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  New Order accessories Winter 2012 | Source: BoF

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  Boys playing in Santa Teresa | Photo: BoF

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  Sandy sidewalk on the edge of Ipanema Beach | Photo: BoF

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  Fabrica in Lapa district | Photo: BoF

RIO DE JANEIRO, Brazil – Arriving in Rio de Janeiro in the middle of the Brazilian summer, in a country experiencing an ongoing economic boom, certainly puts the bleak, uncertain economic outlook of wintry Europe and North America into sharp relief.

I was invited to Brazil on the generous invitation of ABIT, the Brazilian Textile and Apparel Industry Association, to attend Fashion Rio, the smaller of two semi-annual fashion events just concluded in Rio and São Paulo this week. And as ever on my trips to international markets, it was the perfect opportunity to explore firsthand one of the fastest growing luxury markets in the world, to see some local designers, and to get to know the local BoF community as well. Brazil ranked 13 on our list of countries with the most BoF readers, based on website traffic in 2011.

I came to Brazil with three questions on my mind: what are the prospects for the Brazilian luxury industry, what’s it like to do business here, and who is the Brazilian consumer?

HOMEGROWN LUXURY

With a population of 190 million people – the fifth most populous country on the planet – for years, Brazil received little attention from the international luxury goods industry, which was content to serve the market through other channels, primarily via licensing and franchises.

For years, Brazilians also simply bought luxury goods from their friends, who imported luxury products in their suitcases from their trips abroad. This is how the São Paulo-based luxury emporium Daslu is said to have been founded, before growing into the beacon (and then target) for a superrich elite in one of the world’s most unequal countries.

On my last visit here in December 2007, Brazil had yet to welcome stores from major international luxury brands like Prada, Hermès and Bottega Veneta. But all of this has changed. The aforementioned brands have recently opened new stores in Brazil and more than 30 other new retail openings are expected to follow in 2012, Carlos Ferreirinha, president of MCF Consultoria & Conhecimento, a São Paulo-based retail and luxury consulting company, told WWD. In short, the luxury retail landscape is being completely redefined.

This seems well-timed. The number of millionaires in Brazil is on the rise, spurred by a commodities boom and new oil discoveries, and is predicted to surpass 1 million by 2020. Property prices in Rio De Janiero are sky-rocketing. Meanwhile, this year, the Brazilian luxury goods industry is expected to grow to more than $12 billion. In comparison, there is also a thriving homegrown apparel and textiles industry, valued at more than $60 billion, with only $1.5 billion going to exports.

Brazil’s answer to LVMH and PPR is In Brands, a multi-platform “consolidation of lifestyle and premium fashion brands – the iconic brands – in Brazil,” but relatively unknown outside the country. These include high fashion line Alexander Herchcovich, menswear lifestyle brand Richards, swimwear label Salinas, online website FFW.com.br, and the branded fashion weeks organised by Luminosidade in Rio de Janeiro and Sao Paulo, whose fashion week is touted as the fifth largest fashion event in the world.

But the Brazilian fashion brand with greatest international visibility (if not sales) is Osklen, built around the relaxed lifestyle of Rio, founded in 1989 by orthopaedic physician Oskar Metsavaht. With 63 stores in Brazil and 10 stores and growing abroad, Metsavaht’s business is estimated to turn over between $170 to $230 million each year. Reports in Brazilian and international business media say that a majority stake in the Osklen business is currently for sale, with LVMH and PPR as two of the potential suitors.

BYZANTINE BUSINESS ECOSYSTEM

But beneath this glossy surface is a complex market with a complicated future. Despite the sense of optimism, the Brazilian economy has actually been slowing down. After rapid GDP growth of 7.5 percent in 2010, growth fell by more than half in 2011, to about 3 percent. Consensus forecasts peg 2012 growth to be slightly more than this. The spectre of a Brazilian bubble is debated in the financial newspapers.

Many local business people also complain that the Brazilian market is impossible to navigate. The country was ranked 126 in the latest “Ease of Doing Business,” report published by the World Bank in June 2011. As one expat described it to me, Brazil will welcome you with open arms, but when you actually try and do business here, you will eventually find yourself stuck in a morass of government bureaucracy, corruption and an incomprehensible system of taxation.

