SÃO PAULO, Brazil — In emerging markets like India and China, luxury shopping malls have often struggled to successfully take root. Quality and execution issues have plagued many of India's new shopping centres, while, apart from the very best developments, many of China's large-scale malls are often worryingly empty. But despite the fact that the sun is always shining and the breeze is always blowing, Brazil's luxury malls are booming.

Although overall economic growth in the country is slowing, Iguatemi Empresa de Shopping Centers, one of Brazil’s biggest mall operators, expects net sales to rise 25 to 30 percent in 2012, according to its first-quarter earnings report, released last month, and plans to open or expand eight malls by 2015.

Here in São Paulo, the recent opening of the $154.8 million JK Iguatemi mall, the Iguatemi Group's thirteenth in Brazil and third in São Paulo, sparked a frenzy amongst the city's upper and middle classes. The hotly anticipated new mall — which opened two months later than expected after Iguatemi ran into trouble obtaining local permits to build new access roads capable of handling an expected 20,000 shoppers a day — is the veritable talk-of-the-town, not least because the complex houses South America's first Lanvin, Van Cleef & Arpels and Topshop stores, alongside offerings from Burberry, Bottega Veneta, Chanel, Dolce & Gabbana, DVF, Prada and Tory Burch.

"Every time we hit a new market, we adapt to local culture," Daniela Valadão, brand manager of Topshop in Brazil, told BoF. "In Brazil, people are much more used to going to malls than shopping on the street. Therefore, we decided to open our first shops in Brazil in malls," she continued.

Indeed, such has been the success of Brazil's mall culture that brands such as Marc Jacobs and Giorgio Armani have gone so far as to close their freestanding stores in Jardins, a high end shopping district in São Paulo, and reopen in malls.

But why do Brazil’s malls work so well?

"Malls are a success in Brazil because of many different factors ranging from the lack of department stores to convenience, parking and security," Carlos Jereissati Filho, president and CEO of Iguatemi said in an in-depth interview with  BoF.

CONVENIENCE, PARKING, AND SECURITY

Alongside factors like convenience and parking, security is a major issue in a country where, despite economic progress, crime rates are still extremely high. In 2011, according to official government records, Brazil had the third highest crime rate in South America, just behind Colombia and Venezuela.

As a result, luxury malls have replaced streets for many members of the upper and middle classes, becoming full-fledged lifestyle centres where you see families walking together, street fashion and teenagers hanging out with their friends. Even Hèrmes, which attracted attention for opening India’s first freestanding luxury boutique in Mumbai’s Horniman circle, opened its first Brazil store inside the Cidade Jardim mall.

"Brazil is a very peculiar and interesting country, especially when we deal with the luxury market. The decision [by Hèrmes] to open the first store in a shopping mall has a lot to do with Cidade Jardim's profile [amongst Brazilian consumers]. It has managed to unite the customer's desire for an exclusive environment with the needs of convenience, security and easy parking," said Maria Luisa Pucci, director of retail operations at Cidade Jardim, a large luxury complex that opened here in 2008 and houses brands like Chanel, Prada, Louis Vuitton, Emilio Pucci, Jimmy Choo, Rolex, Zegna, Salvatore Ferragamo and soon, Valentino, Dior, Cartier, Balmain, Tod's and Miu Miu, alongside luxury offices, gym and spa facilities, and residential apartments.

MUCH MORE THAN SHOPPING

Brazil's upscale malls typically offer a wide range of services and entertainment that goes far beyond shopping alone. "Paulistas are used to going to malls for shopping and entertainment and they appreciate the high-end environment offered by us with great restaurants and the presence of strong anchors such as gyms, state-of-the-art movie theatres, high-end international brands, beautiful landscaping and green environment," said Robert Bruce Harley, director of JHSF, the real estate development, retail, and hotels group behind Cidade Jardim, referring to residents of São Paulo. "Other services, in general, for example, concierge, personal shoppers, and personal chefs are also very much valued," he added.

On two sides of the river Pinheiros in São Paulo, Cidade Jardim and JK Iguatemi are symbolic of the rising competition between the country’s two major mall developers, who are constantly trying to outdo each other by offering customers additional attractions.

“A shopping centre needs to provide much more than just shopping options,” said Jereissati. “Customer loyalty in Iguatemi succeeded because we offer unique services, such as Iguatemi One or VIP cinemas. We were the first to offer customers services such as concierge and personal shopper — and we innovate to continually bring new events and exhibitions of fashion and culture,” he continued. “The mission of a mall is to constantly amaze customers and this has been the reason for our success.”

In past seasons, Iguatemi has hosted fashion shows for São Paulo Fashion Week, trend presentations for international bureaux, special cocktails, book launches, art and fashion exhibitions and more. JK Iguatemi even has the first “4D” movie theatre on the continent.

SUPPORT FOR INTERNATIONAL BRANDS

There is also strong competition between JHSF and Iguatemi for international brands entering the Brazilian market and both of the groups offer these brands significant local support in return for their business, which in turn attracts consumers. Dealing with the country’s import laws, for example, is no easy task and malls have become local consultants of sorts.

This sometimes means that brands are loyal to a single mall group as they pursue expansion. For example, international luxury  brands such as Diane von Furstenburg, Christian Louboutin, Hèrmes and Pucci have all inked exclusive deals with mall developers. But others like Prada, Armani, Louis Vuitton and Gucci are expanding through both the Iguatemi and JHSF groups.

But when planning expansion further into Brazil, fashion companies should proceed cautiously, advised JHSF’s Harley. “Brands must be careful when analysing expansion plans for the entire country,” he said. “São Paulo is still the luxury hub in Brazil comprising almost 70 percent of the country’s luxury market.”

So which is the most successful mall in São Paulo?

Even with strong competition from Cidade Jardim and the new JK Iguatemi, São Paulo's luxury shopping mall pioneer, the original Iguatemi, offers the familiarity and history that many affluent Paulistas like and still generates the best sales per square metre in the country for most of its retailers. Indeed, at last year's IHT Hot Luxury Conference, held in São Paulo, Diane von Furstenberg revealed that, sales revenue at her store in the original Iguatemi mall ranks second only to that of her New York flagship.

Still, heavy local taxes mean consumers can pay twice as much for the same handbag in Brazil as they would in the US or Europe and, for this reason, wealthy Brazilians sometimes choose to do their shopping abroad. “Since Brazilians are travelling overseas more and more, it is extremely important to have competitive pricing in the Brazilian branch,” said Harley. “Forty to 50 percent [higher] compared to US or European prices would be more acceptable,” he estimated.

But despite this issue, there is momentum building in Brazil’s local luxury retail sector. “Brazilians are choosing to buy locally primarily due to high quality service and the availability of payment plans. Service is a very important differentiator in Brazil. Sales staff go the extra mile to satisfy customers,” observed Harley.

And as Brazilians continue to spend more and more at home, one thing’s for sure. They’ll still be heading to the malls.

Jorge Grimberg is a Brazil-based writer and the marketing director for Stylesight.com in Latin America.