SÃO PAULO, Brazil — You hear about it at dinner parties and fashion events. It’s been the subject of countless magazine stories and news reports. Something special is going on in Brazil. And today, the momentum has nothing to do with cultural clichés like soccer and samba. Brazil is claiming its place on the global stage and interestingly, fashion is playing a major role in the country’s ascendence.
Significantly, the tremendous energy in Brazil’s fashion market is flowing from both inside and outside the country. For global fashion brands, Brazil is a land of opportunity. Just this year, Diane von Furstenberg, Missoni, Chanel, Gucci, Louis Vuitton and Burberry have made, or are making, large investments here, opening stores in major urban centres — mostly in São Paulo, but also in the capital city Brasilia, a fast-emerging market for luxury goods. Indeed, a spokesperson for Gucci told BoF that in 2009, their São Paulo boutique was one of the brand’s top performing stores worldwide.
But the signs of growth are equally impressive on the domestic front: amongst the so-called BRIC countries, Brazil is the only one with a major fashion industry of its own. There are countless Brazilian ready-to-wear and accessory brands which have been highly successful with domestic consumers and are now setting their sights outside Brazil.
After seeing Brazilian high-end boutiques and malls packed with customers who are actually spending, witnessing the creative energy and optimism at São Paulo Fashion Week, and speaking with several leading industry figures, there is no doubting it: Brazil is on fire.
But it’s also clear that the current boom has not happened overnight. Instead, Brazil’s rise as an important fashion market results from a complex set of interconnected conditions, many of which have been a long time in the making.
A Booming Economy
Undeniably, the primary force driving the current surge in the Brazilian fashion market is a healthy macroeconomic context. Brazil’s economy has been expanding steadily for years, a result of a stable political and social climate and long-term reforms set in place by the current and previous government administrations.
As much of the world slid into severe recession in late 2008, Brazil continued to expand. Indeed, according to Brazil’s national statistics agency, GDP grew a record 9 percent in the first quarter 0f 2010.
Amongst Brazil’s more than 190 million inhabitants, there have also been important demographic shifts. The distribution of wealth is changing: large swaths of the population have joined the middle and upper-middle classes. There has also been significant migration into urban areas. And despite reports in Women’s Wear Daily and elsewhere that growth may slow in coming years, the numbers are expected to remain promising enough to continue to fuel domestic demand and attract international brands.
The robust economy has, in turn, fed the country’s self-confidence. Whether at São Paulo Fashion Week, in the streets, or in the nation’s shopping malls, there is a palpable optimism in the air: Brazil believes in itself.
This hasn’t always been the case. When queried on the main factor behind her country’s current optimism, Erika Palomino, arguably the best-known fashion journalist in Brazil, pointed out that a new-found “self-esteem” is as important as the positive numbers: “Because we are a former colony, for a long time we didn’t believe in ourselves and always looked abroad, thinking other countries did things better. That has changed.” Indeed, winning bids to host both the 2014 World Cup and the 2016 Olympics have had a major impact in boosting the country’s sense of confidence.
The Advantages of Insularity: A Strong Domestic Market
Brazil’s growing national pride, combined with the country’s relative geographic isolation, has had a positive effect on the country’s domestic fashion market. Sara Andrade, the influential fashion editor of Vogue Portugal, thinks Brazil’s self-reliance is one of the country’s greatest assets. "One of the things Brazil has working for it is that it’s a country that really supports their own — their own production, their own artists, and even their own trade. That makes it less dependent on other countries.”
This plays out in the shopping malls, as well. Indeed, Brazilian consumers seem to bet on their own designers, as much as they do on foreign brands. Even those who can afford to buy from big European houses like Prada or Valentino, deliberately seek out Brazilian designers.
Because of strong and sustained internal demand, domestic fashion businesses that have been around for 5-10 years are now reaching a certain maturation point, expanding their reach with diffusion lines and new stores. Oskar Metsavaht’s wildly successful label Osklen is a good case in point.
