FOOTWEAR MARKET IN VIETNAM1

The size of the Vietnamese footwear market is valued at US$1 billion a year and accounts for sales of
75 million pairs of footwear per year. The per capita spending of footwear in Vietnam is low
compared to other countries, averaging at 1.5 pairs valued at US$10.70 per pair. The market consists
of 25% foreign brands and 75% local brands and unbranded footwear. The market is dominated by
unbranded products from neighbouring countries, especially from China. Over the period 2013-
2018, the compound annual growth rate of the footwear market is 8%. The market’s largest segment
is leather footwear valued at US$545 million, followed by sandals, textile, and athletic footwear.

The distribution structure is 70% organized market and 30% unorganized market. Sales channels are
currently 90% offline and 10% online. In the organized market, the price structure is 42% premium
price, 20% mass premium price, 20% value prices and 18% low price. In the unorganized market, the
price structure is 7% premium price, 9% mass premium price, 19% value price, and 65% low price.
The sales of footwear by region is 32% Ho Chi Minh City, 20% Hanoi and 48% other provinces.

The spending on footwear by Vietnamese by age and social class is shown in Figure 1 below. By
social class, D and E make up 66% of the population. They spend 2% of their disposable income on
footwear. B and C make up 25% of the population and they spend 3-4% of their disposable income
on footwear. A makes up 9% of the population and they spend 5% of their disposable income on
footwear. By age, older consumers tend to have higher disposable income and they spend more on
footwear.

Figure 1: Breakdown of Sales of Footwear by Age and Social Class

A – Upper class, Income over 200% of average gross income

B – Upper middle, Income between 150 and 200% of average gross income
C – Middle middle, Income between 100 and 150% of average gross income
D – Lower middle, Income of between 50 and 100% of average gross income
E - Lower class, Income of below 50% of average gross income

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Based mainly on a market presentation by A S Louken.

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By demographics, the sales distribution of footwear in Vietnam by volume is 57% women’s
footwear, 28% men’s footwear, and 15% children’s footwear. By value, the breakdown is 57%
women’s footwear, 36% men’s footwear and 7% children’s footwear. By region, the sales of
footwear in Ho Chi Minh city is 70% branded and 30% unbranded, while in Hanoi, the breakdown is
61% branded and 39% unbranded. In the other provinces, the breakdown is 9% branded and 91%
unbranded.

Competition in the Vietnamese footwear market consists of:

(a) Mass market for unbranded footwear – where consumers seek fast fashion and make
frequent purchase
(b) Mid-market for local brands – where consumers look for quality, reasonable design and
affordable price
(c) Premium and niche market for international brands – where consumers seek status and
prestige, interesting and unique design, ultra-quality conscious and is willing to pay a high
price

Examples of the mid- market brands are the following:

Examples of the premium and niche market brands are the following:

There are about 500 stores distributing international and local brand footwear in Ho Chi Minh City
and Hanoi. For fashion, office and casual wear, the penetration of some international brands are:
Converse – 40 stores, Bata – 21 stores, Superga – 15 stores, Nine West – 14 stores, and Clark – 5
stores. For sports footwear, the penetration are: Nike – 40 stores, Adidas – 40 stores, New Balance –
6 stores.

Local producers of footwear indicated that 90% of total footwear production in Vietnam is for export
and are local companies only meeting 40% of domestic demand. Vietnam is one of the top 10
leading countries in footwear production and exporting in the world. The export turnover of leather
and footwear reached more than US$16 billion in 2016. Turnover is expected to reach $17 billion in
2017, a year-on-year increase of more than 10 per cent.

Production volumes are as follows: Sports shoes – 290 million pairs per annum, Ladies shoes – 100
million pairs, Canvas shoes – 45 million pairs, Slippers and sandals – 84 million pairs. State-owned

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enterprises are playing an increasingly lesser role as privatization efforts are underway to make
Vietnamese enterprises more competitive.

There are both manufacturing and sales opportunities for global brands of footwear in Vietnam.
However, high tariffs were barriers to international brands entering Vietnam. The ACFTA free trade
agreement between Asian countries and China encouraged more international apparel and footwear
brands to enter the Vietnamese market.

