The New York Times wrote an article today on the world’s luxury goods market in Brazil and how psychological factors and vanity play larger roles with Brazilians when compared to everyone else. Highlights below:
Vanity, conspicuous consumption, a growing and solid economy, the legacy of slavery, steep markups and an infectious desire to live for the moment — these are just some of the things that set Brazilians apart in the luxury goods market.
But experts agree that the high end brands need to pay careful attention… “The cost of doing business in Brazil is onerous, complex and bureaucratic,” said Carlos Ferreirinha, a luxury goods expert. “Laws, codes and taxes, distribution and logistics are all confusing and difficult and that is very hard for brands to handle.”
Brazilians of all ages love spending money and if they have it, they are not ashamed to flaunt it. Older people don’t save because they still remember the 1980s, when hyperinflation made planning impossible. And the young are all about living for the moment.
“Brazilians don’t like to save money; the savings rates in India and China are much higher than in Brazil,” said Mr. Mazza. “And allied to this is the desire to be exclusive, to show off, to enjoy life.”
Another factor is vanity. Brazilians who have money want the world to know they have money. “The show-off part is very important,” Mr. Xavier said. “It is important to convey that the polo shirt they are wearing is a Ralph Lauren. They want people to know this and that is valid for everything. I think it is more important for Brazilians than most others.”
That vanity leads rich Brazilians to pay exorbitant amounts for everything from cocktails to gadgets. In São Paulo, upmarket bars and clubs charge more than 100 Brazilian reais, or $56.35, just to get in the door; a basic pair of Levis 501 is three times what they are in Miami; and an iPhone or iPad are a whopping 10 times what they cost in London.
Two reasons are high taxes — Brazilians’ overall tax burden is 34.5 percent — and the overvalued real, which earlier this year hit a 12-year high against the dollar. But it is also because of big markups and a captive market.
One other difference between Brazil and elsewhere is how people pay. Because interest rates here are so high (11.5%) almost everything can be paid for in installments.
Here is the Brazil slide of a full research presentation by Bain on the world’s luxury goods market (for the full 47-page presentation, send us a request by email):