Colombia’s luxury market gains pace as second most dynamic in the region (part 1)
The third largest economy in South America, Colombia boasts a steadily growing luxury market, having become the second most dynamic luxury market in the South/Latin American region after Mexico, gaining pace against Brazil and Peru. However, the pace of development has been slower than CPP Luxury Industry Management Consultants Ltd anticipated in a report early 2012, especially due to the over-heating of the economy caused by the real estate sector, the slow implementation of reforms to fight corruption and criminality.
According to a report by Spanish bank BBVA, released first quarter of 2013, Colombia’s economy will increase its growth rate in 2013 and 2014 by 4.1% and 5.0% a year, respectively, after having bottomed out at the end of last year. Private consumption will be the main factor behind the recovery, along with an optimistic outlook on infrastructure projects during both years.
Luxury is one of Colombia’s sectors with a high potential of growth in the mid to long term, especially in the sectors of fashion / accessories, hospitality, home & interior furnishings, watches, travel and beauty (including Spa). Cars and jewelry remain two of the luxury sectors in Colombia, which, due to increased risk of security are expected to maintain a slower growth rate. The number of newly registered luxury car units remains among the lowest in South America.
The new free trade agreement with the E.U. is likely to boost Colombia’s luxury sector, especially its fashion & accessories sector. This year alone, saw the opening of several mono-brand stores in Colombia: Dolce & Gabbana, Burberry, Frey Wille, Steve Madden, Kiehl’s, while the openings of Tiffany & Co, Victoria’s Secret and Michael Kors are expected within the next two months. Most new openings are concentrated in the capital city of Bogota, which encompasses the largest HNWI segment, followed by Medellin, Cartagena and Barranquila.
Burberry, Hublot, Tag Heuer, Michael Kors, Chanel (beauty) and Bulgari opened this year mono-brand spaces at Bogota’s International El Dorado Airport. The biggest challenge hindering the development of luxury retail in Colombia remain the lack of suitable infrastructure and the very high pricing for leases. The luxury sector in second tier cities such as Cartagena, also the country’s premier tourist destination, remains scarce, with few multi-brand sales points. German eyewear brand Mykita is the only international luxury brands with a mono-brand presence in Cartagena.
The second fastest developing luxury sector in Colombia is represented by hospitality and real estate. W Hotels (Bogota), Four Seasons (Cartagena), Ritz Carlton (Cartagena), Conrad (Cartagena), Hyatt Regency (Santa Marta) will join in the next 3 years existing players: JW Marriott (Bogota), Sofitel (Bogota & Cartagena) and Hilton (Bogota). According to CPP’s recent report, there are over 50 luxury residential projects currently under construction with delivery within the next two years, throughout Colombia, with an average of 100 units, most of them located in Cartagena, Bogota, Barranquila and Santa Marta. Bogota and Medellin boast fewer luxury residential projects, than the actual potential, especially due to the lack of experienced developers and coherent concepts with a consistent quality / price ratio.
Oliver Petcu in Bogota