Identifies common practices to be aware of when selling in this market, e.g., whether all sales material need to be in the local language.
Trade Promotion & Advertising
Advertising remains heavily regulated by the Vietnamese government. In principle, only companies licensed in Vietnam may place advertisements. Advertisements for tobacco and liquor (excluding beverages with alcohol content below 15 percent by volume) are prohibited in the mass media. Advertising for pharmaceuticals, agrichemicals, cosmetics, and toiletries require registration and approval from the appropriate ministries, while the Ministry of Culture, Sports and Tourism must approve all advertising content. Arbitrary enforcement and interpretation of the regulations continue to hinder the development of the advertising industry. Limits on advertising and promotional expenditures exist for companies, and are tied to a percentage of total sales. Since 2014, the current enterprise income tax law allows enterprises to spend up to 15 percent of their total spending on trade promotion and advertising, which is deductible against their taxable enterprise income.
According to the Vietnam Advertising Association (VAA), the country had approximately 6,000 domestic ad companies as of 2019, with the majority operating in Ho Chi Minh City. Vietnam hosts over 30 representative offices of the world’s leading advertising companies, including WPP plc, J. Walter Thompson (a subsidiary of WPP), Dentsu, Omnicom, Interpublic, Publicis, Saatchi & Saatchi (a subsidiary of Publicis), and McCann. Foreign advertising firms are generally not permitted to directly sign contracts with local media agencies. Instead they must partner with local advertising companies to implement ad campaigns in newspapers or TV commercials.
Many foreign brand managers make heavy investments in television advertising campaigns. Over 90 percent of Vietnam’s urban population own televisions. Nation-wide penetration is greater than 87 percent. There are approximately 60 local and one national broadcaster (VTV). With the emergence of satellite dishes and cable networks, many households also watch international networks (CNBC, CNN, StarTV). However, TV advertising is expected to drop to 66 percent share of spending in 2018 according to a Kantar Worldpanel report, while online could increase to 30 percent, reflecting that TV still offers the greatest potential in terms of total exposure.
With high internet and smart phone penetration (70 percent and 44.5 percent respectively), Vietnam’s young consumer population obtains much of their information via mobile internet. Social media usage is large and growing. Thus, on-line promotion and outreach are increasingly important channels. Vietnamese consumers, especially those under the age of 35, frequently use Facebook, Instagram, YouTube, Zalo, and other social networking websites. The largest users are in the 18-24 age group. It is common to see young Vietnamese people tapping on their smartphones on the street, at home, in the office, restaurants or coffee shops.
The internet has an increasing influence on consumers’ opinions. People carry out online research before buying items, check the latest trends and promotions and share experiences with other people through online forums and social networks. However, less than 60 percent of internet users shop online and the amount of money they spend is small because most remain skeptical of electronic payment methods. This is unlikely to change until internet security and online banking services improve. Nonetheless, Vietnamese people are keen users of the internet for searching for product information. Therefore, many small businesses use social networking sites to reach a large base of customers. Because of customers’ skepticism of electronic payments, online sellers usually enable cash payment upon delivery. Whether they sell home-made food, clothing and beauty products or electronic gadgets, online stores are popular with many internet users.
Despite facing increasing competition from online media and social media, print media remains an effective channel for advertising. Regulations place limits on space allocated for advertisements. There are over 350 newspapers and other publications in Vietnam, but few have nationwide circulation. Among the more popular publications are Thanh Nien (Young Adult), Nhan Dan (The People), Tuoi Tre (Youth), and Lao Dong (Labor). There are also quite a few international quality publications in circulation, including Nha Dep (Beautiful Home), Dinh Cao (Sports and Fitness), M (Fashion) and Phu Nu The Gioi (Woman’s World), Gia Dinh & Tiep Thi (Family and Marketing). These latest publications are setting new standards for the quality of publishing in Vietnam. English newspapers and publications include the Saigon Times Daily, Vietnam News, Vietnam Economic Times, Thanh Nien English News, and Vietnam Investment Review.
Outdoor advertising ranges from billboards and signboards to public transport, building walls, bus stations, and wash and service stations, among others. Firms should confirm that the advertising agency has proper permits to lease the space. For example, billboard advertising in Ho Chi Minh City is restricted to the vicinity of the airport (per Circular 19/2013/TT-BXD dated Oct. 31, 2013). Advertising on articles such as umbrellas, scooters, etc. does not require a permit; however, it must comply with advertising regulations.
Radio advertising volume is growing due to the constant increase of personal cars, especially in the two largest cities of Hanoi and HCMC. According to Vietnam Registry, Vietnam has a total of over 4.1 million cars registered as of December 2020, and is forecast to continue to grow rapidly. In particular, the car market in Hanoi and HCMC is estimated to grow at an annual rate 17 percent and 15 percent respectively. Today, the audience of radio advertisements represents a cross-section of the population with increasing buying power. Two favorite radio broadcasters are Voice of Vietnam (VOV) and Voice of HCMC (VOH).
Trade fairs are numerous and cover a broad range of sectors, and are generally becoming a more attractive and sophisticated method for product promotion and industry networking. Many exhibitions are co-sponsored by government ministries, state-owned enterprises, and industry associations. Common venues are the Giang Vo Exhibition Center, the National Convention Center, and the Viet-Xo Cultural House in Hanoi. In Ho Chi Minh City, the Reunification Palace, international hotels, the Ho Chi Minh City International Exhibition and Convention Center, and Saigon Exhibition and Convention Centre (SECC) are the main venues. Upcoming trade fairs can be found here: https://tradepro.vn/vi/hoi-cho-trien-lam.
