PressCenter LUXURY MARKET REPORT Romania LUXURY MARKET REPORT Romania
FASHION

2010 saw the addition of major international luxury brands GUCCI and EMPORIO ARMANI, both openings with mono-brand stores, in franchising operations with local partners. Gucci opened within the ground floor of Athenee Palace Hilton, in the very heart of the Romanian capital of Bucharest, an enviable location with large windows, corner entrance and a generous space (approx. 220 sqm). Gucci’s location is better than Vuitton which opened in 2007 within the shopping gallery of the JW Marriott, outside the city
centre. Emporio Armani opened also on Calea Victoriei, 200 meters further down, on a corner location, with two floors, large windows and with easy access to the parking within Novotel as well as walking distance from the parking of the Hilton hotel.
Gucci has been close to opening a direct operation, like in neighbouring Hungary (Budapest), yet the financial crisis must have driven a franchising opening, with a local medium and luxury watches and jewellery distributor, which also operates the franchise of Paul & Shark, therefore, with limited experience in luxury fashion retail.

Emporio Armani franchise is operated by Alsa Group, the leading Romanian luxury retailer which has been operating since 1997. Today, Alsa operates mono-brand franchises of Max Mara, Ermenegildo Zegna, Pal Zileri, Coccinelle and Marella.

Burberry is reported to be in advanced discussions with a potential local partner, a group of companies specializing in IT, alternative energy, real estate and distribution of fitness equipment. The opening was initially scheduled for June 2011, yet it is uncertain when it will be open.

Major luxury multi brand operator Victoria 46, which has four locations has had a stagnant 2010 and 2011 is likely to remain stable. Victoria Men, the company’s store on Calea Victoriei has registered positive results in 2010 and a 5% increase could be expected for 2011, driven especially by brands such as Corneliani. Victoria 46 is also planning online sales. Over half of the turnover of the women’s flagship is made by Dior, a key brand for Victoria 46.

Second luxury multi brand store owned by an Italian entrepreneur, Mengotti intensified marketing and PR activities in 2010, however, the relatively low level of customer service keeps many wealthy customers away. The store has also been challenged by losing Gucci, which is now present in mono-brand.

The Place Concept Store, the only concept store multi-brand owned by lingerie producer Sarrieri reported stable results for 2010. The owner’s intentions to relocate the store could have positive effects.

Casa Frumoasa, which operates three multi-brand stores, two for men (added Tom Ford to its portfolio in 2010) and women (added Ferragamo to its portfolio in 2010) also operated a summer temporary boutique at the Black Sea Side within luxury Grand Hotel Rex, however with modest results. The company’s turnover continues to be dominated by menswear and key brands such as Scabal and Brioni, for which made to measure services are provided.

All multi brand stores have been facing increased competition of the growing outlet retail market which doubled in 2010, oddly such stores opening mostly in the city centre of Bucharest. Some shops even combine outlet stocks with counterfeit products, making matters even worse for mainstream retailers. Another growing competition for the luxury fashion and accessories multi-brand stores is represented by leading European luxury e-commerce sites Net-A-Porter and Vente Privee, which have had an aggressive PR campaign in 2010, most glossy fashion magazines featuring editorials and pictorials mentioning products available at the two sites, rather than local stores. According to our research, sales of online luxury fashion and accessories goods sold by international e-commerce websites to Romanian consumers grew by 10% in 2010 and the rate growth is likely to be maintained throughout 2011. For the moment, there is no local authorized online seller. Most of the websites operating are selling stocks or stolen goods.

The leader of the fashion and accessories sector remained, for a third consecutive year, Louis Vuitton, its impeccable customer service attracting a constantly growing clientele. As indicated by the regional CEO, the company’s short term priority is to expand retail space in most existing stores, the Bucharest one being probably among the first to be considered, either for a space enlargement (less likely due to the lack of attractiveness of the entire gallery at JW Marriott) or relocation to a larger location downtown, within the end of 2012. The brand’s performance has been exceptional, considering the size and location and the lack of ready to wear collections, registering better results than most stores in the Central & Eastern European region.

Sales of stolen goods through various networks from abroad increased to alarming levels in 2010, goods being sold directly to consumers, at their workplace, on the internet or in large outdoor markets. Most counterfeited and stolen goods are of the following brands: Vuitton, Chanel, Armani while Gucci, Burberry and Ralph Lauren are ‘’leaders’’ of counterfeit sales, with three types of product classes, as designated by the sellers: A Class (best quality) from Turkey, B Class from China and worst quality of C Class made in Romania and elsewhere. Authorities have been tacitly condoning the phenomenon, there being no checks of goods origins, invoices, any authorizations etc. This is mostly due to the high level of corruption at the level of local authorities, including Police and local administrations.

