Directory of market studies for luxury and Fine Watchmaking
2014
HAUTE HORLOGERIE JOURNALS
Contents Introduction 3 List of studies and publications 2014 on luxury and watches
4-9
Focus on nine strategic studies BAIN & COMPANY & Appendix
10 - 39
BCG & Appendix
40 - 71
IPSOS WEALTH
72 - 75
IPSOS ASI
76 - 79
KANTAR MEDIA & Appendix
80 - 87
SIMON KUCHER & Appendix
88 - 99
SMART PULSE
100 - 103
SOONSOONSOON
104 - 107
DIGITAL LUXURY GROUP & Appendix
108 - 117
Fondation de la Haute Horlogerie
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Fondation de la Haute Horlogerie
Introduction 3rd edition
Market studies play a fundamental role in strategy. The qualitative and quantitative analysis they provide delivers vital insight that will inform decisions. Because even in today’s global village, our neighbours still have their own particularities. Whether consumption patterns or product preferences, the consumers in this world marketplace continue to speak with a multitude of voices, and market studies are a means of hearing each one more clearly. By looking ahead, they enable businesses to adapt their offer to the geographic, sociological and commercial climate. Published by the Fondation de la Haute Horlogerie (FHH), this is the third Haute Horlogerie Journal to present a compre-
Fondation de la Haute Horlogerie
hensive review of market studies conducted over the past twelve months in the field of luxury in general, and watches in particular. Once again the FHH hands over to specialist consultancies which share their thoughts and their vision of what lies ahead. If, as Emile de Girardin claimed, we cannot govern without foresight, it is equally true that we cannot decide without understanding. Pinpointing the trends that are emerging in the luxury segment, and specifically watches, enables companies to tailor their responses accordingly. Which means first analysing what these trends are. The customer is a chameleon and, as these studies systematically confirm, the only way to satisfy such changing aspirations is to understand what they are!
3
List of studies and publications 2014 on luxury and watches Firm
4
Title
Keywords
Country
Price
Date
BAIN
2013 China Luxury Market Study
Store sales & traffic; Emerging trends, Outlook for 2014 -Macro environment
Global
Free
01 / 2014
Barnes reports
2013 U.S. Jewelry, incl watches, watch attach, etc sold through Department stores-Product & Retail Report
Accurate industry statistics, forecasts and demographics sales of Jewelry, incl watches, watch attach, novelty jewelry
USA
$ 199
12 / 2013
Barnes reports
2014 U.S. Jewelry
Watches, watch attach, novelty jewelry, sold through Vending machine operators-Product & Retail
USA
$ 199
02 / 2013 01 / 2014
Barnes reports
2014 U.S. Jewelry, incl watches, watch attach sold through Jewelry stores-Product & Retail Report
Accurate industry statistics, forecasts and demographics sales of Jewelry, incl watches, watch attach, novelty jewelry
USA
â‚Ź 147 or $ 199
01 / 2014 02 / 2014
Barnes reports
2013 Worldwide Jewelry Stores IndustryIndustry & Market report
47 countries covered, w5-year historical trends on industry sales, estimates on 10 sub-industries, including selling rings, bracelets, necklaces, earrings, silverware, watches and clocks
Worldwide
$ 249
07 / 2013
Battaglia Advisory Services
Benchmarking the evolution of the China luxury market
Overview of China luxury market Retail development of reference brands Selected trends
China
Free
04 / 2013
BCG
Shock of the new chic, dealing with new complexity in the business of luxury
New customers, new geographies, new index of luxury buying, reinforcing partnerships, vertical ecosystem, persistante rise of digital
Global
Free
01 / 2014
BCG
True-Luxury Global Consumer Insight
Qualitative research with growth trends, profiles and relevances, worth of mouth trends concerning luxury
Global
