Esta la 2ª parte de una serie de 2 partes. Catch up by reading part 1 here.
Last week, we explored e-commerce opportunities now available to the luxury industry, and illustrated how luxury brands that expand internationally can win big.
Indeed, as a recent business feature in The New York Times reported, luxury retailers “have come to believe that the future of their business and a route to global expansion lie online.”
But which international online markets are worthy investments for luxury brands? We pick up the conversation today by identifying several. Omar El Ali, a Global Online Strategist for MotionPoint's Global Growth team, accompanies us on this illuminating exploration.
New Frontiers & Opportunities
In contrast to the challenging markets we identified last week, other emerging markets are thriving and "primed for luxury e-commerce initiatives," Omar says. The following four markets are largely untapped by the online luxury industry, have strong economies, and a demonstrated appetite for online shopping. For luxury brands, there's gold in these hills:
"Cheap oil prices might've deflated the economies of many BRIC nations, but not India's," Omar says. "Low fuel costs have positively impacted inflation and growth."
That bodes well for consumer spending – luxury e-commerce, especially.
India is in fact the world’s second-largest market, after China. Its population of 300 million Internet users is mobile-savvy: smartphone and tablet online use represents about 70% of the country’s Internet connections. E-commerce thrives here. The luxury e-commerce market will grow to $25 billion by 2016, according to one report, with a compounded growth of 25% annually.
Research indicates high-end apparel, accessories, watches and electronics is where most of the luxury e-commerce action will happen.
Better still, “the Indian online luxury market isn’t very competitive right now,” Omar says, “which can prove profitable for first movers.” Of the 500 leading international luxury brands, only 30% have a presence in India. (Compare that China, which has 70%.) Between the country’s blooming economic, rising middle class, and favorable regulatory environment and FDI rules, India is an ideal market for luxury e-commerce.
This might appear as an unlikely market, but Iran actually represents a huge opportunity, especially for first movers. Indeed, Tehran is now one of the world’s fastest-emerging luxury travel destinations. As Bulgari’s CEO Jean-Christophe Babin recently said, “It’s very wealthy, and you have a population in Iran which has been used to luxury. Iran will be the next big thing in the Middle East.”
Bulgari has plans to expand to Iran. And with good reason. Its population's disposable income is very high, compared to other countries. According to the International Monetary Fund, Iran's per capita GDP is $16,500. (This is more than China, India and Brazil - and during years of economic sanctions, no less!)
Combine the market’s high GDP, low competition, Internet penetration (55%), mobile phone penetration (126%), and its population’s hunger for luxury fashion, and you get “a pretty compelling recipe for e-commerce success,” Omar says.
Thailand is Southeast Asia’s largest luxury goods market. Last year, its luxury expenditures reached $2.5 billion.
Relatively low housing costs help spur luxury spending here, as does plenty of consumer disposable income: the largest share of Thailand's population (20.5%) is between 30 to 34 years old, and earn over $150,000 annually. Residents 35 to 39 years old account for 18.6% of the population, and are also increasingly affluent.
Internet penetration in Thailand is robust (54%), and mobile adoption is through the roof (150%). Our research indicates Thailand is poised to become one of the biggest m-commerce markets in Southeast Asia. (In fact, some analysts believe m-commerce is the “last explosive sales channel” for luxury retailers.)
“We believe huge potential exists for luxury goods players,” Omar says, “especially those that can persuade the many smartphone users who aren’t yet shopping online to hop onto the bandwagon.”
While other countries are struggling with economic recessions, Poland entered 2015 walking tall. According to Brookings, its “GDP per capita based on purchasing power exceeded $24,000 and reached 65% of the Western European (eurozone) level of income.” This is a greater economic achievement than you might think: it’s the first time Poland has experienced this kind of regional economic parity since the 1500s.
Next year, Poland's spending in the luxury market will be estimated at around $3.4 billion. Interestingly, its e-commerce spending will grow to $12 billion during the same time frame, suggesting clear overlapping opportunities for luxury e-commerce.
At 67%, Poland’s Internet adoption rate is very good, too.
“The Polish market provides an ideal frontier for clients who wish to enter an economically stable and safe central European market,” Omar says. (See our recent report on the V4 for more information on this thriving region.)
Should Luxury Forget BRIC?
With such stability and growth happening far from the borders of BRIC nations, it might be tempting for luxury brands to abandon any e-commerce plans for BRIC nations. We advise against this.
Even though Brazil, Russia and China are presently facing recessions, this economic turbulence will eventually pass. Further, shoppers embrace unconventional buying practices, which can generate revenue. "When companies provide e-commerce sites in international languages, they attract customers living all around the world," Omar explains.
For instance: We've found that a considerable number of savvy Brazilian customers shop for luxury fashion products on Portuguese-language websites operated by non-Brazilian companies. Why? "They do this to enjoy a better selection," Omar says, "and avoid high domestic luxury taxes."
And while the Russian market isn’t as strong as in years past, its neighboring Commonwealth of Independent state nations are. Shoppers living here speak Russian, and shop on Russian e-commerce sites. As noted in our recent report on Russia, one of our clients’ Russian e-commerce sites has generated over $8 million in revenue so far this year – not from Russia, but from customers in the Ukraine.
In light of its current economic and political struggles, China is a different story. Chinese customers are shopping outside China via e-commerce sites - and this applies especially so to luxury goods. Many Chinese are now buying their luxury products in South Korea. In 2020, Chinese luxury consumers will spend $29 billion at South Korea luxury retailers.
It's clear that now is the ideal time for luxury brands to take their e-commerce efforts to the next level and expand internationally. With global Internet and smartphone adoption skyrocketing, and B2C e-commerce sales hitting stratospheric heights year after year, luxury brands can ill-afford to sit on the sidelines.
Engaging these thriving emerging markets is a bold step in ensuring new customers and revenue streams … and immediate and sustained sales growth.
Are you with a luxury brand eying international online markets for expansion? Do you need help realizing your company’s global sales & marketing initiatives? Contacte con nosotros. We can help you enter these markets quickly and affordably, and generate an international success story.