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The marquee of Vietnam Expo 2015.

Vietnam Expo 2015

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Last week we stopped by to check out the 25th annual Vietnam Expo which was held from April 15-18 at the Vietnam Fair Exhibition Center (VEFAC) in Hanoi. The event was hosted by Vietnam’s Ministry of Industry and Trade (MOIT) and directed by the Vietnam Trade Promotion Agency (VIETRADE). Additionally, there were a number of sponsors, organizers, and overseas partners which resulted in 28 countries and territories participating in the event, according to official numbers.

The various exhibitors were spread across three different halls whereas VietBuild Hanoi (the last event we attended at the same location) was spread across both indoor and outdoor areas. Most of the foreign exhibitors seemed to be Korean and Chinese, which was confirmed by official literature. Even though there were more Chinese exhibitors, the Korean exhibitors were organized into their own sections (they had a dedicated area in the main building) which effectively promoted Korean businesses and Korean-Vietnamese economic interests. Surprisingly, there was only one listed Japanese company on the official Vietnam Expo 2015 literature. Furthermore, Cuban exhibitors had a strong showing at the expo, closely followed by Czech companies.

Additionally, there were Russian-origin products, e.g., digital testers for food and other uses. Recently, Prime Minister Medvedev visited Vietnam and announced a new trade deal between the Russian Federation and Vietnam so perhaps there will be more Russian exhibitors at the next Expo. With EU and US sanctions against Russia, this new deal between Russia and Vietnam could prove beneficial to Vietnamese exporters and Russian consumers (and vice versa).

Overall, a variety of beauty and skin care products were on display, mostly of Korean origin as well as some Chinese fashion/clothing trends that were showcased. There were two Korean products that interested us: one was a handmade wooden iPhone 6 case produced in ROK (but could be produced for a much lower cost in Vietnam); and the other was a mobile device charger that doubled as an advertising platform. However, both items seem like they would be better suited in other (developed) markets.

Engaging Exhibitors

We spoke to exhibitors from Nepal, Iran, the Czech Republic, Korea, China, Cuba, DPRK, and Germany, among others. Some had mixed feelings about the Expo; for example, a leather producer from India (but based in China) had paid a Chinese agent $6,000 under the false pretense that the Expo was exclusively for leather (the Indian businessman sold only wholesale). He arrived at the Expo on the first day to find that there were a variety of other goods that were exhibited as well. His attempts to reach his Chinese agent were unsuccessful and the exhibitor left the Expo the next day. This exhibitor described meeting other exhibitors who had been misled, as well as having met other exhibitors who had paid about $1,000 for a similar sized booth.

We met with some exhibitors who expressed confusion about the consumer goods that were present at the event as they had been under the impression that it was to be an industry event (for purchasing and sourcing rather than end-users) which partly reiterated the Indian businessman’s experience. Strangely, there was a large, but mostly empty, Algerian section at the Expo–due to logistical issues as we later found out; we met an Algerian representative who told us that the items for her booth experienced some transportation challenges so she was unable to fill up part of the Algerian section at the event.

We saw individual provinces that were promoted for investment, both by representation of the province (e.g., Quang Nam) and as part of a larger campaign. Furthermore, we met with representatives from more than one company who provided services for Vietnamese companies looking to enter outside markets. Basically, these companies could provide turn-key services for setting up in foreign markets (their respective domestic markets). The majority of the people whom we spoke to—both foreigners and Vietnamese–indicated that they felt there was a lot of opportunity in the Vietnamese market for foreign products as well as opportunity to export Vietnamese products abroad.

At the same time, it seemed difficult for some of the exhibitors to translate the opportunity in the Vietnamese market into success. Some exhibitors had signs in the front of their booths advertising the search for a (new) local partner while others freely expressed their desire to replace their current local partners. Within the first few minutes, exhibitors readily opened up about the challenges of not only attending the Expo but about doing business in Vietnam.

Of three exhibitors whom we spoke to and were actively seeking a new local partner, two of them already had Vietnamese agents. The local Vietnamese agents were described to us as “negative” and “untrustworthy” on two separate occasions. For example, when one exhibitor had informed his local agent of his intended plans to go to the Vietnam Expo, the Vietnamese agent told the foreign exhibitor, “No need, it’s a waste of time.” (Instead of looking forward to seeing his partner.)

In another instance, a different exhibitor shared with us that he suspected his Vietnamese agent was using the foreign brand to command a premium for lower quality parts (substitutes) and that while their organization felt there was a lot of potential in Vietnam, it wasn’t reflected in the small amount of sales coming from the Vietnamese market. (These opinions are from a company that has been operating in China since 1996 so they are not new to entering foreign markets.)

Still, the lack of easily-located quality partners in developing markets is both a hindrance and nothing new. However, with the Expo’s theme of “Cooperation towards the ASEAN Economic Community” (which begins at the end of this year), it remains more important for potential Vietnamese partners to realize the long-term benefits of introducing foreign products, techniques, technology, and other goods and services that Vietnam will need to continue developing into the 21st century.

Key Takeaways

Based on our experiences at the event (over a two-day period), there were several clear and recurring themes:

-The Expo is advertised internationally (to exhibitors) as an industry event—and promoted in other ways as a consumer event;

-Many foreign exhibitors expressed interest in deepening ties with Vietnam and doing more business here;

-It’s a two-way street: many Vietnamese products are suitable for foreign markets—or at least several exhibitors believe so and have formed companies around this thesis; and

-The quality of local agents for newly-entered foreign companies in the Vietnamese market can be greatly improved—but it is challenging to find quality partners.

If you are interested in linking up with a potential Vietnamese partner or would like to learn more about the Vietnam Expo 2015 event then get in touch with us at info@gktagroup.com. The next Vietnam Expo event will be held from April 6-9, 2016.