Free
03 / 2014
BCG
Lux Redux: reshaping the Luxury sector
Projections and scenarios, consumers drivers, Watches and jewellery
US Top 5 Europe, BRIC, Japan
Free
05 / 2013
Beijing Zeefer Consulting Ltd
China Watch and Clock Market Report
Key data and analyses on the watch & clock mfg. industry in China top 10 brands
China
$ 680
10 / 2013
Beijing Zeefer Consulting Ltd
China Watches and Clocks Industry Profile
Key data includes a list of major 100 enterprises in the sector and the comparison on investment environment in top 10 hot regions
China
$ 580
09 / 2013
Canadean Ltd
China Watches And Chronographs Manufacturing Industry, 2014
China Jewelry, Watches market and Accessories Retailing
China
$ 75
01 / 2014
Canadean Ltd
Watch & Jewellery Wholesaling in the UK Industry Market Research Report
UK Jewelry, Watches market and Accessories Retailing
UK
$ 910
01 / 2014
Fondation de la Haute Horlogerie
Firm
Title
Keywords
Country
Price
Date
Canadean Ltd
Jewelry, Watches and Accessories Retailing in Global: Market Snapshot to 2017
Jewelry, Watches market and Accessories Retailing
Worldwide
€ 55 $ 75
12 / 2013 03 / 2014
Also available in Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chili, China, Colombia, Czech, Denmark, Egypt, Finland, France, Germany, Greece, Hong-Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Singapore, Slovakia, South Africa, South Korea, Spain, Sweden, Thailand, Turkey, UAE, UK, Ukraine, USA, Venezuela
Canadean Ltd
Jewelry, Watches and Accessories Retailing in Global: Market Snapshot to 2017 Also available in Bulgaria, Finland, Hungary, Indonesia, Ireland, South Korea
Forecasts are provided for 2013 - 2017 Jewelry, Watches and Accessories Retailing: Historic Sales Data. Apparel, Accessories, Luggage and Leather Goods - Historic Category Analysis
Canadean Ltd
Jewellery and Watches Retailers in Europe and Main Countries Worldwide
Jewellery & Watches retail chains in Europe, America, Asia and Africa
Canadean Ltd
Jewelry, Watches and Accessories Retailing in Indonesia: Market Snapshot to 2017
Canadean Ltd
Worldwide
€ 55
02 / 2014
Global
$ 670
02 / 2014
Forecasts are provided for 2013 - 2017 Jewelry, Watches and Accessories Retailing Indonesia: Historic Sales Data. Apparel, Accessories, Luggage and Leather Goods - Historic Category Analysis
Indonesia
€ 55
02 / 2014
Jewelry, Watches and Accessories Retailing in Thailand: Market Snapshot to 2017
Thailand Jewelry Watches and Accessories Historic and forecast sales value
Thailand
€ 55
03 / 2014
Chalhoub Group
Luxury in the Middle East: an easy sell?
The UAE, Saudi Arabia, Qatar, Bahrain and Oman Middle East and major luxury brands. The region’s consumers, have increasingly sophisticated tastes
Middle east
Free
08 / 2013
Credit Suisse *
Industrie horlogère suisse Perspectives et défis
L’industrie horlogère suisse, La diversification géographique; Chine: la chute après l’envolée? L’importance des marques suisses dans les pays émergents ; commerce de détail de montres
Global
Free
10 / 2013
Credit Suisse
Swiss Watch Industry prospects and challenges
Watches market Geographical Diversification, China and emerging markets, signifiance of swiss brands, distribution channels
Global
Free
10 / 2013
Cushman & Wakefield Research
Luxury retail in India; Evolution and futur prospects
Demographics of Luxury, Requirements of Luxury real estate; Entry Routes for International Brands Obstacles for Luxury in India
India
Free
09 / 2013
Deadel Research
Global Online Jewelry Market - Focus on the U.S., China and India: Trends & Opportunities (2013-2018)
Major jewelry markets trends in the market and outlines key factors; forecasted period
Worldwide
€ 640
10 / 2013
Deloitte
The Deloitte Swiss Watch Industry Study, Timing the Future
Challenges and risks, new products drive, vertical integration, crucial social medias
Global
Free
09 / 2013
eMarketer
