By  on June 18, 2008

SAO PAULO, Brazil — The most blatant sign of Brazil's booming luxury market is The Shopping Cidade Jardim, or SCJ, the largest multibrand luxury center in South America, which opened May 30.

The SCJ is a $150 million, 387,500-square-foot emporium around which an $830 million luxury complex, the Parque Cidade Jardim, is being built. The complex will include nine residential buildings (2.29 million square feet) and four commercial towers (2.03 million square feet) when completed in 2010 in São Paulo, South America's largest city.

Modeled after Miami's upscale Bal Harbour Shops mall, SCJ's 180 shops encircle a long, open, central garden. Its orchid-festooned, native trees soar 60 feet to its third floor, atop which sits a 21,000-square-foot garden, with breathtaking cityscapes. The mall opened with 120 shops occupying 322,000 square feet. They represent a mix of high-end local and foreign labels. Another 60 stores start operating in 2009.

"Sex and the City" actress Sarah Jessica Parker stars in SCJ's splashy ad campaign, sporting some of the luxury center's foreign labels. Those brands include Chanel, Giorgio Armani, Ferragamo, Louis Vuitton, Zegna, Lacoste, Zara, Fogal, Hermès, La Perla, Furla, Longchamp and French luxe children's brand Bonpoint, the last five being newcomers to the Brazilian market. Tiffany, Rolex and Montblanc also have units there, and Hugo Boss plans to open a store there next year. Among the top Brazilian brands are Carlos Miele, Iòdice, Reinaldo Lourenço and Osklen.

SCJ's closest competitor — the ultrachic Daslu fashion emporium, situated in a 200,000-square-foot, Florentine-style villa in São Paulo — runs the Chanel store at SCJ and has an anchor there as well. The Daslu shop features its own label and foreign brands like Jimmy Choo, Sergio Rossi, Valentino, Pucci, Balenciaga and Blumarine, with accessories accounting for 50 percent of its foreign-brand stock.

SCJ's other big multibrand store is Fashion Factory, with foreign casual brands like True Religion, Rock & Republic, See by Chloé, Z Brand, Custo Barcelona and Theory. Footwear retailer Centauro offers Nike, Puma, Adidas, Reebok and Asics.

SCJ also features bookstores, seven Cinemark movie theaters, a Reebok Sports Club athletic center-gym, the most complete spa in Latin America and a mix of midmarket to upscale restaurants. There is no food court, however."SCJ is São Paulo's first open mall, not a huge, boxed-in space, but one whose naturally lit gardens, framed by two long corridors, give you the impression that you're walking down a tree-lined city street. Such a mall provides both security and comfort from the heat," said José Auriémo Neto, chief executive of JHSF, the real estate developer behind SCJ and Parque Cidade Jardim. "SCJ is also located in Cidade Jardim, the highest-income neighborhood in the city. These factors are behind what we believe will be a winning formula."

Auriémo Neto estimated that the average SCJ store will annually sell $3,300 a square foot. As such, by the end of 2009, when 120 of its 180 stores will have been open for over a year, they will ring up annual sales of $1 billion. By the end of 2010, when all 180 stores are running, annual sales could tally $1.3 billion. Retailers, who pay key money between $550 and $840 a square foot to open a SCJ store, pay rent equal to between 5 and 7 percent of their sales. The mall will create 1,600 direct jobs, he added.

SCJ developers, retailers and luxury market analysts believe that Brazil's strong economic growth, 5.7 percent in 2007 and an estimated 4.8 percent in 2008, also ensures the mall's success. That growth boosted the average income of the SCJ's main shoppers — the upper class, earning more than $150,000 a year, and upper-middle-class families earning over $25,000 a year — 7.3 percent in 2007 from 2006, according to government statistics. By contrast, the average income of all families in Brazil, including the middle class, grew 5 percent last year.

Increased incomes are why Brazil's annual sales of $900 million in luxury fashion — part of the country's $3.9 billion-a-year overall luxury market — grew 17 percent in 2007, are expected to grow by 22 percent in 2008 and should continue to thrive in the foreseeable future, said Carlos Ferreirinha, president of MCF, a São Paulo consulting firm that specializes in luxury goods.

