Vietnam’s Evolving Luxury Market: Opportunities for Italian Companies

Vietnam’s luxury market is evolving and growing rapidly, driven by the country’s growing middle class, which is increasingly interested in high-end goods and services. The number of ultra-high-net-worth individuals in Vietnam with a worth of at least US$30 million is also forecast to increase by 26 percent to more than 1,500 people by 2026, as stated in the Wealth Report 2022 released by the UK property consultancy firm, Knight Frank. In this context, Italian companies have been taking notice of the country’s potential, particularly in the areas of clothing, furniture, luxury cars, and wine.

According to the German portal Statista, in the next five years the Vietnamese luxury market is set to expand by 3.3 percent annually and will cross the US$1 billion mark by 2025. The biggest segments would be fashion, leather goods, cosmetics and fragrances. Considering fashion, many international brands have already established their presence in the country: Christian Dior, Louis Vuitton, and the Italian powerhouses of Versace, Gucci, and Prada have flagship stores in either Ho Chi Minh City or Hanoi, catering to the country’s affluent consumers. Their strong interest is fuelled by the projected growth of the middle class, which is expected to reach 56 million by 2030, as per World Data Lab.

Premium furniture is an area where Italian companies have found success in the Vietnamese market. While the domestic furniture market in Vietnam is strong, it is primarily driven by low-cost products. Consequently, there is a segment of customers in the country who are searching for imported high-end furniture products. As reported by the Vietnam Chamber of Commerce and Industry, some 80 percent of luxury woodwork and interior decoration items in Vietnam are imported from Europe, with local players accounting for the rest. On this basis, Italian brands such as Poltrona Frau, Minotti, Natuzzi and Segis have already opened showrooms in either Ho Chi Minh City or Hanoi, offering luxury home furnishings that are renowned for their craftsmanship, design, and attention to detail.

Luxury cars are also gaining popularity in Vietnam, particularly among the country’s wealthy elite. According to the Vietnam Register, almost all major luxury car brands reported increases in sales in the first half of 2022 compared to the first half of 2021. Italian automakers like Lamborghini, Ferrari and Maserati have all established a presence in Vietnam, with Lamborghini opening its first showroom in the country in 2019. Although luxury cars can be very expensive, especially due to the Special Consumption Tax (Law no. 02/VBHN-VPQH) introduced in 2016 (by means of example, the tax rate is 35% for cars with an engine size accounting for less than 1.5 litres up to to 150% for cars with an engine size of more than 6 litres), the prospects for the future are positive. Thanks to the European Union-Vietnam Free Trade Agreement (EVFTA), in fact, we will see all tariffs on vehicles imported from the European Union eliminated over the course of the next ten years.

In addition to these traditional luxury goods, wine is another potential area for high-end customers. Although beer is still the most favoured alcoholic drink, the wine market in Vietnam is growing rapidly, driven by a young and affluent consumer base. As claimed by Statista, revenue in the Wine segment amounts to US$229.20 million in 2023. The market is expected to grow annually by 3.95%. Vietnam’s high spenders choose wines mostly from France, Italy, Chile, the US, and Australia. The opportunity for Italian winemakers is huge and the results are already visible: according to the Italian Trade Agency, Italian exports to Vietnam have been steadily increasing, with a 30% increase in 2020 alone.

In conclusion, while the luxury market in Vietnam presents many opportunities for Italian companies, there are also challenges that must be navigated. One such challenge is the lack of awareness and understanding of Italian brands among Vietnamese consumers, as well as competition from other international luxury brands. However, the growing middle class, supportive government policies, and receptive consumer base in Vietnam make the luxury sector a promising area for continued growth. Italian companies can leverage their reputation for quality and craftsmanship to capture a share of this expanding market.