For years, Brazil’s wealthy have jetted to Miami or London to buy luxury goods. But that could start to change.
That’s because at least 35 luxury shopping malls are set to open in Brazil by 2019, enabling brands to reach a larger swath of the country’s booming millionaires in large cities beyond São Paulo and Rio de Janeiro. Outlet stores are also on the rise, observers said.
In 2015, four malls are scheduled to open in Porto Alegre, Belo Horizonte, Fortaleza and Cuiabá, adding to a string of fledgling malls in Rio, Curitiba, Recife and Brasília, said Claudio Diniz, owner and chief executive officer of luxury consultancy Maison du Luxe. Leading operators Iguatemi and JHSF will run many of the new facilities.
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“In the past, you didn’t have enough luxury shopping malls for brands like Chanel or Hermès, except in São Paulo,” Diniz said. “But now they are opening everywhere. They have realized Brazil is not just São Paulo and Rio. There are lots of millionaires in other cities.”
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According to Diniz, Brazil is generating one millionaire every 24 minutes and one billionaire per week (in local currency terms). There are 165,000 citizens holding more than 1 million reals and 164 with billions in their accounts.
As the new centers spring up, around 70 stores could open this year, Diniz said, adding to recent expansion by Burberry, Prada and Brunello Cucinelli. The frenzy could see the number of luxury fashion and beauty shops quadruple to 600 by 2019, he added.
Brazil’s economy is forecast to gain an anemic 0.5 to 1 percent this year. However, luxury is set to grow 15 percent to around $49 billion, up from a 12 percent jump last year when the World Cup and elections sapped sales.
Diniz said the retail boom and brands’ efforts to cut prices to encourage customers to buy locally will drive this year’s gains.
“The brands started lowering prices last year,” he said, adding that rising demand will offset falling margins. “They are now more competitive when compared to Miami, New York or Paris.”
While buying Chanel used to cost at least 100 percent more in Brazil than in Miami, consumers can now buy some products for 50 to 20 percent less than previously, according to Diniz. Overall, luxury goods are 15 to 20 percent cheaper compared with much higher rates in the past, Diniz emphasized.
The malls are also making it safer and, therefore, more appealing for Brazilians to buy locally, despite much higher price tags, according to Euromonitor luxury analyst Fflur Roberts. However, she noted brands are working hard to launch special in-store events and provide “uber and specialist luxury [customer] services” to well-heeled individuals.
“The big trend is brands are doing more to make customers stay and shop in Brazil,” Roberts noted, adding that the rewards are high. Brazilian tourists spend $215 million a year (in all categories) when they go abroad compared with around $30 million domestically. If they started buying at home, the market could grow 2 to 3 percentage points more a year, she said.
Brazilian luxury has a 28 percent market share in Latin America, a tad behind Mexico, she said. “If we look at beauty and personal care, Brazil is third in the world and eighth in apparel yet in luxury, it is 18th,” Roberts said.
To boost its fortunes, the industry could deepen discounts, she added, noting that while a Rolex watch can fetch, say, $9,300 in Paris, it can go for $10,600 in São Paulo, while a Louis Vuitton standard silk scarf can change hands for $338 in Paris and command $589 in São Paulo.
While local shopping’s allure has increased, Brazilians can still get to Miami — their preferred destination — relatively inexpensively.
“Budget airlines are fairly reasonable and you can get a Visa in a day,” she said. “The majority of wealthy consumers are still willing to fly.”