The Reality of Retailing & Luxury

Ralf Matthaes Regional Managing Director

Agenda
Present consumer reality and confidence spend Areas of spend / areas of saving Confidence Consumer Modern retail not growing very fast due to What and where consumers spend The growth of Modern vs traditional trade Drivers of growth Hindrances of growth Luxury myth % whom have bought luxury items Definition of luxury Consumer misperception of luxury

Consumer Confidence 2011-2012

2008 2012 Consumer Confidence Index

110 100 80 60 40 20 0 2008 2009 2010 2011 2012 89 78 64

79 68

Index has fallen drastically due to poor Vietnamese economic performance

4
Source: TNS CCIP 2008 2012 urban only

Consumer overview of Vietnam's next 12 months

Q: In the next 12 months would you think that the following will be better, the same or worse than they are now?

Value of the Vietnamese dong Employment The cost of living Vietnam's economy Foreign investment My personal standard of living

2012 = 68
51
44 30

2011 = 79
15
26 20 21 13 7 5 27 42 43

34

57
42 43

25
36 36 58 41 51

16

29
34 20 13 Worse

41
35 38 48 Same

30
32 35 39 Better

Confidence has dropped substantially in the past 12 months

Source: TNS CCIP 2011 2012 urban only

Job Security is Falling

Do you think your present job is safe, or do you think theres a chance you may become unemployed?

Mid 2012

68

20

12

Early 2011

76

17

Present job is safe Chance of unemployment Don't know

Job security is falling, driving consumer caution

6
Source: TNS CCIP 2011 2012 urban only

Employment Concerns
Will unemployment rise or fall in 2012 in Vietnam?

Mid 2012

25

69

Early 2011

30

54
Will see a fall in unemployment Will see a rise in unemployment Same/ Don't know

16

An additional 15% of the population believe unemployment will increase in 2012

7
Source: TNS CCIP 2011 2012 urban only

Consumers savings
Roughly how much of your monthly income do you save?

++
Mid 2012 32 26 23 18

Early 2011

55

18

14

13

Up to 5%

5% - 10%

10% - 20%

More than 20%

Not only savings but the percentage consumer are saving has risen sharply
8
Source: TNS CCIP 2011 2012 urban only

Consumers spending in the near future?

Given the economic situation, will you be spending, less, the same, or more on each of the following items?

Education Health care products/services Food & beverages products Personal care products Household utilities House hold care products

47 46

46 43

7 12

37
32 32 27 25 25 24 52 58 55 52 54 56

55
15 14 16 23 17 21

Entertainment & dining out

Mobile, Laptop, Devices Home appliances Transportation Communications

24
20 More

59
65 Same Less

17
15

Some sectors continue to see growth, whilst other continue to decline

9
Source: TNS CCIP 2011 2012 urban only

Modern retail in Vietnam

Monthly household spend

Travel/ holidays Healthcare Investment 3% 3% 2% Groceries Entertainment Eat / drink 4% Total Housing 4% Groceries Toiletries 32% 5% Communications 5% Utilities 8% Transportation 9% Education 10%

out

= 32% = 15% = 47%

Eating/drinking out 15%

47% of all spend is still spent on Food What is the mix of food versus other items at modern retailers?

2011 TNS

Source: TNS VietCycle 2011.

Most frequented Modern retail outlets

HCM City
67 65

Ha Noi

38

35 20
16

20
5 7 0 2
Citimart

10

4
Co-op Mart Big C Metro

2
Maximark

2 3
Parkson

1
Vincom

0
Fivimart

Lotte Mart

Nationally Big C followed by Metro are the most frequented outlets Note low penetration of high end venues
Source: VietCycle 2011 Base: HCMC & Hanoi

Value Growth of Modern vs other trade channels

2008-09

2009-10

2010-11

2011-12 1st half

13

The Luxury Myth

Who is Vietnams luxury consumer?

