SANTIAGO, Chile — As far as skyscrapers go, Chile's Gran Torre doesn't hold a candle to the Burj Khalifa in Dubai, or, indeed, to any of the heaven-hugging leviathans now soaring above cities in Asia. At a respectable, but uninspiring 64 stories high, Santiago's sleek new landmark just about squeezes onto the list of the world's 100 tallest buildings. But in its own neck of the woods, the Gran Torre can revel in its status as the tallest building in all of Latin America.
And with the Costanera Center shopping mall at its base, the tower's Chilean developers, Cencosud, can also boast that they've built one of the largest retail emporiums in the region, housing a veritable anthology of fashion brands, from Armani to Zara, under one sun-scorched roof, wedged between the desert and the Andes. But how is it that Chile, a sliver of a country just a couple of hundred miles wide, ended up with a trophy like this when six of its neighbouring countries – including powerhouse Brazil — dwarf the market in every conceivable way?
"You’re right, the Chilean market is small compared to other Latin American countries like Argentina, Brazil or Mexico. But we’ve had steady economic growth, a sense of security in day-to-day life and a very stable uninterrupted democracy, so this is one reason we’re seeing the development we now have," says Milena Vodanovic, chief editor of Paula, Chile's pioneering women's magazine, founded in 1967, which continues to be a leading source of fashion news in the country.
Besides the familiar story of rising incomes, swelling middle classes and the many obvious gaps left to fill in the line-up of international boutiques along its shopping thoroughfares, according to Vodanovic, there is something special going on that keeps luring big fashion brands to a small country like Chile.
"Many of the joint venture partners here are large conglomerates that can immediately provide a solid local customer base and [significant] advertisement investment, because they have been nurturing retail outlets of their own like department stores and malls for many years," explains the business-savvy editor who worked her way up from an entry-level position at Paula that she took twenty years ago.
"But that's not all. Many of these same big Chilean groups are investors in retail networks in Argentina, Peru, and Colombia, so in this sense they provide a safe bridge for approaching the region,” she continues. “Chile, then, becomes a nice, stable and trusted testing platform. By entering Chile, international brands can also try their luck in these neighbouring countries carried out safely by the hands of a Chilean partner who is years ahead of overcoming the problems and barriers still present in those other Latin American markets."
Almacenes París, for instance, is a department store founded over a century ago in Santiago, which now has over 30 branches dotted around the country with high-street and mid-tier concessions like Topshop, Esprit and Lacoste. It is owned by Cencosud, which in addition to its towering new landmark in Santiago, has over 25 other malls and several hundred supermarkets and hypermarkets in Argentina, Peru, and Colombia. At this scale and with this scope of distribution, Cencosud is effectively amongst the top three players in Latin America; the other two are giants from Brazil and Mexico: Grupo Pão de Açúcar and Walmart de México y Centroamérica.
But Cencosud is not alone among Chilean conglomerates — usually family firms or consortiums with parallel interests in media, banking or textiles — that have retail tentacles stretching into the markets of Chile's larger neighbours. Bethia, Corp Group/Corpbanca and Grupo Luksic are all significant players. Ripley is another. And the Falabella Group, which evolved from a lone tailor's shop in 1889 and is close behind Cencosud, operates over 30 branches of its Falabella department store and, through a subsidiary, over 10 Mall Plaza shopping centres.
In a bid to play catch-up with the others, Chilean mall developer Parque Arauco is ratcheting up investment in the next few months to complete what many consider to be the country's first dedicated luxury mall. Here, provisional tenants include Salvatore Ferragamo and Ermenegildo Zegna, among others, who will join the likes of Louis Vuitton and Hermès, already firmly planted in Santiago's wealthy Vitacura district along the Avenida Alonso de Cordova.
Fflur Roberts, head of luxury goods at Euromonitor International, says that, compared to the rest of the region, Chile’s "retail modernisation took root earlier than in the rest of Latin America, driven by [these] powerful local players."