The luxury consumer, shoppers lead brands to digital channels
Statistics and usage social medias
Worldwide
Free
11 / 2013
Euromonitor
Luxury Goods in Argentina
Leading companies, the leading brands Rolex Argentina SA: Key Facts and strategic analysis of key factors, Sales of Luxury Jewellery and Timepieces by Category; figures & FORECASTS
Argentina
€ 1’402
02 / 2014
Euromonitor
Watches in Worldwide Also available in Argentina, Brazil, Canada, China, Germany, India, Indonesia, Italy, Japan, Malaysia, Mexico, Netherlands, Poland, Romania, Singapore, South Korea, Sweden, Taiwan, Turkey, US
Size and shape of the market at a national level. It provides the latest retail sales data, forecasts Watches by type
Worldwide
€ 664
05 / 2013 03 / 2014
Euromonitor
Watches and Clocks Worldwide Also available in Australia, Brazil, Canada, India, Indonesia, Japan, Mexico, Russia, South Korea, Spain
Size and shape of the market at a national level. It provides the latest retail sales data, forecasts Watches by type
Worldwide
€ 443 - 664
04 / 201303 / 2014
Euromonitor
Rolex Deutschland GmbH in Personal Accessories (Germany)
Strategic direction of Rolex Watches (Germany) to expand opportunities in the premium watch segment
Germany
€ 115
01 / 2014
Euromonitor
Seiko Holdings Corp in Personal Accessories (World)
Strategic direction of Seiko Watches to expand opportunities in the premium watch segment
Global
€ 400
11 / 2013
Euromonitor
Watches Global Trends and Opportunities
Leading companies, fashion-driven competitive landscape, trend developments, economic/ lifestyle influences, seasonal patterns, market and distribution strategies
Global
$ 2’000
11 / 2014
Euromonitor
Luxury Goods in India
India the strongest growth rates in the Asia Pacific region Gifting Tradition, Zimson Watch World
India
€ 1'402
08 / 2013
Euromonitor
Zimson Watch World in Luxury Goods (India)
Strategic direction of Zimson Watches (India) to expand opportunities
India
$ 150
08 / 2013
Euromonitor
Luxury Goods in Indonesia
Leading companies, the leading brands and strategic analysis of key factors, FORECASTS
Indonesia
€ 802
02 / 2014
Fondation de la Haute Horlogerie
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6
Firm
Title
Keywords
Country
Price
Date
Euromonitor
Luxury Goods in Italy
Leading companies, the leading brands and strategic analysis of key factors, Sales of Luxury Jewellery and Timepieces by Category; figures & FORECASTS
Italy Singapore Thailand
€ 1'402
06 / 2013 07 / 2013
Euromonitor
Citizen Watches (Malaysia) Sdn Bhd in Personal Accessories (Malaysia)
Strategic direction of Citizen Watches (Malaysia) to expand its network of store-based retail outlets
Malaysia
$ 150
01 / 2014
Euromonitor
Luxury Goods in Malaysia
Leading companies, the leading brands and strategic analysis of key factors, Tag Ventures Sdn Bhd internet strategy, Timepieces by Category, FORECASTS
Malaysia
€ 1'402
06 / 2013
Euromonitor
Van der Gang Watches BV in Luxury Goods (Netherlands)
Strategic direction of Van der Gang Watches (Netherlands) to expand opportunities in the premium watch segment
Netherlands
$ 150
06 / 2013
Euromonitor
Zibi SA in Personal Accessories (Poland)
Strategic direction of Zibi Watches (Poland) to expand opportunities in the premium watch segment
Poland
€ 115
12 / 2013
Euromonitor
Casio Singapore Pte Ltd in Personal Accessories (Singapore)
Strategic direction of Casio Watches (Singapore) to expand opportunities in the premium watch segment
Singapore
€ 115
03 / 2014
Euromonitor
LVMH Watches & Jewellery Singapore Pte Ltd in Luxury Goods
LVMH Watch & Jewelry Singapore Key Facts Company Background: Luxury Brands by Category 2012 Internet Strategy
Singapore
€ 111
07 / 2013
Euromonitor
Gallery O'Clock in Personal Accessories (South Korea)
Size and shape of the market at a national level. It provides the latest retail sales data, forecasts Watches by type.