The following trends in the Vietnamese footwear market can be observed:

(a) Burgeoning growth expected in future – due to current low ratio of footwear to population
of 0.77 and due to population growth.
(b) Higher growth of women’s footwear expected in future – due to women becoming more
fashion conscious as they are exposed to foreign and social media, and they are working and
are able to make their own purchase decisions
(c) Men’s growth is in sports wear – men are becoming more active and are engaging in more
diverse physical activities
(d) Unit price of footwear increasing – average price increase is 6% per annum, with increasing
disposable income and affluence driving the increase in price
(e) Stronger presence of international brands – proportion of sales of higher price shoes
expected to increase in future and this will attract international brands which have been
improving in their penetration of the distribution and retail channels

Vietnam Population Demographics and Consumer Behavior

Vietnam has a population of 96.16 million (15th largest in the world) and population growth rate of
0.93%. The life expectancy is 73.7 years with 71.2 years for me and 76.4 years for women. The age
breakdown is shown in Figure 2.

Figure 2: Age Breakdown of Vietnamese Population

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The population is expected to expand to 120 million before tailing off around 2050. Currently, 70
percent of the population is under 35 years of age but the population is rapidly aging. There is an
emerging middle class—currently accounting for 13 percent of the population, but expected to reach
26 percent by 2026. The population density of Vietnam is shown in Figure 3. The two most density
populated cities are Ho Chi Minh City (3.47 million people) and Hanoi (1.43 million people). The
gender ratio is 1.11 male to 1.00 female. The religious breakdown is: 81.8% none, 7.9% Buddhist,
and 6.6% Catholics.

Over the last thirty years, the provision of basic services has significantly improved. Vietnam is today
a significantly more educated and healthy society than twenty years ago, and these qualities are
equitably distributed. Coverage and learning outcomes are high and equitably achieved in primary
school—evidenced by remarkably high scores in the Program for International Student Assessment
(PISA), where the performance of Vietnamese students exceeds that of many OECD countries.2

Figure 3: Population Density of Vietnam

2
World Bank Vietnam.

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Vietnam’s economic performance in 2017 has been resilient, reflecting robust export-oriented
manufacturing, strong domestic demand and gradual rebound of agriculture. GDP growth is
estimated at 6.8 percent in 2017 – the fastest expansion in the past ten years. The uptick in growth
reflects a strong rebound of the agriculture sector, rising global and domestic demand that boosted
manufacturing and trade, coupled with robust foreign investment inflows.2

Access to household infrastructure has improved dramatically. In 2016, 99 percent of the population
used electricity as their main source of lighting, up from 14 percent in 1993. In rural areas, in 2016,
77 percent of the population had access to sanitation facilities—compared to 36 percent in 1993.
Rural access to clean water has also improved, up from 17 percent in 1993 to 70 percent in 2016.
Access to these services in urban areas is above 95 percent.2

In a population of about 96 million, 64 million Vietnamese are online, which adds up to a remarkable
Internet penetration rate of 67%. 57 million of them are active social media users, a penetration rate
of 57%. The average amount of time that Vietnamese spend online every day is nearly seven hours,
including 2 and a half hours using social media. 71% of internet users watch videos on a daily basis,
which underscores the importance of using videos in as a form of digital marketing. Most
Vietnamese get their news from the Internet, including social networking sites like Facebook,
Twitter, and others. In the case of Viet Nam, “others” includes Google+, LinkedIn and Zing Me.

Figure 4 shows the daily reach of social networks in Vietnam.

Figure 4: Daily Reach of Social Networks in Vietnam

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Some characteristics of the Vietnamese consumers are:

(a) Generally ethnocentric and they tend to be loyal to local products and brands. 71% of
Vietnamese believe that local products are of good quality and 80% prefer domestically
produced garments
(b) Promotion driven and they are easily influenced to make purchases with price discounts and
free gifts with purchases.
(c) Greater roles of women as there is rise in number of working women and many of them are
taking senior positions in companies. 90% see improvements in their roles and position in
society
(d) Rural and urban consumers behave differently. Rural consumers rely a lot on word of mouth
to make decisions, whereas urban consumers are generally more educated and rely on more
sources for information, including social media.
(e) Consumers in the South are generally more open and willing to try new products than those
in the North. This needs to be careful considered in market entry strategies Southern
Vietnam is generally preferred as a “launch market”.
(f) Increasing Westernization especially in younger generation has encouraged consumption of
fashionable clothing, footwear, cosmetics and accessories those that help young consumers
to express their individualism.