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* Brazil, India tough markets to enter, luxury execs say
* Middle East is 4.5 pct of global luxury sales, but growing
* Van Cleef & Arpels, Hermes to expand in the Middle East
By Astrid Wendlandt
PARIS, June 15 Luxury groups discouraged by
thickets of red tape and taxes are putting on ice ambitions to
expand into India and Brazil and focusing instead on the Middle
East, their No.2 priority after fast-growing China.
Gulf countries represent a tiny pool of buyers compared to
India and Brazil but they offer low tariffs, a friendly business
environment, retail space and solid appetite for Western
upmarket products, luxury executives say.
In contrast, they complain of a shortage of retail
infrastructure in India, and other bottlenecks that make it
easier for wealthy travellers to buy luxury goods while flying
And Brazilians often prefer buying luxury watches and
handbags in Florida, Paris or London to avoid paying several
times more at home due to the high customs duties.
French luxury lobby group Comite Colbert, whose 75 members
generate about a quarter of world luxury sales, said luxury
companies struggled to enter both countries.
"For the moment, we consider India to be a market on
stand-by," said Comite Colbert Chief Executive Elisabeth
Ponsolle des Portes.
Custom duties are often more than 100 percent on luxury
products in India and Brazil, and sometimes as high as 300
percent. In India, tariffs can change depending on which region
the product is sold.
With regards to Brazil, duties depend on the customs
officer's interpretation of the rules, Ponsolle des Portes said.
Therefore, luxury groups are not hurrying to develop their
business in the country and the Comite Colbert plans to wait
until 2012 to help groups develop their presence there.
"This country (Brazil) has an important potential," said
Ponsolle des Portes. But "we are focused on the Middle East at
present... Comite Colbert members have identified the Middle
East as a top target."
She added that nearly all of the Comite Colbert's members
had a growing presence in the Middle East, aside from wine and
spirits makers "for obvious cultural reasons."
But in India, many luxury companies had a small presence,
she said, with Chanel and Louis Vuitton, for example, operating
mainly out of luxury hotels due to the shortage of retail space.
NO RUSH IN INDIA
Hermes, which opened a shop in New Delhi in 2008, sees India
as a long-term project. "I don't see India as a fire that will
take off like China did over the past 10 years. India will take
much more time," Chief Executive Patrick Thomas told Reuters.
Swiss watchmaker Blancpain UHR.VX this spring said it was
feeling slightly discouraged about entering Brazil and India.
"In India, we feel that if the state can do something to
make our life more complicated, it will," Mark Hayek, CEO of
luxury watchmaker Blancpain UHR.VX told Reuters this spring.
While in Brazil, Hayek said: "there is no guarantee our
products will enter the country as tariffs and rules change all
On the other hand in Dubai, there is no value-added tax and
companies can do business relatively easily, executives say.
But analysts warn Dubai is getting flooded with luxury
products, prompting distibutors and makers to expand their
presence in neighbouring cities and countries.
Rivoli Group, one of the biggest importers of luxury
products in the Middle East, said much retail infastructure was
now being made available in Abu Dhabi.
MIDDLE EAST BECKONS
Louis Vuitton, Hermes, Valentino, Van Cleef & Arpels, and
luxury face cream maker La Prairie, are among many luxury groups
who regard the Middle East as their main focus after China.
"Definitely, the Middle East is our No.2 target after
China," Valentino Chief Executive Stefano Sassi told the Reuters
Global Luxury Summit earlier this month.
Valentino, which has shops in Abu Dhabi, Doha and Dubai,
said it looking for new partners in the region.
The Middle Eastern luxury market is worth about 7 billion
euros ($8.53 billion) in annual sales, which is about 4.5
percent of world sales, estimates London-based broker Bernstein.
In comparison, the broker calculates that India represents
only 0.5 percent of global luxury sales and Brazil 0.7 percent.
For jeweller Van Cleef & Arpels CFR.VX, about one-fifth of
total sales are made to clients from the Middle East.
The jeweller, which started operating in the Middle East
five years ago, said it planned to open two shops in Kuwait this
year, one in Qatar and another in Abu Dhabi.
Marie Girardot, Van Cleef head of Europe, Middle East and
CIS, said every market was different, with for example Saudi
Arabia more sensitive culturally than the United Arab Emirates.
Hermes, which is keen to expand in the Middle East, said it
planned to open a store in Beirut in July and next year one in
Kuwait and in Abu Dhabi. It makes only 2.5 percent of its sales
in the region.
Bernstein calculated in a recent note that Abu Dhabi, Dubai,
Manama in Bahrain and Doha in Qatar had developed a higher
luxury retail point-of-sale density than Seoul and Tokyo.
(Additional reporting by Silke Koltrowitz in Zurich and
Tamara Walid in Dubai)
(Editing by Sitaraman Shankar)