South Korea
€ 111
03 / 2014
Euromonitor
Cortina Watch Co Ltd in Luxury Goods (Thailand)
Strategic direction of Cortina Watches (Thailand) to expand opportunities in the premium watch segment
Thailand
$ 150
07 / 2013
Euromonitor
Accurist Watches Ltd in Personal Accessories (United Kingdom)
Strategic direction of Accurist Watches (UK) to expand opportunities in the premium watch segment
UK
€ 115
11 / 2013
EUROSTAF *
Les perspectives du marché mondial de la haute horlogerie
La mutation des business models Pénurie sur les approvisionnements et forte dépendance au réseau multimarques secteur est sous tension
Worldwide
€ 2'750
12 / 2013
First Research
Jewelry & Watch Manufacturing
Major companies: James Avery Craftsman, Richline Group, and Tiffany, Cartier ( France); Bulgari (Italy); PANDORA (Denmark); D Swarovski & Co (Austria); Gitanjali Gems Limited (India); and Kingold Jewelry (China)
Global
$ 129
04 / 2013
Forward & Intelligence Co
China Luxury Industry Market Demand and Investment ForecastReport, 2013-2017
Development Prospects Forecast of China Luxury Industry; Investment Suggestions to China Luxury Industry
China
Free
05 / 2014
Fung Business Intelligence Centre
Luxury market in China
Nature of luxury and to the motivational and behavioral drivers of luxury consumption
China
Free
04 / 2013
Gereje Corpfinance
Luxury markets, investment, opportunities & trends between Europe and Asia
Trends and figures: consuption par segments, watches, jewelery, trends of commerce
Asia Europe
Free
11 / 2013
Global Data
Hengdeli Holdings Limited - Financial and Strategic SWOT Analysis Review
SWOT Analysis, Strategy, Revenues and Profits China, Taiwan and Hong Kong
Asia
€ 240
11 / 2013
Global Data
Compagnie Financière Richemont SA SWOT Analysis, Strategy, Revenues and Profits
SWOT Analysis, Strategy, Revenues and Profits
Global
€ 100
12 / 2013
Global Data
Seiko Holdings Corporation
SWOT Analysis, Strategy, Revenues and Profits
Global
€ 240
11 / 2013
Global Data
The Swatch Group Ltd
SWOT Analysis, Strategy, Revenues and Profits
Global
€ 100
11 / 2013
Global Data
Oriental Watch Holdings Limited
Financial and Strategic SWOT Analysis Review
Hong Kong
€ 240
11 / 2013
Global Data
Cortina Holdings Limited (Cortina)
Operates in-store specialty retail stores and distributes luxury watches
Singapore
€ 240
11 / 2013
Global Data
Sincere Watch Limited -
Strategic SWOT Analysis Review
Singapore
€ 240
07 / 2013
Global research and data service
Global Database of the Top Watch, Clock, and Part Producers - Company Names, Financial Performance, Key Executives, and Contact Details
Part Producers - Company Names, Financial Performance, Key Executives, and Contact Details
Global
€ 990
06 / 2013
Hurun
Chinese Luxury Consumer Survey 2014
Brand preferences, consumption habits and lifestyle trends of China’s wealthiest individuals
China
Free
01 / 2014
Fondation de la Haute Horlogerie
Firm
Title
Keywords
Country
Price
Date
Hurun
The Chinese Luxury Traveler (2013)
Calculate the number of Chinese luxury travelers, evaluates their consumption patterns, travel habits
China
Free
06 / 2013
Hurun
The Chinese Millionnaire, Wealth Report 2013
Retailing by City, Lifestyle and Habits, Media Usages
China
Free
08 / 2013
IBISWorld
Jewellery and Watch Wholesaling in Australia - Industry Market Research Report
Scope, size, growth including the key sensitivities and success factors forecasts, and an analysis of the industry key players
Australia, UK
$ 880 $ 890
06 / 2013 08 / 2013
IBISWorld
Watch and Jewellery Retailing in Australia Industry Market Research Report
Jewellery and Watch Wholesaling in Australia wholesale jewellery, watches or clocks, precious stones or precious metals
Australia
$ 890
06 / 2013
IBISWorld
Clock and Watch Manufacturing in China
Competitive lanscape Market Share Concentration Key Success Factors, major compagnies
China
$ 1 020
03 / 2013
IBISWorld
Jewellery & Watch Stores in the UK - Industry Market Research Report
Watches through speciality stores and retail outlets scope, size, growth of the industry
UK
$ 830 $ 880
IBISWorld
Jewelry & Watch Wholesaling in the US Industry Market Research Report
Fine jewelry, costume jewelry, watches, clocks, precious metals and metal flatware, precious and semiprecious stones
USA
$ 1 020
01 / 2014
IBISWorld
Jewelry & Watch Wholesaling in the US Industry Risk Rating Report
