Much like in other Eastern European countries such as Russia, Ukraine and Romania, politics have had a most negative impact on the luxury markets. Elections this year have brought Russia’s luxury market to stagnation and an inhibition of consumer demand – the same effects being visible even ahead of elections in Ukraine and Romania, scheduled for end of October and beginning of December, respectively.
Research conducted in 2010 and 2011 by CPP Luxury Industry Management Consultants Ltd highlighted the growth potential of Serbia, among the most promissing luxury markets in Eastern Europe. The delayed E.U. integration process, the European debt crisis as well as an unstable political environment generated by elections have brought the Serbian economy on the verge of collapse in 2012. Growth of luxury in 2012 is expected to slow in Serbia, with most luxury sectors likely to register up to 10% decrease in sales compared to the levels of 2011. Major international luxury brands present in most other Eastern European luxury markets with direct operations, such as Louis Vuitton and Prada, are unlikely to enter Serbia before 2014. At least two luxury mono-brand store projects (franchising) initially planned for 2012, will be delayed at least till the end of 2013.
Serbia’s GDP declined in the second quarter of 2012 compared to the same period of last year was 0.6%. In the first half of 2012 Serbia’s trade with foreign countries amounted to 14,7 billion which is 4.1% less than in the same period last year (in EUR 11,35 billion). In the exchange of goods with foreign countries in the first half of 2012 has been recorded a deficit of USD 3,9 billion which represented an increase of 5.2% compared to the same period of 2011.
The new Government of the Republic of Serbia has been elected on July 27th2012. The primary goal of the new government is the acceleration of the process of European integration with a maximum effort to get a date for the start of EU accession talks. In the first six months of the mandate of new government is expected to take urgent measures to prevent further decline in economic activity. These measures are related to reduction of government spending, budget deficits, and tax reforms, solving the problem of liquidity, reduce operating costs and unemployment.
The general rate of value added tax (VAT) in Serbia increased from 18% to 20%, beginning October 1st 2012. Also, certain excise tax rates increased beginning on October 1st 2012. According to the new minister of finance and economy, preparations for the adoption of a set of measures both in term of revenues and expenditures are underway and these would include 17 laws. The most of the measures would be implemented as of October, but effects of the measures cannot become visible in 2012, and that they can be felt at the beginning of the next year at the earliest. Plan is to refrain from adoption of unilateral measures for the increase of some taxes only, and to reduce expenditures. Around 256 para-fiscal taxes should be abolished.
Sales of luxury cars in Serbia have maintained a stable performance despite the general market decline of about 30 percent this year. Managing Director of “Delta Motors” (dealers of BMW, MINI and Honda in Serbia) Mr. Nemanja Lazic said that the Serbian car market last year was bad, and that’s going to be even worse, except that it does not apply to so-called premium segment stating that BMW and Honda achieved a growth of 10 percent compared to the same period last year. The cause of the opposite trend in unit sales in the premium segment (Mercedes, BMW, Audi …) could be found in the organization of the company and the quality of the product. The demand for automobiles BMW, MINI and Honda is globally changed for the better. This trend is moving in the upward direction, and there is no reason why we would not be in Serbia. Lazic said that “Delta Motors” by the end of February 2012, has sold about 30 new BMW “triplets” sixth generation.”I think people are far better informed when it comes to the total cost of maintaining of a vehicle,” said Lazic, pointing out that the Serbian market is very specific, because those who have the money for a luxury car is very demanding. These cars are, by Lazic, more cost-effective because less broken and require less money to maintain. Outside the premium segment govern exceptional competition, based on a struggle to offer a lower price, which affects some car companies due to the lack of long-term and medium-term profitability fall to test post-sale and cannot retain the confidence of customers, which are all less. On the other hand, customers are increasingly demanding with the right and serious company should be interested in the relationship with the customer after the sale, which is at least in Serbia, a long four years, said Lazic.
As for luxury watches, Petar Petrovic of Petrovic (exclusive importer of Bvlgari and Coin for Serbia and the operator of the only mono-brand space of Rolex in Serbia) has countered the growing number of wealthy Serbians shopping abroad by opening a Rolex boutique in Budapest, Hungary, in December 2011. Speaking exclusively to CPP-LUXURY.COM, Mr Petrovic also said: ”There are two groups of customers, the existing ones with whom our relationship is growing with every year, and potential ones that are now probably more price sensitive.” Speaking about the performance of his company, Mr Petrovic said ”Overall our figures for 2012 are the same. Taking into consideration what has been happening in Serbia end 2011 and first half 2012, we are actually quite pleased with good performance.”.
With a firm belief in the potential of the domestic market as well as potential in the country to attract more foreign visitors, Mr Petrovic speaks proudly of his company’s expansion plans in 2013. ”We are currently expanding our existing store in Belgrade. By the spring 2013, we shall have an additional 230 square meters dedicated exclusively to Rolex. This is a very important step for us, as we shall then be responsible for two stand alone Rolex stores, one in Budapest, and one in Belgrade. Our existing showroom, 110 square meters, will become a multi brand boutique, an interesting new chapter for our family business.”
Mr Dusko Trifkovic, Director of Movem, franchisee of Hugo Boss (2 stores in Belgrade) and exclusive distributor of Canali (shop in shop) and Trussardi for Serbia, told CPP-LUXURY.COM ”For the first half of 2012, our sales levels were the same with the same period in 2011. Over 15% of our customers opted in 2012 to no longer buy locally, and instead to make their purchases abroad.”. Mr Trikovic also said ”Wealthy consumers in Serbia are searching more for discounts.” For the overall performance in 2012, Trifkovic expects the same value as in 2011.
The largest operator of luxury retail in Serbia, Sportina Group, Daimler AG – importer of Mercedes Benz , Everet (largest importer and distributor of major luxury fragrances brands in Serbia) and Pernod Ricard Serbia – all, declined to provide any information over their performance.
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