Vietnamese context, ‘natural’ needs to be something local that consumers are able to understand and resonate with.
     
  3. Look at premium offerings: The open doors through FTAs present opportunities for international players to bring their own products from other countries. Therefore, ensure local portfolios are innovative and profitable through premium offers.
     
  4. Expand your digital footprint: The reach and consumer adoption of the internet poses a challenge for brands to control the right information circulating online, play catch-up to the new power of online reviews, and compete with the ease and subjective influence of online shops. Manufacturers will thus have to up their game on digital – either through a greater focus on communications and interaction or cooperating with renowned beauty bloggers and e-commerce sites – to create significant impact on the shopper’s journey.

The internet has gradually changed the way people build knowledge, get influenced and decide on a beauty item. Needless to say, it’s now a crucial topic worth deliberating in any route-to-market plan.

Victory awaits those who can drive the market by setting the right trends, offering full routines, exciting consumers with innovation, and capturing emerging touch-points.

Source : Kantar Worldpanel Vietnam

Editor's Notes

*4 key urban cities in Vietnam include: Ho Chi Minh, Ha Noi, Da Nang, and Can Tho.

** Beauty products here refer to the following:  Hair Conditioner, Hair Colorant, Hair Styling, Facial Moisturiser, Facial Wash, Cosmetic remover, Mask, Toner/Astringent, Lip Make-Up, Eye Make-Up, Face Make-Up, Nail Make-Up, Hand & Body care, Sun protection, Deodorant, Fragrance.

For more insights on Vietnam’s beauty market or to speak to Fabrice, please contact us here.

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