What: Luxury in Mexico is a USD 4.7 billion industry, according to Euromonitor, and despite challenges around pandemic restrictions, Bain & Co. forecasts a 22% surge in the luxury goods sales in Mexico for 2021 and 2022, partly fuelled by rapidly evolving e-commerce demand.

Why it is important: Although baby boomers and Gen X have a solid purchasing track record, Mexico is a predominantly young country. Millennials are deeply invested in the luxury arena, with a rapidly maturing Gen Z close behind. Also, the country’s burgeoning middle class now comprises 42% of the population: it is digitally ultra-savvy, interested in travel, tech and fashion.

Shopping culture in Mexico is tied to malls and department stores, the latter prominently represented by Liverpool and El Palacio de Hierro.

Liverpool is present with 150+ locations catering to the country’s middle class, while El Palacio de Hierro retails to the upper echelons of the socio-economic pyramid and has 14 locations (plus several homewares and concept stores). Luxury’s top brands are amongst the big sellers at El Palacio de Hierro: between January and December this year Louis Vuitton, Gucci, Tiffany, Carolina Herrera, and Saint Laurent were among top 10 brands.

Prosperous consumers have traditionally been keen to shop abroad because of lower prices and more attractive assortments, but the arrival of international brands in the market has created a more year-round and ongoing relationship between brands and local clients, who may still purchase overseas but return to brands domestically. International brands have historically entered Mexico by partnering with local distributors, but the market’s stability has encouraged brands to explore operating independently and setting up local teams.

Pure play e-commerce platforms such as Farfetch have successfully infiltrated the market, offering access to younger, more modern fashion and luxury brands with extended assortments, but the surcharge for international duties can act as a deterrent.

Smart shopping apps and payment technologies are advanced. Payment schemes that increase spending power are popular, from fixed monthly instalments with no interest to buy-now-pay-later options. Many fashion brands typically offer this, while most luxury houses discreetly participate too.

The Covid-19 pandemic accelerated the development of e-commerce. Retailers and brands pivoted quickly to remain close clients via email, Whatsapp, phone or face-to-face. This speaks to a local culture that hugely values warmth in client-brand relationships and meticulous service. Mexican consumers are extremely loyal to their brands and to retailers: personalised attention is crucial in building bonds.

Sales of luxury goods are also increasing because brands are being much more assertive in terms of the assortment and exclusives they bring into Mexico. Mexico was once low on the priority list of their international accounts, but the country has shown how avid the local consumer is for more sophisticated and limited-edition products. Price competitiveness is key in the market. High street labels must align with the pricing tier of their adjacent brands, while luxury must remain on par with USA prices including VAT (16% in Mexico) for which wholesale prices and discounts are crucial negotiation points.

Understanding luxury in Mexico Vogue Business