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Luxury BRIC by BRIC: the most unstoppable market in the world?

Some worry that the success of luxury brands in emerging markets is unsustainable. Talking to local consumers suggests that the good times still have a long way to roll.

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Please click here for your complimentary trend download ‘Affluence – in a developing worldfrom our website.

It is hard to open a business magazine in any language these days and not find another story about Western-originating luxury brands happily devouring the incomes of the newly prosperous of China, India, Brazil…

The scholarly expectation is that China will soon become the world’s largest market for luxury goods – a prediction that is rendered all the more astonishing when one considers that GDP per capita is still around six times higher in the USA and around 5 times higher in the UK than, even with all the economic power-surging of the last decade, it is in the People’s Republic.

Although only a relatively small proportion of local populations are as yet able to afford big brands from Europe and the States, we continue to read of, say, Burberry reaching 100 stores there; yet more openings, exhibition appearances and even a Chinese-character twitter-page from Louis Vuitton; Bentley setting up stall,; Vogue China unable to cope with the demand for advertising space; Armani introducing  an online store exclusively for Chinese customers;  Mulberry’s first mall-launch in Beijing in 2011... All this must seem to those concerned like a god-sent gold-rush, the klondyke de nos jours, a total Marketing Director’s fantasy.

So, as the Insight Professional might say to the Forecaster, is this a never-ending story or should we be preparing for disruptions and subversions, new trends to weaken the global luxury bear market of the last few years?

At the Future Foundation, we track a number of themes here. Firstly, from our own opinion research, we get the strong sense that new-world customers seem to have no scepticism or inhibition about saying what they want from life. There is just no social value in being an inconspicuous consumer. In India, over 50% of wealthier people agree that they actively enjoy talking about the fashions they have selected; the equivalent figure in Scandinavia is around 10%. Around 50% of our metropolitan sample in China tells us that as their income increases they will definitely be buying more designer clothes and accessories in the future; the figure for Germany is less than 20%.

And, as our chart suggests, more citizens in many parts of BRIC are happy admitting that their personal image needs product. Over 50% of Brazilian women say they would devote new income to "expensive cosmetics"; less than 20% of our female sample in Germany takes the same view. The general point holds good when we explore food & drink markets too. Chinese consumers are happy to say that they would like to buy more speciality products "from outside my own country".  And for a majority of consumers there "a well-known brand is the best assurance of quality"; among the more hard-bitten Swedes the figure is less than 20%.

Some analysts have speculated that in due course high-income BRIC spend will switch in favour of local production and local talent. Luxury will thus be redefined away from all our megawatt Western brands. But for our part we find little evidence that this is imminent. The bear is, as it were, still running at an open goal.

Much is made of the ambition of domestic brand-contenders like Shui Jing Fang or Ammar Belal or Shanghai VIVE.  And it is natural for governments to promote and favour home-grown winners to woo their own consumer-citizens.

But so hungry for a deluxe lifestyle still populated by American and European labels are the world’s most open, excited and optimistic consumers that we just cannot see the bubble bursting soon.

In 2011, the Chinese authorities banned billboard displays which promoted an over-luxurious lifestyle. Too much showy exclusivity and the social inequality it implies have, apparently, been deemed bad cultural karma. In advertising executions, luxury itself had officially become a dirty word.  But truthfully  such is the nature of West-to-East globalisation these days, such is the screaming demand for the plush opulence of the best Western cars, whisky, handbags, suits, yachts, face-cream, cocktail dresses… than one might think that the authorities could equally try, as it were bric by bric, to dismantle the Great Wall.

The big luxury brand-beasts are running the show. The commercial neo-colonialism project is still intact.

True now – and true, on our analysis, for a long time to come.


Please click here  for your complimentary trend download ‘Affluence – in a developing worldfrom our website.

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The Future Foundation helps companies to make better decisions. Decisions which ultimately drive shareholder value.

We view the world through a consumer lens and enable our clients to plan the future with their customers at the epicentre.

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