Gender
Living in Age between

52% Male Hanoi = 36% - HCMC = 19% 35 54 = 49%

Monthly Income 8.5 Mil. vnd plus = 67%

18
Source: TNS VietCycle 2011 Urban only

% of populations which have bought luxury items in last 12 months

*Luxury item here is defined as valued over VND 10,000,000

2008

2011

10

14

Slow growth indicates that luxury is still well out of reach for most consumers
Source: TNS VietCycle 2011 Urban only
19

Urban Declared monthly household income

41,000,000 VND Plus
SEC A+ SEF F 1% 3% less than VND 2,500,000 A 9% E 22%

15,000,001 40,000,000
B 9%

13,500,001 15,500,000

2,500,001 5,500,000

C 31%

D 25%

VND 8,500,001 13,500,000

5,500,001 8,500,000

Urban luxury market is estimated to be about 19% of urban population

Source: TNS VietCycle 2011 Urban only

Vietnam National annual household income

Wealthy 1.5% 1.3 mil Affluent 9.5% 8.2 mi Middle 26% 22 mil

A1 A B

1.5%

3.9%

5.6%

C
D

11%

15%

BOP 63% 54 mil

E F

29%

34%

2/3rds of Vietnamese are still eking out a day to day existence

Source: TNS Vietnam

What does Luxury mean to Vietnamese consumers

Q: Which of the following statements describe what is luxury to you?

Premium price Premium quality Unique design Used by famous people Hard to find Country of origin Limited edition Exclusive

60 56 36 32 26 23 18 14

Vietnam Luxury = Price & Quality, Western World Luxury = Exclusive & Country of origin
Source: TNS VietCycle 2011 Urban only
22

How we define luxury?

Q:

Which of the following activities do you consider to be luxury?

65

2008
60
58 45 57

2011

52
42

44
39

44

35
27 21

26

Dining out at 5-star restaurants/hotels

Travelling for pleasure abroad

Playing golf

Shopping at boutique venues

Living in a high-end apartment

Staying at 5-star hotels/resorts

Having membership to VIP club

Until end of 2011 boutique shopping & overseas leisure travel were on the rise as luxury past-times
Source: TNS VietCycle 2011 Urban only
23

The luxurious difference between Hanoi & HCMC

HCMC
82

Hanoi

63 46

18

22 13 6 9

Having a successful life

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Showing off Flashy

Enjoy high quality life

With good taste

13
2011 TNS

Source: TNS VietCycle 2011 Urban only

Hanoi versus HCMC, Luxury is.

HCMC Hanoi
61 56

52
44

26 21

Premium quality

Premium price

Country of origin

For Hanoians luxury perceptions are much higher than in HCMC , except for Quality
10
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Source: TNS VietCycle 2011 Urban only

2011 TNS

Technology the top of the luxury food chain

58
Categories I would be willing to pay a premium for

Top-2-box agreement (%) 35 29 27 24 20 18

15

13

Tech item laptop, Household LCD TV, items camera

Cars

Clothes

Jewelry

Furniture

Accessories Cosmetics/ Alcohol footwear Perfume

Almost 2 in 3 luxury buyers willing to pay a premium for tech items.

21
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Source: TNS VietCycle 2011 Urban only

2011 TNS

Premium brands

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Most desired luxury brands

Top 5 most desired luxury brands

iPhone / Apple

Toyota

Sony

Honda

Gucci

Technology & vehicles rule the luxury roost

24
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2011 TNS

Source: TNS VietCycle 2011 Urban only

I Brands willing to pay a premium for

Which brand would you be most willing to pay a big premium for in this category?

23%

22%

22%

14%
11%

13%
10%

13%
10%

8%
7%

4%
4%

9%
5%

25
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Source: TNS VietCycle 2011 Urban only

2011 TNS

Retail Synopsis
Due to the below factors, retailing is not what it is supposed to be.
NAT is limiting value/volume retail from opening up

Lack of prime space

Low consumer confidence

High Inflation
High rents High product cost restrictive to consumers Wrong mix of retail outlets all premium and not in line with consumer affordability

30
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Retail Solution

Many products under one roof at affordable prices Must offer reasonable prices to entice consumers Must offer right mix of consumer basket needs Must offer grocery / food & beverage outlets Location - Location - Location www.tnsglobal.com www.tnsvietnam.vn 31
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