What’s more, according to “Apparel in Chile,” a Euromonitor report published in April, amongst the country’s consumer population, which has a relatively high disposable income, per capita expenditure is expected to continue to rise. Youth demographics are also working to the advantage of the retail sector, with "40 percent of the population aged between 15 and 39, which is the most economically active and fashionable part." And perhaps most interestingly, the report's authors conclude that unlike many markets in the region, "Chilean apparel seems to [have been and remains] insensitive to the global economic crisis."
Indeed, Chile has been punching above its weight economically for nearly a generation, ever since the country first opened up to global markets at the end of the 1980s, when the dictatorship of Augusto Pinochet, who assumed power in a coup d'état in 1973, finally imploded. A landscape flush with minerals wealth and other commodities, a long bountiful coastline and more than two decades of political stability and fiscal prudence have all contributed to a retail environment that is positively tasty — if not mouth-watering — for many global brands.
Just ask analysts at management consultancy A.T. Kearney, whose 2013 Global Retail Development Index gave Chile a retail market attractiveness score of 95.6 out of 100 points. Among the 30 top developing countries ranked by the firm, only Brazil, with ten times Chile's population and GDP, scored higher. More telling for fashion brands is that the company's sector-specific Retail Apparel Index places Chile in the number three slot, behind China and the UAE.
When the Costanera Center in Chile’s Gran Torre opened last year, it attracted more than 700,000 visitors in the first week, "doubling the average number of weekly visitors to Parque Arauco or Alto Las Condes," according to Euromonitor. Equally impressive are reports from H&M of over 2,500 fans queuing for over 12 hours outside the brand’s newly opened store, earlier this year. "For almost two weeks it was impossible to enter the store, it was so full of people all the time," recalls Vodanovic.
But beyond the facts and figures, Vodanovic suggests, are deeper cultural forces behind Chile’s growing demand for fashion. More than ever before, fashion is being understood as a gateway for self-expression and individuality; not only a construct of class. "Culturally and politically Chile is changing," she says. "We used to have a very conservative elite which was the only one with any buying power and without any counterpart to the rules of their lifestyle. I remember in the 1990s we used to complain that Santiago was a very boring city where nothing happened. That's not true anymore. Now, there's truly a great cultural life here.”
“Ordinary Chileans now openly discuss edgy subjects with an open mind. The axes of power are changing,” she continues. “Discrimination, human rights, sexual minorities rights, animals rights, ecological issues all used to be taboo or subjects only raised only by minorities but are now part of everyone's agenda."
But because of Chileans' historically conservative approach to personal appearance, this new sense of openness isn’t reflected in what sells on the shop floor.
"Niche is still difficult in Chile,” says Vodanovic. “Personally, I love it but our national market is small and most consumers still tend to fall for the mainstream or what's trendy because retail selection imposes that on them. The biggest single growth area in the fashion market today is in the not-so-educated portion of the middle classes who are not inclined to experiment with edgy clothes."
As a result, concept stores and other specialist multi-brand retailers are far and few in between. And although the legacy of the country's textile and handcraft industries has brought about the emergence of a handful of noteworthy local designers, most remain on the fringes of the market. Even fashion e-commerce, Vodanovic says, is remains weak in Chile, in spite of high Internet penetration rates, because of worries about fulfilment.
Outside the capital, which accounts for about 46 percent of Chile's population, it’s even more conservative than one might expect. "Santiago is still a lonely king," she quips. "The provinces have not made the same upgrades in terms of understanding fashion. In the south, in Concepción and Punta Arenas, people are still buying with [old notions] of wearability like 'I have a pair of boots; I don’t need another,' whereas in Antofagasta, where there is a lot of money because of mining, miners’ wives have money to spend but no place to show the clothes they can buy, because there's lack of a cultural space to do so."
"Having said that, I dare say that, all in all, there's a big evolution [happening]. We're embracing our urban style tribes more and we can already see two other groups forming. One is wealthy people with an educated eye, still classic in style, but prone to [discreet brands] and noble textiles. On the other hand are the younger generation of the new middle classes, who fall for alternative design but don't have much money to spend. This a very creative group who now dress mostly at vintage stores, which, by the way, have been a great success recently in Chile," she adds.
"I think things will be changing even more quickly going forward and the only thing we can expect is further opening — both in terms of culture and fashion.”