HO CHI MINH CITY -- One of Asia's biggest health and beauty retailers has entered Vietnam's fast-growing but crowded cosmetics market, where a young and growing middle class is fueling demand for imported products.
Hong Kong-based Watsons opened its first outlet in Vietnam on Thursday and announced plans for 50 more shops in the next few years, which would put it slightly behind two of the country's biggest players: Guardian, founded in Singapore, and local player Medicare.
Vietnam fully opened its retail markets to foreign companies in 2009, three years after joining the WTO. The Southeast Asian country's growing ranks of millennials and rising incomes have apparently convinced Watsons that the time is ripe for a foray.
The new store, located on the first floor of the 68-story Bitexco Financial Tower in central Ho Chi Minh City, offers some 6,000 products. It also includes a makeup counter where shoppers can try out the products and get makeup advice.
"We are very excited about opening our first Watsons store in Vietnam. Watsons is looking forward to building long-term relationships with Vietnamese customers and helping them to look good and feel great," said Rod Routley, regional managing director for Asia at A.S. Watson Group.
Watson operates 7,200 stores across Asia and Europe. With its entry into Vietnam, the company operates in 13 markets.
Routley said Watsons expects to open at least 50 outlets in the country within five years and will offer both offline and online services to reach young, tech-savvy Vietnamese customers.
The company can expect fierce competition. Vietnam's beauty products market has grown at a compound annual rate of 30% over the past few years, with foreign brands making up more than 90% of sales, according to the Vietnam Essential Oils, Aromatherapy and Cosmetics Association. Vietnamese spent $6 billion on imported cosmetics and beauty products in 2018, a threefold increase over 2016.
Rising incomes, fueled by the country's robust economic growth, are driving the expansion. Vietnam's middle class is forecast to reach 33 million people by 2020. About 30% of the population consists of millennials, who tend to be more health- and beauty-conscious than earlier generations, and willing to pay a premium for quality.
Watsons faces big, established rivals in the market, including Vietnam's first homegrown health and beauty chain, Medicare, founded in 2001, and Guardian, owned by Dairy Farm International, which entered the market in 2011. Medicare operates more than 80 shops across the country, while Guardian has some 70 stores in four cities. The Faceshop chain, which specializes in South Korean products, also has an online shop and more than 60 stores across Vietnam.
In big cities, many smaller cosmetics chains or individual stores sell imported products from South Korea, Japan, France and the U.S. There is also a bustling online trade in health and beauty products on e-commerce platforms, such as Lazada, Sendo and Tiki, as well as Facebook, the biggest social network in Vietnam.
Watsons is operated by A.S. Watson Group, part of multinational conglomerate CK Hutchison Holdings, which runs businesses ranging from infrastructure and energy to retail and is active in more than 50 countries.