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April 13, 2016
As the middle-class in Latin America continues to grow, the sales of luxury goods have in turn grown although relatively modestly in comparison to other continents such as Asia-Pacific region. In April 2014, Euromonitor reported that Latin America saw both a growth in sales and the number of luxury outlets opening across the region. The report stated that over the last two years, this number has risen by almost 25%, which is significantly greater than any other region in the world.
Once at the top of all the nations of Latin America in terms of luxury sales, Brazil’s luxury sales grew by 12% in 2013, a figure which translated into six times greater than the whole economy of the country. However, in recent months Brazil has been passed by some of its smaller neighbours in terms of domestic consumer appetite. Although Brazil’s retail infrastructure is booming with the likes of Burberry, Dolce & Gabbana and Yves Saint Laurent setting up their first shops in Latin America in São Paulo the import tariffs remain a greater problem for foreign brands than its slowly weakening economy. Since the devaluation of the Brazilian Real, prices have been steadying which in turn has stopped consumers flocking abroad when the prices used to double overnight.
Mexico overtook Brazil as Latin America’s largest luxury goods market back in 2012 and today it is the second biggest economy in Latin America and the fifth emerging economy after the BRIC nations. With a GDP of about $1.2 trillion Mexico is estimated to double its current number of high income earners to 952,000 by the year 2030. Mexico’s population is young and there is a booming middle class that in 2013 spent over $4 billion on apparel, accessories and wine proving that the wealth has begun to spread to secondary and tertiary cities. Brands are beginning to take notice of Mexico and expanding their catchment areas by straying beyond the confines of department stores and are instead opening boutique shops offering home delivery services.
It can be said that industry experts never thought that the day would come when Colombia would be considered as a place for luxury investments. However, in recent years the country has rebranded itself and is currently riding the wave to what could be one of the largest economies in Latin America. With improved governance, competitive industries and favourable demographics of Colombia, companies offering lower price points such as Sephora and Estee Lauder have been investing heavily in the country and are reaping the benefits. In nations such as Colombia, accessible luxury goods and the rise of the internet in the area has made items and their favourite brands that were once only available abroad appear in their department stores and at their doorsteps.
Set to re-enter its economic meltdown that occurs every decade, Argentina has sound the alarm as a warning sign to their Latin American neighbours. Over the last 18 months, stores such as Louis Vuitton, Cartier, Armani, Escada and Calvin Klein are now nothing more than boarded up shops due to a number of foreign exchange controls introduced by the government. Many of the stores, rather than being actual sales vectors, were in fact simply marketing vehicles in order to attract consumers into buying their products outside of the country. With millions of Latin American travellers doing exactly that, the figures are startling. Half of the sales made in M.A.C. flagship store in New York’s Times Square were made by Brazilians and in Miami in 2013, over 8 million Latin American tourists purchased luxury items.
As an overall proportion of the luxury market, the sector remains relatively small. With luxury sales in China falling and economic growth in emerging markets slowing due to social unrest and other issues; beyond Brazil, the future of the luxury market in Latin America remains and looks set to be as sparkling and bright as a well-polished diamond.
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