 

Michelle Phan and Vietnam

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“I am first a creator, but my ongoing objective is to leverage my personal success, to help mentor new and existing talent, and further help them achieve their goals.” —Michelle Phan

Michelle Phan is many things; an entrepreneur, a Vietnamese-American, a role model, a success story, and a phenomenon. Coming from humble beginnings, in 2007 she was rejected by Lancome for a makeup artist position because she had no prior sales experience. Instead, Phan turned to blogging and after two readers requested that she make a video tutorial, she obliged and a week later the video had 40,000 views. Today, Phan’s legacy so far is defined by $120 million in annual sales and 100 employees with brands like ipsy (offering a monthly makeup subscription) and her ICON Network (formerly “FAWN” or For All Women Network). Above all, Michelle Phan seems like she hasn’t reached her peak; just recently she was compared to and proclaimed as the next Oprah—all at the age of 27.

While Phan certainly hasn’t shied away from her roots, she also hasn’t seemed ready to take a plunge into business ventures in Vietnam. Phan’s first scheduled time in Vietnam was in November, 2010 (though she was not able to make it) and by her own account, the last (and first) time she visited Vietnam was in August, 2012. Recently, she celebrated her birthday in Japan, where she seems to prefer spending her time in Asia. However, she might be currently missing out on some very big opportunities in Vietnam.

[Update: Michelle Phan appeared at an event in Ho Chi Minh City on May 12, 2015.]

Investing in Vietnam would allow Phan to tap into one of the fastest growing markets (annual growth between 5 and 6 percent) in the world where Phan has clear and demonstrated cultural and heritage ties. Vietnam is part of the group dubbed “New Wealth Builders” which will outnumber mature markets after 2020. Already, the number of super rich (defined by having net worths over $30 million) in Vietnam has increased to over 100 in 2013 from only 34 in 2003. In short, many people are becoming successful as a result of the growing economy here and the growing middle class is continuously demanding newer and higher-quality products, fueled by their increased purchasing power.

Foray into Vietnam

Exactly how Phan should enter the market here is debatable. Vietnam is a complex market—each region (north, south, central, etc.) has its own quirks and consumer styles. However, there are over 90 million people, almost two-thirds of which are under the age of 40 and about a million babies are born here every year. The common area and interest is in two parts: foreign products are preferred in Vietnam, and young Vietnamese are already familiar with “vlogs” or video blogging—something that Phan pioneered in the US.

More importantly, Phan could be a role model for the country’s youth, especially its girls. In local advertising, White, Korean, or Japanese women are mainly present in ads—bombarding the youth with carefully crafted forms of “acceptable” beauty. But in Phan, young and impressionable Vietnamese women can see something else: themselves, i.e., someone who looks like them, who is successful, and who overcame a variety of challenges that they can directly relate to (gambling and/or absent father figure, sharing sleeping surfaces with siblings, financial troubles, rejection, etc.).

Phan’s makeup tutorials and other media can ultimately inspire and build confidence in young women. And in Vietnam that confidence can take several forms—both in the ability to do something (or try something new) but also to ask clarifying questions without the fear of looking foolish in front of colleagues (a significant problem in workplaces). And it can also provide something that money can’t buy: hope.

Cultural Trends

Even though KPOP, Korean soap operas, and other aspects of Korean culture have huge influence in today’s Vietnam, many young Vietnamese love American cultural products. American flag-themed fabrics can be seen in the streets of Ho Chi Minh City along with “Je t’aime Paris” apparel. Things are more toned down up north but in general, blonde-haired and blue-eyed people are often seen as the archetype of beauty and they are consistently showered with compliments when traversing the city streets in Vietnam.

For many Vietnamese, having white skin is one of their ultimate desires (meanwhile countless White people are trying to become a darker color via tanning—both naturally and artificially). There are entire product lines that are dedicated to skin whitening creams and bleaching lotions—a very different approach to beauty care than some westerners might be used to. In the streets, female motorbike drivers will go to great lengths by covering their entire bodies in order to prevent even a single ray of sunlight from reaching their skin (even in the blistering summer heat). There just aren’t many Vietnamese (role) models who are able to balance their local roots with international expectations (with the exception of some niche Viet Kieu singers) and transcend cultural boundaries.

Again, Phan is different; she is American and Vietnamese and she can help to bridge the cultural and understanding gap between people in both countries—imagine her appearing in a travel blog while going through Vietnam. It would help put Vietnam on the map for her legions of fans (whom she refers to as “Dreamers”). Right now the interest between the two countries is in one direction: toward the US for study (more than 16,000 Vietnamese students are currently studying in the US).

Additionally, Michelle, with her model/foreigner boyfriend would be a surefire hit in Vietnam. Husband and wife/DJ duo Matt (of Poreotics) “Dumbo” and Tessa Nguyen are an example of a cross-cultural couple who has found success in Vietnam (mostly based in Ho Chi Minh City). (They spin regularly at Ace Club in Ho Chi Minh City.)

A Rising Brand

As profiled in Forbes’ 30 Under 30 recently, “She’s also got a line of makeup at L’Oréal, a music venture that promotes artists on social media and a deal with reality-TV giant Endemol for an online lifestyle channel. ‘I feel like this is just the beginning,’ she says.” Indeed, Michelle Pham is just getting started: imagine the brand and licensing opportunities when she gets married, has a baby, and her firstborn goes to school for the first time, etc.

Her “name and fame” would allow her to take smart risks in Vietnam to extend her brand. In the future, the Icon Network could be the roadmap for young Vietnamese: lifestyle, personal interest, comedy, and other advice all intersecting together in unison. Some adventurous Vietnamese YouTubers have started to push boundaries here in cyberspace like An Nguy, DamTV, and Mie Nguyen, but a unifying platform (like Icon Network) does not yet exist.

(What’s the alternative? The most famous private television channel in Vietnam is scaling back its programming and some new experiments like Can Ho So 69 have been tried but have proven to be too risqué for mass consumption.)

Thus, Phan could make an impact here and leverage the Vietnamese diaspora in France, Australia, Eastern Europe, and so on. In other words, first establish a brand in Vietnam and then expand outward again, tapping into those existing networks between Vietnamese and Viet Kieu. An alternative is to form a following then expand into other areas such as fashion— and Vietnam already a has robust textiles and manufacturing industries. Michelle Phan already disrupted the cosmetics industry–what’s next for her?

