Brazil´s rising luxury retail market attracts European premium brands

10.09.2013 By: Rebecca Hanser, Transfer LBC

Shopping Mall Leblon, Rio de Janeiro (Source: www.forbescustom.com)In the midst of a global crisis and the ongoing recession in Europe, international luxury retail brands are increasingly looking for developing markets to explore new business and expansion opportunities, setting their eyes on one of the most promising and emerging markets of the moment: Brazil. 

Together with Russia, India and China, the South American giant forms part of what is colloquially known as ‘BRIC’, currently the fastest-growing and emerging economies. In the meantime, next year´s World Cup host country has become the world´s 7th largest economy with not only a rising middle class, however also a growing wealthy upper class which ultimately triggers the luxury market growth. According to Forbes´ 2012 World Billionaires´ list Brazil is home to 36 billionaires and 165,000 millionaires out of which one third is younger than 35 years.

With a growing purchasing power and a rising income rate, Brazilians now have more access to luxury goods. “Brazilians like to establish instinctive and affectionate relationships including with luxury brands. [T]hey are at the crossroads of three cultures: European roots, a lifestyle marked by the American Dream, and local cultural values amplified by a comeback of patriotism,” highlights a study by Living Luxury.

This year, several venerable European brands like Prada, Fendi and Luxottica are making their moves on Brazilian soils. According to Luxury Society Market Guide these trends will result in 20% luxury market growth to $3 billion this year. The European luxury goods invasion has been restricted to solely the main cities like Rio de Janeiro, Brasilia and Sao Paulo, but “Brazil is the only country in Latin America that has shown that it will be able to have larger distribution in multiple cities,” says Carlos Ferreirinha, president of retail and luxury consulting company MCF Consultoria & Conhecimento, in an article of Forbes.

Though, brands like Gucci, Louis Vuitton and Marc Jacobs are already successfully operating in Brazil, many others remain reluctant over entering the Brazilian market. The complex taxation system and government bureaucracy are the main inducers for duplication or even triplication of the European and American purchasing prices. Foreign businesses therefore fear these outrageous store prices might discourage Brazilian locals from buying anything.  

On the other side, the interest in international brands among the Brazilian consumers is incessantly growing. Whereas a couple of years ago Brazilians had to travel abroad to purchase luxury goods of their favorite brands, shopping closer to home has now become easier.

Despite the extremely high prices according to Fashionbi Newspaper Brazilians are willing to shop in their own country for two main reasons: 1) the payment plan by installments, and 2) the unique customer services. Brazilian clients value close relationships with their brands and sales persons who become their personal fashion consultants and have a major influence on their purchasing behavior.

The key to success for European brands that want to try their luck in the Brazilian luxury market is undoubtedly to invest in an impeccable customer service and in an unbreakable bond with clients.