Romania’s luxury market shows recovery signs after 3 years of downfall

After several store closures in the past two years, namely Vilebrequin, Ermenenegildo Zegna, Hugo Boss, La Martina and Victoria 46 (Dior), the Romanian luxury market, mostly concentrated in the capital of Bucharest, is showing signs of revival.

Michael Kors is opening this Fall its second store in Bucharest and Armani Jeans is opening its first mono-brand store, also later this year – both new openings at the Baneasa Shopping City Mall. Victoria 46 multi-brand store is reopening at Baneasa Shopping City this Fall almost 2 years after the closure of its street-level store on Calea Dorobantilor.

The Romanian luxury fashion market also saw the surprise arrival of Vionnet with an oversized mono-brand store, last year, at The Grand Avenue shopping gallery (JW Marriott Hotel, Bucharest).

‘Survivors’ of the economic downfall of the past 3 years include the Bucharest mono-brand stores of Max Mara, Gucci, Brunello Cucinelli, Burberry, Emporio Armani, Escada, Roberto Cavalli, Valentino, Ermanno Scervino, Dolce Gabbana, Moschino, Canali, Porsche Design, Paul & Shark. Louis Vuitton remains the best performing luxury fashion brand in Romania with an estimated turnover of 3,2 million euros for the full year 2015, followed by Dolce & Gabbana, while Burberry and Gucci (franchised by a company led by Alessandro Amato, co-owner of Cellini) are among the worst performing, both due to location issues – Burberry a side street location and in the case of Gucci a rent which makes the operation unfeasible. Both brands are operated under franchising and CPP estimates a full year turnover of less than 2 million euros for each brand.

The feeble recovery of Romania’s luxury market is due to the overall recovery of the economy (country GDP growth is estimated at +3,5% for 2015) but also an abrupt shift towards a different consumer target – the upper middle class, rather the the ‘ultra rich’, many of which lost a great part of their fortunes following major corruption scandals. Over 50% of such ultra-rich consumers completely disappeared from the books of the luxury brands with a mono-brand presence in Romania.

Another positive factor has been the revival of Bucharest as a tourism destination with the biggest increases in arrivals from Western Europe and the Middle East, led by Israel in 2014-2015. Chinese residents in Romania, most of them running import/export businesses and wealthy consumers from the neighboring Republic of Moldova account for almost 20% of luxury sales.

Other luxury sectors such as cars and hotels have also registered a rebound in the past year, each with improved performances. In contrast, the watches and jewelry sector has remained stagnant, especially due to the grey market (”private” imports on order – tax-free) and the fact that local connoisseurs still prefer to make their purchases abroad. In terms of jewelry, Carrera y Carrera launched in 2013 is one of the most dynamic luxury jewelry brands, represented in a hughstreet Bucharest store operated by B&B Collection.

Romania’s luxury watches & jewelry sector is dominated by local retailers B&B Collection and Cellini, both operating a large number of stores not only in Bucharest but throughout the largest cities in the country. Their mix is made up mostly of affordable luxury brands, mainly fashion brand watches (Diesel, Emporio Armani, Fendi, Versace etc). In 2014, the owner of the Cellini retail network told ZF.RO that sales of watches above 5.000 euros had dropped by 50%.

Cellini is also the franchisee of Swarovski, operating 4 mono-brand stores of the Austrian upscale brand. Recently, Cellini closed its hughstreet flagship store location on prominent Calea Victoriei (steps from the Gucci store) however, in compensation, the company plans to enlarge it store at Baneasa Shopping City, later this fall.

Smaller specialist retailers which operate less than 2 stores include: Helvetansa (Piaget, Vacheron Constantin, Panerai etc), Chronolink (Rolex), Galt (Zenith, Jaeger LeCoultre, Ulysse Nardin etc) and Micri Gold (Chopard, Bvlgari, Damiani etc). Rolex and Omega remain the best selling luxury watch brands on the Romanian market. Italian luxury jewelry brand Scavia operates in franchising a mono-brand store at The Grand Avenue (JW Marriott Bucharest).

This Fall will see a notable new addition to the local luxury watches & jewelry sector, with the arrival of Spanish retailer TOUS at Baneasa Shopping City. The TOUS store, located on the ground-floor will be operated in franchising by local retailer B&B Collection. Danish affordable luxury jeweler Pandora operates directly 17 mono-brand boutiques throughout Romania, while Austria brand Frey Wille operates two stores, both in Bucharest. Austrian crystal jewelry and accessories maker Oliver Weber, operates one boutique at Baneasa Shopping City (franchised by B&B Collection)

Besides fashion, luxury beauty is probably the best developed luxury sector in Romania. Apart from the 3 major international retailers Douglas (18 stores), Sephora (24 stores) and Marionnaud (28 stores) – which all operate directly in Romania, the haute parfumerie (niche beauty) market is extensively covered by Elysée Concept (market leader which also operates a Spa – ‘Retreat’ at JW Marriott Bucharest) along with Beautik and Madison Perfumery.

The only international luxury mono-brand Spa, Shiseido, operates in Bucharest at the Stejarii Country Club residential complex. Luxury natural brands Aromatherapy Associates and Voya is featured exclusively at the Belaqua Spa of Kronwell Hotel in Brasov, both for treatments and with retail.

Previously confirmed interest in Bucharest by Hermes (franchise), Prada (direct operation), Ralph Lauren (franchise) and Saks Fifth Avenue (franchise / JV operations) have been postponed indefinitely. In keeping with the performance of the market for the rest of 2015, CPP Luxury Industry Management Consultants ltd. expects Bucharest to attract new luxury brands, specifically Longchamp (franchise), Tiffany (direct operation), Jimmy Choo (franchise) and Coach (franchise) in 2016/2017.

Also, despite rumors, Zegna, and Hugo Boss will not be re-entering the market, at least not in 2015.

Oliver Petcu in Bucharest