Into Vietnam

Ipsy (or something like it) in Vietnam can find the right niche (via clever experimentation since most e-commerce here is COD). If not, then Birchbox, Loot Crate, Barkbox, or any other monthly subscription service (most likely after proving it can be done in China) will be the first to break into this and other emerging markets (already Bethany Mota has visited India, a one billion plus consumer market). That’s not to say that Michelle Phan hasn’t attempted to connect more deeply with Vietnam. Em, “a reflection of Me” is Phan’s attempt to mate her culture and her personal brand. “Em” meaning “she” or “her” in Vietnamese (and other things, depending on the  context); but there’s no need to stop there—keep going until something beautiful happens.

So how exactly to build up in Vietnam?

  • Start small: aptly translate YouTube videos for Vietnamese or release special videos for the Vietnamese market (which means videos 30 seconds to one minute in length—any longer and there’s not enough patience/attention span);
  • Make more regular visits to Vietnam (and bring your boyfriend);
  • Expand the Icon Network into Asia, especially Vietnam. There are a number of successful YouTube VJs here but you can also hand-select and cultivate suitable talent;
  • Good quality and affordable makeup is hard to find in Vietnam; explore localization options for ipsy;
  • Develop service learning, social enterprise, or impact investing opportunities—the dollar goes much further in Asia and being a good citizen is good marketing; and
  • Mentor new and existing talent in Vietnam; there’s a lot of talent here. Young Vietnamese people are in the middle of changing times between tradition and modernity and feel like their generation is unlike any other. Start with the 2014 Graduate of the Year.
LED accent lights.

Vietbuild Hanoi 2015

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Today is the last day of the 2015 Vietbuild Home International Exhibition, a place to showcase new products, new technologies, and to check out new trends in the Vietnamese construction industry. The fair, held from March 25-29, is located at the Giang Vo Exhibition Center in Hanoi’s Ba Dinh district (184 Giang Vo, to be precise). More than 1,000 booths were spread over five areas to represent over 400 local, international, and joint-venture companies.

We stopped by the exhibition twice over the course of the four day event to get a feel for both the direction of the construction industry and for current customer expectations in Vietnam. At times, the exhibition felt more like a nightclub with the loud Vinahouse music playing as well as the “PG” (promotions girls).  Some of the larger and more popular booths were set up by companies like Eurowindow, Viglacera, and Austdoor. In addition to products, several real estate developments were on display such as V-Green City Pho Noi and Cam An – Hoi An. Furthermore, there were some crowded safety booths, which is good considering the generally lax attitude toward safety on many construction sites; we’re glad to see that safety considerations are becoming a higher priority.

Overall, there was a strong showing of reputable foreign products such as Stanley Tools and DeWalt; as well as products from South Korea, Germany, China, and others at the fair. For smart home options, there were several companies, including brands from Portugal and the Czech Republic. However, there were also a portion of products that would have a hard time finding traction in the west. Eastern and western tastes can be very different, i.e., what is considered “good design,” “fashionable,” or “stylish” in one part of the world would be seen as falling flat in another. Vietnamese (and Asian, to an extent) preferences, in general, tend to gravitate toward ornate, flashy, or imposing furniture, art, and, design (or frugality for items that very few people will see). For example, we witnessed plenty of oversized wooden furniture at the exhibition, as well as showers with multi-colored and changing LED lighting installed in the unit itself; a “karaoke shower,” if you will.

As we continued to walk around, at one point we caught a glimpse of 18th century aristocracy via a local company’s booth representing the Renaissance brand. The closest product to the other side of the spectrum was a “futuristic” nano spray which could render an item waterproof if appropriately applied—product demonstrators were using hair dryers, light bulbs, and other appliances that had been coated with the spray under water in a fish tank. According to the salesman, a can sells for approximately $50 and a coating will last between one and three years. While certainly a useful technology, the spray has the high potential to be misapplied, misunderstood, or misused–especially when using electrical products under water.

One section that caught our eye was the CNC machining and laser engraving area where small Buddha statues and other traditional-looking pieces of art were being crafted in front of us. It was interesting to see the numerous companies that are operating in this space, and even more curious that they were choosing to (re)produce traditional art pieces instead of contemporary ones. Tourists beware: that “old wood carving” (you’ll buy thinking that an old grandfather in a remote village somewhere spent years carving) could have actually been made by a computer-controlled machine the day before.

Vietnamese Homes and Expectations

The basic shape of Vietnamese homes (also known as “tube houses”) is credited to older tax codes resulting in the standard shape of ~3 stories tall by 5 meters by 13 meters deep (15ft wide, 40ft long). Many Vietnamese homes have a retail business (with fewer numbers having a business office) on the ground floor. Some newer houses can still use these dimensions as an archetype, but for those who can afford it, bigger is always better—especially in Asia.

Still, space is at a premium, especially with two, three, or more generations under the same roof (traditional Vietnamese children don’t move out until they marry and the eldest child must care for his/her parents). Additionally, taste, like art, is highly subjective; what looks or sounds “good” to one person may not to another. However, if you want to sell in a particular market then you need to understand the local culture and sell things the local consumers want. At the same time, you can also risk damaging or diluting your brand image just to make a quick sale. Thus, educating consumers about your product or service—and continuing to drive a consistent message—is the best way to establish your brand as a market leader in the long term. However, it can and will be capital and time intensive.

For example, new homeowners don’t care that the unit they are being handed over is dirty (e.g., paint spots on the floor and all over the baseboard), has shoddy installation (e.g., door trim not flush with the walls), and generally represents poor craftsmanship (e.g., gaps, crooked lights, and cheap materials). Why? Because once they take possession of the unit, they invest additional millions or billions (VND) to renovate the (sometimes) brand new unit.

(And why should trade workers and their managers care if clients don’t demand higher standards? These low standards only work as long as the requirements are low—they definitely aren’t suitable for smart homes.)