Indeed, nobody could definitively explain to me the country’s byzantine tax system. According to Rafael Cervone Netto, chief executive of Texbrasil, a textile and apparel industry export program, tax rates differ depending on the product category, the state into which the product is imported, and where the product is purchased, resulting in more than 300 different tax positions within the textile and apparel sector alone. What’s more, these tax policies are constantly changing, at multiple levels of government. A staggering 38 percent of Brazil’s GDP is comprised of taxes, versus 8 to 20 percent for other countries, Mr. Netto said.

Not only does this make Brazil extremely difficult for global luxury brands to manage, it also makes imported products as much as two or three times more expensive than in their home markets. According to Jenny Barchfield, fashion writer for the Associated Press, “at the Burberry store in Sao Paulo, a trench coat that retails on for $915 on its UK website was selling for 3695 reais, or $2075,” or more than twice as much as it costs in the UK.

WHO IS THE BRAZILIAN LUXURY CONSUMER?

All of this begs the question: who exactly are these Brazilian luxury consumers and why are they willing to pay such outrageous prices? Why don’t they simply shop abroad like their counterparts in China and India?

Brazilians do shop abroad, particularly in Miami or New York, but contrary to popular opinion as gregarious people, they “tend to be shy and prefer to buy at home because they are more comfortable here, where they can speak in Portuguese” said Graça Cabral, a director of Luminosidade. Customer service is also a magnet for shopping. In Brazil, clients have close relationships with their favourite sales people, who constantly feed them information.

On the recommendation of a Brazilian friend, I flicked on the television in my hotel room one night to watch Mulheres Ricas, or ‘Rich Women,’ a new reality TV show based around the lives of extremely wealthy women in Rio who apparently have nothing to do all day but flaunt their designer dogs and Birkin bags. One character named Brunete Fraccaroli, with her blown out hair and extreme plastic surgery, spent much of the episode clutching a Barbie-style doll, of herself. As it turns out, the doll was a gift from Mattel, who bestowed her with this honour.

Are these the kinds of consumers snapping up luxury goods at inflated prices in Brazil? Not entirely, said Monica Mendes, founder of the country’s leading lifestyle public relations firm that has worked with Daslu, and global luxury brands like Hermès, Chanel and Prada. “Of course we have these kinds of clients, but these are the very new rich, who want to show everything,” she said.

And then it came out. “The woman in Brazil is completely crazy,” said Mendes enthusiastically. “She is completely fashion-oriented. She knows everything about fashion.”

These women, said Ms. Mendes, follow American Vogue as much as they follow Brazilian Vogue. They see all the same editorial and advertisements at the same time as the women in America. “They tear out the pages, mark them with post-its and send them to sales girls who bring it all to their homes.”

“We like fashion,” agreed Ms. Cabral. “It’s a media phenomenon in Brazil. It’s not like [this] anywhere in the world. You see fashion on television, in every kind of slot and programme. You see fashion in all the newspapers. You see fashion in magazines — even magazines that are not fashion magazines.”

But still, how can they afford it? Luxury prices in Europe and America are already stratospheric, but in Brazil they are in another galaxy. “We’ve had a lot of economic crises. We’ve changed our [currency] I don’t know how many times,” recalled Ms. Mendes, and with no irony added: “The Brazilian people are very creative with money.”

You see, in Brazil you can buy everything by payment plan, even luxury goods from Chanel and Hermès. You can pay for your tweed suit in four payments or pay for your luxury handbag in seven installments, and so on. Depending on the kinds of stores you’re visiting, and how much you’re spending, you can split your payments into smaller and smaller chunks.

More than one expert suggested that these payment plans are also a convenient way for women to disguise their luxury purchases from their husbands, splitting up payments across credit cards, cheques and cash.

“We like to dress up. It’s different from other cultures. Maybe more similar to the Arabian culture,” said Ms. Cabral. “Don’t forget, we come from Indians and Africans, and all of them like to wear things and decorate themselves. It’s part of our DNA. It’s there.”

“We want to be cool and have everything that everybody has. We want to wear the Brazilians, but also the international designers,” she added. “We have more and more consumers that want [to buy] quality as well, who are more demanding. And even if you can buy a bag from a Brazilian designer that is 2,000 reais, or a bag from Balenciaga that is 2,000 euros, they prefer [the latter],” she said.

