Revisiting the BRICs
Following the market upheaval that began one year ago, each of the BRIC countries needs to be considered one by one.
It’s been nearly a decade since Goldman Sachs first anointed the so-called BRIC countries — Brazil, Russia, India and China — promising uninterrupted growth and development for the global economy, based largely on the huge populations, vast resource base and sheer geographic scale of these new powerhouse economies. With a surge in wealth and growing consumerism, the BRIC markets were at once the greatest opportunity and greatest challenge facing the luxury industry at large.
Fast-forward to October 2008 and the onset of the greatest economic crisis in a generation. Some economists were espousing the theory of “decoupling”, which asserted that emerging economies would continue to plough ahead unabated (albeit, at a slower pace), while those of the industrialised countries, mired in a financial crisis that killed consumer confidence and credit markets alike, stagnated or, even shrank.
In fact, things did not play out that way. Stock markets and consumer confidence in the BRIC countries plummeted as they did elsewhere, and decoupling was very much in doubt. The global economy, it seemed, was much more interconnected than had previously been thought, and the US banking crisis quickly became an economic pandemic to which no nation was immune.
Then, something unexpected happened. In early 2009, some emerging economies, in particular China and Brazil, continued to grow, partially boosted by economic stimulus packages concocted by national governments intent on maintaining sky-high GDP growth and economic development. Russia, on the other hand, suffered a dramatic decrease in wealth, while India, previously touted as “the next China”, turned out to be the farthest thing from it, with ongoing cultural, infrastructure and regulatory issues holding the country’s luxury industry back.
It soon became clear that the BRIC markets, which may have nattily been grouped together by Goldman Sachs, actually had their own responses to the market upheaval and needed to be considered one by one.
The BRIC economy that received perhaps the least attention from luxury brands in the pre-crisis world. No more. Today, Brazil is in laser-focus as the global luxury industry has taken notice of its relative market buoyancy in contrast to the other BRICs.
In India, however, the mood is decidedly less jubilant for international luxury brands — at least in the short term. Some brands are still smarting from ill-advised partnerships and retail expansion, while others are concocting new strategies and aproaches for India, a country with its own tradition of luxury and great cultural pride.
a long-term approach is also appropriate for Russia, where a massive contraction of wealth has left some local luxury groups in economic distress and their international partners, like Alexander McQueen and Stella McCartney, in rapid retreat.
As for China, the one great short-term hope for luxury in the emerging markets, things are a bit more complex than they seem on the surface, according to W. David Marx. And finally, Robb Young looks beyond the BRICs to investigate the other emerging markets that may hold promise for the luxury industry as the Noughties come to a close.
by Imran Amed