Latin American Luxury Poised for Rebound
MEXICO CITY — Latin America’s luxury market is poised to gain 10 percent in 2021, rebounding from a roughly 25 percent decline last year, as an aggressive vaccination campaign drives shoppers back to stores. Growth may take longer to materialize in Brazil, however, where a new COVID-19 strain has forced Latin America’s largest economy to shutter for two weeks.
Overall, luxury sales are trending up as coronavirus outbreaks ebb across the region, encouraging brands to bolster investment to remodel stores, improve customer service, streamline management and grow e-commerce, executives said during a webinar hosted by consultancy Luxury Retail Partners.
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“We had a softer landing than expected because of a [sales] rebound at the end of last year,” said Luxury Retail Partners’ managing director Diego Stecchi, adding that consumption is accelerating in Mexico and Chile, which are set to outperform Brazil.
While sales were on track to decline 25 percent last year, they fell by less than 20 percent for some brands as governments lifted social restrictions.
In addition, “selective customers continued to buy over the phone and online during the pandemic,” as they were prevented from traveling to favorite shopping destinations such as Miami, New York or Paris, according to Stecchi.
John Price, managing director of researcher the Americas Market Intelligence, said the recovery’s pace will still hinge on how fast countries can vaccinate their populations. In this regard, he noted Chile is doing a good job, being ahead of Mexico, Brazil and Costa Rica.
“On the vaccine front, Chile stands out,” Price said. “It has vaccinated a similar proportion as the U.S. This is important because not only will Chileans be more comfortable about revisiting malls sooner than in other Latin American countries, but Chile will become a destination for Brazilians and to a lesser degree Peruvians and Argentines to receive vaccines,” as the nation has an excess of doses of vaccine.
“As people need to stay for two jabs, Santiago will see an interesting level of affluent vaccination and shopping,” Price added.
Being able to cater to the local but also the in-bound tourist market has given the Dominican Republic a similar edge, said Price.
“They have been very forthcoming in opening for tourists and more liberal than other Caribbean islands with arrival protocols. Right now, 98 percent of travelers can enter the Dominican Republic without a COVID-19 test, so this will provide more inbound traffic to beaches and boost luxury sales.”
Mexico will turn the corner faster than Brazil, Price predicted, amid declining infections, but also a stronger currency and improving economic outlook, with gross domestic product set to expand 3.7 percent from a 9 percent decline last year.
Brazil has declared a state of emergency over its new P.1 strain from the Amazon, with leading shopping malls such as JK Iguatemi in São Paulo and other luxury purveyors closing shop last week and expected to remain so for at least another week, if not more.
Infections are falling in neighboring Colombia and Peru, however, boosting hopes that luxury markets there will gain strength in the coming months after anemic sales last year.
Meanwhile, e-commerce has been a bright spot, helping offset the decline in stores sales.
“In Mexico, we had 6 to 7 percent growth in e-commerce last year,” said Bulgari’s Latin America and Caribbean president Christian Konrad, adding that in Brazil, online comprised 20 percent of revenues in December. “We have looked to develop e-commerce. Last year, we accelerated and launched our own e-commerce in Brazil and Mexico. This is a strategy that will absolutely continue as everyone has realized online has become a part of daily shopping.”
But rolling out an e-store in Latin America has its challenges. Konrad said the process saw hiccups in Brazil, where people are used to paying in installments, forcing the brand to incorporate that feature into its platform.
Fraud is also a headache.
“We’ve had 60 percent refusal rates from customers trying to do a transaction, but bouncing back because the system detects potential fraud,” Konrad recalled. “If we can find a better way to analyze this [tackle the issue], e-commerce growth can be astronomical.”
Keeping a personal touch with well-heeled Latin Americans is essential to win sales, according to Konrad.
“Eighty percent of transactions are done with a person to talk to about the entire experience so that this is a customer service experience, not just click and collect,” he noted.
Bulgari will be adding staff and training teams to boost this, as well as clienteling in a region where in-store customer service and salesperson’s luxury knowledge could be improved, executives said.
Alberto Candellero, Dolce & Gabbana’s head in the region, agreed online is set to boom, representing up to 25 percent of the company’s sales in the area in the near to medium term.
“I don’t have a dot-com in my region, but I am asking to have one for Mexico, which is easier to have than Brazil,” said Candellero. “That is my priority for this year.”
Latin America remains full of promise but one-to-one customer service relationships must further develop to encourage the rich to shop locally instead of venturing abroad, hurting local retailers. To achieve a greater level of service and improve the bottom line, brands would also benefit from having a stronger local management presence as opposed to centralizing it in New York or Miami, Candellero said.
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