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Luxury fashion brands drive global retailer expansion

Luxury goods retailers have emerged as the most active and expansive retail sector, responsible for over 23% of new store openings during the past year, according to the new edition of “How Global is the Business of Retail?” by global real estate adviser CB Richard Ellis (CBRE).

CBRE’s annual survey – now in its third year – mapped the global footprint of 294 of the world’s top retailers across 69 countries, exploring the globalisation of the retail industry at national and city levels and highlighting differences between sectors and regions, thereby identifying trends in the patterns of global retail expansion.

Despite the global economic slowdown, luxury retailers have continued to globalise, with the majority of luxury brands present across all three major global regions. On average, luxury retailers operate in over 25 countries and 50 cities worldwide – giving them the largest global presence of all retail sectors. Growth in the global footprint of luxury retailers has mainly been geared towards emerging markets. China has been a major target, where the luxury sector is thriving, driven by rapidly increasing wealth and disposable income, along with a strong demand for new luxury Western brands. This is particularly evident in the major cities across China where many of the luxury brands have not been available for long and consumers are looking to display their personal wealth with luxury brand products.

Hong Kong maintained its position as the most popular global destination for luxury retailers, attracting 91% of luxury brands surveyed as part of the CBRE study. Hong Kong was closely followed by London, attracting 87% of luxury retailers, and by Dubai in third place, with 85% of luxury retailers present. In total, Asian cities accounted for eight of the top 15 luxury cities, with Taipei, Beijng, Shanghai and Singapore all featuring in the top 10.

As the global economic recovery begins to gather some momentum, Asia continues to largely lead the recovery with many global luxury brands identifying China as a vital market for future growth. Some of the world’s best known luxury brands are strategically targeting emerging markets as part of their longer-term growth plans. Attracted by the powerful growth of economies in countries such as China and Brazil, many brands are looking towards previously untapped markets for new retail expansion prospects. Brazil is rapidly becoming a new luxury hot spot in response to its growing economy and emerging middle class, with retailers such as Burberry – who recently opened their first store in Brasilia – planning to open a further four stores there this year. Louis Vuitton has recently opened three flagship stores in Shanghai, with other brands such as Tiffany & Co., Hermes and Prada all expanding rapidly across China.

“Retailers’ expansion strategy reflects the global economic performance; however, luxury brands are less hit by the crisis than mid-class retailers,” added Gábor Borbély, CEE Research Analyst at CB Richard Ellis. “Because of the better growth prospects luxury retailers have rather large BRICS countries on their radar and not the European Union at the moment. Central European cities attract obviously even less of such names compared to fashion capitals like Paris or London. Budapest retail market has not been too active with new brands opening recently; luxury retailers open significantly less stores than before the crisis.” (BBJ)