The Rising Influence of Rising Affluence

[DewDiligence]

Brazil’s Nouveau Rich Boost Sales of Luxury Purveyors

http://blogs.ft.com/beyond-brics/2011/11/11/irresistible-pull-of-brazils-new-money/

›November 11, 2011
by Andrew Downie

“Recession? What recession?” asked Suzy Menkes, fashion editor of the International Herald Tribune at the newspaper’s annual Hot Luxury conference in São Paulo this week. “You don’t see too many closed stores (here) as you see in Europe and America.”

Brazil’s rich are getting richer. The country has 155,400 “dollar” millionaires and is 11th on the world’s rich list, ahead of Russia, India, Spain and Mexico, according to the 2011 World Wealth Report by Capgemini and Merrill Lynch Global Wealth Management.

The country’s economy has been booming for years and sailed through the storm of 2008-09 relatively unscathed. It grew by 7.5 per cent in 2010 and is expected to grow by 3.5 per cent this year, much more than the US or Europe.

Sales in the luxury goods market are expected to reach $12bn this year, a 33 per cent rise on 2010, said Carlos Ferreirinha of MCF Consultoria e Conhecimento, a luxury consultancy in São Paulo. “I don’t think there is any chance of us not having expressive growth over the next 10 years,” he says.

Brazil’s millionaires tend to be younger and richer than those in other countries and spend freely. They live for today, are often spoilt rotten, and have little notion of saving – partly because Brazil’s history of hyperinflation meant saving was a risky business.

“The sense of immediate consumption is extremely present here,” says Massimo Mazza, a consumer goods and luxury specialist at McKinsey in São Paulo. “Many of the new rich guys who are 30, 40, 50 years old, they remember hyperinflation when they couldn’t save money so when they have money they want to spend it and have fun and live life. Allied to this is a desire to be exclusive, to show off.”

High end retailers are eager for a slice of the pie. Gucci, dressmaker Diane von Furstenberg, and Christian Louboutin, whose red soled and impossibly high heeled shoes can cost several thousand dollars, have opened shops here recently and plan to open more. Louboutin said he decided to open his first store in São Paulo in 2009 because so many Brazilian clients in the US pestered him. “I realized I had a lot of Brazilian customers because when I did signings in New York they kept telling me I should open a store in Brazil,” he says.

“When you hear that 50 or 100 times you start to believe it makes sense and it really did make sense.”

It makes sense because retailers are making money. They charge vastly more for their goods in São Paulo than they do in Paris, Sydney or Moscow. Brazil’s high taxes are one reason; big mark-ups are another. Yet high prices don’t deter shoppers willing to pay for the pleasure of having something exclusive – and for Brazilian service.

“Designer labels are often cheaper abroad, much cheaper,” said Vera Lopes, head of the Brazilian chapter of the Luxury Marketing Council. “So why buy here? Because they want it when they want it and because they like Brazilian service. If they are treated well then they won’t go overseas to shop.”

All this exerts and irresistible pull. The IHT’s conference attracted several hundred delegates from around the world, each paying £2,495. Like their customers, they seemed to enjoy shelling out.

“The emerging markets are not only sources of revenue but sources of new ideas,” said Nizan Guanaes, a Brazilian advertising executive. “We [used to be] a source of problems. [Now] we are players, we are big guys, we are opportunities. So bet on us.”‹