In apartment buildings, this renovation can mean that even the original front door is replaced with some drab steel cover and, of course, bars are added to the windows for security purposes. However, this isn’t the norm in much more expensive serviced residences. Yet, when we visited Lotte Center Hanoi last year about a month before it opened, the most technologically advanced equipment in a serviced unit was a motion sensor near the front door to turn a single light on/off upon entering/exiting. We covered the opportunity in this space in last week’s post.

Last week, we went to a brand new apartment to check out a recently finished two bedroom unit in the center of Hanoi; overall, the space was poorly utilized. For example, the “master” bedroom had a tiny balcony but no bathroom. The other bedroom had its own bathroom but there was a two square meter hole in the wall (near the ceiling) leading outside. The original door on the unit was for a flimsy deck door so there was little privacy. The other residents on that floor had all replaced their doors with a heavy wood door with a gray metal security gate to cover it (from different vendors). And, of course, security bars could be seen in front of the windows—an after market addition. Ultimately, it was hard to tell whether it was a hallway in a new apartment building or in a new prison.

Current and New Opportunities

Home security remains a huge opportunity in the Vietnamese market. As mentioned, Vietnamese homes usually have barred windows as well as shudders. There is at least one heavy-duty gate on the front door and if there is another then it’s a different style (metal gate or metal roller). Any walls might have barbed wire or broken glass perched on top and some deck spaces will be fully enclosed with metal bars. This security conscious approach to their homes is partly the result of a cash-bashed society, but it’s also because Vietnamese consumers tend to follow the pack: “if my neighbor does it, then I must also do it or do it even better.” Think of it like a hyper “Keeping up with the Jones’” mentality.

Companies like Dropcam provide the perfect option for Vietnamese consumers, who can check up on their homes while they are away or can be alerted when there is unauthorized movement. Beyond security, other smart home products could be successful in Vietnam as well including Philips Hue and the Sonos line up. But how can consumers want something they don’t know about?

Events like Vietbuild remain a great opportunity for demonstrating products—and in markets like Vietnam’s where educating consumers about a nascent industry is required, there is no substitute for seeing how a product works (instead of hearing about it). This is a country where the majority of e-commerce payments are handled COD once a consumer has had the ability to check out the product in front of his/her house before paying the delivery driver. Seeing is believing when it comes to new technology, and especially in Vietnam where consumers are suspicious about product quality as it still has room for improvement.

The next Vietbuild expo will be held in Danang from April 22-April 26.

First Impressions of Vietnam

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Trying to explain Hanoi, and Vietnam in general to someone who has never been here can be quite challenging. For many expats in Southeast Asia, the region and its cultures can be difficult to understand and navigate let alone effectively explain to family and friends at home. And research, while helpful to understand settings, is not a substitute for direct experience.

This week we have a guest contributor who is with us here in Hanoi. Zdravko Tumbovski is an international businessman who has done business in Turkey, Bulgaria, his native Macedonia, and other countries. He arrived in Hanoi for the first time on Tuesday, November 18 in order to take a firsthand look at the Vietnamese market and to gauge its potential for his interest in trading with Vietnam and in Southeast Asia.

His professional experience includes an internship at an insurance company in Macedonia; a Business Analyst position at a family owned company, Info Group Ltd, which made investments in the Macedonian Stock Exchange and the Macedonian Real Estate market. Currently, Mr. Tumbovski is the founder and director of Z&Z Capital Ltd based in Bulgaria, which specializes in transport and logistics services in the European Union (EU).

Additionally, in conjunction with partners in Turkey, he is involved in import-export transactions, mainly in cooking oil, but they are also expanding to other commodities for the Turkish bazaar. His primary role is to find a suitable supplier and to negotiate the payment methods and transportation of the goods.

Zdravko shares his first impressions of Vietnam below:

After constantly moving around between the US, Europe, and the Middle East in the last seven years, I spent a considerable amount of time in Los Angeles this year. About a month ago, I reconnected with director of GKTA Group, whom I have known for several years.

GKTA Group introduced me to some of the many challenges, opportunities, and conditions faced in Vietnam. I felt attracted to learning more about this dynamic market and it didn’t take long for me to decide to come here and check out Vietnam for myself.

Even though I am still in the first week of my arrival, I must admit that I am having a very smooth transition to this country so far. I was already familiar with Asian cultures due to my friendship with Asians in my network that I have known for a long period of time, and also because GKTA Group put a lot of effort to set up at least one meeting per day with a local person where I can get his/her answers to some of my questions about his/her country’s future, his/her point of view toward foreigners, and the changes that s/he has seen the past five years in Hanoi, especially.

Hanoians and Hanoi

Vietnamese people in the capital of Hanoi are generally polite and quiet. It usually requires some time until they start to feel comfortable sharing their views, and begin to realize the goal of my questions because I see that they are not very used to foreigners who are interested in their culture, and who try to understand their values.

Vietnamese people seem to be the loudest on their motorbikes. They are honking at every cross street, and from my findings they rarely show anger with words, but only with menacing stares at the perceived wrong-doer. The amount of motorbikes and the traffic frequency for me was something unseen before; in short, outrageous.

Hanoi is a city with a long history, and it is shown on every corner. Hanoi has the street-selling spirit and it is still done traditionally and mostly inexpensively for locals. However, there is luxury consumption visibility in the younger generations and newly rich populations. For me, this is probably more visible because I was raised in a former communist country, Macedonia (Former Yugoslavia).

The Wi-Fi coverage and the use of internet are quite impressive compared to the expectation of technology in a developing country. The “drinking-coffee” habit is at large range, and the number of cafes is seemingly endless but a favorite of Vietnamese people. One new thing for me is using condensed milk (“sua dac”) in almost every cup of coffee—and I find it tasty—even if it is uncommon for me as a European.

