Latin America’s luxury market is booming, underpinned by robust economic growth. “The phenomenon has put the region on the map for the world’s largest luxury brands, which are expected to spend millions to pursue aggressive expansions in coming years,” WWD reports.
According to Bain & Co., Brazil, Mexico, and Argentina remain the largest markets and are worth about $5 billion combined. Panama, Chile, and Colombia follow close behind, and Peru is also a promising market, WWD reports. Brazil’s luxury market is expected to grow by 20% in 2021, while Mexico and Argentina will expand 22% and 30%, the publication adds. “The remainder of the Latin American market, worth some $700 million, will also grow significantly.”
The rest of the Americas is seeing similar growth in the retail sector, and particularly in the luxury goods segment. With Coty Inc., Hermès International, and Kering all expected to post impressive growth between now and 2025, the personal luxury goods market in the U.S. is on track to grow by $33.53 billion over the next four years.
“The sustained growth in the North America luxury goods market can be attributed to the continuing rise in the tourism industry,” Mordor Intelligence points out, noting that millennials comprise the majority of the buyers. “North America is an economically strong market, and therefore, the major multinational brands often launch their premium products earlier in this country, as compared to many other countries in the world.”
Web Sales Contribute to Sector Growth
Reflecting on the retail sector’s performance in 2019, Andre Aragao, National Key Account Manager, VM Fashion and Retail at DB Schenker, said the market has maintained a fairly consistent performance over the last two years. Not only does retail account for one-quarter of Brazil’s GDP, but it’s also a major contributor to the country’s employment base.
“About 26% of employees (9 million total workers) are linked to the retail sector,” he said. Those numbers haven’t retreated much due to COVID-19 despite the fact that retail locations and malls were forced to shut down for extended lengths of time. To offset these challenges, the luxury goods retailers that DB Schenker works with shifted their efforts to online sales—a sector that grew by 24.1% globally last year.
“Consumers worldwide spent nearly $4.29 trillion online in a pandemic-fueled 2020, up from almost $3.46 trillion the prior year,” according to Digital Commerce 360, noting that the 24.1% year-over-year jump in global web sales was an increase from 17.9% growth in 2019. “The acceleration after years of slowdowns was driven by unprecedented online growth in the United States’ e-commerce market, but tempered by a less robust performance in China.”
Getting the Goods to the Right Place at the Right Time
To ensure that its luxury brand customers’ supply chains stayed in motion and on track during the pandemic, DB Schenker has been working closely with them to find new ways to act and respond quickly during this period of uncertainty. Those that had to close their stores, for example, promptly pivoted over to selling online and delivering to store for customers to pick up.
Credit the fact that many brands already had robust e-commerce storefronts and reliable logistics networks in place with making this shift a bit easier for companies to manage. And, the fact that travel was restricted and customers couldn’t just jet off to another country to shop for their luxury goods also worked in retailers’ favor.
“Domestic stores were positively impacted by the shift in buying behaviors,” said Aragao. “Due to their close proximity to buyers, luxury goods retailers were able to sell more in the local market than they might otherwise have.” To meet the needs of those customers, DB Schenker’s Runway Project has taken the company’s existing, successful luxury logistics model to new heights.
“At DB Schenker, we’re being challenged on a daily basis to find a fast way to deliver to stores the new apparel collection or handbag that a celebrity used the night before and that suddenly appeared on social media and was selling 10X faster the next morning,” Aragao said. “It’s all about the timing and the fast transport of the product onto the sales shelf.”
An Eye on Sustainability
According to Deloitte, corporate social responsibility issues were important even before the pandemic for a large group of consumers, mostly millennials and Generation Z, who had already adopted them as basic and essential principles in their purchasing choices. “These generations are expected by 2025 to account for approximately half of all global personal luxury goods sales, and as present and future clients they are outlining the rules for the luxury goods market,” Deloitte explains.
“They are very much aware of the sustainability and environmental impact, issues that are likely to affect their purchasing decisions,” it continues, noting that while just 34% of baby boomers agreed to change their buying habits due to environmental concerns, 75% of millennials were willing to do so.
Knowing this, DB Schenker is meeting luxury retailers’ (and, their respective customers’) demand for more sustainable transportation and logistics. “I recently sat down with representatives from two large luxury brands to discuss the next five years, and much of the conversation focused on sustainability,” said Aragao.
That conversation included discussion about what can be done differently, the introduction of EVs into DB Schenker’s fleet, and how all supply chain partners can work together to reduce their carbon footprints. It’s a conversation that DB Schenker takes very seriously. “Our customers have a responsibility to society to make a difference in this area,” Aragao concluded, “and we share that responsibility with them.”