With Asia-Pacific continuing to be the bread and butter for the luxury houses, Indonesia’s wealthy has now become a target.
Hermès has just opened their third boutique in Jakarta, a luxury-watch boutique this week with a local partner. Fendi has opened two stores this year, whilst Gucci is currently building a 5,500-square-foot flagship store in Jakarta.
But it’s not just the luxury houses who are having a look in at Indonesia with The Wall Street Journal reporting that high-end department stores are also making their presence with Central Retail Corp. of Thailand and SA des Galeries Lafayette of France both opening in Indonesia.
Their moves into Jakarta come as some of the world’s largest markets for high-end goods sag: Sales for many high-end brands have weakened in the West, while a slowing Chinese economy has dampened its consumers’ appetite for luxury.
“We firmly believe in the potential of the Indonesian market,” because of the steady economic growth, stabilising political environment and rising middle class, says Alexis Babeau, managing director of PPR’s luxury division.
“Indonesians show a liking for luxury, they appreciate quality products and they value craftsmanship.”
PPR CEO Francois-Henri Pinault led about a dozen PPR executives to Indonesia earlier this year to study the luxury market.
The luxury group has yet to run its own stores in Indonesia because of concerns about the transportation infrastructure, legal environment and high luxury-goods tax, says Babeau.
The number of Indonesians with more than $US1million in investible assets excluding their primary residence is rising 25 per cent a year, marking the fastest growth rate in Asia, according to brokerage form CLSA Asia-Pacific Markets. That is expected to push luxury-goods sales to $US742.3 million in the country this year, nearly double the amount in 2007, according to market-research firm Euromonitor. Still, that would be only a tiny fraction of China’s $US17.9 billion in estimated luxury-goods sales and Japan’s $US31.7 billion.
For the most part, luxury brands are building slowly in Indonesia because of the country’s high luxury tax – between 10 and 200 per cent of the purchase price – and the shortage of high-end real estate outside Jakarta, which makes it difficult to open stores in other major cities.
By Cassandra Murnieks
Image credit: skyscrapercity.com
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