Expanding into a new market, particularly one as dynamic and rapidly growing as Vietnam, can be an exciting yet daunting challenge for foreign solopreneurs and small-to-medium enterprises (SMEs). With opportunities on the rise, it’s tempting to jump in and start exploring the possibilities. However, without proper market research, the risks of failure far outweigh the rewards.
Whether you’re planning to set up operations from scratch, collaborate with local partners, or use distributors to reach your target audience, market research is an essential first step. At SOSP Consulting Group, we have worked with numerous foreign businesses to ensure they don’t just survive but thrive in new markets. In this article, we’ll explain why market research is crucial for solopreneurs and SMEs entering Vietnam, the key challenges it can help address, and the various approaches you can take.
Entering a foreign market without research is like navigating a new city without a map. The chances of getting lost, taking wrong turns, or missing out on key opportunities are high. Market research helps you understand the landscape, minimize risks, and create an actionable plan that positions your business for success.
Here’s why thorough market research is critical:
1. Understanding Customer Needs and Preferences
Vietnam’s population is diverse, with varying needs and preferences depending on location, age group, and lifestyle. What works in Saigon may not resonate with customers in Hanoi, Da Nang, or smaller cities. Without market research, you risk creating a product or service that doesn't align with your target customers' desires, which could result in poor sales and low adoption.
Example: A foreign food delivery startup may find that their premium pricing strategy works in Saigon’s central districts but doesn’t appeal to budget-conscious consumers in other regions. Market research would help identify these preferences early on.
2. Identifying the Competitive Landscape
Vietnam is a hotbed for new businesses and startups, and competition is fierce. Without understanding the existing players, their strengths, and weaknesses, you may misjudge the viability of your business. Market research helps you identify key competitors, analyze their strategies, and pinpoint gaps that your business can exploit.
Example: An SME launching an e-commerce platform needs to be aware of established giants like Tiki, Shopee, and Lazada. Understanding what these platforms offer and how they engage customers would help you create differentiation strategies.
3. Evaluating Market Size and Growth Potential
Before investing significant resources, it’s crucial to determine the potential market size and whether there’s enough demand for your product or service. Market research helps estimate your total addressable market (TAM), serviceable available market (SAM), and serviceable obtainable market (SOM). This ensures your expectations are realistic and prevents overestimating demand, which could lead to costly mistakes.
4. Assessing Regulatory and Cultural Barriers
Vietnam has a complex regulatory environment that varies across industries. Market research helps you understand the legal requirements, local regulations, and potential barriers to entry. It also reveals the cultural nuances that are essential to successful business operations.
Example: A tech startup from abroad might need to navigate Vietnam’s data privacy regulations or obtain specific licenses to operate in certain sectors. Cultural factors, such as how Vietnamese consumers view privacy and data security, could also impact business operations.
5. Optimizing Entry Strategies
There’s no one-size-fits-all approach to entering a new market. You might plan to establish a physical presence, hire local staff, or work with distributors and partners. Market research helps you choose the optimal entry mode and understand the pros and cons of each approach.
For instance:
Hiring local staff might be beneficial for market insights but comes with higher operational costs.
Partnerships or distributorships could offer faster market access but may reduce control over customer relationships.
Each of these strategies comes with its risks, but thorough research will help you identify which approach aligns best with your business model and growth goals.
Areas You Should Research Before Entering a New Market
According to Kadence, when expanding into a new market, these eight areas can guide your research to ensure a smooth transition:
1. Target Audience Behavior:
In Vietnam, urban populations like those in Ho Chi Minh City and Hanoi have rapidly adopted e-commerce and digital services, driven by a young and tech-savvy demographic. However, rural areas still show a preference for traditional retail and cash payments. Understanding these distinctions is crucial for businesses like e-commerce platforms or digital services.
Example: Shopee and Lazada gained traction by offering cash-on-delivery (COD) options, acknowledging that many Vietnamese consumers prefer this over credit card payments, especially in non-urban areas.
2. Marketing Channels:
The Vietnamese market is heavily influenced by social media platforms, with Facebook and Zalo (a local messaging app) being dominant. For digital marketing, businesses should consider Facebook Ads, Zalo marketing, and influencer partnerships, which can create immediate impact.
Example: Local brands like The Coffee House have leveraged Facebook and Zalo for customer engagement, running successful digital campaigns with chatbots for seamless ordering.
3. Cultural & Language Nuances:
Vietnam’s culture is deeply rooted in family values, respect for elders, and national pride. Localization of your marketing and branding to reflect these values can go a long way.
Example: Brands like Vinamilk emphasize family-centric themes in their campaigns, promoting healthy lifestyles and traditional family bonds, which resonate with Vietnamese values.
4. Regulations:
Vietnam has various regulatory hurdles for foreign businesses, such as the Enterprise Law and industry-specific licenses. Depending on your sector, approvals from the Ministry of Industry and Trade or State Bank of Vietnam may be required, especially for financial services, tech, or logistics.
Example: In fintech, companies must comply with strict data localization laws, ensuring customer data is stored in Vietnam, and must get approval from relevant authorities.
5. Preferred Payment Methods:
Cash still reigns supreme in Vietnam, with COD (Cash on Delivery) being a popular payment option. However, digital payments are growing, especially in urban areas, with MoMo and VNPay emerging as leading e-wallets.
Example: MoMo, Vietnam’s most popular e-wallet, has partnered with businesses across sectors, offering promotions and incentives to encourage users to switch from cash to digital payments.
6. Cost Structures & Price Parity:
Labor costs in Vietnam are relatively low compared to other ASEAN countries, but price sensitivity varies. High-end luxury goods may only succeed in affluent urban centers, while mass-market products have better chances of adoption in both cities and rural areas.
Example: International brands like IKEA and Uniqlo offer products at competitive prices in Vietnam, balancing affordability with quality to cater to local price-sensitive consumers.
7. Competitive Landscape:
Vietnam’s economy has seen a rise in both local and international competitors in various industries, especially in e-commerce, food delivery, and retail. Understanding key players and their market strategies is critical.
Example: In the ride-hailing market, Grab faced competition from Xanh SM and Be. Each competitor capitalized on unique pricing and promotions to attract users, creating a competitive landscape in urban transportation.
8. Market Volume & Growth Potential:
Vietnam’s economy is growing rapidly, with opportunities in sectors like retail, consumer goods, and tech. The Vietnamese middle class is expanding, driving demand for quality products and services.
Example: The Vietnamese retail market has been growing annually by over 10%, making it a prime destination for businesses in the FMCG and consumer electronics sectors, with companies like Samsung capitalizing on the local appetite for tech products.
How SOSP Consulting Group Can Help
At SOSP Consulting Group, we specialize in helping foreign solopreneurs and SMEs successfully enter the Vietnamese market. Our comprehensive market research services include:
Primary research (direct surveys, interviews with target customers).
Secondary research (market size & growth forecast, segmentation & competitor analysis, PESTLE analysis).
We tailor our approach to your specific needs, helping you understand the local market landscape and providing actionable strategies to ensure your business thrives in Vietnam.
Conclusion: Don’t Skip Market Research—It’s the Key to Success
Entering a new market is a high-stakes venture, and the importance of thorough market research cannot be overstated. Whether you’re a solopreneur launching a new product or an SME looking to expand, market research provides the insights necessary to make informed decisions and mitigate risks.
Let SOSP Consulting Group help you navigate the complexities of the Vietnamese market and unlock long-term success. Reach out today for expert guidance tailored to your business needs.
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