Why don't 'big spenders' coming to Vietnam open their wallets?

The paradox of many visitors but little spending is still a knot that the Vietnamese tourism industry has not yet solved.

International visitors to Vietnam mainly go to traditional markets to eat and buy small souvenirs.

Top most crowded markets "bottom" in spending

According to the 2022 Statistical Yearbook, the average spending per international visitor to Vietnam increased slightly from 1,141.5 USD in 2017 to 1,151.7 USD in 2019.

In particular, the average spending per visitor is the Philippines with 2,257.8 USD/person; followed by Belgium with 1,995.3 USD; the US with 1,709.7 USD; Australia with 1,416.5 USD; Denmark with 1,383.5 USD... Notably, the markets at the bottom of the list are the ones that contribute the largest number of visitors to us. Typically, the market that is being evaluated by travel companies as the most expected at the end of this year is Japan, with an average spending per capita of only 972.5 USD; Malaysia with 900.7 USD; China with 884.3 USD; Thailand with 846.6 USD; South Korea with 838.4 USD; Cambodia with 734.9 USD. In particular, Lao visitors have the lowest average spending in the statistics with only 343.5 USD/person.

The presence of China in the top markets with the least spending when visiting Vietnam has surprised many people. Because up to now, Chinese tourists have always been known as the "golden goose" of tourist countries, not only because of their quantity but also because of their huge spending and shopping levels.

Mr. Thanh Tung, a tour guide in the Japanese market, used the word "horrifying" to describe the image of a group of Chinese tourists when they arrived at Ginza - the richest shopping area in Tokyo. He said: "As soon as the car stopped, they dispersed everywhere. The tour schedule only stopped here for 2.5 hours, but they asked to change the itinerary, spending 5 hours in this shopping area. Dior, Gucci, Balenciaga... they all bought. There was not a single luxury brand that they missed. They went into the luxury brand area and "swept" the goods, with both hands, each hand full of big and small bags. When they arrived at the factory outlet near Fukushima, they also barricaded themselves and swept, and when they returned, everyone registered to pack a few more boxes of goods. Just looking at the boxes made me dizzy, not to mention mentally calculating the "total damage".

Research and statistics on world tourism also show that Chinese tourists tend to spend more on vacation than any other market. Statistics published by Statista show that in 2016, Chinese tourists accounted for 21% of global tourism spending, with 261 billion USD. In 2019, that figure was 292.8 billion USD, topping the list of international tourists spending the most in the world, above the US (182.3 billion USD) and Germany (99.8 billion USD). However, according to statistics from 2004 by the Vietnam National Administration of Tourism, Chinese tourists spent the least, at 517.6 USD. Nearly two decades have passed, although China has risen to account for nearly 50% of international visitors to Vietnam, its spending is still at the bottom of the list.

Similarly, Malaysian and Thai tourists when traveling to Japan, England and America spend hundreds of millions of dong on branded goods, and tens of millions just on souvenirs in affordable shopping areas. Yet when they come to Vietnam, they are quite confident.

In the total spending structure of tourists in Vietnam, room rental accounts for the most but also tends to decrease, from the rental level of 360.3 USD in 2017 (accounting for 31.6% of total spending) down to 347.2 USD (30.1%).

Next is food and drink, accounting for 21.9% (about 251.9 USD), travel in Vietnam 16% (about 184.6 USD), sightseeing 9% (103.2 USD). Medical expenses are 13.1 USD (1.1%) and other expenses account for 9.5% (109.0 USD) of the total average spending when tourists travel in Vietnam. Tourists spend about 142.7 USD (12.4%) on shopping.

Compared to the survey data of the General Department of Tourism (now the National Tourism Administration) in 2014, the level of spending on shopping by tourists decreased sharply by nearly 6% (in 2014, shopping accounted for 18.34%). Thus, although before the pandemic was the golden age of Vietnamese tourism, tourists' spending still tended to decrease.

Loss of shopping front

Looking at China at the bottom of the list of tourists' spending when coming to Vietnam, "king of luxury goods" Johnathan Hanh Nguyen, Chairman of the Inter-Pacific Group (IPPG), regrets: "This is the world's number 1 spending market. They love luxury goods and spend without thinking. When coming to Vietnam, they spend little because there is nothing special for them to buy."

Analyzing more closely the poor product system of Vietnam, Mr. Johnathan Hanh Nguyen said: Both local and branded goods, Vietnam does not have good products. Tourists coming to Japan want to buy Japanese domestic goods, going to Thailand want to buy Thai goods, going to Korea they "rush" to shopping areas for Korean domestic goods, but almost no one comes to Vietnam to buy Vietnamese goods. At tourist attractions, night markets, and walking streets, only miscellaneous items are sold, mainly from China. Local souvenirs have not been invested in, domestic goods are not guaranteed to be of good quality, and there are no suitable shopping places for tourists to spend money. Meanwhile, the "battlefield" of branded goods is almost empty when there is no policy to develop factory outlet areas, duty-free shops on the street...

Citing the Lotte Duty Free store in the center of Da Nang City, which opened less than a year ago and has become a "magnet" attracting Korean tourists with large groups from hundreds of charter flights, the "king of luxury goods" affirmed that an attractive shopping tourism product will be the "key" to attracting international tourists to spend money in Vietnam.

In terms of resources and growth rate, Vietnam is equivalent to Thailand. However, in terms of the number of visitors, we are only 50% and the spending level of international visitors is only 40%. The reason is that Thailand focuses on improving the types of services and products, enhancing the experiences for tourists. Thailand's shopping tourism has a full range of models, from mid-range and high-end shopping malls in city centers, factory outlet shopping malls selling seasonal branded goods, to duty-free shops on the street, street food models and many other special retail activities such as fabric markets, fashion markets, etc.

Thailand's shopping tourism contributed to a sharp increase in international spending revenue with a compound growth rate of 28.2% in 2020. Singapore, Japan, and South Korea are also doing very well in this field.

"Although Vietnam has great potential for growth in quantity, quality and service need to be seriously considered. If the quantity only increases but tourists spend little and the quality does not improve, the contribution of the tourism industry to the economy cannot be commensurate," emphasized Mr. Johnathan Hanh Nguyen.

Dr. Luong Hoai Nam, a member of the Vietnam Tourism Advisory Board (TAB), also believes that shopping tourism is a huge waste of Vietnam's tourism. The system of factory outlets and duty-free shops on the streets are extremely attractive destinations for both international and domestic tourists. Singapore is a typical example of how powerful a shopping tourism industry is. Not only does it attract a huge number of visitors all year round, but it also brings in huge revenue.

There should be a separate tax exemption policy for tourists.

The total tax rate currently applied to luxury goods is up to 40%. Although businesses like IPPG have negotiated with suppliers to achieve import prices equal to those in France or Singapore, adding tax will make the selling price 40% higher. There needs to be a separate tax exemption policy for tourists to increase their spending. Lessons from Singapore, Thailand or Hainan Island (China) have proven that tax exemption policies not only bring about socio-economic efficiency and attract investment, but also allow domestic tourists to shop tax-free in free trade zones or duty-free zones... also retain foreign currency in the country, limiting the flow of foreign currency abroad.

Mr. Johnathan Hanh Nguyen

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