The Luxury Industry Resists Financial Turmoil

More than the economic crisis, merchants claim that the slower growth of the luxury market is influenced by the luxury tax law of as much as 30 percent. The rental of the most expensive retail locations continues to grow, despite the economic crisis, as merchants focus on the largest global fashion centers, concludes a study by CB Richard Ellis.

Written by: Mislav Nekić
 
 According to the research of this real estate consulting agency, Fifth Avenue in New York remains the most expensive global retail destination, with a price of €16,800 for a one-year lease per square meter. On this list, Zagreb ranks 68th with €1,020 per square meter per year. In addition to rental price movements, the CBRE study also mentions the prospects of the retail market for the Central and Eastern Europe (CEE) region, estimating that the number of shopping center square meters in the CEE region will grow by more than 50 percent by 2010, with the fastest growth expected in Bulgaria, Romania, Slovakia, and Croatia. However, it is questionable what place luxury brand stores occupy in the Croatian market. Is the love of consumers for designer items strong enough for the successful operation of exclusive shopping destinations? Recently, the fourth largest store of the Hugo Boss fashion house opened in Zagreb. Prior to that, exclusive stores were established in the Croatian metropolis by Patrizia Pepe, Emporio Armani, Escada, Max Mara, Kenzo, Diesel, Givenchy Accessories, Miss Sixty, and many others.

Loss for the State

– According to all forecasts, a time of crisis is ahead, so it is difficult to assess how much room there is for market growth. However, I believe that luxury goods have their customers even in times of crisis, so I hope that the luxury industry will not be affected by the aforementioned economic events, explains Luka Marinović, the general director of Marli, which represents luxury watch brands such as Breitling, IWC Schaffhausen, Panerai, Cartier, Ferrari Engineered by Panerai, Breitling for Bentley, Zenith, and Glashütte Original. He believes that the slower growth of the luxury market, regardless of the economic situation, is influenced by the luxury tax law of as much as 30 percent, which, among other things, applies to precious metals, while steel watches are not affected. – Although the state may think that it is filling the budget this way, I am not so sure about that. This tax forces us to set higher prices and makes us uncompetitive, which drives customers to neighboring countries where they can get the same product cheaper.

People have avoided buying watches made of precious metals in Croatia, going abroad for them, reclaiming VAT, and in that way, they have fared much better, while the state has only lost revenue in this whole story, explains Director Marinović.
Although border controls are now stricter, which deters people from reclaiming VAT, Croatia still loses because the tax is paid in another country.  – I would emphasize that this law also encourages the black market where these products are cheaper but of dubious origin, believes Marinović. The Marli company has been present as a brand since 1991, and has received various representations over the years, starting with Raymond Weil in 1991 to Glashütte Original, which arrived in Croatia in 2007. The company has three stores in Zagreb. Outside of Zagreb, it is represented with the brands Tissot and Raymond Weil through a network of 30 distributors covering the entire Croatia.

Globally Recognized

– Croatians love well-known brands if they are globally recognized. They like to buy something that they know others will recognize. Sometimes there is a problem with brands that are not very well-known, yet can be better and of higher quality in many respects. Our market is still quite small and sometimes lacks a critical mass of connoisseurs who recognize the right product even if it is not well-known, says Director Marinović. Mijo Renić, a manager from Renimo, the representative of Hugo Boss for Croatia, believes that there is still much room for progress in the market as some brands are still not present in Croatia, forcing citizens to buy them abroad. For this reason, he announces the opening of representation for fashion brands Ermenegildo Zegna and Brioni. However, he believes that the global recession could affect the market and that long-term thinking is necessary.
– Customers in Croatia are fashion-conscious, follow fashion trends, and travel the world. Therefore, for success in the Croatian market, the presentation of glamorous brands needs to be done as in other fashion metropolises, says Renić.