"Since São Paulo accounts for 70 to 75 percent of all of Brazil's fashion market, and since SCJ is 100 percent dedicated to luxury business, it will, as the economy continues to boom, mainly attract an expanding upper and upper-middle-class local clientele, as well as well-off out-of-towners," said Ferreirinha. "SCJ has virtually everything working in its favor."The Brazilian market, including its luxury business, also got a boost by Standard & Poor's and Fitch upgrading Brazil to an "investment grade" rating on April 30 and May 29, respectively.

"These rating agency [indicators] of foreign investors' increased confidence in Brazil's economic stability should greatly increase the foreign investment flow here, which will grow the economy, and generate consumption — including luxury consumption," said Silvio Passarelli, director of the M.B.A. program for fashion management at FAAP, a São Paulo university. "So, the SCJ is opening at a very good time. Also, the 250 upper-income families that will inhabit the nine residential complexes surrounding the SCJ will be a captive buying audience, as will executives in the four surrounding commercial towers."

The SCJ also hopes to attract middle-class buyers with higher aspirations and with pockets that are deeper, as the rising economic tide and easier credit has also boosted their buying power. The dollar's 55 percent drop against the Brazilian real since 2003 has also made dollar-based fashion imports cheaper. So even though SCJ's main clients will be upscale ones, those who can't afford Chanel or Armani may occasionally splurge on a top at Zara or premium jeans at Fashion Factory, retailers said.

"Brazil is an aspirational market and as soon as you put more money in the pockets of the middle class, they buy upwards. And since Brazil has no department stores, most Brazilians buy at malls," said Marcelo Noschese, the South America development manager for Ferragamo. "True, the middle class typically buys at more downscale malls. But, in this mall culture, they will venture into the SCJ and might find a Ferragamo bag they can afford. Even though they won't be our main customers, they'll add to our client base."

Cristiano Ferrario, retail manager for Vuitton in Brazil, agrees.

"We have a store at Daslu that does well. But Daslu is for more elite clients, whereas the SCJ's less expensive shops and restaurants, as well as its cinemas, will attract more down-market clients in a country where the middle class is also growing," said Ferrario. "Still, the increased buying power of high-end consumers is the main reason we expect our SCJ store to, by 2010, be the biggest grossing of our five stores in Brazil."Daslu decided to open an anchor store at SCJ, its main competitor, for two reasons, said Daslu representative Patricia Ramalho. "We decided on the expansion into SCJ, in part, because the upper-middle class is getting bigger," said Ramalho. "Also, unlike the Daslu emporium, where women go strictly to shop, SCJ belongs to Brazil's mall culture, where entertainment attracts men and families, and where impulse buying is more common. That's one reason why, at SCJ, Daslu's own brand, in separate stores for men and women, accounts for 70 percent of our stock."

Rosanne Behar, an Hermès representative in Brazil, said, "Hermès decided to open its first Brazilian store at SCJ because of the quality of the tenant mix, with top international and Brazilian brands, the ease of shopping at an open mall, where all shops face two long corridors, and its high-income-neighborhood location."

Stéphane Béraud, the international director of Longchamp, said that his brand chose the SCJ as the location for its first Brazilian store because "Brazil is the latest stop in our push to invest in big, emerging market countries like China [12 stores], Russia [two stores] and India [two stores by the end of this year]. In all these growing economies, we only open stores at malls because Longchamp needs this customer traffic. We are not like Vuitton and Chanel, whose clients will go to wherever they open stores."

Tiffany opened its second Brazilian store at SCJ, said Patricia Assui, its general manager, "because of brand alignment. Clients who buy at Chanel, Hermès, Zegna and Vuitton also buy at Tiffany."

Carlos Miele, one of Brazil's top designers, with stores in New York, Paris, Miami and São Paulo, said he opened his second store here at SCJ because "as it is a mall offering the best Brazilian and foreign fashion brands, visitors to São Paulo, whether from other parts of Brazil or from other countries, will flock to the SCJ as their shopping and entertainment point of reference."

Miele expects his SCJ store to ring up $15 million in sales in 2009 — triple that of his store in São Paulo's main shopping district.

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