Brazil is more than just football!
Interesting fashion can be found in every corner of the globe and Brazil is no exception. Compared with China, Brazil has had far less attention from global brands. But that’s changing.
As I’m typing away on my flight from Rio de Janeiro to Sao Paulo and reflect on my trip so far, it becomes more and more apparent that the fashion industry here is set to explode in more ways than one. It is primed to be both impacted by global forces as well as make an impact on the world stage with more than just flip-flops and bikinis.
“B” as in BRIC
Brazil is the fifth largest country in the world with 200 million people, half of whom are under the age of 30. It is becoming more urbanized as millions of people have transitioned from poverty to the middle class. Brazil has a $54 billion apparel market that’s expected to keep growing, and by 2020, almost half of apparel spending will come from its smaller cities.
The country is ripe with opportunity. But big, global brands must make note of certain realities when evaluating growth prospects in this region. Brazil has a long and rich culture, with very distinct regional differences —from the German influence in the South, to the free and laid-back attitude of Rio, to the rain forest.
Morphologies all vary widely. While there are plenty of J-Lo curves and health conscious people to be found, not everyone has Giselle’s slim, model perfect body. Men dress smartly and women go to great lengths to emphasize curves on the lower half of their bodies with less attention paid on top.
Inversed seasons—and yes, it does get very cold—mean that to serve Brazil apparel needs well and better targeted fashion collections. And stilettos? Forget them! I learned very quickly that they are for indoor use only due to the mosaic stonework in the sidewalks and the steep hills. If there is an enterprising shoe company out there, Brazil is surely a huge potential market for pliable, lightweight ballerina shoes that can be stowed away in a purse after arriving at one’s destination.
The retail market is still relatively undeveloped, with a low number of square feet of physical store space per capita — estimates indicate that it is around 10% or less. And here’s the good part: Brazilians love to shop and they love fashion.
Going to the mall is still fun here; it is to see and to be seen. The shopping experience is much more than just purchasing goods; as Carlos Jereissati Filho, president of the Iguatemi Group once said, “Service has become a crucial factor in Brazil.” That being said, based on my retail experiences here, there is a lot of room for improvement in this area, as the sales people in stores seem disinterested in the customers.
High taxes and complex governmental administration requirements make Brazil a daunting region. Euromonitor International estimates that apparel vendors pay an estimated 35% in taxes on their products, compared with about 8% in the US. Import taxes can mean another 35% for those retailers shipping their products into the country. Brazil is one of the costliest regions for manufacturing, and there is talk of an impending economic slowdown.
It can be difficult for international brands to build up a presence here when facing this type of tariff environment, not to mention the language barriers. Brazilian, they assure me, is not the same as Portuguese. Regardless of these complexities, people are optimistic and positive.
Global Brand Vacuum
Despite entries by Gap, Desigual, Top Shop, Forever 21 and top luxury brands, Brazil still lacks many of the popular global brands available in other emerging markets. Uniqlo and H&M, for example, have not yet made their entrance—but will be doing so soon. Foreign brands in Brazil are often expensive, costing upward of 50% above the retail prices of comparable items in the US. One thing of note: after wading through approximately 20 local brands, based on the labels, we only saw three countries of origin: Brazil (the majority), China (goods that leaned toward basics) and India (pretty much beadwork or embellishments only). Brazilian fashion brands dominate this market. They are fun. They offer decent quality, great colors and are not the same stuff that we find over and over everywhere else in the big box, homogenized stores. Animale, Dudalina, and Lança Perfume, among others, have grown significantly within the country. C&A and Zara both design and produce here, no doubt to cater to the local tastes and sizes, but also to be able to turn over trends quickly. Brazilians are very trendy, fashionable people on the whole. But watch out; the styles and cuts are unique to the area so setting up a local design (and sourcing office) is likely needed.
Brazil’s Apparel Evolution
One of the unique things about fashion in Brazil that could potentially do well on the world stage is that it is still relatively vertically integrated. There are more than 26,000 fashion and apparel companies including big groups like Malwee, Guararapes/ Riachuelo, Lunander, Grupo Kyly and Hering, all hailing from the south, that produce textiles and apparel. These guys also have their own brands and run their own retail operations.
Brazilian companies are becoming increasingly modern and cutting edge. In fact, every company and fashion school that I ran into during my 12-day trip (including the busiest trade show I have seen in years, four domestic flights, a bus ride and numerous treks by car and foot) is undergoing some sort of modernization. There are many environmental and corporate social initiatives already in place, and several companies are implementing lean manufacturing programs (or have already done so). In case you are wondering, many of these companies are privately-owned family businesses that have set out a charter of slow and steady growth. Keeping it in the family, they have consistently reinvested back into their businesses and their people.
One caveat is that fashion education is currently a weak point, although the schools are full of young fashionistas wanting to study design, since it’s a much more glamorous profession than patternmaking or production. But there are strong signs that the government is stepping in to help sustain the industry. Senai Cetiqt, in Rio de Janeiro, is undergoing a major transformation. The school offers an end-to-end education including fashion and textile design and apparel production (and everything in between). It is becoming a technology showcase for the industry, undergoing a $30 million update.
So, what’s next? Brazilian brands could very well be eyeing expansion on a global scale. Brazil’s knowledge base and manufacturing infrastructure, combined with its unique cultural identity and creative aesthetic, give it a potential that we haven’t found in other regions of the world.
And for those global brands eyeing Brazil as a source of growth, they must take note that Brazil is a large, diverse nation. Its citizens are hungry for global brands, but they must be served with relevant, differentiated products. Companies must maintain a keen eye to this reality, adjusting the brand positioning appropriately and tailoring product to the needs of such a dynamic population.
They must also decide if local production or partnership with a domestic player makes sense, and whether to explore the growing but relatively untapped e-commerce market.