Brazil might not offer luxury brands the same potential in terms of size as Russia, India or China, but it provides more near-term opportunities for expansion, Bernstein Research said in a new report.
Although it is Latin America’s biggest economy, Brazil is often overlooked because its population of 192 million is lower than that of China and India, which both top the one billion mark, the study said. Output has also grown more modestly than in other emerging economies, with gross domestic product rising on average 3 percent a year between 1995 and 2008, versus an average increase of 9.6 percent for China and 6.8 percent for India.
“Nonetheless, the country seems to have developed a sizable high-net-worth population —second only to China among the BRICs [Brazil, Russia, India and China],” Bernstein noted.
Despite this, luxury retail distribution is extremely limited, with more than one-third of the companies in a sample of 15 leading luxury brands having no direct retail presence in the country. More than three-quarters of luxury stores are located in the financial hub of São Paulo, mainly in upscale malls.
Brands with no retail presence in the country, such as Prada, Fendi and Burberry, have the option of entering via São Paulo and expanding from there, according to Bernstein, noting that Burberry was preparing to open its first point of sale this year.
The report said brands that already have a retail presence in Brazil, including Louis Vuitton, with six stores, and Salvatore Ferragamo, with eight units, face three options: expanding further in existing luxury hubs, targeting the less populous capital Brasília or accessing untapped urban markets like Porto Alegre, Belo Horizonte and Recife.
Events such as the 2014 World Cup and the 2016 Summer Olympics, both to be held in Rio de Janeiro, could significantly boost local markets and justify additional openings, the study said.