LUXURY MARKETS: Why They Thrive Like Samba in Brasil

Image via Google Images on search

With the BRICs (Brazil, Russia, India, China and most recently South Africa) calling for a non-European to replace Dominique Strauss-Kahn as the new head of the International Monetary Fund on the heels of his sexual-assault scandal, ending what they BRICs (and alike nations) have dubbed as an “obsolete” rule by The West, it’s no surprise that when it comes to the growth in the luxury market, companies have their eyes on a new, never before imagined, future.

Even at the 2011 G20 Summit, Zhou Xiaochuan, who runs China’s central bank, said that it doesn’t matter whether or not the new head of the IMF is French or European, but that the new leadership of the IMF should reflect the growing stature and needs of emerging economies, implying the new leader should be from one of the latter.

It’s a clear shift in the winds of commerce into a New World, where “what once was” is beginning to take a second step into a new, certainly more exotic, way of life.

No one said it better than, Starwood Hotels and Resorts CEO, Fritz Van Paasschen, at the Global Luxury and Fashion Summit 2011

“Thirty years ago, in the Forbes 400, so many people in that group were heirs and had come from money, I think the term ‘nouveau riche’ had a clear disparaging aspect to it. Whereas today, most money is new.”

This, on the heels on his company planning no less than eight new hotels by 2016 (publicly released as of May 2011,) for their contemporary and trendy, luxury brand of W Hotels, in Africa, China and other East Asian nations. In fact, the W St. Petersburg opened  in Russia a little over one month ago, on April 20, 2011.

But while a lot of brands are still concentrating on Russia, India and China, with the World Cup in 2014, followed closely by the Summer Olympics in 2016, a lot more companies are focusing their attention on BRAZIL.

“The (Brazilian consumer) is a consumer who loves beauty, loves fragrance, loves cosmetics. So we just have to figure out a way to get our brands to them.” ~ Bernd Beetz, CEO Coty Inc., Coty. UL, Global Luxury and Fashion Summit  2011

As Reuters points out, that while luxury sales in the football-obsessed, samba dancing country are smaller than that of other markets such as China and the Middle East, what makes the Brazilian market exceptionally important, is the rate of which it is growing.

It is much faster than analysts expected and thereby, critical to pay attention too, for the future of market growth in the luxury sector.

Iguatemi Empresa de Shopping Centers - Image by Sergio Luiz on FlickR

This is a vast difference from of the previous market analysis that have taken place, as many luxury groups have long refrained from doing business in South America’s only Portuguese-speaking nation, due to Brazil’s high import duties, lack of space and difficulty in luring local business investors to setup partnerships for business.

However, in the course of a few short years, the country’s ‘rise,’ as author Larry Rohter states, has taken an exponentially incredible upward turn.

As Reuters pointed out,  the number of very high net worth individuals in Brazil has risen.

In 2010, there were 30 billionaires in Brazil, which is up 60 percent against the previous 2009. This can be attributed to a new target market of people who have benefited from high commodity prices and a more powerful currency, says Forbes.

The evolving former-current-developing-nation, has the seventh largest economy in the world for their nominal GDP and eight for purchasing power parity.

It is predicted that within the next decade, Brazil will have one of the world’s top five largest economies based on it’s current and increasing growth (currently five percent).

Therefore, true to capitalism and the makings of a solid, booming economy (even though Brazil is moderately made up of free markets and has an inward-oriented economy,) that survives and thrives on a strong middle class, if this is any indication of where the progressive nation is headed, it is also an indication of where the global economy is going.

For example, Gucci, Chanel, Burberry, Christian Louboutin and other high-end names have opened locations in Brazil. They have comfortably found partnerships in new luxury establishments built by local groups such as Iguatemi Empresa de Shopping Centers.

Image via Burberry

Even Apple is looking to make investments in the South.

According to Folha de São Paulo, Apple’s manufacturer, Foxconn, the controversial parts maker, wants to invest approximately $12 billion in Brazil over the next five years.

They are not the only ones.

For as the increasing awareness of this rising Brazilian middle class emerges within the business world, thereby, boosting and creating a larger affluent group (ie. billionaires etc.,) those with the power to make strategic, business development decisions in the global playground are paying attention and looking for new playmates to consort with.

For example, the 155-year old English fashion house, Burberry, will be investing approximately $292-$325 million throughout 2011 and 2012 to open new stores and renovate existing ones. About half of that investment will go to new shops, in Latin America, including Brazil.

Diane von Furstenberg at the 2011 Luxury Summit in Paris - image via Reuters

And why wouldn’t they?

In 2010, international visitors to the United States spent $103.1billion, up 10 percent from 2009. Of this demographic, spending by Chinese and Brazilian tourists rose 39 percent and 30 percent, respectively.

It’s official: luxury is back.

It has evolved and is taking new shape, breeding unique expectations in previously uncharted territories.

Personally, I find this interesting and fascinating as it is incredible to watch a formerly labeled Third World nation thrust their way into what will eventually make them fully part of  The West, or industrialized nations, rather.

Of course, they still have a ways to go by social and socioeconomic standards, but that should not hinder the fact, that they will eventually get there.

Especially, since in terms of economic city booms, there are only two Alpha++ (global) cities on the planet, New York City in the United States and London in the United Kingdom. Quaternary to those, are the Alpha- cities. This puts Brazil’s São Paulo in the same company with Rome, Athens and Amsterdam, ahead of such cities like, Washington D.C., Atlanta, Melbourne, Dubai and Barcelona. (Source)

Seeing a city such as São Paulo have the complexities, diversity and population of an Alpha, makes it (and it’s country) an even stronger candidate for business development across all sectors — not just the luxury market.

The sheer recognition of that fact is critical in understanding the current state of the global economic stage and its future.

As Diane von Furstenberg said at the 2011 Global Luxury and Fashion Summit 2011,

“Brazilians love life … Brazil is really an incredible market.”

**Main Source: Reuters**
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Sasha H. Muradali runs the Little Pink Blog (formerly Little Pink Book PR). She holds a B.S. Public Relations from the University of Florida with a minor in Dance (’07) and an M.A. International Administration with a concentration in Communication from the University of Miami (’08). She loves Twitter (@SashaHalima), Harry Potter and the colour pink. Get a copy of the Little Pink Blog delivered to your Kindle and find us on Facebook.

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