The Caribbean has long been synonymous with the 3 S’s: sun, sea and sand. But, for many holiday makers, there’s one more S to add to the list: Shopping. Retailers and brands have been keen to take a slice of the Caribbean’s annual tourist spend, which, according to the CTO, came to a record total of $29.2 billion USD in 2014. Islands such as St Maarten and Aruba have established themselves as duty-free shopping destinations and prestigious department stores are springing up across the region, such as the Blue Mall in the Dominican Republic and Saks Fifth Avenue in Puerto Rico.
The Blue Mall, Santo Domingo, the Dominican Republic
As cruising and shopping have long gone hand in hand, many luxury brands have largely focussed on the 24 million cruise passengers that travel to the region. Michael Kors, for example, recently opened a boutique on board the Celebrity Eclipse and Tiffany & Co opened its first store at sea on Royal Caribbean’s Oasis of the Seas.
While on board retail has flourished, retailers targeting cruise passengers on land have faced a challenging environment. As cruise ships have sought to take as large a slice as possible of consumer spend, “passengers spend less money on luxury goods on shore,” explains Thomas Mukamal, CEO of IGY Marinas, which has operations on various islands, including St Thomas, St Maarten and St Lucia. According to Mukamal, “difficult operating environments and high operating costs coupled with seasonality in the Caribbean make it a hard place for luxury retailers to make money.”
However, beyond marinas and cruise terminals there is a wealth of opportunity. Air arrivals, which totalled a record 26.3 million in 2014, typically spend up to 3 times more than cruise passengers. Attracted by growing volumes of affluent tourists willing to spend money while on vacation, many retailers and brands therefore have land-based tourists in their sights.
Dufry Inc – the world’s largest duty free retailer – operates stores across the Caribbean in airports, marinas and shopping centres. According to Rene Riedi, CEO of Dufry’s Latin America Division, the luxury retail market in the Caribbean is enjoying growth, particularly in the major destinations. “We are seeing increased numbers of cruise passengers and hotel visitors and the Caribbean market has always had a big attraction for customers shopping for luxury goods,” she says. More importantly, tourists in the Caribbean are often in the right frame of mind for shopping for luxury items. As Riedi explains, “visitors on vacation in a beautiful part of the world having great moments have more time to shop or browse. This encourages them to spend more on average than they might at home. We have seen our average ticket price increase now for the last five years.”
Hotel boutiques present another opportunity that should not be overlooked. Most of the Caribbean’s luxury hotels feature retail space which is ideal for reaching affluent consumers in the right frame of mind for shopping. Luxury British swimwear brand Heidi Klein which is launching its first Caribbean retail store with Capella Marigot Bay in St Lucia has recognized the importance of the market. “We have seen unprecedented growth in the Caribbean for many of our retail clients and hotels,” says Penny Klein, one of the brand’s founders. The Caribbean is “one of our key markets in terms of attracting customers when they are on holiday,” she says. “I think the holiday mindset is a very powerful one for spending.” Sebastiano di Bari, CEO of Carmen Sol New York, which operates 10 luxury clothing and accessories boutiques in resorts and shopping centres in tourism powerhouse the Dominican Republic, agrees. “People are shopping more and more inside resorts,” he says. “At home they have no time and they do most of their shopping online. While vacationing they enjoy spending time inside the store and trying clothes on.”
While the Caribbean offers great potential for luxury retail brands, the opportunity in this fragmented market varies from location to location. Understanding where the greatest opportunities lie is of critical importance. A specialist with knowledge of the region can provide you with a detailed understanding of which markets offer the most potential for your brand and which are closest aligned to your target consumers. If you represent a luxury brand with plans to expand in the Caribbean or a retail space looking to reach out to luxury brands, 7th Heaven Properties can help you achieve your objectives.
This article was originally published in Issue 6 of The Caribbean Property Investor magazine. To read the full issue, click here.