May 16 (Bloomberg) -- For years, Brazilians coveting a Coach bag or Tiffany diamonds boarded flights to places like New York and Miami. Now American luxury is coming to them.
Coach Inc., the largest U.S. luxury handbag maker, last month opened its first South American store in Sao Paulo, has a second one in the works and is eyeing as many as 10 more malls. Tiffany & Co., the world’s second-largest luxury jeweler, is doubling its three-store count and has moved beyond the key city of Sao Paulo. Liz Claiborne Inc.’s Kate Spade and Juicy Couture labels and Tory Burch LLC are present, too.
“When you see wealth established in an economy, it takes some time to study the market and feel good about putting stores on the ground,” said David Schick, an analyst with Stifel Nicolaus & Co. in Baltimore. “Brazil is here, Brazil is meaningful. You hear it in the luxury conversation.”
Last year luxury sales in Brazil accelerated 20 percent to 2.3 billion euros ($2.9 billion), according to Bain & Co., the Boston-based consulting firm. Luxury brands’ investment there also grew by a fifth, to $858 million, said Carlos Ferreirinha, president of MCF Consultoria e Conhecimento, a Sao Paulo consulting firm. The Brazilian luxury market’s strength contrasts with a moderate pace in the U.S., a slowdown in some European countries and cooling sales growth in China.
Brazil’s economy will expand 3.5 percent in 2012 compared with 2.7 percent last year, the central bank said in March. The largest oil finds in the Americas in three decades, the 2014 World Cup and the 2016 Summer Olympics are creating jobs.
European luxury brands such as Louis Vuitton and Cartier have been selling their wares in Brazil for years. Tiffany and Coach woke up to the South American nation’s potential after watching 1 million Brazilian tourists visiting the U.S. each year and dropping thousands of dollars at American luxury emporiums.
Meanwhile, Brazilian mall developers are opening more swanky shopping destinations, such as the Cidade Jardim Sao Paulo mall, where well-to-do Brazilians browse the boutiques, enjoy sparkling wine and salmon sandwiches at the cinema cafe and can even buy helicopters and boats on the top floor.
The new JK Iguatemi luxury mall’s April 19 opening was postponed while developers wait for permits to build roadworks capable of handling the traffic generated by an expected 20,000 daily visitors.
“There is a change in the consumer in Brazil,” said Luciano Rodembusch, Tiffany’s vice president for Latin America. “They are looking much more for quality, becoming more demanding. For a brand like ours, it is a great moment.”
Brazilians are sufficiently keen on foreign luxury to pay tariffs that can push a Poppy leather “glam” tote in Sao Paulo to 998 reais ($523) versus $298 in New York. Tiffany and Coach are offering to ease the sticker shock with installment plans, an unusual practice for luxury brands outside Brazil.
Treating herself at Sao Paulo’s Morumbi Shopping mall last month was Viviane Tabalipa, an architect from the southern city of Curitiba, who was carrying a Michael Kors handbag and was laden down with two Armani Exchange shopping bags.
“Brazilians’ shopping power grew a lot,” she said. “So we indulge ourselves buying one little thing here and there.”
While Tabalipa was planning a girls’ shopping trip to New York in July -- with her daughter, sister and niece -- she said she’s happy to find what she wants at home.
When New York-based Coach’s distributor partner Aste Group last month opened a first Brazilian Coach store at Morumbi Shopping it received “excellent consumer response,” Chief Executive Officer Lew Frankfort said on an April 24 conference call with analysts.
Frankfort, 66, said he visited “eight or ten” malls when he traveled to Brazil for the first time in November. All of them are candidates for Coach, he told analysts the week after.
“I’m pumped about Brazil,” Frankfort said. “I see Brazil as a country of optimism, a country of possibilities. In many ways, it reminds me of America, particularly 20 and 30 years ago.”
Tiffany, also headquartered in New York, opened a store in Brasilia in October and plans to open one in Rio de Janeiro in November and one in Curitiba in 2013, Rodembusch said. It is also considering a store in Recife, he said. It already had two locations in Sao Paulo.
While strong demand from Brazilian tourists in the U.S. is encouraging the jeweler to capture that consumer at home, Tiffany also hopes its local expansion will build brand recognition and spur even more Brazilians to buy its jewelry when they are traveling, he said.
“Tiffany has the benefit of being a global brand that can provide the consumer at both ends,” he said.
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