Luckily, I am fan of Asian cuisine, and have been eating it frequently. Compared to other cuisines and the tastes of some westerners, you may remain hungry here if you are very picky with the food. The traditional street foods, or the local dishes in the very basic and not-so-modern restaurants can be tasty for people who are food enthusiasts and open to new flavors; on the other hand, it can be off-putting (even though I aim to be cautious with my language here), because I certainly know many people who would not be able to eat the local food here, and who would not be willing to be seated and served in the Hanoian or Vietnamese way of small tables and children chairs. So far, I enjoy it.

Work Ethic and Exposure

My personal view is that most of people here work hard and long hours. The basic example for that is the staff at the hotel where I stay. They are here every single day of the week, for over twelve hours per day. They are very friendly and very helpful even if there is occasional miscommunication.

When talking to waiters or other people in cafes and on the streets, I have come to realize that many of them have not had a chance to travel a lot. Actually, many have never been outside of Vietnam. The reason for that is first, money and second, time since, as mentioned before, they have to work almost every day, year-round.

There is a sense of trust that permeates through the people here. I had a very unique experience that occurred to me at the border upon arriving at the airport: I had arranged for visa upon arrival and at the bureau the visa was issued and stamped more quickly than what I had estimated, but I had no cash on me to pay. The customs officer asked me if I had any currency equal to the amount of $95 (the price of the visa), but I had none. The ATM was outside the immediate area, after the passport control, so I thought that I couldn’t consider the option to withdraw some money. As a matter of fact, the officer walked me through the immigration border without any checking and without any concern, just to withdraw the necessary money for the visa, and then led me back to her desk in order to pay. That was surprising. Actually, the border control experience in general was more liberal than in many other countries.

If I am allowed a chance or could offer some suggestions to Vietnamese who want to be successful with westerners, it would be:

  • Learn more English, the number of tourists is increasing  and you need it
  • Strive to be more comfortable with foreigners
  • Be more creative for international businesses; this land is rich
  • Act more responsible to the duties and respond to requirements efficiently and faster

Business and Understanding Vietnam Now and in The Future

I haven’t experienced any business deals in Vietnam yet, but I am most worried about the changing industry regulations, the unpredictable law amendments, unfair competition, and the guarantee of quality standards.

My advice to the expats that want to do business in Vietnam is to spend as much time as possible here, but with local people. It is essential to understand the habits of the Vietnamese before starting any sort of business, in order to prevent an organizational mismatch and communication misunderstandings. It is complex and different here indeed.

I can already see that the necessary attributes required to succeed in Vietnam are patience and simple guidelines.

What I would like to learn about Vietnam or the Vietnamese is: until what extent have the ancestors shaped today’s population, and how much is the young generation willing to keep and practice the old traditions? I hope that finding this balance will help me to predict and understand their place in the world for the next decade.

This next decade will be crucial for Vietnam as the country transitions to increased trade with more global partners, the middle class continues to grow, and more foreign investment pours into the economy. Vietnam has many natural resources, a lot of talented people, and a willingness to exceed economic indicators but it will not be without some development friction, conflict between traditional and modern Vietnam, and addressing some major investor concerns. However, the long-term benefits will be far greater than what the shortcut rewards of today will provide. After all, as Jim Rohn says, “You cannot change your destination overnight, but you can change your direction overnight.”

Thanks to Zdravko Tumbovski who contributed to this week’s post.

On the road north of Vientiane.

Vientiane, Lao PDR

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In the 1960s Vientiane had the reputation of being the wildest city in Asia. Today, Laos–with Vientiane as its “sleepy” capital–is known as one of the most underdeveloped countries in the world. Usually, people know one of two facts about Laos: that it is land-locked or that it is the most heavily-bombed country, per-capita, in the world as a result of being a battleground for 20th century ideology. However, these quick facts don’t do the beautiful country and its warm and friendly people justice–and this basic knowledge barely scratches the surface of the complex history of Southeast Asia.

Laos shares a linked history with Vietnam but this relationship was further strengthened during French colonial times, and continued through the Second Indochina War. Even today, there are strong and deep ties between the two countries; for example, earlier this year Vietnam funded an upgrade to the Kaysone Phomvihane museum in Vientiane.

Similar to Vietnam, Lao PDR began to open its economy to the world in 1986 but maintained strict controls on its political apparatus. Despite the current political and economical situation, there is foreign investment here; a significant portion of new construction projects are implemented by either Vietnamese or Chinese companies depending on the size of the project. For existing construction, the electrical wiring indoors, while exposed, is run neatly, and the wiring in the streets are bundled together in an orderly fashion. In homes, switches and outlets are grouped together in junction boxes that are dispersed at chest level in various rooms. Anecdotally, the power might go out for a few hours once a month in the capital.

The most visible element of consumption by the upper class, luxury vehicles, are somewhat common throughout the capital and there are some nicely designed houses in a westernized sort of style dotted throughout Vientiane. The Toyota Hilux is the unofficial vehicle of Laos as it is ubiquitous throughout the capital. Furthermore, a significant number of vehicles are modified from their stock origins in some way–be it hood scoops, snake eyes, or chrome accents–so there is a growing tuner culture in Vientiane.

Unfortunately, rush hour traffic fills up portions of the city quickly and traffic jams can occur for no apparent reason, e.g., lack of a traffic collision or police checkpoint. When there isn’t heavy traffic, whirring diesel engines and turbo-chargers spooling up in SUVs are common sounds (and the drivers love to careen down roads meant to be driven on no higher than 30 or 40 KPH). Mercedes-Benz, Porsche, and other luxury vehicle brands have dealer presences in the capital; considering Lao PDR’s economic rankings, it can be surprising to see the Mercedes SLS in a showroom—and even more surprising to see it on the roads of Vientiane.

Vientiane Through Foreign and Local Eyes

Chiang Mai, Thailand and Vientiane, Lao PDR are two cities that are similar despite being in different countries; in terms of population, consumer preferences, and lifestyles they are very much aligned. Additionally, there is a strong Thai influence in regards to fashion, youth culture, news, and entertainment in Laos. The Lao PDR capital is literally across the river from northern Thailand, after all.

