Consumers have been tightening their belts in recent years with Vietnam’s economy going through a tough spell. Yet this has also been the age of technological development, with many new products coming on to the market and winning popularity. Without the money to pay in full and unwilling to wait until they do, many consumers have decided to take out instalment payment plans, which allow them to buy now and repay over the course of a set number of months.

A number of financial companies are now working with retailers to provide instalment payment plans in order to stimulate consumption and earn profits. The convenience these plans provide have helped retailers expand their customer base and increase sales, with customers, especially students and low-income earners, becoming more willing to take out such plans.

Explaining why such plans have flourished, Mr Le Duc Thuan, Director of Service Industry at FPT Retail, said that, firstly, it is due to increasing demand of customers and the rapid development of technology. “Customers these days not only care about a product’s value but also its perceived value,” he said. “So rather than waiting until they can afford it, they sign up for instalment plans to have the product they want when they want it.” The second reason is that financial companies and banks offer attractive and affordable lending packages, giving customers more options.

Standing out

There are many retailers of electronic products in Vietnam, such as Pico, MediaMart, Topcare, Big C, Nguyen Kim, Tran Anh, and FPT Retail, and they have all partnered with financial companies or banks. For example, ASC works with FPT Retail and Media Mart, HomeCredit with FPT Retail and Pico, and ANZ with MediaMart, FPT retail and Pico. This creates competitiveness among retailers in attracting customers, so each must have a strategy in offering different promotional policies to win customers over to the instalment payment plan they offer, with the focus primarily being on interest rates.

According to Mr Nguyen Thanh Hai, Marketing Manager at MediaMart, the retailer cooperates with a number of financial companies, of which the largest and most common partners are financial companies such as ASC and HomeCredit and banks such as HSBC, ANZ, Viettinbank, and HDBank. In instalment payment plans, each partner has their own procedures, offer different incentives and interest rates, and have certain conditions in evaluating and approving loans.

At Media Mart, the interest rates set by financial companies are quite competitive, usually from 1.7 to 1.9 per cent per month. In order to differentiate itself from other retailers, Media Mart has also conducted consumption stimulus programmes. At all of its electronic supermarkets around the country, customers need not pay a deposit and can receive a loan at 0 per cent interest for terms from three to six months. “When buying a product under an instalment payment plan, customers receive double preferences: preferential interest rates of 0 per cent and promotional prices and gifts,” said Mr Hai. “These are only available at MediaMart.”

Similarly to MediaMart, at Pico there are two forms of instalment payment plans being applied, one via credit card for customers with a card from ANZ, HSBC, or Viettinbank, and the other directly with financial companies such as HomeCredit and HD Finance. According to Mr Tran Ngoc Viet, Communications Manager at Pico, in order to stand out Pico cooperates with multiple partners to offer different lending arrangements. “Pico is now working with five partners providing instalment payment plans,” he said. “With diverse cooperation, our customers have more choice.” Pico also offer different incentives on different lending arrangements, with 0 per cent interest being applied for all terms of instalment payment plans paid by credit card, with the same rate being applied on unsecured loans for certain terms, or example from one to six months.

Having offered instalment plans since 2009, the Tran Anh electronics supermarket works with two partners to provide the best and most competitive interest rate to customers as well as simple and quick procedures, “which are an essential factor in attracting customers,” a representative from the company said.

Promoting plans

Though instalment plans have become more common, many consumers remain unfamiliar with the model and express doubts and concerns. Procedures can actually be quite complicated, with a range of documents needed, such as ID card, family registers, utility bills, and wages records, etc. Interest rates can also be very high, but the entry of more financial companies is driving down rates and procedures are becoming more straightforward and faster. The market for instalment payment plans is predicted to take off and retailers target developing the service.

Pico arranges 1,500 instalment plans each month, accounting for 5 per cent of its total sales, for products including smartphones, laptops, TVs, refrigerators, washing machines, and air conditioners. This service has helped Pico expand its customer base, with 30 per cent being students. This year, Mr Viet said, Pico aims to increase such sales to 10 per cent of the total.

At MediaMart, such sales are growing at 200 per cent each year. As with Pico, technological products are most commonly sold under the method. Seasonal products, such as TVs around the Tet holiday and refrigerators and air-conditioners during summer, record even stronger growth. Mr Hai from MediaMart said that to attract more customers to the service the company will further develop its online sales channel, with loans also appraised online. It will also coordinate more with partners to stimulate demand for the service. “We will offer long-term incentives for our six main products and more than 20 sideline products, with priority on key technological products,” he said.

According to Mr Thuan from FPT Retail, over the next few years it aims to become the leading retailer of digital products in Vietnam, with sales under instalment payment plans reaching a minimum of 25 per cent. It will continue to focus on collecting feedback from customers and actively cooperate with lenders to improve policies and operational processes. “FPT will strengthen the links between service providers, distributors and FPT Retail, to organise promotional programmes for customers taking out instalment payment plans,” said Mr Thuan.