Osklen offers well-made directional design that is wearable and thereby accessible to a wide audience. And even though it’s far from inexpensive (an Osklen t-shirt can cost 700 Reais, or almost US$400, while dresses and signature pieces often run much higher), the label’s clothes are still more affordable than foreign fashion, due in part to Brazil’s extremely high import duties. Indeed, to gauge the company’s success it’s enough to look down: everyone in São Paulo seems to be wearing Osklen shoes, easily recognizable by a stripe on their sole.
Osklen and other local labels are able to produce their goods using mostly domestic materials, which is not that surprising considering Brazil’s abundant natural resources, another factor that reinforces the country’s relative autonomy from external economies.
While it would be a stretch to say that self-reliance made Brazil immune to the effects of the global recession, it’s true that the country was far less affected by the financial crisis than other major countries in the global system. Indeed, while people in most nations were forced to consume less, middle and upper-class Brazilians held onto their buying power and consumption habits.
The Price Gap Effect
Andrade pointed out another interesting feature of Brazil’s domestic market: “Unlike [in] Europe or the US, where there are many high-street options like Zara and Mango, in Brazil most brands fall into two extremes: they have very low-profile brands like C&A, where you can get things of rather low quality at a really cheap price and, on the other end: designer brands, like Maria Bonita and smaller independent labels that offer good quality and design at a high price point.” What this means is that the consumer who wants good design — and that is the majority of middle and upper class Brazilians — has little choice but to buy from designers brands. In a way, the lack of affordable fashion options has forced consumers to spend on, and thereby support, serious domestic fashion labels.
The Cultural Advantage
Fashion also has a special place in Brazilian culture. It’s something of a national pastime and a topic of everyday household conversation, not just a luxury of the urban, privileged classes. Brazilians have also long had an appreciation for aesthetics and quality.
Richard Barczinski is general director in Brazil for Hermès and a luxury retail veteran — before joining Hermès, he was the CEO of jewelery juggernaut H. Stern. His work frequently takes him to Russia and China, giving him a unique vantage point from which to compare Brazil to other emerging countries. "In terms of potential, China maybe the champion because it is experiencing such tremendous growth and has such a huge population, but culturally Brazil may have an advantage because the consumer here is highly sophisticated and informed. People here appreciate not just the value of something expensive, but the value and pleasure of good design and materials.”
Other brands seem to agree. In a brief statement issued for this piece, a spokesperson for Gucci singled out the Brazilian customer’s “deep knowledge of hides” as an asset for the brand: “The more precious and exotic the hides, the more they are appreciated.”
Commenting exclusively for BoF, Eliana Tranchesi, owner and president of legendary Sao Paulo department store Daslu, confirmed that in Brazil “brands can spare the effort of building knowledge regarding new collections, style, product launches. As collections arrive to national stores, they already have an enthusiastic client base.”
A more informed customer is also a more demanding customer. In Tranchesi’s words, “today, the Brazilian customer knows exactly how much they are willing to pay for an item, how much it is really worth and the quality they expect to access in return for any investment in fashion.”
None of this means that international luxury brands do not face hurdles in Brazil. Clearly, structural changes are still necessary for the country to become a truly friendly environment for foreign fashion businesses. The main obstacle is Brazil’s exorbitant import duty that keeps most foreign luxury goods out of reach of all but the wealthiest consumers. Indeed, a thorough review of the country’s outdated tax structure is in order. Paulo Borges, president of Luminosidade, the company that produces São Paulo Fashion Week, adds that laws governing labour and pensions also need updating: “Brazil is at a very good place politically and economically, but these changes are necessary to enable the further development of the creative and design industries.”
But while challenges exist, there is little doubt that this is a tremendously exciting moment for fashion in Brazil. At BoF, we will be keeping a close eye on Brazil as this giant of the Southern Hemisphere continues to grow.
Suleman Anaya is a contributing editor at The Business of Fashion.