Even though many Thailand-based expats (farong in Thai) travel to Vientiane for visa-runs, it’s surprising that there isn’t a larger presence of foreign freelancers in Vientiane and in Laos in general. From a visa perspective, it can seem quite attractive for remote workers and there exists the support for foreign freelancers in Vientiane in the form of Toh Lao co-working space. For foreign full-time professionals, the options range from EMC to Sciaroni and Associates to DFDL (the last organization having been founded in Lao PDR). Of course, there are also some foreign banks such as VietinBank and Sacombank (Vietnamese banks) that have branches in Vientiane and there are also many foreign restaurants in the capital to represent small expat-operated businesses—Istanbul Restaurant, Soul Kitchen, and Jamil Zahid to name a few.

Many Non-Governmental Organizations (NGOs) have a large presence in Vientiane as well so there are expat support staff who regularly work with their local counterparts. In general, locals and foreigners who might meet and develop a romantic interest in each other can’t live together and sexual relations between them are forbidden–but marriage is always an option for those who find their soul mates in Lao PDR. A good way to meet people in the Vientiane business community is via weekly events such as the meetups put on by AmChamLao. In addition to the robust expat house party scene, there are the famous get-togethers at CCC bar in downtown Vientiane. Overall, Vientiane is a small place—there is a sense of a village mentality so reputation is important since “everyone knows everyone” in both the local and expat communities.

Outside of Vientiane and into the Countryside

The youth of Lao PDR’s high-society (Hi-So) in Vientiane can be found at Mark2 or Marina wearing trendy and/or revealing clothes and dancing the night away to western style arena house music from Thursday through Saturday nights. “After hours” almost always includes karaoke in some interesting but comfortable places for all sexes (since the culture is inclusive). Yet, these experiences are so far removed from the daily lives of the average Laotian.

Outside of Vientiane things quickly become poor besides a few cities like Luang Prabang, Pakse, and Suvannahkhet. Think unpaved roads, wooden huts, shoeless children, etc. However, throughout Lao PDR there exists a deeply respectful and hospitable culture with a strong beer drinking tradition; Lao people are perhaps the most laid back in Southeast Asia. The quintessential Lao experience is singing karaoke on a nearby river or body of water while drinking Beerlao. Social gatherings are important and women and men are not always separated at these events where people are sometimes sitting on the floor and are sharing food with one another. One unique aspect of Lao culture is the use of a single glass to drink beer in addition to a personal glass, which is passed around and shared among all the guests at an special event.

Other activities that Laotians enjoy include fishing, football (there already is a healthy representation of the up-to-date Germany World Cup jerseys), and petanque. Petanque in Laos is different than petanque in France (where it originated) and government ministries usually have a petanque court on site. Half the government ministries have their signs in French, and the other half in English (besides Lao)–the same goes for the road names in Vientiane.

The three most visible brands throughout Laos are Beeline, a telecommunications company; Beerlao, a product of Lao Brewing Company—a joint-venture between Carlsberg and Lao PDR; and Johnnie Walker, which is also popular in Thailand. Beerlao is on every restaurant sign as well as restaurant equipment such as standees and cash register desks—the result is a very large market share of beer consumption in Lao PDR.

A Future Focus

Officially, the Lao PDR government actively seeks investments in agriculture, hydropower, manufacturing, and tourism, according to its investment brochure. Organically, Laos experienced its first Startup Weekend ever in Vientiane in May of this year. Last week, Nana Souannavong, president of Snap International, and co-founder of Toh Lao co-working space, was gracious enough to explain to us the state of the startup ecosystem in Vientiane.

As Nana sees it, the biggest challenge ahead of the Vientiane startup community is getting people to understand what a startup is and getting people to be more entrepreneurial because they like the stability of public sector jobs. She shared with us that a generally strong curiosity among participants and a higher proportion of female entrepreneurs are the biggest strengths of the startup community in Vientiane. Those (aspiring) entrepreneurs who are passionate are the hardcore ones who stick through the multi-day events such as Startup Weekend–and they will be the ones to get the most out of the events. It gave her hope to see so many people show up to the first Startup Weekend because if no one showed up then she knew that the community wouldn’t be ready for another five years–the fact that people showed up was a huge victory for the Vientiane startup community. Nana also revealed that the winners of the May event are still working on the concept but as a side project since the team members already had a full-time focus before winning at the Startup Weekend.

While the official Lao PDR Small and Medium Enterprises (SME) office also supports startups, there will be many challenges on the way to creating and building a suitable environment for venture capital (VC) firms and angel investors to operate in—something does not exist although there are other forms of external investments. However, the legal framework does exist for foreign investors and founders in regards to equity but only outside of the retail industry. Nana’s advice to future entrepreneurs is to “think through what you are trying to do to understand the consequences.” Along those lines, her favorite quote is “life is an investment.” She should know since her company provides financial advice in money markets for local and foreign companies.

Startup Vientiane

At the Startup Weekend, there was a mix of tech and non-tech products and services being pitched but going forward there are no obvious areas for startups to form around. Y Combinator, perhaps the most prestigious startup accelerator, has a Request for Startups (RFS) feature on its website. While the list below is not a request for startups in the strictest sense, it does provide an external view on the opportunities in Vientiane and beyond after speaking to locals and longterm residents.

Opportunities for Startups:

-Targeting tourism (perhaps first via Triip.me and then expanding on original concepts specifically for Lao PDR)

-Creating accounting controls (perhaps in the form of mobile applications) for local and/or foreign SME in Lao PDR

-Products and/or services for the many NGOs in Lao PDR, e.g., tools to train local staff or tapping into external crowd funding

-Leveraging the growing consumer communities (for example, the car tuner culture) and collecting data points on them

-Helping expats to adjust to Laos by finding housing, goods, or services more easily (a better English->Lao dictionary, for example)

Perhaps when people think of Lao PDR in the future, a third fact might enter their consciousness: a growing startup hub centered around Vientiane. The people in Lao PDR have many things to offer the world–foremost among them is their hospitality and resilient attitude–this much is apparent upon crossing the border into Lao PDR. Another Startup Weekend is scheduled for later this year at Toh Lao co-working space–hopefully, the organizers will be able to build off the success of the last event and the participants will take even bigger risks to share their ideas with the community. It will be a long road indeed, but with community leaders like Nana, anything is possible.