“It brings status as well, because they need that too.”

Imran Amed is founder and editor-in-chief of The Business of Fashion

Lucas Nascimento’s A/w 2011 at Fashion Rio | Source: FataleFashion

SÃO PAULO, Brazil — “I didn’t even know international trade fairs existed when I set up my business in 2003,” admitted Alessandra Migani, founder of Brazilian designer label Alessa. “I got a phone call from ABIT (the Brazilian clothing and textile association) telling me they wanted to show my collection at trade show Simm in Madrid,” she told BoF from her stand at womenswear show Who’s Next in Paris earlier this month, where she was showing her Autumn/Winter collection. Fast forward to 2011 and Ms Migani now sells her brand to some 30 countries and boasts an impressive list of stockists. She also shows at Rio de Janeiro’s fashion week, Fashion Rio.

With Brazil’s huge domestic market, most of the country’s fashion designers — save for a few international success stories like  Osklen and Carlos Miele — had been quite content to live in their South American bubble. Then while the US, followed by Europe, hit financial meltdown in 2008, Brazil was still sitting pretty on economic growth. Suddenly, all eyes (and not just those in fashion) were on a country that, until then, had been largely synonymous with football, bikinis and samba. Suddenly, more emerging Brazilian fashion designers, operating both inside and outside the country, had a tremendous opportunity to be noticed on the global stage.

So, while once upon a time, the country was mostly known for its manufacturing capabilities, today, international press and buyers are focusing their attention on Brazil, eager to uncover fresh design talent. “Some people still tend to think of swimwear, but that’s just not the case anymore,” said Jessica Bumpus, fashion features editor of Vogue.co.uk, which covered the two major Brazilian fashion platforms São Paulo Fashion Week and Fashion Rio for the first time last season. “What’s great about Brazilian fashion is that it’s fresh — some ideas we may have seen elsewhere in the past, but here they are done in quite a different way.”

But while Brazil’s relative youth in the global fashion market may have its advantages, emerging designers here still face significant cultural obstacles that they must overcome if they are to succeed internationally. “Brazilian fashion designers rarely break through in the US and UK because of language and cultural barriers,” explained Scott Mitchem, a US-based journalist who writes about Brazilian culture for Wallpaper and The New York Times. He advises designers to ramp up their PR efforts by building a team that understands the culture in both Brazil and export countries, and points to established brands such as Osklen and Lenny Niemeyer as role models.

As the Brazilian fashion weeks’ Autumn/Winter 2011 editions draw to a close, it is those designers who combine creativity with commercial nous that the global fashion industry should keep a close eye on. BoF spoke with a number of editors, buyers and other experts, both inside and outside the country, to suss out the top new names on their Brazil fashion radar.

RIO DE JANEIRO, Brazil — While Sao Paulo Fashion Week kicked off on Friday, the industry’s eyes have been on Brazil and its booming fashion sector for a few weeks already, specifically on Rio de Janeiro and its own designer showcase, Fashion Rio. The weeklong run of shows in the country’s second city traditionally precedes the higher-profile Sao Paulo collections. And in the first month of the new decade and with an increasingly competitive and crowded calendar vying for the attention of busy editors, the pressure was on for Fashion Rio to justify its existence.

Some voices have called for a consolidation between Sao Paulo Fashion Week and Fashion Rio. Others said that the fabled vacation and cruise destination should stick to what it does best, namely beach and casual sportswear. Even the event’s organizers, Luminosidade, signaled that it might be time for a refocusing: in a press conference held last fall in Paris, the organization’s president Paulo Borges promised to transform the week into a first tier platform where international designers would present their resort collections, a laudable if overly ambitious plan that, if it comes to fruition, may take years to implement.

Nonetheless, the real and positive news is that none of the drastic prognostications has, yet, come to pass. Instead, Fashion Rio wrapped up last week after one of its strongest seasons in years. In what seemed to be a concerted, silently agreed upon effort, the over two dozen designers that showed their Winter 2011/12 collections to an international audience proved that a radical organizational reinvention isn’t necessary to make a strong case for Fashion Rio’s continued importance. The overall message was that Rio de Janeiro is moving away from bikinis towards sophisticated sporstwear and doing it with unexpected self-assurance.

