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Consumers have many ways to combat inflation
Ralf Matthaes, General Director of TNS Market Survey Company, said that 63% of Vietnamese consumers are dealing with inflation by purchasing fewer commodities..
High inflation and higher expenses have different impacts on different people. The inflation index of TNS Worldpanel showed that people with low incomes in urban areas and people in rural areas are the biggest sufferers from the price increases.
The total purchased consumer commodities’ value increased by 20% in 2006 over 2005 and increased by 11% from 2006-2007. However, households with lower incomes (VND3.5mil and less) purchased less in those years: 4.5% less in 2005-2006 and 17% less in 2006-2007.
In an interview with Tien phong newspaper, Mr Matthaes said that the age of companies specialising in making products for low-income earners to double their growth rates is over.
However, he said, the producers should not be pessimistic as the higher-income earners, especially the richest people, still can create high growth rates for the producers. Statistics show that the spending of high-income earners rose by 40% in 2006 and 47% in 2007. The spending of the middle-class also increased by 37% and then, because of the high inflation rate of 12%, increased by 15% in 2007. The trend will continue in 2008 and in 2009 as well.
The said figures mean that if producers want to maintain the turnover in the market of products for low-income earners, they need to consider cutting prices, or they will lose customers and say ‘goodbye’ to growth. On the other side, as rich people continue spending money, luxury products may offset the losses from sales to low-income earners.
Regarding the consumption trend, Mr Matthaes said that Vietnamese consumers are well-known as smart shoppers and sensitive to prices. The majority of Vietnamese customers are fighting inflation by buying fewer commodities. 1/3 of consumers have delayed the purchase of big things. 20% of customers plan to buy less well-known brand name commodities. Over 90% of residents in urban areas have had to tighten their belts for the last several months.
The survey has found that 1/10 of rich consumers have decided to use less well-known brand name products, while the figure is ¼ of low-income earners. 8% of Hanoians have shifted to use products of other brand names, while one in every 13 customers in HCM City and Da Nang do that.
Until the high inflation is eased, both producers and retailers have to see the numbers of customers decrease, which will make their growth slow down. However, they can take advantage of the recession to develop a value chain in order to be able to compete better in the future.
VNN
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