MEXICO CITY — Parfums Christian Dior is betting on Mexico, despite the country’s slump in prestige beauty sales.
The French luxury brand opened its first Maison Dior fragrance shop here last month, which carries its 22 fragrances as well as skin cream, soaps and candles.
The shop-in-shop, which is Parfums Christian Dior’s first in Latin America, debuted in department-store network El Palacio de Hierro’s Polanco luxury mall, which also houses flagships from rivals including Gucci and Saint Laurent.
The move comes as the Dior brand is expanding in Mexico generally, with plans to open its first Dior Couture stand-alone store in Mexico City’s new Artz Pedregal mall by the end of the year. If the plan succeeds, the LVMH-owned house will ring 2019 with four Mexican fashion stores. Already it operates shops-in-shop in El Palacio de Hierro’s Santa Fe, Polanco and Perisur locations.
Parfums Christian Dior also sells through corners in El Palacio de Hierro and other department store chain Liverpool as well as Sephora, said one insider, without providing a precise breakdown. Dior’s push, as well as L’Oreal’s recent launch of dermatological brand CeraVe, stems from the firms’ belief in Mexico’s long-term potential, despite sagging sales this year, analysts said.
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Dior officials did not immediately return a request for comment.
Mexico is facing political and economic uncertainty following the election of new left-wing President Andrés Manuel López Obrador and lingering concerns over the key North American Free Trade Agreement, or NAFTA, treaty. Amid this environment, consumers are tightening their purse strings, hurting luxury purveyors.
“The market is very difficult right now,” said Giselle Soriano, who manages Chanel’s fragrance and beauty business in Mexico, adding that sales in the fragrance sector could decline 5 percent this year while overall prestige sales could fall 3 percent to 4 percent.
Raul Romo, a consultant for Elizabeth Arden in Mexico and Latin America, agreed. “The growth in Mexico is going to be very low, even zero percent,” he said, noting that few brands have opened new doors this year. “A market without openings is negative, consumption is dropping and fragrances sales are falling. Fragrances make up for 60 percent of the luxury market.”
This year’s performance contrasts sharply with 2017, when luxury sales posted double-digit gains, Romo said.
Magda Zapata, who oversees CeraVe and L’Oreal’s specialist skin-care portfolio, said Mexico’s $9 billion beauty market could grow 4 percent this year, down from 6 to 7 percent in 2017.
This is a far cry from a recent Euromoney report predicting sales could surge 11 percent annually in nominal terms by 2020.
“We are seeing a decline in consumption because of uncertainty from the elections, the treaty [NAFTA] negotiations and all of [President] Trump’s tweets,” Zapata said.
Still, the executive noted there is room for growth and boasted that L’Oréal will outperform the market this year.
Part of this will be achieved by huge growth in the dermocosmetics segment, which will gain 13 percent this year, matching 2017, according to Zapata. L’Oreal is making a big bet on the market, which accounts for 5 percent of the industry.
“There is growing awareness about the importance of healthy skin as a beautiful skin,” Zapata said. “Before, the focus was on just having beautiful skin and looking pretty but the culture is changing.”
L’Oreal sells CeraVe in leading pharmacies as well in Liverpool and the retailer Sanborns. Still, Zapata conceded the brand and category face growth challenges in Mexico, notably a lack of consumer education about medical skin care and other para-pharmacy products, which the label is working to foster by staffing retailers with its dedicated specialists.