Luxury Market Strengthens FootholdWed, 05/08/2019 - 09:58
Mexican consumers increasingly have a taste for the luxurious lifestyle and high-end brands are taking notice. “Mexico has become one of the main markets for luxury products,” says Guillermo Ordóñez, Regional Director of Mexico and Latin America of Inspirato. The glaring factor behind the market’s success in Mexico is the growth of the upper and middle classes.
INEGI data show that in 2014, almost 16 million families belonged to the middle class. Although there has not been a significant increase in salaries, INEGI’s figures show that consumption represents 30 percent of families’ income. Moreover, the data shows that credit for consumption has increased steadily over the years, reaching a historic mark in 2017 of almost MX$900 billion (US$47.8 billion), up from the MX$44 billion (US$2.3 billion) registered in 2000.
According to Deloitte’s Global Powerhouses of Luxury Items 2018 analysis, the country is the most attractive market for luxury brands in Latin America. Boston Consulting Group adds that the Mexican luxury market will experience growth rates of around 6 percent, which is above the 4.5 percent the industry experiences globally.
The increase demand, business digitalization and new ways of communicating with users have also led to a change in the way luxury brands interact with consumers. “If there is one element that is gaining importance each day in the luxury market given the digital revolution, it is storytelling,” says Ralph Simmons, CEO of Tane. For the Mexican luxury brand, telling a gripping story is key to keeping existing customers engaged while attracting new ones. “Posting pictures on Instagram or any other social media is not enough. Nobody is going to engage with it unless there is a story that they can relate to,” says Simmons.
Particularly in Mexico, there has been a cultural shift that is boosting the consumption of Mexican products. “We have seen that more and more people appreciate locally made products, due to a sense of pride for what this beautiful country has to offer,” Simmons says. The upswing for Mexican products extends into the beverages segment, adds Bertha González Nieves, CoFounder and CEO of Casa Dragones. “Mexico in general, is experiencing a vibrant moment in major aspects, such as its gastronomy, design, culture and art.”
Similar to traditional retail products, e-commerce or omnichannel experiences are increasingly important in the luxury segment but Deloitte’s study also states that luxury sales are boosted by the construction of large multi-brand malls that host luxury brands. Jimmy Arakanji, Co-Founder and CEO of Thor Urbana, agrees. He says commercial realestate developers help different brands enter the Mexican market with innovate projects. “Commercial real estate is in an upswing and demand will only continue to grow,” he says.
Still, the omnichannel strategy, along with the introduction of technologies like augmented reality, AI and IoT, will be key for luxury brands, according to Deloitte. This is all based on the premise of not focusing on the product but on the customer experience. According to the Boston Consulting Group, there is a rise in experiential luxury, which includes categories such as high-end food and beverages, hotels and vacations. González believes that the excitement that surrounds Mexican products and cuisine allows consumers to appreciate the country’s history. “Consumers today want to interact with a complete product repertoire. They fall in love with a category and want to learn from it and establish a relationship with the brands.”
Ordóñez says the hype for unique experiences has also translated to the traveling sector. “Mexico is in the global Top 10 for travel and luxury accommodations,” he says, adding that Mexicans also know what they want. “The Mexican service level is among the Top 5 in the world. This makes Mexican travelers among the most demanding in terms of quality, service and details.”
The idea of luxury is changing, however, and it is not just about comfort anymore. According to Deloitte, sustainability is becoming a key factor for luxury brands, given an increase in consciousness among younger generations. Nico Wilmes, CEO of Los Amigos Tulum, believes that luxury does not run counter to sustainability. “Clients who visit Tulum want luxurious services and to enjoy a high-level and unique experience,” he says. “Although sustainable developments are more e