MEXICO CITY — Latin America’s luxury market is expected to decline 30 percent this year, if not more, as the coronavirus pandemic dampens sales in key markets such as Brazil and Mexico.

“Luxury retail, like everywhere in the world, has been affected in Mexico as stores were closed for 100 days,” said Jimmy Arkanji, co-chief executive officer and founder of Thor Urbana, the developer behind some of Mexico’s newest mixed-used real-estate projects.

One such project, Mexico City’s new Ritz-Carlton, a 58-story hotel overlooking the city’s storied Chapultepec Park, will see its debut delayed to just before Christmas from a slated opening in August, he revealed.

Still, Arkanji claimed COVID-19 — which has killed 35,000 people in Mexico, the fourth-highest total in the world — is not delaying the aggressive expansion plans of the firm, part of New York-based global developer Thor Equities.

Thor Urbana is on track to inaugurate a Four Seasons Hotel in Belize in late 2022 and has another Ritz-Carlton planned in the Riviera Nayarit resort for around the same time. A mixed-use mall, residential and hotel complex also is planned in Mexico’s other top tourism spot, Tulum.

Arkanji reiterated his long-term belief in Mexico’s economic future, stressing that Latin America’s second-largest luxury market will survive the crisis better than other sectors.

“This is a niche market that’s not as affected by the economy and people are not traveling to the U.S. or Europe like they used to” amid travel restrictions, he said. As wealthy Mexicans stay home and market favorites such as Louis Vuitton rush to boost online sales, luxury sales are expected to decline by a smaller degree than overall retail, which some sources say could shrink by 50 percent to 70 percent.

“We see physical-store [luxury] sales declining around 30 percent but growing very aggressively online. What was expected to take five or six years [brands’ migration to e-commerce] has happened in four months,” Arkanji noted.

In Brazil, luxury sales are also suffering as the country battles rising cases of the coronavirus, which has even sickened President Jair Bolsonaro. “We see a decline of 30 percent to 40 percent” for the region’s biggest luxury market, which would have been much deeper if online sales weren’t soaring at record rates, said Luis Lima, chief financial officer of upmarket swimwear brand Lenny Niemeyer. “Our e-commerce sales will grow 400 percent but our physical stores will fall 30 percent to 40 percent. At the end, we expect a sales decline of 10 percent to 15 percent.”

That’s if sales continue to grow, something that’s increasingly uncertain as consumers remain wary about Brazil’s economy, which is set to decline nearly 7 percent this year amid 73,000 deaths and 1.9 million cases, setting back the country’s economic rebound after years of recession.

On top of discounting items by up to 50 percent, Niemeyer is hastening investments to grow its online footprint, improve delivery speeds and customer service with $40,000 set to be earmarked for that process in 2020.

“We just bought WMS software [warehouse management systems] to triple our order processing and delivery speed,” said Lima, adding that the firm can now process an online order in 24 hours versus 72 hours before. “We are also investing in omnichannel, placing computers in our stores, so customers can order goods that are out of stock in a particular shop but still get them at home. If an item is not available in our warehouse, customers can also order it directly from stores which can ship it.”

In neighboring Colombia, where luxury brands were recently flocking to capital Bogota’s upscale Andino mall, the outlook seems more grim.

“We are starting to reopen malls, but we have a capacity restriction of 35 percent and boutiques are still closed,” said Katherine Ortiz, who co-leads Banco Davivienda’s equity research team, noting that consumer retail is seeing “very little traffic” as the country nears its virus peak following 5,500 deaths.

Colombians remain mostly quarantined until Aug. 1, said Ortiz, noting that the virus has brought economic devastation to the country; its stock market has plunged 35 percent this year and remains the worst-performing index globally.

But Lima is not losing hope that the industry can turn the corner soon.

“I think things will begin to normalize in five to six months,” he predicted optimistically. “People will begin traveling and shopping in New York, Paris and Mykonos again.”

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