WATCHES

Marked by an increase in prices, the continued international financial crisis and the un-fair competition from retailers abroad, the Romanian luxury watches market registered poor performances in 2010, with sales drops of up to 25% compared to the levels of 2009. Although the first three months of 2011 brought a slight stabilization of sales, CPP’s estimates for the rest of 2011 remain in the red. More Romanian consumers preferred to buy abroad, especially in major international luxury shopping hubs such as Dubai, Milan and Paris, the main drive behind their motivation being the lower pricing as well as a wider selection of products.

The best performing luxury watch brands in Romania remain Longines, Rolex, Hublot. The only brands present with mono-brand stand-alone locations are Rolex and Maurice Lacroix. In 2010, the local distributor of Rolex opened a second mono-brand location on leading high street Calea Victoriei, the first having been operational for four years within the shopping gallery of the JW Marriott Hotel in Bucharest.

2010 also saw the closure of several retail locations for retailer CELLINI, especially in cities outside Bucharest, the most notable being the one in Timisoara, third wealthiest cities in Romania. Chronotime, the trading company of retailer Cellini, which is also the importer of major brands such as Omega, Breitling, Blancpain, Hublot, Bell & Ross ended 2010 in red according to official figures available at Romanian State Fiscal Authorities. The same negative trend could be traced at Impulse (Galt), importer and distributor of several major watch brands such as Girard-Perregaux, Ulysse Nardin, Zenith, Harry Winston, Hysek and TAG Heuer.

Second largest luxury watch retailer, Helvetansa, also one of the market pioneers, operating for more than 15 years was fully integrated into its Swiss majority shareholder holding company, the company being no longer administered by its Romanian founder, but by a representative of the majority shareholders. The opening of Helvetansa’s new flagship store early 2010 did not have direct positive financial consequences, market conditions being a major negative driver for the weak results. The company added new luxury watch brands in 2010, Carl F. Bucherer, Fortis, Daniel Roth but also lost distribution of Dior watches. Cartier remains Helvetansa’s main financial driver, however, it is not clear why, in a market the size and potential of Romania, the French brand remains distributed solely in a corner of the Helvetansa store, while in much smaller regional markets such as Bulgaria, Cartier is present with a mono brand store.

2010 was a difficult year for leading Romanian retailer of fashion watches and jewellery B&B Collection which was forced to stop its expansion plans and maximized potential of existing locations. Despite market conditions, B&B Collection managed to open three new locations, one, taking over the space formerly operated by Cellini in Timisoara. B&B Collection operates four types of different branded locations, the high end one being Be In Time, which also includes Dior watches, exclusively distributed by B&B Collection.

The black and grey market of luxury watches distribution received a hard blow in 2010, with the much publicized scandal surrounding Belgravo, its two boutiques being closed following a raid by the police days after Fashion Tv Summer Festival event which took place in Mamaia at the Black Seaside in July 2010. The company could not account fiscally for the distribution of major international luxury watch brands (Audemars Piguet, Cartier, Hublot etc). Despite the closure of its retail locations (Calea Victoriei and Grand Hotel Rex), Belgravo continues to sell online and still operates its showroom within a residential building downtown Bucharest.

CPP’s extensive research has uncovered two other online retailers of luxury watch brands, which have been operating since 2009 and which send ‘’catalogues’’ with price lists on request, selling directly to consumers, either at home or their offices. However, the financial crisis did not provide extra revenues for such grey market retailers, due to the fall in purchasing power. Mention should be made that these retailers have been selling genuine products at discounted prices, having purchased them through the international ring of grey distribution. The huge demand from China has pushed the major world grey market retailers to focus their attention on Asia, therefore, limiting their capacity to distribute in regions such as Eastern Europe.

Two of the largest Swiss owned luxury watches grey market wholesalers have reportedly managed to buy merchandise worth 100 million euros from official retailers in three Eastern European markets Romania, Ukraine and Bulgaria in 2010 alone and the figure is likely to double in 2011.

Sales of stolen goods through various networks from abroad increased to alarming levels in 2010, goods being sold directly to consumers, at their workplace, on the internet or in large outdoor markets. Most counterfeited and stolen goods are of the following brands: Vuitton, Chanel, Armani while Gucci, Burberry and Ralph Lauren are ‘’leaders’’ of counterfeit sales, with three types of product classes, as designated by the sellers: A Class (best quality) from Turkey, B Class from China and worst quality of C Class made in Romania and elsewhere. Authorities have been tacitly condoning the phenomenon, there being no checks of goods origins, invoices, any authorizations etc. This is mostly due to the high level of corruption at the level of local authorities, including Police and local administrations.

CPP has already initiated a media campaign to raise awareness with facts being present at CPP’s 2011 edition of its annual event BUSINESS OF LUXURY FORUM. A concerted effort is needed to involve more retailers and international luxury brands as well.

 

 


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