luxury market-brazil 2015 - brazil -marcado de luxo
TRANSCRIPT
Highlights & Data
Shopping abroad for designer goods is a privilege reserved for themiddle classAs millions have recently risen from shoe shine boy to billionaire,nouveau riche tastes favour extravaganceHigh import markups are managed strategically by companiesoffering instalment payment plans and special customer serviceBrazil’s size and spread of cities promises a decentralisation ofluxury consumption and broader evolution across the country’smarketA lurch in growth has resulted in more rational consumption ofluxury lifestyleThe youth and tastes of the current population makes Brazil anattractive market to international brands
The number of luxury brands has doubled over the last five yearsPrices for imports are usually between 30% and 100% higher thanthose in the US or EuropeThe ranks of the super rich have grown to 172,000, with a rise of7,000 in the last yearAnalysts expect the number of millionaires to continue to grow to332,000 by 2019Luxury estate could generate R$4.6 billion in the next four years,with 54% of millionaires intending to buy residential propertyForeign investment in Brazil reached $66.5 billion in 2014By 2018 the luxury market should grow another 30%, withadditional value sales of $1.4 billion
Is the outlook bright for Brazil’s luxury market?Gustavo Gomes, Creative Commons (2010) ©
REPORT 27 Mar 15
IS THIS THE END OF BRAZIL’SLUXURY BONANZA?
New shopping malls and a young population withsophisticated shopping tastes are helping make Brazil one ofthe world's most profitable luxury markets. But the recenteconomic downturn means optimism is ebbing. Does agloomy economic outlook spell the end of Brazil’s luxurybonanza?
Location Brazil
ScopeThe luxury market in Brazil has been through a transformation spurred by the boom in the economy. The number of foreign luxury brands hasdoubled over the past five years, and by 2018 the country is expected to be amongst the top 15 luxury goods markets in the world. [1] Theproliferation of luxury coincides with the swelling ranks of the super rich. The figure has risen by more than 7,000 in a year, and in 2014, the countryreached a record of 65 billionaires. [2][3]
Brazilians can now find designer brands wherever they go. Stroll down the ‘eighth most elegant street in the world’ – Rua Oscar Freire in SãoPaulo – and you’ll find the likes of Montblanc, Dior, Louis Vuitton, Emporio Armani, Versace, and Tiffany. [4][5] This has changed the way peopleshop. Djalma Rezende, a lawyer from Goiás, used to go to Miami to buy his clothes, jewellery and wine. But in the past two years, he’s been able topick up his favourite brands closer to home. “I like to have the very best,” he says. “I can now find almost everything here, even a box of ChâteauPétrus.” [6]
But the luxury market faces a tough reality in Brazil. Optimism has been ebbing in light of the recent economic downturn and rising politicaluncertainty. Brazil’s GDP growth for 2015 should contract to 0.3% and inflation is expected to reach 7.93% by the end of the year. [7][8] Does thisgloomy outlook spell the end of Brazil’s luxury bonanza?
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A new market for new moneyThe luxury market in Brazil has only been around for 20 years. Before that, the country had a closed economy and most Brazilians didn’t haveaccess to these kind of products, says Marcus Matta, president of Prime Fraction Club, which manages the shared use of luxury assets such as
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helicopters, jets, yachts and cars. [13] “For years, people had access to luxury brands through friends who would bring them in their suitcases fromtravels abroad,” adds Luz Vaalor, president of luxury business consultancy, the Valor Luxury Lab. [14]
The economic turmoil has not affected the entire luxury market, though. In 2014, while Brazil’s automotive industry as a whole saw a drop in sales,those who focused on high-end vehicles – like Audi, Toyota, Lexus and Mercedes Benz – managed to conquer new markets. Audi reported anincrease of 118% in sales in the first half of 2014. [9]
For years, people had access to luxury brands through friends who would bring them in their suitcases from travelsabroad
Luz Vaalor, president of Valor Luxury Lab
Sales of luxury cars is less dependent on macroeconomic conditions, explains Letícia Costa, a car industry expert. “Those who buy these cars tendto be a lot less price sensitive, and less susceptible to credit conditions, so they keep replacing these cars,” she says. “And there’s a sizableproportion of the population with a significant income or wealth.” [10]
The luxury real estate market is also blissfully unaware of most signs of recession – expensive areas in São Paulo saw a surge of 10% in propertiesprices last year. [11] The market for the rich is always surprising, says Amir Makansi, partner and chief executive officer at estate agency AngloAmericana. “Wealthy individuals don’t follow the same logic as the general market,” he says. “These people can pay for properties that meet theirspecific needs, like being close to work.” Luxury real estate in Brazil has the potential to generate R$4.6 billion (that’s £950 million) in the next fouryears, with 54% of the millionaires intending to buy a new residential property during this period. [12] So for the car and home markets, business isstill booming.
