The new emerging markets consumers: Who are they and what do they want?
INTERNATIONAL. BRIC nationals have money, status, information, a nascent sense of luxury lifestyle…now they are coming of age.
The U.S. is still the world’s largest domestic luxury market: consumers spent 48 billion euros on luxury last year. But this is fast being eclipsed by emerging markets luxury spending at warp speed.
To wit: personal spending on luxury goods in mainland China nearly doubled between 2009 and 2011 – to 13 billion euros, according to statistics from Bain and Company. And that’s not the whole picture: when you include Chinese shoppers in Hong Kong, Macao and Taiwan (where prices are lower) and Chinese tourists opening their wallets outside of Asia, the total Chinese luxury spend globally last year is nearly 40 billion euros.
China leads the pack but the rest of the BRICs are booming, too. Luxury goods sales in the Middle East increased 12 percent last year, Brazil saw a 50 percent increase, Russians bought more than 4 billion dollars’ worth of luxury last year. Consumption figures like these are not generated only by the super-rich.
“It’s not only the wealthy customers who are driving these demands,” INSEAD Professor of Organizational Behaviour Frédéric Godart told INSEAD Knowledge. “It’s a sociological phenomenon – the rise of the middle class. That’s when you start thinking of social status and what kind of goods you can buy to show your neighbour that you have some status. These customers want to express more: status and style.”
Online and savvy
Increased communication and sources of information – through the Internet, global television channels, international publications and advertising and just plain travel – have escalated the pace of change and raised the level of sophistication of these new shoppers. “They are very curious and they have time to investigate,” says Godart. “They know what things cost, what their friends have, what’s in style.”
And their bargain-hunting is not restricted to local stores. The Dubai Mall alone last year racked up 54 million visitors – more than the number of people who visited New York City. And here’s where demand and supply join to create a new environment.
Whereas most developing nation citizens need visas to enter France or Italy, (making shopping in the meccas of the luxury world complicated) the U.A.E. makes a quick shopping trip to the Dubai Mall nearly stress-free: BRIC nationals can get a 96-hour/4-day transit visa at the airport on arrival for 250 UAE Dirhams (about 50 euros).
Creative retailing
This demand has in turn led to a wave of activity in creative circles to come up with more, glitzier and commodious retail space. “The most creative retail innovations are now taking place in Dubai and in China,” says Godart. “ Local retailers have to adapt to these waves of customers arriving from China or from Russia, and elsewhere.
That means changing the retail space itself, architecturally at times. “In the Middle East, for example, people shop in groups. Men and women separately. They try stuff together, they discuss it before purchasing. It’s a committee decision. So you need larger dressing rooms,” points out Godart.
The brands themselves also need to adapt to these new customers. There, the challenge is how much adaptation is possible without diluting the brand: a balancing act between emerging market demand and old-world supply. Godart points to the story of Berluti, an Italian men’s shoe-maker whose classic shoes with laces just weren’t making an impression in the sands of the Middle East.
“The distributor in the region (Dubai-based Chalhoub Group) worked with Berluti to create a sandal,” explains Godart. “At first it was a challenge because the first model showed only two toes, which in this region is considered a model for women, and men weren’t buying it. So Berluti made a model with more toes showing and it has been successful. This was a company that didn’t make sandals until it entered the Middle Eastern market.” Today, those popular sandals start at 780 euros per pair.
Category : lifestyle