The rich will always be with us!
This week on Facebook: My 2009 and 2013 posts both had the title ‘The rich will always be us’, and while this post does not link directly to the High Net Worth Individuals (HNWI) in the Capegemini Wealth Reports¹ it certainly alludes to them. A Deloitte report on those who spend their discretionary income on luxury items² and one from an Oxford Research Encyclopaedia on the luxury business³, are used in this post sharing the title “The rich will always be with us’. Having written a number of posts on Brazil I have received criticism from my colleagues in the USA regarding Brazil’s uncertain economic growth, especially with the publication of my post on China Brazil a perspective. This time, rather than take what is a complicated global perspective, I have focused on Brazil as a global indicator for the purchase of luxury items.
The one thing that this confirms is that the sale of luxury items is rarely a pointer to economic growth in a State but it is a clear indicator of the income inequality and wealth existing in a State, which is clearly the situation not only in Brazil but globally. It is misleading to measured a State’s wealth by the expenditure of discretionary income on luxury items as this is rarely an indication of a rise in the State’s economic growth, anymore than the State’s expenditure on a social welfare programme. Both are primarily more representative of political trends within a State, which has certainly been case globally where State fiscal policy uses those reliant on a social welfare programme as pawns¹⋅¹.
Brazil has long been the forerunner of economic growth amongst those nations that made up the BRICS, that is until it was named as a member of the ‘fragile five’, a term coined by Morgan Stanley in 2013. As my acquaintance in the USA pointed out, Brazil’s economic growth has never been sustained and it has yet to be seen if Chinese money being poured into Brazil raises the economic growth of the State for everyone without increasing the disparity in wealth.
The articles which follow are taken to represent Brazil’s growth in the luxury items market over approximately the last decade. Brazil is fairly representative of the consumer who purchases luxury items during a time in which the public administration implemented a fiscal policy of austerity following the 2008 financial crisis. Generally it is deduced that the expenditure of discretionary income on luxury goods by HNWI is taken as a measure of the wealth attributed to the rich who will always be with us.
1. Exactly How Hot Is Brazil? (2011) How real is this feeling that Brazil has a tide of fashion sweeping over its beach culture? And that this irrepressible enthusiasm for style in Rio de Janiero and São Paulo is only the beginning of a wave of luxury consumerism lapping at the rest of Latin America?
2. Selling Luxury Goods In Brazil — Lessons From An Insider (2011): “We are not just a simple distributor. We combine distribution, commercial representation and public relations. In Brazil, either you have the extremely expensive luxury brands that are sold everywhere or the local fashion brands that are not always very nice. My idea was simple: to bring to Brazil brands that stand in between these two categories I just mentioned,” he tells FORBES in an exclusive interview.
3. Capturing the hearts of Brazil’s luxury consumers (2014): Brazil isn’t a market that brands can afford to ignore. Emerging markets are driving global luxury consumption growth, with Brazil the third largest contributor, after China and Russia. Brazil, in particular, has lots of room for growth. Current luxury penetration is low compared to other countries, with annual 2012 consumer spending on luxury in Brazil $314, versus $1,121 in China. Among the three top luxury brands in Brazil, there are 0.3 stores for every million potential luxury consumers (individuals with annual income above $30K), versus 4 stores in China. Part of the reason that Brazil is far from being a mature market is because higher prices make it accessible only to the elite, but that is starting to change. By 2018, Brazil will be among the top 15 luxury goods markets in the world.
4. Beyond The Buzz — The Brazilian Luxury Goods Market 2014: There are many reasons for luxury executives to feel optimistic about the local luxury market. Despite a slowing economy and high inflation, the long-term prospects remain positive. Euromonitor International forecasts that the country will become the world’s fifth largest consumer market in 2023, with total consumer expenditure reaching US$2.7 trillion in 2030. Its luxury market is set to grow by approximately 30% in the five years to 2018, with additional value sales of US$1.4 billion. This growth will place Brazil among the top 15 luxury goods markets in the world (ranked 14th by 2018), overtaking both Taiwan and Australia.
5. The Trouble With Brazil’s Luxury Market (2016): While Louis Vuitton‘s Cruise 2017 runway extravaganza seemed to suggest otherwise, make no mistake: the current state of affairs in Brazil is having a serious effect on the country’s appetite for luxury goods. “Nobody knows what’s going to happen here politically — that’s the truth. It’s a very strange situation for any level,” says Brazilian fashion industry consultant Gloria Kalil. “Brazil gives false messages; the beauty, the openness. But I don’t know who continues to buy here right now. Sometimes you go to those big luxury shops and you see no one in there for days and days and days. It’s very hard to nail down the problem; you never get very straight answers when you ask. They say that they send their collections to clients’ homes. Maybe they’re right, maybe they know what they’re doing. I’m not sure.”
Referenced Articles Books & Definitions:
- A text subscript above and preceding the title here, refers to a download that is usually free.
- Brackets containing a number e.g. (1) reference a particular article (1-5).
- Sometimes a superscript is added to definition¹⋅¹ to indicate its intended context.
- A long read url* (especially below) is followed by a superscript asterisk.
- Occasionally Open University (OU) free courses are cited.
- JSTOR lets you set up a free account allowing you to have 6 (interchangeable) books stored that you can read online.
¹World Wealth Report 2018 (url/pdf): Capgemini’s World Wealth Report 2018 explores trends that affect high net worth individuals (HNWIs) in 71 countries, accounting for more than 98% of global gross national income and 99% of world stock market capitalisation.
²Global Powers Of Luxury Goods 2018 — Shaping The Future Of The Luxury Industry (pdf): 2016 had been a very challenging year for the Brazilian luxury market and the expected growth that many companies and retailers had been hoping for failed to materialise in 2017. Because of political and economic crises, Brazilian consumers adopted a conservative attitude, preferring in general to cut their purchases of luxury items and expensive goods. Sales of luxury goods fell for the second year in a row, with entry-price luxury products being the most affected by the slowdown in consumption. 2018 is expected to present a better economic scenario for sales of luxury goods.
³Luxury Business (url/pdf): The luxury business has been one of the fastest growing industries since the late 1990s. Despite numerous publications in management and business history, it is still difficult to have a clear idea of what “luxury” is, what the characteristics of this business are, and what the dynamics of the industry are. With no consensus on the definition of luxury among scholars and authors, the concept thus requires discussion. Luxury is commonly described as the high-end market segment, but the delimitation of the lower limit of this segment and its differentiation from common consumer goods are rather ambiguous. Authors use different terminology to describe products in this grey zone (such as “accessible luxury,” “new luxury,” and “prestige brands”).
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