It's no secret that China continues to steal the bulk of the world's luxury apparel and goods sales, accounting for some 50% of the total. But with China's growth rate forecast to slow in 2016, luxury houses could be forced to expand in other markets - with Latin America topping that list.

Thomas Mesmin, a senior luxury goods analyst at Paris-based broker CA Cheuvreux, forecasts China's luxury good sales will plateau in the next three years, growing 13-14% annually from a spectacular 30-40% yearly increase since 2008.

"You cannot grow at those percentages forever," Mesmin notes. "At some point, the market becomes saturated."

According to Fflur Roberts, head of luxury goods at Euromonitor, hundreds of luxury outlets - both of established and small, emerging brands - have arrived in China in the past decade. This, of course, has not happened in Latin America, where brands have mostly focused on the region's economic juggernaut, Brazil.

But that, however, is about to change as luxury purveyors recognise the huge potential some fast-growing Latin American economies present.

In population terms, there are three under-penetrated regions for luxury brands: India, Africa and Latin America, observers say. They note India is a very tough market for upscale brands to crack because of high import taxes, store rentals and a dearth of quality retail infrastructure. Meanwhile, Africa's broad per-capita income levels are still low.

That leaves Latin America as the ideal choice for the LVMH's and Gucci's of the world.

"In Latin America, you have Brazil, Mexico and Argentina which are all large countries with rising upper class populations and growing economies," Mesmin explains. Despite sky-high import duties in some countries (notably Brazil), a stabilising political environment and developing retail infrastructure makes the region south of the border a more attractive destination than India or Africa.

"In the next few years, the region will become a more significant contributor to luxury houses' top lines, Mesmin says, adding that many of the established luxury houses are sizing up the region before engaging in an ambitious expansion.

"Latin America is probably going to surpass Asia [in growth rate terms] in the next three to four years as luxury brands start to open stores and invest in the region," Mesmin predicts.

Double-digit growth
He adds luxury brands recognise high double-digit growth can be obtained in Latin America while that same growth level is becoming increasingly hard to achieve in China.

In growth-rate terms, Latin America's luxury sector should expand 10-15% annually by 2017, slightly slower than the 15-20% average growth chalked up in the2007-2012 period, but a robust result nonetheless.

By 2022, Latin America should account for 7% of luxury brands' total sales (including apparel), up from 3-4% now. The number of Latin American "buyers" (to distinguish those who buy abroad instead of locally), should double to around 8%, Mesmin predicts.

This of course is small fry compared to China, which represents 30-35% of global luxury goods sales while its buyers account for as much as 45% of that equation.

Also, China and Greater China (which includes Hong Kong, Macao and Taiwan), Singapore, South Korea, Malaysia, Vietnam and Russia will remain much larger markets than Latin America in volume terms, Mesmin notes.

Avid buyers of luxury abroad
Milton Pedraza, CEO and owner of New York-based luxury consultancy the Luxury Institute, agrees that Latin America will gradually become a bigger contributor in the $200bn global luxury market.

"Latin Americans have always been avid buyers of luxury abroad," Pedraza says. "That's not new. However, there is a growing percentage of elite consumers in Brazil, Mexico and Chile that are spending in luxury because of the strong performance of the economies there."

Latin America has a growing class of highly educated professionals that is aware of global brands and trends and is becoming part of the global elite - high-earning educated professionals that in developed markets account for some 20% of the population.

In Latin America, this new group of well-heeled consumers makes up for 12-15% of the population. They are mainly in Brazil, which is said to be generating 100 millionaires a day (in US dollars), but increasingly in Mexico, Argentina, Chile and even more traditionally poor countries like Peru, Colombia and Uruguay.

Pedraza notes these consumers buy luxury in the same way others do around the world. "They like more vibrancy and colours but they still buy the Gucci's, Burberry's and Louis Vuitton's of the world," Pedraza says, adding that there is a uniformity (as related to other global elite consumers) when it comes to wearing the trendiest brands.

According to Pedraza, the market is dominated by established luxury players like LVMH, Burberry, Coach, Gucci and Ferragamo. Observers say these labels are likely to retain their pre-eminence in coming years because they have more expansion currency than new or emerging brands.

Click on the links below to read other articles in this management briefing.

just-style management briefing: Brazil and Mexico lead Latin America's luxury sales

just-style management briefing: Challenges face luxury retailers in Latin America

just-style management briefing: Latam consumers follow global brand trends