|The Bahamas Investor Magazine
January 21, 2010
January 21, 2010
The luxury retail market in The Bahamas has traditionally been a thriving one, capturing the tourist dollar with an array of well-known brands from Fendi and Gucci to Breitling and Cartier. The two major hubs of the sector are on Paradise Island and the main Nassau thoroughfare, Bay Street. But are customers still taking advantage of this shopping paradise given that most are feeling the effects of the global recession?
One of the most high-profile retailers in the downtown area and on Paradise Island is John Bull, which sells high-end brands such as Rolex, Gucci, Tiffany, Bulgari and Cartier, among others. The company has just celebrated its 80th anniversary and director of business development with the John Bull Group of Companies, Inga Bowleg, says that it is well positioned to continue performing strongly thanks to its reputation for high quality and a range of products to suit every shopper, even those watching their wallet.
“John Bull’s success over the years has a lot to do with its commitment to the Bahamian tourism product, excellent rapport with international vendors and its sensitivity to the demands of local shoppers. During what is now undoubtedly a global economic downturn there are those John Bull customers who, despite the economic climate, can still afford to purchase top-ticket items,” she says. “There are also those clients who have to be a bit more mindful of their spending for various reasons but still shop with us because of the diversity in brands and price points.”
Cruise and hotel customers
According to William Carey, senior manager at high-end jewellery and watch retailer Little Switzerland, the cruise ship and hotel customers provide a ready pool of potential buyers and are a major opportunity for retailers. “You have a captive audience. The merchants have to figure out a way to attract them. We have them on our doorstep.”
Carey says that Little Switzerland gets around 60 per cent of its trade, in terms of dollar value, from hotel guests, but when the cruise ships dock the increased activity draws people onto the streets. “When the ships come in, there is a buzz [about the place], and hotel guests want to get involved in that frenzy of spending.”
According to Carey, who is also a retailer of Breitling in The Bahamas, hotel guests generally have higher disposable incomes than cruisers, but he believes this could change if the government focused on attracting a different type of liner–those that sail routes of the wider Caribbean region. “This is key,” says Carey. “We had a ship in from St Thomas recently, and it was like Christmas!”
To this end, the government has contracted the dredging of Nassau Harbour and an extension to Prince George Wharf, where the ships dock, to accommodate the next class of cruise liner that will be sailing the region. These superliners will carry around 3,000 passengers and will, in some cases, be 43 per cent bigger than existing cruise ships. Contributing an estimated $150 million annually to the Bahamian economy, these ocean-going behemoths should be cruising Bahamian waters from the beginning of this year.
Retailers are hoping that the government will put into action other plans to revitalize the downtown area to help lure tourists off the boats and beaches and into their shops. “The rejuvenation will have a tremendous impact on business, not only in the short-term but in the long-term too. It will have such a positive impact and is a good investment,” says Carey.
Peter Phillips, managing director of The Brass & Leather Shops, distributor of Fendi in The Bahamas, also believes that improving the area will make a huge difference. “An important component of the economic recovery is the revitalization of downtown Nassau,” he explains. “The government has to facilitate a set of conditions or an environment that is conducive to tourism. If you get that environment, business comes in and starts throwing money around.”
While most retailers are looking to the tourist industry for their primary business, others are lucky enough to have a secure local client base. Specialist jewellery store Coin of the Realm, on Charlotte Street, enjoys a loyal domestic clientele–around 90 per cent of their customers are local.
“Our main business is local. We are very unique compared to the Bay Street stores as our main clientele is the local market and most of them we keep from generation to generation,” explains general manager Cathy Moultrie. “Sales have been holding steady, and we are still getting the clientele we have always had.”
Cole’s of Nassau is another high-end retailer fortunate enough to have a loyal local client base together with its tourist shoppers. The store, which has outlets on Paradise Island, Bay Street and Lyford Cay, sells designer clothing and accessories from brands such as Calvin Klein and Diane Von Furstenberg.
Advertising, merchandise and receiving manager Kim Nixon says that the way they sell has changed to mirror changes in customer habits.
“We are using clearance areas, better pricing and promotions as well as being more sensible with buying and listening more to what people’s needs and wants are.”
Moultrie agrees there has been a change in customer buying habits, suggesting that people have become more selective in their spending.
“People are now thinking about how they are spending their money; they want that piece [of jewellery] to mean even more. Something they can hand from generation to generation, and therefore are considering their purchases more.”
And, according to owner Karen Alliata, there are also changes to be seen in the type of product customers are choosing. “Gold is an investment. The price is going up and up, so people feel more confident buying it now.”
Luxury brand longevity
Carey, who has over 30 years experience in the retail sector, agrees that there has been a move away from decadence for decadence’s sake and buyers have become more thoughtful when making costly purchases.
Carey says that well-established brands such as Breitling will be key in helping the luxury market stay stable. “Take a walk down Bay Street and you can see the money is still there, but there is not as much, so we, as merchants, have to work to attract the customers. What is setting us apart is having a niche.
“Previously in the luxury sector there were legitimate brands and there were brands that existed simply because of the environment of wealth. These new brands are going to go away and leave the stronger brands in a better position,” he predicts.
Phillips also has confidence in the ability of the Fendi brand to ride out the storm. “We are dealing with the North American market, which is particularly down, but the luxury brands continue to do well in the Middle East and Asia. This allows Fendi to invest in their product,” he says. “You can bank on them coming out with strong new products and strong new fashions.”
Dilip Wadhwani, manager at the Quantum store on Bay Street, which sells watches from designers such as Christian Dior and Jaeger Le-Coultre, is another retailer putting his faith in the pulling power of big-name brands.
“Everybody is cutting back but we have brand recognition–designer brands always do well, recession or no recession,” he explains.
He says selling to customers who are keeping to a budget while maintaining the high-end reputation of the brand is key to surviving the downturn.
“Business is going to be down, but you have to position yourself better by catering to the needs of the customer and people looking for bargains with the right mix of products and making the brand affordable.”
Focusing on key brands is one strategy retailers are adopting, but others are also looking at factors such as location and marketing. Coin of the Realm is increasing efforts to attract more tourists through promotional materials and widespread advertising in the major resorts. This combined with an expected upswing in the market is what will ensure the retailer continues to do good business, says Moultrie.
“Worldwide there is a change happening and then there is the Christmas season to look forward to. We are a very positive company; we see things as half full and I’m hoping we are over the worst.”
Phillips agrees: “We do business in a very competitive environment. Luxury is sensitive to economic downturns and upturns, but it will come back when the market picks up.”
Wadhwani is another optimist. “People love the finer things in life. Luxury will always be in demand.”
Go duty-free in The Bahamas
Visitors wishing to purchase goods in The Bahamas to transport them back to their own country should take note of the relevant customs regulations. Products falling under a duty-free exemption vary from country to country and are regularly updated, so it is important to check before heading to the airport.
US residents: US residents are permitted to take home duty free, purchases up to the retail value of $800 if they have been outside the US for more than 48 hours and have not used the exemption in the past 30 days. Any items exceeding this exemption are subject to a three per cent tax.
Canadian residents: Canadian residents can take advantage of three different types of personal exemption: if out of Canada for 24 hours, they can claim a CN$50 duty-free allowance any number of times each year. If out of the country for 48 hours, the exemption rises to CN$200 and, for seven days or more, it reaches CN$750. These exemptions may be used for all souvenirs and gifts including alcohol and tobacco.
UK residents: UK residents may bring in up to £340 worth of merchandise duty-free. Arrivals by private plane or private boat may bring in up to £240 worth of duty free gifts.