With spending on luxury goods down across the developed world in the economic crisis, luxury brands are looking beyond the chic avenues of New York, London and Paris for revenue.
The new names on the lips of luxury professionals are far less familiar — Almaty, Shenzhen, Ulan Bator — respectively, the commercial capital of Kazakhstan, a major Chinese city and the capital of Mongolia.
“The desire for luxury is more and more universal so the luxury sector has to reach its clients around the world,” Yves Carcelle, chairman of Louis Vuitton, said at the Paris launch of a luxury Web site for China.
Louis Vuitton earlier this month opened its first store in Mongolia, a country of 2.7 million people with extensive mineral resources and an average per capita annual income of just US$1,800.
“It’s a country that is taking off economically,” Carcelle said. “In just a few days, we already know the store is doing well and we should make as much in Ulan Bator as in a good-sized provincial town in China.”
Antoine Belge, luxury expert at British bank HSBC, explained the strategy.
“In Mongolia or in Kazakhstan, the big luxury brands are targeting pockets of wealth. In countries which are making revenues from energy, there are small communities of people that have money,” he said.
“When you open a store in a new city in China, the clientele in that city multiplies by a factor of 10. There’s the client who is used to buying the brand abroad and nine others who are new,” he said.
A study by consultancy Bain and Co showed luxury sales this year will drop 16 percent in North America, 10 percent in Japan and 8 percent in Europe.
In Asia, however, sales are set to grow by 10 percent this year.
“First we get local elites familiar with our brand, then we open a place where we offer the same quality of service, the same products and therefore the same prices” as in other brand shops, said LVMH, the world’s top luxury firm.
Out of 300 openings of luxury stores this year, Bain said, 15 percent will be in China, 25 percent in other Asian countries, 30 percent in the Middle East and 15 percent in Eastern Europe and the Middle East.
Just 15 percent will be in Western markets, the study found.
“Emerging markets with dynamic profiles and appropriate economic potential will offer good growth opportunities,” the Gucci luxury group said in a statement.
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