Colombia, the fastest growing luxury market in South America
According to CPP’s latest market research, Colombia is set to overtake Brazil by 2014 in terms of growth rate of its luxury market, the sectors with the highest potential for growth being: hospitality, SPA, fashion & accessories, watches, fine foods / gourmet and home furnishings & decorations.
The least developed sector in Colombia is cars, also the sector with the slowest growth. The economic downturn in Argentina, which culminated with the closure of several stores of major international luxury brands earlier this year, is also likely to divert attention to other markets in South America, especially Colombia and Chile.
The luxury fashion and accessories sector in Colombia is set to grow by 20% in 2012, compared to 2011, with several notable market entries in 2012 (mono-brand stores): Salvatore Ferragamo (directly operated), Coach (directly operated), Longchamp (franchised), Vilebrequin (franchised), Armani Exchange (franchised). Hugo Boss (franchised) and Montblanc (franchised) have doubled their retail presence in Colombia in 2012, compared to 2012. Directly operated mono-brand stores in Bogota also include Louis Vuitton and Loewe.
Development of the luxury fashion and accessories sector in Colombia is highly devependant on availability of commercial real estate. That is why, the development of shopping galleries or smaller scale premium malls with a clear concept could bring high returns on investment for developers. Currently, there are only two commercial projects under development in Bogota, each with less than 1.500 sqm and with developers mix matching mass market with premium or even luxury brands.
The exceptional performance of the Cartier and Bvlgari mono-brand watches & jewellery stores in Bogota (both franchised) are motivating several other international brands to open mono-brand boutiques. Three major international luxury brands are currently exploring market entry, one of them with direct operations.
As for the luxury hospitality sector in Colombia, the capital city of Bogota saw the opening of Hilton and two new luxury boutique hotels this year. Starwood’s W Hotel is slated to open in Bogota late 2014 and several major luxury chains are in discussions with developers. Sofitel is already present in Colombia with two properties – Bogota and Cartagena (soon to be upgraded to Sofitel Legend).
The highest potential for growth is for the capital city of Bogota and the holiday destination of Cartagena. Four Seasons signed earlier this year a management agreement to operate a luxury resort in Cartagena.
CPP estimates that over 4% of Colombia’s population has an annual income of over US$ 250.000, this upper middle class segment representing a solid base of growth of luxury, most of these consumers being more likely to buy locally, should major brands have a proper representation – mono-brand stores, international level of customer service etc. Colombia’s ultra rich, less than 50 are likely to continue making their luxury branded purchases abroad, the preferred destinations being Miami and New York.
CPP Luxury Industry Management Consultants Ltd has been actively covering Colombia since 2010, having already conducted a comprehensive annual luxury market report on 2011, with an in depth analysis of all luxury sectors and the consumer profile, with the aim of evidentiating the real potential of the market and potential for future growth. CPP will be releasing in February next year comprehensive analysis data – Luxury Market Report Colombia 2012.