 

The outdoor stage before the event.

Yamaha Town Hanoi

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On September 5 Yamaha Town Hanoi opened its doors to the public at 62 Nguyen Chi Thanh in Dong Da District, Hanoi. The opening of the showroom is unique because it is the only official Yamaha Motors Vietnam showroom in Hanoi—although a potential local partner has the option to takeover the management of the facility, which includes a state-of-the-art service area on the first floor (ground floor for the Americans), and office space on the second floor.

It took about a year to open this particular location but depending on a local partner’s resources (and relationships) and taking the dealership location into consideration, it can take between three and 12 months to open up a new Yamaha Motors Vietnam dealership.

Across Vietnam there are approximately 500 showrooms where Yamaha Motors products can be found in—a staggering figure considering that Yamaha Motors Vietnam has been operating here for 15 years. Yamaha Town Hanoi is the latest location to join the stable of other Yamaha Town locations throughout Vietnam. There are Yamaha Town locations in the cities of Can Tho, Vung Tau, Phan Thiet, Nha Trang, Da Nang, and Hai Phong. In the entire country, Hanoi is the second-largest market for Yamaha Motors Vietnam as the brand is more popular in Saigon.

At the opening ceremony, the director of Yamaha Motors Vietnam, Mr. Masaru Ono, spoke about grasping the needs of each customer segment and he also set the development of marketing as an urgent task. Mr. Ono laid out how Yamaha Motors Vietnam has a specific strategy to set the highest standards for its customers—something that will help Yamaha drive sales in the current market and in the future.

It’s currently a particularly difficult time in the motorcycle industry in Vietnam due to saturation, some recent economic uncertainty, and a rising interest in cars from consumers with increasing purchasing power. Currently, about 61% of the vehicles in Vietnam are motorcycles. But cars will not be able to fully replace motorcycles due narrow passages, housing density, and high vehicle tax barriers.

FZ150i brand ambassador, singer Tuan Hung was present at the event and delivered some remarks about his opinion on the Yamaha brand and its products.  Mr. Hung mostly spoke about his affinity for Yamaha’s sporty designs and how he thought they contributed to the brand’s success here in Vietnam. Afterward, fans were able to take photos with him in the showroom and outside on the sidewalk.

During the event there were different elements of Yamaha operators, each fulfilling a different role: promotion girls to attract attention to the products, ao dai girls to greet the event guests, Yamaha Grande girls to parade through Hanoi, and sales girls to answer questions from potential customers.

The event wrapped up with a parade of at least twenty Yamaha Grande scooters led by Mr. Masaru Ono, who also had the pleasure of owning the first motorcycle sold at the new dealership. He then proceeded to don proper riding gear in front of the showroom and took off in a southerly direction through the streets of Hanoi.

Yamaha’s Local Operations

Honda is Yamaha’s main competitor in Vietnam. Whereas Honda can leverage its economies of scale, and expertise in the automobile and other markets, Yamaha focuses specifically on motorcycles segments and connecting with its customers.

One way that Yamaha Motors Vietnam engages its customers is through a customer relations management (CRM) program based on three month intervals. It uses call centers to directly contact their customers in order to remind them of service dates and intervals. The service technicians also use stickers that are placed in the storage compartment of motorbikes (under the seat) so when getting gas the customers are reminded of the next service date as well. Because of these different methods of engaging consumers, the average Yamaha product has a seven year lifespan.

In terms of training and customer service, Yamaha Motors Vietnam’s technicians go through a training program to eliminate technicians with poor attitudes and/or a lack of soft skills. This training program ensures that graduated technicians will be able to deliver consistent experiences at every showroom, thereby resulting in satisfied customers. In order to be selected for the training program, technicians need to have at least a basic understanding/basic training of technical know-how.

Yamaha Motors, like many corporations, has a global strategy but largely relies on country organizations like Yamaha Motors Vietnam to implement local initiatives. For example, Yamaha Motors Vietnam has a specially modified caravan that goes into small towns across Vietnam. During local weekend events thousands of Yamaha riders will attend and receive free oil changes and other perks.

These local community support events are important because some motorcycle (and bicycle) riders do not perform basic maintenance on their vehicles, resulting in a smokescreen behind them due to burning oil or screeching brakes when stopping–so these sort of initiatives are imperative to keep the products functioning properly on the roads. Nine complimentary oil changes are included in the sticker price and every Yamaha product that is sold has a three-year warranty or coverage for up to 30,000 kilometers—whichever comes first.

All of Yamaha Motors Vietnam’s production is in northern Vietnam. Yamaha Motors Vietnam has about 7,000 factory workers spread across three factories in the surrounding areas of Hanoi. One factory produces spare parts and two are dedicated to the assembly of Yamaha Motors products. Additionally, about 200 marketing staff work out of an office in Hanoi.

A 15 Year Legacy and Positioning for the Future

When Yamaha entered the Vietnamese market, it initially made a big push in Saigon because the surrounding cities would and did end up following the trendsetting Saigonese. In Vietnam, Yamaha Motors Vietnam is positioned as sporty brand, targeting the young males consumer segment. Since Yamaha entered the Vietnamese market in 1999, it has used its sporty designs, sporty engines, and key local influencers to attract and maintain the attention of young Vietnamese men. Its tagline: “Revs your heart” and its byline on advertising, “Fun injected” (a play on words for “fuel injected” or the primary way fuel is delivered into engines), reflect this sporty and playful brand positioning.

Other foreign motorcycle/scooter brands have an easier time to target Vietnamese consumers because of consumer perceptions of higher-quality foreign products. For example, Piaggio is a go-to brand for women interested in scooters because Vietnamese consumers prefer American and European brands over even some foreign Asian brands.

