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Nielsen busts myths about rural consumers

Released at: 16:03, 13/07/2017

Nielsen busts myths about rural consumers

Photo: tiepthithegioi.vn

Rural consumers increasingly tend to use higher quality products, latest Nielsen report finds.

by Hong Nhung

Mainstream and premium are the two key contributors to growth in fast-moving consumer goods (FMCG) in rural areas, at nearly 40 per cent and 38.5 per cent, respectively, the latest Nielsen report on rural Vietnamese consumers found.

Accounting for 68 per cent of Vietnam’s 90 million people, rural consumers are evolving in leaps and bounds, Nielsen wrote. As the country’s growth continues and the outlook for FMCG progresses, there is increasing interest from both local and multinational businesses around Vietnam’s rural consumers.

With its huge population and increasing affluence, rural Vietnam is, in fact, a lucrative market, as these consumers are enjoying income growth.

Yet, this high-potential group remains largely unknown and has been long thought to pose great challenges to businesses. Those barriers are highly related to myths as to whether rural consumers are less connected consumers, whether they are more likely to be keen on affordable products, and whether pushing products to these far-flung places is too expensive.

Myth 1: Are rural consumers less connected than their urban counterparts?

TV reach in rural communities is at saturation point, with more than 90 per cent of people owning a TV at home, with 57 per cent of these connected to more than ten TV channels. According to the Nielsen Rural Mythbuster study, 90 per cent of the rural consumers own a mobile phone; half of which are smartphones.

While internet penetration remains relatively low, internet and digital platform use is on the rise among these consumers. There are nearly 24 million people in rural areas using the internet, which is on par with their counterparts in cities.

Myth 2: Are rural consumers only keen on consuming low-priced products?

Rural has constantly been a new source of growth for many manufacturers over recent years. In fact, in the first quarter of 2017, rural grew at 12.4 per cent, contributing 51 per cent to total FMCG sales nationwide, while urban only rose 6.5 per cent. More importantly, the pick-up in both urban and rural areas is mostly driven by volume increases.

“Opportunities abound for products that are appealing to consumers’ aspirations and uplifting life goals, as consumer off-take for mass and premium products are observed to be significantly higher than in other segments,” said Mr. Nguyen Anh Dung, Director, Head of Retail Measurement Services, at Nielsen Vietnam.

Myth 3: We have less chance to push new products in rural

Correlated with rural consumers’ aspirational outlook and fascination with urban lifestyles, they show a thirst for new products. Seventy-seven per cent want to try new products and 95 per cent appreciate having a wide range of products to choose from.

Subsequently, these insights lead to the point where new launches in rural perform better than those in six key cities within a store, as proven in 25 out of 27 categories. But with a highly-diversified retail sector, ensuring products are reachable and available is instrumental and critical for success.

Myth 4: Reaching these far-flung places is too costly and resource consuming

“Where to focus” is a common question, Mr. Dung said, because the reality for most manufacturers servicing half of the 1.1 million outlets in the country is not realistic. Even large manufacturers with extensive sales teams and great resources only service approximately 30 per cent of outlets directly.

However, according to the Nielsen study, if businesses target 400,000 stores in top districts, those stores are highly likely to contribute up to 39 per cent of retail sales. Given this result, through proper targeting, reaching the majority of sales is feasible and is not as expensive and resource-consuming as many might think.

“As the rural Vietnamese community continues to evolve, transform, and take center stage as a key group for businesses, understanding who they really are, where, how and what they are buying, and what their most effective touch points are will be prerequisites for future success,” Mr. Dung said.

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