As with much of the world, the economy in Vietnam is in a slump. But it’s easy to think otherwise when luxury cars, motorbikes and clothing outlets are such a common sight. Chris Mueller looks at the local retail markets to find out where the money is going and who is spending it. Photos by Christian Berg.

The drive along Nguyen Huu Tho Street between districts 4 and 7 is always an interesting one. Half-finished property developments line the road, while the skeletons of new buildings fill the horizon. In the rearview mirror is the skyline of downtown Ho Chi Minh City, punctuated by ongoing or stalled building projects. The view from this highway is a depressingly clear sign of the economic instability currently plaguing Vietnam.

Take a left on Nguyen Van Linh towards Phu My Hung, and it is more of the same. Walls have been erected, plastered with promises of even more buildings — all-inclusive condominiums, shopping malls, and movie theatres. But everything is on hold.

Further down Nguyen Van Linh is a glimmer of success, albeit an unattractive one. The Crescent Mall suits the area of Phu My Hung well, even if it looks like it was dropped in pre-made by a crane. And while the dozens of other malls throughout the city struggle to bring in customers, on any given weekend or weeknight, the Crescent is filled with shoppers. The fact that people are actually going to the mall may not be surprising given its location on the water, which offers a brief respite from the city. But shoppers are not just here for the peaceful atmosphere outside the mall, they are actually buying products.

The Crescent is certainly not the only mall in the city, but why does it seem to be the only one doing well?

“Crescent Mall, being the first international standard shopping mall in Vietnam, is somehow able to wade through these challenging times,” Cecile Gamboa, the mall’s deputy general manager, told me.

While it isn’t exactly a satisfying answer, Gamboa does make a point — the times are indeed challenging. The Vietnamese economy isn’t doing well at all. It is actually experiencing the longest spell of slow growth since Doi Moi, the economic reforms of the late 1980s, according to a World Bank report that came out last month. Real GDP in 2012 grew by only 5 percent, the lowest level since 1998, and it isn’t doing any better so far this year.

While the Crescent may be OK, other shopping outlets are failing miserably, a sure sign of bad times. Some economists argue that consumer spending is one of the most important indicators for a healthy economy. As Bill Bonner, founder of Agora Inc and author of books and articles on economics, once said: “The entire world economy rests on the consumer; if he ever stops spending money he doesn’t have on things he doesn’t need — we’re done for.”

The economy in VietnamLabel lovers
On a drizzly Tuesday afternoon, I stood outside one of the many luxury-brand shops in District 1, waiting for customers to come out. I had already been asked to leave the store — sitting opposite the Opera House — after pummeling the clerks with questions. It took nearly an hour before I was able to stop a customer coming out, not because they were unfriendly, but because no one — other than the occasional aimless tourist — was shopping there.

Lan, a well-dressed mother of two, was stopping by the shop in between errands. She clearly had a knack for choosing high-end clothes, but were they authentic? “Of course,” she said. “I never buy them in Vietnam, though. I fly to Singapore or Bangkok.”

This is common practice for most of the top spenders here, Afonso Vieira, the managing director of Total Wealth Management, told me. Instead of spending locally, these high rollers are going abroad.

“If people want to buy expensive things, they fly to Singapore to buy them and come back to Vietnam the same day,” he says. “Some even do all their shopping in the duty free shop at the airport. They know whatever they are buying there is the real thing. Vietnam still has a dubious reputation.”

Of course reputation is only part of it. The products in these already-expensive shops are significantly pricier than in other countries around the region. This is mainly because of the insanely high rent in both the retail malls and the storefronts.

“It is extremely difficult for any company to come here to lease out a few shops and make money,” Vieira says. “The rent is so high that they can’t actually make anything.”

Although Vietnamese consumers still don’t trust products in Vietnam (even the brand-name stuff that is made here for export), many still want those well-known names stitched across whatever they buy.

According to a survey released last month by the Nielsen global information and measurement company, 56 percent of Vietnamese would be willing to spend more on name-brand, designer products than on others. The survey showed that Vietnamese consumers were the third most likely in the world to pay for designer goods, after those in China and India.

“Cashed up and ready to spend, these consumers are seeking out designer and well-known brands to project their new-found social status,” David Webb, managing director of advertising solutions at Nielsen, said in a press release. “The rapid expansion of the internet and other media channels has given rise to more exposure, awareness and desire for brands and products than ever before.”

Take a stroll down Dong Khoi Street or near the roundabout at the intersection of Le Loi and Nguyen Hue, and you could be forgiven for thinking that luxury brands are a ubiquitous part of the local consumer market. Gucci, Louis Vuitton outlets, and other high-end shops take up many of the storefronts in this area, but who actually buys these products?

“No one,” Vieira says.

The economy in VietnamLooking local
Christina Yu, the founder of fashion accessories brand Ipa-Nima, says she has noticed a similar trend with her customers. “Only the Vietnamese that are very rich are still buying,” she says. “However they are buying less than before. They used to by whole sets — clothes and shoes and bags. Now they will only buy one item and come several times before they choose.”

Ipa-Nima has been hugely successful since the store opened in 1997, but Yu says there aren’t many locally made brands following in her footsteps. Yet she expects they soon will.

“Most Vietnamese with money are still very brand conscious,” she says. “But I think the trend will start changing. Vietnamese will realise that Vietnam is actually making a lot of these well-known products anyway for export.”

It’s easy to see why so few brands exist in Vietnam. Only 20 years ago there was little you could actually buy here. Even motorbikes were much more expensive than they are now. Spending habits were also different. After decades of war and poverty, people learned to save for a rainy day, rather than flaunt their money.

“I found people in Hanoi were much more conservative about spending,” Yu says about her early days in Vietnam in the late 1990s. “They spent more money on things people didn’t see. Now you can definitely see there is a change in this habit. People are buying flashy cars and expensive jewelry.”

But for companies like Ipa-Nima — and the vast majority of the Vietnamese population — the habits of the super-rich are far from their minds. Over the past 17 years, Yu has successfully tapped the middle market consumer — people who are looking for quality without the huge price tag.

“There is no doubt that Vietnam has a huge population,” Yu says. “But when you talk about the people that can actually spend, there aren’t many. There is not a big middle market and we need to teach Vietnamese that local products are just as good as foreign brands.”

Benjamin Grepinet agrees and is hoping to corner that market as well with his T-shirt company and concept store. He started Ginkgo six years ago with his wife, and has now opened 10 shops and employs 80 people.

“Vietnamese seem to be really fed up with cheap Chinese products,” Grepinet told me on Skype from France. “They are also becoming more and more aware of quality, eco-safe, and fair trade products.”

While at the moment Ginkgo sells mainly to tourists, it recently started a new concept store that Grepinet hopes will create a space for both local Vietnamese and expats to sell their ‘made in Vietnam’ products. But he too has noticed the local market is still hooked on big foreign brand names.

“We don’t want to compete with the big brands,” Grepinet says. “We want to compete with the local brands that are doing high-quality, mid-range stuff. When you have Adidas coming in with big marketing campaigns, what Vietnamese company can compete with this?”

Even if competition were on a more level playing field, the anemic economy still makes it difficult for new companies to start. Small business loans are almost non-existent right now, says Vieira of Total Wealth Management. Instead, what little money there is to lend out is going to stalled development projects, like the ones littered around the city. Vieira says the problem lies with the banks.

“There are far too many banks in Vietnam,” he says. “The only reason they were created was to lend money to the real estate developers, which are actually the owners of the banks. The developers are lending money to themselves.”

Vieira adds that he is optimistic. “I’m not too concerned over the long term,” he says.