Wealth comes from two camps; old money and the nouveau richeGustavo Gomes, Creative Commons (2010) ©
Fascinated by all things foreignBrazilian luxury consumers have come a long way since the ‘90s. Today, they’re familiar with international brands and are influenced by Europeanand American lifestyles. Since going abroad or buying imported products is not something for the masses, it gives those who can afford it somestatus. Brazilians have a fascination with foreign things. “The middle class and wealthy women in Brazil are completely fashion orientated, andfollow international trends closely through magazines like American and European Vogue,” says Vaalor. [14]
“Distances feel shorter now,” says Matta, in reference to travel facilities and internet access. “So behavioural trends are simultaneous acrosscountries.” [13] According to Vaalor, upscale Brazilian consumers are sophisticated, demanding and open to new experiences. They also care
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about the quality, exclusivity and distinction that these labels can give them. The major luxury market players in Brazil include many of the obviousbrands – from Montblanc to Mercedes Benz, BMW to Burberry. [14]
French philosopher Gilles Lipovetsky still points to differences in the way people consume luxury across developing economies and more maturemarkets. In places like Brazil, these kind of products have been traditionally used for ostentation, while in Europe they have a more emotionalappeal. “In the emerging economies, it’s a way of gaining social status,” he says. [15] Louis Vuitton bags, Rolex watches and Audi cars are someof the icons. They’re among the most desired and sported items by Brazilians.
Payment plans make luxury purchases affordable to more peopleGustavo Gomes, Creative Commons (2010) ©
Old money meets the nouveau richeMillions of people rising from poverty in the last decade has altered the landscape of inequality in Brazil. At the same time, the ‘nouveau riche’ havemade a place for themselves besides the aristocratic families. One example is José Janguiê Bezerra Diniz, who began as a shoeshine boy at eightyears old, and has since become the billionaire founder and principal shareholder of education company Ser Educacional. [16]
When it comes to consumption habits, some see differences between new and old money. New riches, in general, tend to be distinguished by theirextravagant taste and for a tendency to emphasise their privileged status, says Vaalor. [14] The more traditional ones don’t like to show much – it’sless about displaying brands and more to do with exclusivity and limited editions. Some are more discreet for simple security reasons. In fact, forNielsen Cohn of the Nielsen jewellery store in São Paulo, consumption of high luxury products is capped in Brazil due to the high crime rates. [17]
Brazilians have seen significant improvements in recent years, but security remains a serious issue across the country. Business jets andhelicopters are used not only to avoid traffic, says Matta, they also work as a means of getting around safely. High criminality has lead to theintegration of the shopping mall into Brazilian culture. The air conditioned malls moreover, provide escapes from the hot and damp weatherconditions and offer a great choice of brands under one roof.
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Brazil’s nouveau riche have a taste for extravaganceGustavo Gomes, Creative Commons (2010) ©
All abroadThese facilities are not enough to curb Brazilians’ overseas shopping habits. According to Maxime Tarneaud, country manager for Cartier in Brazil,prices for imports are usually between 30% to 100% higher than those in the US or Europe. “Our strategy is to adopt an aggressive pricingapproach, and aim for just a 20% markup on the US or Europe,” he says, adding that despite high prices, the upper classes are predominantlyeager to spend. [18]
Companies channel domestic consumption by recruiting local ambassadors or promoting exclusive events. Offering customers the option of payingin instalments – a common practice amongst Brazilians – is seen as a bonus even by the wealthiest individuals, says Fernando Marchesini,coordinator of MBA in trade and sales management. [19]
Customer service can also be a key differentiator. “Brazilians like to be recognised and treated as if they’re special,” says Vaalor. “They tend todevelop a long-term relationship with their favourite salesperson from their preferred brand, which means customer service is a determining factorfor loyalty.” [14] Louis Vuitton often takes its most loyal Brazilian customers to Paris Fashion Week, while Audi takes potential customers in Brazil tothe Le Mans endurance race in France. [20]
Brazilians like to be recognised and treated like they're special. They tend to develop a long-term relationship withtheir favourite salesperson from their preferred brand, which means that customer service is a determining factor forloyalty
Luz Vaalor, president of Valor Luxury Lab
Most luxury brands are looking at Brazil in the long-term, says Carlos Ferreirinha, former president of Louis Vuitton in Brazil, and owner of luxurybrand consultancy MFC Consultoria. [21] “The market here will be successful in the next 20 years because half the population will still be under 35,” he says. While in China and Japan, consumption is concentrated in large centres, in Brazil it’s scattered across a vast number of cities, whichshows strong potential that will sustain today’s investments.