Since Yamaha is not viewed as a luxury brand in the Vietnam market, it needs to focus specifically on certain motorcycle segments and leverage its competitive advantages. In part, this foreign preference is due to a desire for larger engines and models—which can present some challenges for operators with smaller bodies who are essentially sacrificing vehicle control for image. This example is one key difference that distinguishes the Vietnam market from even other markets in Asia.

In fact, Vietnamese consumers are so different compared to other consumers in Asia-Pacific region that Yamaha launched a product specifically for the Vietnam market, the Yamaha Grande. Previously, it had tested some Indonesian models in Vietnam but they were not that successful with consumers. Between markets, several elements can be changed such as the engine timing, shift points, throttle sensitivity, etc. For example, in other markets such as Malaysia, drivers like to go (and can go) faster on roads (partly due to better infrastructure).

The Yamaha Grande is specifically designed for women who like scooters. It took two years to develop the Grande, which was released over the summer. With the Grande, Yamaha now offers nine models to serve the Vietnamese market. For its Yamaha Grande marketing campaign, Yamaha enlisted prominent celebrities such as Ho Ngoc Ha to target and connect with women. In its message, there is a clear Paris influence (promoting foreign luxury elements) that is evident from its video promotion to the outfit on its Yamaha Grande girl riders—all of which is done in-house.

We were surprised to find out that the company puts on over 200 events per year—and it’s usually closer to 300 events per year with about 20 big events such as the grand opening of the showroom. Recently, Yamaha teamed up with Elite Model Look Vietnam 2014 in a quest to find the best model talent in Vietnam. During a “Thanks Party” held in Hanoi, the Yamaha Grande was prominently featured in the event, including a $20,000 version outfitted with Swarovski crystals.

The exposure from Elite Model and Fashion TV (who had correspondents at the party) will positively impact Vietnam’s image on local, national, and international levels by instilling national pride in Vietnamese and exposing new people around the world to the beauty and potential of Vietnam. If Yamaha continues these clever kinds of cross-promotional events then it will surely be able to capture the hearts of women in addition to its success of attracting thrill-seeking men in Vietnam and beyond.

E-Commerce in Vietnam

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With a population of over 90 million, there is no doubt that the middle class in Vietnam is growing; in 2012 the middle class consisted of 8 million people and consumed $46 billion[1] up from around $20 billion in 2004.[2] Today, Vietnam is the 13th most populous country in the world—and almost one million people are born here each year.[3]

The mobile phone (and smartphone) continues to rise in Vietnam. There are approximately 140 mobile cellular subscriptions for every 100 people in Vietnam.[4] Vietnam is the second-fastest growing smartphone market with approximately 13 million iOS and Android users as of 2013. 40% of those are iOS users.[5] Mobile phones will soon overtake PCs as the most common web access.[6] According to 3rd party app store Appota, “on average, mobile users consume 4.5 hours of media daily of which 35% is on mobile devices.”

In terms of social media, Vietnam is one of Facebook’s fastest growing nations. Facebook has over 70% penetration rate for internet users which equals approximately 22 million people.[7] Furthermore, Google officially entered the Vietnamese market by establishing AdWords here in early 2013.

E-commerce is growing but consumers still prefer cash on delivery (COD) payment for online orders. For the most part, consumers are simply unwilling to use their credit cards. Of the total $700 million in e-commerce sales in 2012, only 11.8 percent of online consumers used a non-cash payment method.[8] For 2013, 74% of all online consumers had used COD as a major payment method.[9]

Why? Because consumers are suspicious about the quality of the products they have ordered and want to inspect the item before paying to make sure it’s what was advertised. Even at retail stores, buying a $15 rice cooker or $10 electric kettle may result in the floor staff taking out the item from the box and plugging it in, thereby proving to the consumer that it does indeed work.

As with much of Asia, the society here on a public level revolves around the concept of “glamour” or being able to show off that one is successful (which is closely tied to “saving face,” another HUGE deal in Vietnam—that can’t be stressed enough). This theme can take shape in several forms: ostentatiously counting money when one (usually the oldest male member at the table) goes to pay the bill at a restaurant, aggressively pushing past those already queued up to show that one doesn’t need or have time to wait around, or belittling service staff in front of others. Successful Vietnamese are willing to spend big money on luxury cars as they are often twice or thrice the price of the same or comparable model in the United States. However, wealthy Vietnamese also love a good deal and some may feel entitled to not pay the same price as everyone else (looking for special price) due to their VIP status. As for the normal folks, they will have to make do with daily deals sites.

Vietnam’s Groupon (Nhom Mua) skyrocketed in recent years, reaching over $30 million in total revenue in 2011 and over two million users in 2012—but ultimately crashed. Customers and merchants are generally wary of the group buying facilitators due to a history of mismanagement of the former leader, a large number of clones, and the customers that they drive to businesses are usually one-time consumers.

Generally, Vietnam is still a largely cash-based society so due to inflation there are some large denominations ranging from 100 to 500,000 Vietnamese dong (VND), with the latter being worth about $25.

Some figures about the local market:

  • Total Advertising Spending in Vietnam is a $770+ million industry.[10]
  • Digital Advertising Spending in Vietnam is $40+ million.[11]
  • E-Commerce spending was over $300 million by 2011[12] and has the potential to be over $2.5 billion by 2015.[13] Some estimates project that e-commerce spending can top $4 billion by next year.[14]

The challenges ahead for e-commerce in Vietnam are for consumers to be more comfortable using credit cards, the negative reputation Vietnam has for fraudulent activities in payment processing, and establishing effective trust verification and logistics systems for fulfilment as volume increases. New solutions and incentives different from those in the west will have to be proposed to Vietnamese consumers in order to entice them to embrace e-commerce more efficiently and wholly. As with most things, it boils down to trust.

For more information on the state of e-commerce in Vietnam see here: http://goo.gl/XoRroO

[1] OECD

[2] McKinsey & Company

[3] The World Bank

[4] The World Bank

[5] Appota

[6] Nielsen

[7] TechInAsia

[8] VECITA

[9] VECITA

[10] IMF

[11] Appota

[12] VECITA

[13] PwC

[14] VECITA