The overriding factor in pricing for the Vietnam market is the low level of per capita income. While consumers want quality and understand that quality comes at a premium, most buying decisions are highly price-sensitive. Imported products generally must incorporate the following elements into the pricing structure: 1) Import agent fees; 2) Customs duty; 3) Value-added tax (VAT) in the range of 5 to 10 percent is levied on the landed cost when the goods change title; and, 4) Luxury/Consumption Tax (especially on autos, beer and alcoholic beverages).
Price also plays an important role in consumer perception of the product. Although Vietnamese consumers expect to pay a premium for a foreign label or brand, in practice, the actual number of consumers who are willing to pay the higher price is limited. Market analysts agree that one notable exception to this generalization is big-ticket purchases of motorbikes, cars, and some fashion items that convey status and may also be considered an investment for long-term use. One important pricing cycle to note is linked to the Christmas Holiday and the Lunar New Year “Tet” celebration (several days between late January and mid-February, depending on the year). As there is a flurry of buying in the few months preceding these holidays and little activity immediately afterwards, price hikes and reductions follow accordingly. Savvy marketers also develop promotions and incentives surrounding these gift-giving holidays.
Sales Service/Customer Support
After-sales service and customer support are important components of a sale; purchasers of foreign products will expect access to a local provider, rather than from a regional base. This is especially true for State Owned Enterprises or government customers. Foreign firms should invest in customer service training for front-line local sales staff, as well as training for technicians.
Warranties are also an effective marketing tool to assure customers that they are buying a genuine, high-quality product. Foreign (offshore) suppliers are generally not permitted to directly provide after-sales service and customer support unless they have a licensed foreign investment project in Vietnam. Otherwise, a Vietnamese company must provide these services.
Local Professional Services
Branches and subsidiaries of foreign law firms in Vietnam are important partners for firms seeking to enter the market. Foreign law firms can hire licensed Vietnamese lawyers and trainee solicitors. Licensed Vietnamese lawyers working at foreign firms can provide formal legal opinions on matters of Vietnamese law. Although foreign lawyers who have not been admitted to the Vietnamese Bar Association cannot appear as representatives of their clients in Vietnamese courts, Vietnamese lawyers who work for foreign firms do so. The U.S. Commercial Service Offices in Hanoi and in Ho Chi Minh City maintain a list of foreign law firms with offices in Vietnam for reference purposes.
The American Chamber of Commerce has several reputable professional service providers, including consultants, accountants, advertising, freight-forwarders, etc. among its membership.
Principal Business Associations
American Chamber of Commerce Vietnam
AmCham Vietnam is a not-for-profit, non-governmental, and non-political voluntary membership association of the U.S. businesses in Vietnam. In addition, AmCham welcomes international firms whose business relations with the United States and/or U.S. firms are such that membership would help achieve their objectives. In Vietnam, there are AmCham chapters located in Hanoi (http://www.amchamhanoi.com/) and HCMC (http://www.amchamvietnam.com/)
U.S. - ASEAN Business Council
The U.S.-ASEAN Business Council is an advocacy organization for U.S. corporations operating within the Association of Southeast Asian Nations (ASEAN), serving as a voice of the U.S. private sector in promoting mutually beneficial trade and investment relationships between the United States and Southeast Asia.
Vietnam Chamber of Commerce and Industry
The Vietnam Chamber of Commerce and Industry (VCCI) is a national organization which assembles and represents the business community, employers and business associations of all economic sectors in Vietnam. The purpose of VCCI is to protect and assist business enterprises, to contribute to the socio-economic development of the country, and to promote economic, commercial and technological co-operations between Vietnam and the rest of the world.
Limitations on Selling U.S. Products and Services
Since entering the U.S.-Vietnam Bilateral Trade Agreement in 2000, Vietnam has granted the United States Most Favored Nation status (Normal Trade Relations), where our imported goods are treated as locally-produced goods (National Treatment). Since then the bilateral trade relationship between the two countries has been steadily increasing. With Vietnam’s commitment to the WTO, the country is in the process of liberalizing the trade and distribution of imported goods. However, there are still restrictions on the distribution of some products.
In general, the following goods are currently prohibited from import:
- Weapons, ammunition, explosive materials, and military technical equipment.
- Assorted firecrackers, sky lights, and the equipment interfering with the road traffic, speech measuring instruments.
- Eight categories of second hand consumer goods.
- Types of publications in the category prohibited from dissemination and circulation in Vietnam.
- Postal stamps in the category prohibited from business, exchange, display, and propagation as prescribed by Law on Post.
- Radio equipment, equipment applying radio wave not in line with planning on radio frequency and relevant technical regulations in accordance with Law on radio frequencies.
- Cultural products in the category prohibited from dissemination and circulation in Vietnam or having issued decision on suspension of dissemination and circulation in Vietnam.
- Many categories of vehicles.
- Six categories of second hand materials and transport facilities.
- Chemicals prohibited in Appendix III of the Rotterdam Convention.
- Plant protection agents prohibited from use in Vietnam.
- Scrap and waste, refrigerating equipment using C.F.C.
- Products, raw materials containing asbestos of the group of amphibole.