The Vietnamese Market for Russian Exports

The Vietnamese market for most Russian companies can be categorized as "exotic."

However, it is promising for many product categories and simultaneously undervalued by domestic businesses. Of course, Vietnam is more attractive for companies located in Siberia and the Far East, which is related to logistics costs, but for entrepreneurs from a number of industries in the European part of the country, this market can also be very interesting.

Analysis of the Potential of Vietnamese Markets for Russian Goods

Vietnam is a fairly large country in the Southeast Asian part of the globe. Its population exceeds 100 million people, which gives Vietnam 16th place in the world. The income level of the country's residents, however, is not high - GDP per capita is 10.5 thousand US dollars - this places it in the second hundred countries. So, from the point of view of consumer goods, the Vietnamese market is large, but the purchasing power of demand is low. This predetermines the basic requirements for imported mass-market products entering the market.

In terms of nominal GDP, Vietnam is in the fourth dozen of countries, which characterizes the country's economic sector as quite developed. The main specialized industries of the Vietnamese economy are agriculture and agricultural processing, production of electrical goods and equipment (production facilities of major Japanese and Korean companies have been relocated to Vietnam), light industry, and oil extraction.

During the Soviet era, close economic ties were established with Vietnam, and joint enterprises were created. Starting from the 1990s, Russia's significance as a trade partner of Vietnam decreased. Currently, the potential for cooperation between the countries is clearly not realized, which opens a "window of opportunity" for new importers and exporters.

According to the results of 2021, Vietnam's total imports amounted to 331 billion US dollars. The main supplier of goods to the Vietnamese market is China, whose exports were at the level of 110 billion US dollars or one third of the total import volume into Vietnam. Also among the leading exporters to Vietnam are South Korea, Japan, Taiwan, and the USA. Russia is in 19th place on this list with an export volume of 2.3 billion US dollars or 0.7%.

Key import items for Vietnam are electrical machinery and equipment (118 billion USD), mechanical devices and machinery (24 billion USD), plastics and articles thereof (20 billion USD), oil and its refined products (16 billion USD), and ferrous metals (15 billion USD).

Looking at the commodity structure of exports from Russia, ferrous metals dominate (624 million USD), followed by oil and its refined products (590 million USD), meat and meat products (232 million USD), fertilizers (141 million USD), fish and crustaceans (87 million USD), plastics and articles thereof (75 million USD), wood and wood articles (57 million USD), aluminum and articles thereof (56 million USD), and cereals (54 million USD). In general, the structure of Russian exports to Vietnam is comparable to the overall structure (with all countries worldwide) and touches upon key Russian specialized industries. At the same time, the significance of oil and oil products is relatively small, as Vietnam itself is a major exporter of crude oil (while purchasing petroleum products from abroad).

Among the leading buyer countries of Vietnamese products (total Vietnamese exports equal 336 billion USD) are the USA (96 billion USD of goods), China (56 billion USD), South Korea (22 billion USD), Japan (20 billion USD), and Hong Kong (12 billion USD). Russia imports goods from Vietnam worth 3.2 billion USD (thus having a slight negative trade balance), which corresponds to 23rd place in the list of importers.

What does Vietnam sell abroad? The list of basic export items is determined by the country's specialized industries. First, these are electrical machinery and equipment (131 billion USD), because, as noted above, Vietnam is one of the largest assembly hubs in Southeast Asia. The second position - mechanical devices and machinery - is significantly lower, amounting to "only" 24 billion USD in value. The third and fourth places are occupied by light industry products - footwear (18 billion USD) and clothing (16 billion USD). Fifth place belongs to furniture (14 billion USD).

Which Vietnamese products go to the Russian market? The leaders are mostly the same items: electrical machinery and equipment (a clear first place - 1.7 billion USD, i.e., more than half of all Russian imports); clothing; coffee, tea, and spices; mechanical devices and machinery; fish and crustaceans; footwear; fruits and nuts.

From the provided data, it is clear that Vietnam is highly attractive both for developing the export activities of Russian companies and as a supplier of goods to the domestic market of our country. At the same time, working in the Vietnamese market requires preparation and specific competencies. Without detailed and up-to-date market information, the risk of making incorrect management decisions will be very high.

Marketing Research of Vietnamese Commodity Markets: The Key to a Successful Export Project

Entering the commodity markets of Vietnam is associated with overcoming a number of barriers, which requires certain costs, sometimes significant. In this case, it is rational to first map out the entire export supply scheme before taking any specific actions.

For the competent development of an export project for expansion into Vietnam, a company will need to collect a large volume of market information; therefore, the first recommended step is to conduct a desk marketing research.

Analyzing Vietnamese commodity markets in general is quite feasible for a competent marketer who has at least some experience in studying foreign markets and systematizing collected data for use in the company's practical activities. However, several points should be kept in mind to save time and improve the quality of the research.

First, when collecting information from open sources via internet browsing and using search engines, it is necessary to form search queries in the Vietnamese language, as the main volume of information is posted in it. Some information can be found in English, but the quality of the data will be significantly inferior, including in terms of relevance. The main success factor is correct search queries, so that the translation maximally corresponds to the formulations used by Vietnamese speakers.