Some believe that the most exciting growth prospects lie in cities like Brasília, Curitiba, Recife, Ribeirão Preto and Belo Horizonte. The federaldistrict of Brazil leads the ranking of GDP per capita; R$63,020, which is almost three times the national average and almost double São Paulo’s. [22] “The economic stability that Brazil has enjoyed in recent years – which has increased purchasing power of the population – is the main reasonfor the decentralisation of luxury consumption,” explains Ricardo Teixeira, a professor of business strategy. [23]
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The big name luxury brands like Dior and Louis Vuitton are the most pop in BrazilGustavo Gomes, Creative Commons (2010) ©
Insights and opportunitiesUp until now, the luxury market has passed relatively unscathed by the hardships of Brazil’s slower economy sectors, but some believe that it willsuffer a more significant impact in time. Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation, expects the sector inBrazil to grow between 3.8% and 4% this year, below the world average of 5%. [24]
Luxury market specialist Renata Galhanone says that as the sector deals with high earners – who are not usually the first to be hit by economiccrises – it’s not affected as quickly by difficult times. [25] For Matta, Brazil’s economic slowdown, rapid inflation and the soaring dollar have beenaffecting the luxury market, but in a less aggressive way than in other departments. The downturn has had an influence on how companies andconsumers behave, he says. “In our case, we have seen a greater demand for the sharing of aircrafts, boats and cars, thus ensuring a moreintelligent and rational use of these assets.” [13]
We’ve seen a greater demand for the sharing of aircrafts, boats and cars, thus ensuring a more intelligent andrational use of these assets
Marcus Matta, president of Prime Fraction Club
Despite Brazil’s difficulties, foreign direct investment – FDI – in the country reached $66.5 billion in 2014. [26] “Sluggish growth is just part of thestory, and is not by any means the only criteria on which investors focus their investment decisions,” says Irene Mia, regional director for LatinAmerica and the Caribbean for the Economist Intelligence Unit. “Brazil’s attractiveness for FDI remains huge.” Moreover, analysts expect thenumber of millionaires to continue to grow to 332,000 by 2019. [27]
There’s still a large, untapped luxury goods market in Brazil, says Flur Roberts, head of research for the luxury industry at Euromonitor. [28] “Thebig brands are yet to extend their presence beyond the three major cities; Rio de Janeiro, Brasília and São Paulo,” he says. “Other cities remainlargely unexplored.” By 2018, the luxury market in Brazil should grow by 30%, with additional sales of $1.4 billion.
New shopping malls, a dynamic, consumer-based economy and – most importantly – a young population eager for novelties and with sophisticatedshopping tastes. All these factors make the Brazilian luxury market one that cannot be ignored.
Cecília Bergamaschi is a Brazilian journalist who has been living and working in London since 2003. She’s covered various sectors; most recentlyfinance and technology. Cecília holds an MA from City University London.
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Related behavioursNew World Order:When America is no longer in charge.Death of the Middle: Polarising opinions, behaviours and choice.
Sources1. ‘Capturing the hearts of Brazil’s luxury consumers’ , McKinsey & Company (October 2014)2. ‘Brasil ganha quase 7 mil super-ricos em 2013, diz relatório’ , G1 (July 2014)3. ‘Brasil tem recorde de 65 bilionários; confira quem são’ , Terra (March 2014)4. ‘A vitrine de São Paulo’ , Associação dos Lojistas dos Jardins (March 2015)5. ‘Recife no mapa do luxo’ , Jornal do Commercio (August 2014)6. ‘A indústria do luxo agora invade o interior do Brasil’ , Exame (September 2013)7. ‘IMF cuts Brazil's GDP growth forecast down to 0.3%’ , Agência Brasil (October 2014)8. ‘Mercado eleva para 7,93% previsão de inflação’ , Jornal do Brasil (March 2015)9. ‘Carros de luxo ficam na contramão da queda das vendas’ , Brasil Econômico (July 2014)10. ‘Brazil’s luxury car sales stay steady as overall auto market stalls’ , CCTV America (February 2015)11. ‘Sao Paulo’s luxury neighborhoods ignore Brazil recession’ , Bloomberg (September 2014)12. ‘Cresce o mercado imobiliário de luxo no Brasil’ , Terra Magazine (April 2014)13. Interview with Marcus Matta conducted by author14. Interview with Luz Vaalor conducted by author15. ‘O luxo não conhece a crise e cresce no Brasil’ , Folha de São Paulo (September 2012)16. ‘Ex-engraxate é o novo brasileiro na lista de bilionários da Forbes’ , UOL (June 2014)17. ‘Milionários buscam exclusividade’ , O Estado de São Paulo (December 2012)18. ‘Red tape and high costs make Brazil’s luxury market a tough sell’ , FT (May 2014)19. ‘Clientela do mercado de luxo cresce e movimenta cerca de R$ 24 bilhões no Brasil’ , Hoje em Dia (March 2014)20. ‘A indústria do luxo investe em experiências exclusivas’ , Exame (October 2013)21. ‘Nenhuma marca de luxo ganha dinheiro no Brasil’ , Época Negócios (August 2014)22. ’DF tem maior PIB per capita do Brasil’ , Agência Brasília (November 2013)23. ‘Grifes de luxo "descobrem" o Brasil e abrem lojas fora do eixo Rio-SP’ , UOL Mulher (December 2013)24. ‘No mercado de luxo, sapato vende mais’ , O Negócio do Varejo (December 2014)25. ‘Crise começa a atingir mercado de luxo’ , Jornal do Brasil (March 2015)26. ‘Brazil's downturn fails to put off foreign investors’ , BBC (November 2014)27. ‘Número de milionários triplicou em 14 anos, diz estudo’ , Notícias Terra (October 2014)28. ‘Expansão da camada de maior renda aquece mercado de luxo’ , Brasil Econômico (January 2014)
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