Brazil’s booming luxury market

CHANEL at Shopping Iguatemi Mall

Sao Paolo, Brazil’s leading business and financial hub, is currently concentrating most of the country’s luxury market. Chanel, Hermes, Burberry, Carolina Herrera, Marc Jacobs, Goyard, Celine and Jimmy Choo are just some of the major international luxury brands which have opened mono-brand stores in Sao Paolo over the past 2 years, most of them operated in franchising.

Brazil currently accounts for just USD 7,59 billion in luxury revenues, or about 1% of the global market. But its rate growth is 22% a year, far outpacing several more established markets and even Brazil’s general retail sales, which rose an estimated 11% in 2010. And the country’s luxury sales are now almost twice the value of 2006.

As a result of the economic stability brought on by eight years of President Luiz Inacio Lula da Silva’s Government, which is expected to continue under the new President Dilma Rousseff, who took over on Saturday. This new ”bourgeoisie” according to a report by Goldman Sachs, can drive luxury goods sales in the next decade. According to the report, luxury sales in Brazil could represent 6% of the global market by 2025, or USD 63,5 billion.

”The Brazilian market is mature. This is now the time for us to consolidate our presence there, directly operating the boutique network, as we do elsewhere” said Bruno Pavlovsky, President of CHANEL’s fashion division. After more than a decade under the operation of Daslu, Brazil’s leading luxury retailer for the past 50 years, Chanel ealier this year closed its franchise shop inside the four story Daslu Villa here. Las July, it took over the management of its store in Shopping Citade Jardim, where it stands on the same floor with HERMES’s first store in Brazil, a concession which was opened late 2009 and near Louis Vuitton, which has been directly operating its stores in Brazil since 1999. This move had an immediate 30% price drop effect on Chanel’s prices, this way cutting out an extra commission. A second CHANEL store in Sao Paolo opened last November within Shopping Iguatemi Mall, across the GUCCI store which opened in 2009.

Far removed from the Oscar Freiere and Haddock Lobo, the two main luxury streets in Jardins, Citade Jardim isn’t as easily accesible as Iguatemi. Its location could be the one reason Citade Jardim attracts only about 15.000 consumers per day, a third of the number who visit Iguatemi. Still, Citade Jardim’s consumers spend big, averaging USD 1.700 on a visit, almost six times the Brazilian minimum wage. ”Iguatemi is the best location in the Latin American market. It is a strong and growing luxury fashion environment, with other brands opening regularly”. Citade Jardim is a new ultraluxury shopping mall with a very strong potential expected for the end of 2011 when the project, which includes residential and office buildings as well as a new road to avoid traffic are scheduled to be completed” said Pavlovsky.

Although Sao Paolo concentrates more than 70% of Brazil’s luxury market, there is potential in other cities too. Iguatemi already has a mall in Brasilia, where Burberry opened its first directly operated store in May 2010, which was followed by a second opening of a Burberry store within the Iguatemi Mall in Sao Paolo in December 2010. A site being eyes by luxury brands in Rio de Janeiro is the Village Mall, which is being planned in the city’s Barra da Tijuca neighbourhood. Nicole Kidman has been hired to promote the new project which is due 2012.

Iguatemi is expanding in Sao Paolo and is soon expected to unveil a second address Shopping JK Iguatemi, which insiders say is expected to see Gucci Group’s first directly operated stores in Brazil. HERMES which is operated in franchising by local luxury real estate company JHSF is reportedly looking for a second location in Sao Paolo and a location for its first store in Rio de Janeiro.

from WWD