Zara not Prada to tempt emerging market shoppers

By Reuters Staff
January 21, 2013

By Dasha Afanasieva

Markets got a fright today when luxury goods maker Richemont reported stagnant Asian sales in the last three months of 2012.  Richemont shares as well as those in its rivals such as LVMH (maker of Louis Vuitton handbags and Hennessy cognac) tanked after the news.

Like many of its peers in the west, Richemont the maker of Cartier watches, looks to China to drive its growth as the United States and Europe face the stark prospect of stagnation.

But the fastest growing class of the world’s fastest growing economy will probably not be Cartier-clad.

By 2030, emerging and developing economies will account for more than four fifths of the world’s middle class, as defined by consumers who spend between $10 and $100 a day, according to consultancy Roland Berger. Fashion, leisure and communication are likely to see growth rates of 30 percent in the next seven years, the report said. According to Bernd Brunke,  a partner at Roland Berger:

 In the next few years, we will see rapid population growth and a major improvement in the standard of living in emerging regions of the world …Accordingly, the consumers in these countries will buy more and demand high-quality products.

The report does predict a rise in demand for branded products across the developing world. However Roland Berger defines the “global middle class” as those of relatively modest means, meaning their budgets will probably not stretch to designer clobber.

For example, it says the top selling brands in oil-rich Saudi Arabia are high-street names Mothercare, Next and Zara – not the sorts of brands owned by Richemont or Prada.

Inditex, the maker of Zara, said last month it would step up expansion in China where it already has almost 350 stores. It  launched the Zara brand online in China last September.

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