Second, to form a general idea of the consumer goods markets in Vietnam, it is advisable to use the marketplaces that are widely spread in the country, including the three most popular ones (these are macro-regional and global marketplaces): shopee.vn, lazada.vn, and amazon.com. Although Vietnam significantly lags behind many countries in the same region - China, Japan, South Korea - in terms of the share of online purchases, the market for marketplace services is constantly growing, and prices on them are getting closer to average prices, taking into account offline trade formats. However, if the goal is to justify an export project and collect the most accurate price information to form a correct selling price, then one should consider conducting a census of the territory.

In any case, one can start with marketplaces, where, among other things, one can familiarize themselves with the visual presentation of the product, which is not always similar to the packaging accepted in Russia and European countries. Also, marketplaces are often used as an entry point to the market by importers from various countries, so one can always quickly get an orientation on the competition in terms of imported products.

When it comes to electronic platforms for industrial goods, they are less common in Vietnam, although major global players are present there, for example, alibaba.com. There are also industry-specific marketplaces, especially related to Vietnam's specialized industries, for example, for the sale of seafood, equipment, etc. But still, to form a more or less complete picture of the assortment policy and prices for industrial goods, marketplaces, as information sources, are not suitable. Here, one needs to work more through communication with players in the markets of interest, use industry data where possible, and apply methods of field marketing research.

Also, for certain purposes within the framework of desk marketing research, one can recommend using data from the General Statistics Office of Vietnam (https://www.gso.gov.vn/). As a country with a prolonged socialist past (and perhaps partially present) and significant state influence in the economy, Vietnam has a fairly developed statistical accounting system, including for prices. The website is accessible to users in Vietnamese and English.

Thus, in a very general approximation, an experienced international analyst will be able to form a database on the Vietnamese commodity market to, at a minimum, provide a basis for calculating the financial model of an export shipment. However, this will require a certain amount of time to immerse oneself in the specifics of the country's market. For certain commodity markets, especially B2B, conducting such work remotely will be difficult or impossible. In this case, the Russian company should consider the possibility of outsourcing to a marketing agency specializing in such research. For small and medium-sized businesses, an additional opportunity may be the services of regional export support centers, which co-finance marketing research of foreign markets, including for a country like Vietnam.

Selecting a Vietnamese Partner and Organizing Negotiations with Them

Vietnamese culture is one of the oldest in the Southeast Asian region. It leaves a significant imprint on the negotiation process with potential partners. In building communication with Vietnamese counterparts, much overlaps with communications with Chinese partners, although there are certain differences. The underlying leitmotif in both cases is the close interweaving of business and personal matters, a holistic perception of the partner as an individual, and the desire to save one's own "face" and the "face" of the other side of the negotiation process, regardless of the course and results of the communication.

All this must necessarily be taken into account when interacting. It is also desirable to observe the main rituals inherent in reactive Southeast Asian cultures: a leisurely pace of communication, avoiding attacks and provocations, a minimal number of direct questions that oblige negative answers, the multi-stage nature of negotiations, a large personal share in business communication, gift-giving, shared meals, and so on.

Naturally, all or almost all of these rituals can only be implemented in personal offline communication. And although it is quite possible to meet and establish contact remotely with Vietnamese of younger generations, reaching agreements and starting trade are usually achieved only through personal meetings. Of course, the translator will be of great importance at these meetings, as the Vietnamese language is not widespread in Russia. It is desirable that the translator represents the side of the seller of goods or services. The commercial proposal is better prepared in advance and also in Vietnamese, as a small proportion of Vietnamese (estimated at 15-20%) speak English at least at a minimal level for business communication. Although the proportion of English-speaking residents in Vietnam in the business environment is much higher, especially among the younger strata of society.

The main issue, nevertheless, is related not to the technical side of negotiations, which is solvable with a certain amount of expense, but with the selection of target partners, especially if this process occurs remotely and the Russian company is not ready to spend funds on engaging a marketing agency for this task.

In such a case, several tools can be recommended for parallel use. The first, which is more suitable for large businesses, is making inquiries to special organizations that can assist in finding a local buyer – the Russian Trade Mission or the Russian Export Center. They provide services free of charge. Then, you can independently study the market and try to build communication with managers or owners of Vietnamese companies. Their contacts can be searched for in different ways, but the most preferable will be those posted in open or conditionally open sources, for example, on marketplaces (where you can find a distributor based on the company's assortment policy; also, there are trading firms in Vietnam that specialize in importing Russian food products) or in social networks, preferably business-oriented ones like LinkedIn. Vietnamese people start communication quite well, are friendly, but the process of transitioning to business matters will be long one way or another and will often require a visit to the country.

If the decision to visit is made, one should consider the possibility of participating in relevant international exhibitions on the territory of Vietnam or in business missions. This will allow for attracting additional warm contacts and expanding the circle of business acquaintances.

Classical tools can also be used – emails and mailings to contacts from the websites of potential partners – but their effectiveness will be much lower. Whenever possible, priority should be given to oral rather than written communication. In any case, with a certain persistence, it is possible to form a list of warm contacts with whom substantive negotiations can be conducted offline.

In the current situation, the number of geographical markets for Russian exporters is shrinking. Vietnam is a country with good potential for many domestic products and is quite loyal to Russian business. It should definitely be considered as a new growth point for your business.