Among a motley (and admittedly uneven) assortment of shows, there were more than a few that would fit right in on the runways of Sao Paulo — and, in some cases, New York or London.

Logistically, Fashion Rio is already on par with these fashion capitals, with shows running on time and production values professionally high across the board. But a well-run week of fashion shows would matter little if what was presented didn’t measure up or have global relevance. Indeed, a few convincing trends prevailed at Pier Maua (a picturesque stretch of the city’s harbor where the shows take place) that are sure to reverberate on the international runways in the coming months.

To this observer, the biggest news from Fashion Rio were unequivocally bold prints. Strong fabric patterns were on display in a number of collections, most notably Márcia Queiroz, Alessa, Cantao and in the Pendleton-inspired guys-and-girls showing of British Colony. What made these prints fresh was their innovative application, particularly the way summery designs, even florals, were applied — and looked right — on warm, often layered fall-winter pieces.

Well-chosen prints were also a key factor in the success of the collection presented by designer Andrea Marques, perhaps the standout show of the week. The well-edited presentation worked on every level, offering a modern, chic and wearable women’s wardrobe that managed to be, all at once, reminiscent of the pre-1990s heyday of American sportswear, perfectly contemporary and somehow Brazilian in sensibility.

Ms. Marques’ collection delivered the definitive proof that, after this season, it will be hard to question Fashion Rio’s raison-d’etre. If anything, we may hope for a further qualitative and quantitative tightening of the schedule so that the event does not overlap with the Milan men’s shows like it did this season, to the chagrin of many international editors who had to leave one of the world’s most beautiful cities a few days early.

Suleman Anaya is a contributing editor at The Business of Fashion.

São Paulo Cityscape | Source: Superfuture

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.

National Optimism

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.”

Remaining Barriers

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.

As friends told us over dinner last night, nobody is thinking about recessions or credit crunches here. The Brazilian economy is on fire and the top end of the market in particular is being fuelled by cash generated from a record number of IPO’s on São Paulo’s stock market. There are months-long waiting lists for Porsche Cayennes and executive helicopters, which jet the well-to-do from home to work to play, thereby avoiding the traffic gridlock in the heaving city below. Today, the size of São Paulo’s private helicopter fleet is thought to be one of the largest in the world.

One of the many city’s many helipads is at Daslu, the cavernous multi-brand emporium carrying everything from Chanel and Vuitton to Gap and Banana Republic. As we waited in the main entrance area for a Daslu PR to take us on a tour organised Monica Mendes, Daslu’s Director of International Marketing, we saw streams of well-dressed women with two thousand dollar handbags coming in, and then leaving laden with shopping bags.

The much-discussed women’s only department was off limits to us, but locals who have experienced it say that many customers head to the salon first in order to look their best when trying on clothes in this exclusive part of the store which has no fitting rooms. Women must doff their clothes in the open while others examine the merchandise and steal glances of their shopping companions in the buff. Everything is on display.

However, Daslu’s stranglehold on the market may be loosening somewhat, as Paulistas now have more choice than ever. While Daslu was once the only place to go for a spot of luxury therapy, international brands have been aggressively setting up shop around the ritzy rua Oscar Freire and in the Iguatemi shopping mall.

Still, what really sets Daslu apart is its impeccable service, a point of difference it shares with other world class luxury stores like Bergdorf Goodman in New York and Isetan in Tokyo. As we toured Daslu, we saw an army of valets at the entrance speeding off to park the vehicles of arriving customers. Assistants dressed in black-and-white maid outfits were feverishly folding clothes to keep the store looking its best.

Best of all, personal shoppers were selecting product from throughout the store to cater to customer requests on for an evening gown or a suit for an unexpected important business meeting. These savvy women are not your average salespeople. Their prominence on São Paulo’s social, cultural and political scene rivals that of their wealthy customers. Daughters of governors, heiresses to industrial fortunes and local socialites provide priceless style advice to those who are less able or too busy to throw the perfect outfit together.

Who better to give style advice than people who really understand that helicopter world that these women live in?