Consumers may still be frugal with their purchases for Tet 2024

"GDP is growing, but from now until Tet, pessimism will still remain," said Nguyen Phuong Nga, senior business development director of market research company Kantar WorldPanel Vietnam, at the seminar "Market fluctuations and business opportunities at the end of the year" on October 4. According to her, consumer spending confidence may react more slowly than GDP data.

Ms. Nga's comments came after Vietnam's economic data in the third quarter showed many positive changes, with GDP increasing by 5.33% compared to the same period in 2022, according to the General Statistics Office. In the first 9 months, GDP increased by 4.24%.

"In the last two quarters, concerns about food safety have decreased slightly while worries about income, costs and stable employment have increased rapidly. These three things affect consumer spending levels," said Ms. Nga.

According to the Kantar survey, the proportion of Vietnamese households saying their financial situation is "not stable" has increased in recent quarters, despite the end of Covid-19 and the summer - a time when consumer sentiment is usually positive. In the second quarter, 28% of households surveyed said "not stable", compared to 24% in the fourth quarter of 2022 and 19% in the fourth quarter of 2029, that is, before the pandemic.

In the context of tightening spending, consumers are tending to choose according to the criteria: prioritizing health, increasing home experiences, and personalizing needs. 66% said they plan to cut spending on entertainment outside (going to the movies, singing karaoke), followed by reducing eating out and buying household appliances.

With products that are a must-buy, many people switch to lower price segments, buy in bulk to save money, and look for promotions. Recently, 40% of the FMCG industry has failed to retain customers because of this. The top 5 products that have been moved to lower price segments are cooking oil, dishwashing liquid, laundry detergent, baby diapers, and sunscreen.

Mr. Luong Van Vinh, General Director of My Hao Company, shared that he also felt the difficulties. After 9 months, his company only achieved more than 50% of the annual sales target. My Hao still has more than 2 months to earn 20% more of the target. "This year we must try to achieve 80%," Mr. Vinh said.

Assessing the Tet market, Mr. Vinh predicted that the business situation during the two peak months will be better than usual, but efforts will be needed to make prices more affordable and convenient to attract customers. For example, My Hao has a 5-liter dishwashing liquid bottle and recently launched a 4-liter version.

During Tet, the company plans to sell a smaller 3-liter size with a tap. "Customers' money is limited now, so we have to come up with a product that doesn't cost them much at a time, has a good price, is convenient, and is of good quality," said Mr. Vinh.

The labor market picture continued to improve in the third quarter, but there are still unfavorable indicators for purchasing power in the coming time. According to the General Statistics Office, the number of jobs has increased, but the quality is not sustainable, such as unstable jobs, unsafe working conditions, and low income.

Accordingly, the number of people with informal jobs in the third quarter was 33.4 million, an increase of 355,800 people compared to the same period in 2022. The unemployment rate among working-age people increased by 0.14 percentage points. Average labor income continued to increase but slowed down significantly, reaching 5.3% compared to the same period in 2022 (same period increased by 6.7%).

Once selling 30 billion VND worth of pickled eggplants each year, Mr. Nguyen Quoc Tuan, CEO of Song Huong Foods, said that he would not be able to reach this number in 2023. Now, on average, he only sells more than 1 billion VND worth of this product each month. To maintain a stable revenue of 100 billion VND like previous years, his company focuses on new products that are still in demand, which are traditional frozen local cakes.

According to Mr. Tuan, banh nam and banh loc are selling well in domestic supermarkets. Meanwhile, new types of cakes such as banh cam with red bean filling, banh gai, and xoi vo have contributed to "saving" revenue through export channels. "Next Tet, the value of export cake orders will double the same period last year, reaching 600,000 USD, helping us reach our target of 1.5 million USD from exporting frozen cakes," said Mr. Tuan.

According to Ms. Nguyen Phuong Nga, Vietnamese people usually shop a lot in the 3 weeks before Tet. The 2 weeks before Tet alone account for 60% of revenue during this time. The upcoming Tet Giap Thin 2024 will have a peak business period of 5 weeks from January 7 to February 10. Of these, there are 3 major trends that businesses need to pay attention to in the context that people may still tighten their spending.

One isPrioritize products with high applicability. In the context of economic difficulties, consumers will re-evaluate the importance and prioritize which industries have value in daily life. Accordingly, food and fast-moving consumer goods have the opportunity to continue to grow.

Second, the trend of premiumization will slow down. Consumers are more optimistic about their financial situation in the next 12 months, but there are no clear signs of loosening spending restrictions during Tet 2024. They will not cut spending on essential items and gifts, but will tend to look for products in the lower segment or with more promotions, according to Ms. Nga.

Final,Convenience will dominate the choice of shopping channel. Customers will choose the channel that offers more value rather than being loyal to a certain choice. New shopping experiences that are driven by technology such as e-commerce or highly convenient such as mini-marts are predicted to grow strongly.