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- 15 Feb 2013
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Luxury in Brazil: Beware of Barriers to Entry


Hotel Unique, Sao Paulo

Claudio Diniz, author of O Mercado do Luxo no Brasil, investigates the opportunities and challenges the Brazilian luxury market presents in 2013

After more than doubling its growth rates between 2008 and 2012, Brazil is quickly establishing a reputation as the most important luxury market in Latin America. In 2011, the market for designer clothing and footwear grew 7.3% to $2.6bn, while sales of luxury accessories increased 4.5% to $1.2bn (Just-Style).

In terms of the Americas, Brazil is second only to the United States. And as the country invests heavily in hosting both the World Cup in 2014 and the Olympic Games in 2016, one can only imagine how the luxury market will grow.

We have already witnessed an expressive increase in the establishment and improvement of local retailing, hotel management, airlines, private banks, jewellery, cosmetics, gastronomy, well-being, navigation, education, not to mention luxury tourism.

 High taxes, red tape and lack of infrastructure continue to prevent successful market entry 

But Brazil is already becoming known for it’s barriers to entry. Among the difficulties encountered by foreign investors, high taxes, red tape and lack of infrastructure continue to prevent successful market entry.

Further obstacles limit the growth of this market, such as social inequality and the concentration of the luxury market in the city of São Paulo. São Paulo is the leading city in Brazilian luxury consumption, accounting for 67% of the market.

Rio de Janeiro is second, and though accounting for less than half of this percentage, has shown good growth with excellent opportunities for the next few years. In third place is Brasilia, with an older mentality towards the luxury market, still tending to value ostentation over the personality of a product.

 Growth rates in Brazil are still below those of other BRIC countries, especially China 

Growth rates in Brazil are still below those of other BRIC countries, especially when compared to China. But where Brazil may hold future advantage, is in the quality and sustainability of this growth. Particularly if Chinese labor laws were to suddenly significantly change.

Where Brazil has disadvantages against these countries is a poor educational system and low savings rates. But there are some fiscal and politcal advantages that Brazil commands when compared to the other BRIC countries. In China, India and in Russia, the percentage of realty mortgage debts mount to 12% against 3% for Brazil. In European countries, this average reaches 64%.

Brazil also has a reasonably stable political climate at the hands of its democratic government. There are no armed militant revolts, nor religious or ethnic conflicts. Brazil imports more petrol than weapons and has positive relationships with its foreign investors.

 There are some fiscal & politcal advantages that Brazil commands when compared to the other BRIC countries 

To mention Luxury markets, one must keep in mind that consumption in this area is more than a mere purchase; it represents a password to enter a new universe that confers status. Brazil has conquered a space in this select club, although it is still on a different level from that of Europe or the U.S.

The gateway to the world of exclusive brands in this country is through accessories, particularly handbags and eyewear. Most Brazilians cannot afford to pay10,000 Reais for a handbag, but may be willing to buy a keyring for 500 Reais.

To succeed in this market, one must comprehend a consumer’s aspirations and understand that he or she will not settle for just any product. Brazilian consumers are globalized, keep updated and wish to “see and be seen”.

 Brazilian consumers are globalized, keep updated and wish to see and be seen 

The Brazilian luxury market shows notable signs of solidity and not only is there the presence of reputable foreign companies (which have a strong influence over this market in Brazil, veritable by the size of their participation), but also of national enterprises, still at an embryonary stage, having expanded to the international luxury markets and accomplishing renown.

This is the case of H. Stern, Fasano, Embraer, Carlos Miele, among others. Their success sets an example for other Brazilian luxury brands which may wish to venture on the road to success in the Luxury Universe.

To further investigate BRIC countries on Luxury Society, we invite your to explore the related materials as follows:

- Why Men Are So Important to China’s Luxury Market
- Luxury Opportunities Abound in India, But How To Manage Challenges?
- 14 Must Know Russian Luxury Brands


Claudio Diniz is the author of O Mercado do Luxo no Brasil: Tendências e Oportunidades (Seoman, 2012).