The report looks at the operational risk associated with this industry
USA
$ 1 020
01 / 2014
IBISWorld
Online Jewelry & Watch Sales in the US Industry Market Research Report
Scope, size, growth including the key sensitivities and success factors forecasts, and an analysis of the industry key players
USA
$ 1 020
05 / 2013
IBISWorld
Watch & Jewelry Repair in the US - Industry Market Research Report
Scope, size, growth including the key sensitivities and success factors forecasts, and an analysis of the industry key players
USA
$ 1 020
04 / 2013
ICON Group
The 2013-2018 Outlook for Watches in Greater China
Watches across the regions (Guangxi, Nei Mongol, Ningxia, Xinjiang, Xizang - Tibet), municipalities (Beijing, Chongqing, Shanghai, and Tianjin), special administrative regions (Hong Kong and Macau), and Taiwan). Latent demand, potential industry earnings
China
€ 396
10 / 2013
International Business and Social Sciences and Research Conference
Luxury Consumption in Poor Countries of Eastern Europe
Survey by countries of luxury goods, jellery, watches Luxury consumption has impressively increased in the emerging markets Ukraine, Moldova, and Belarus luxury aspirations,
Eastern Europe
Free
12 / 2013
Journal Of International Business And Economics
Luxury brands: how luxury brands enter the emerging markets of eastern Europe
Definitions: nature of luxury; motivational; behavioral drivers of luxury consumption in the post-Soviet era
Eastern Europe
Free
12 / 2013
KEN Research
India Watch Industry Outlook to 2018 Premium Segment and Online Retail to Lead the Growth
Trends and developments and future projections of the mass, mid and premium price wrist watches as key segments of the market
India
€ 900
10 / 2013
Key Note Publications Ltd
Jewellery & Watches Market Report 2013
Growth rateson the watches segments forecasts, emergence of smartwatches. Technological advances
UK
€ 1'012
06 / 2013
Koncept Analytics
Global Luxury Goods Market Report: 2013 Edition
Watches, focus on major segments, wines and spirits, jewelry and watches. Europe and emerging market of China is being discussed in the report. The major trends, drivers
Worldwide
€ 640
01 / 2014
KPMG
Global reach of China luxury
Survey concerning China luxury consumer with cases studies: Montblanc Oriental Watch Company Peninsula Qeelin Sheme Trinity
China
Free
01 / 2013
KPMG
Luxury Goods market in Poland Edition 2013
Luxury buyers in Poland, brands perception, key segments, brands success
Poland
Free
01 / 2014
KPMG ASSOCHAM
India luxury summit 2014
Emergence of Indian luxury, Key consumer segments, overview figures
India
Free
02 / 2014
Ledbury Research
The UK Luxury Benchmark Report 2013
Luxury Map, Luxury Consumer, British Luxury Abroad, Sales Channels, a definitive guide to the UK luxury goods market
UK
on demand
01 / 2014
Luxury Daily
Four trends driving the new age of luxury
State of Luxury 2013 specific trends are driving changes
Worldwide
Free
05 / 2013
Luxury Institute
Wealth and Luxury Trends 2014
White paper: A New Model to Increase Profitability
Global
Free
10 / 2013
Market Avenue
Quarterly Report on China's Import and Export of Clocks and Watches and Parts thereof
Watches, Clocks, Importation, Exportation Analysis of of Clocks and Watches and Parts thereof Supply and Demand in China
China
€ 2'177
03 / 2014
MarketLine
Jewelry & Watches in Worldwide
Watches qualitative and quantitative survey, forecasts competitive intensity and attractiveness Geography segmentation Market rivalry and Segmentation, Market value forecast; Five Forces Analysis
Worldwide
€ 258
03 / 2013
Fondation de la Haute Horlogerie
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Firm
Title
Keywords
Country
Price
Date
MarketLine
Citizen Holdings Co., Ltd. -
SWOT, Strategy and Corporate Finance Report
Global
€ 140
04 / 2013
MarketLine
Jewelry & Watches: Global Industry Guide
Descriptions of the leading retailers including key financial metrics and analysis of competitive pressures
Global
€ 1'103
01 / 2014
MarketLine
Jewelry & Watches: Global Industry Guide
Retail market size (value 2008-12, and forecast to 2017 Leading company profiles, details of key jewelry & watches market retailers' global operations and financial performance
Global
€ 1'103
02 / 2014
MO Luxury Group
AUSTRALIAN LUXURY MARKET REPORT, AUGUST 2013
Market Growth Brands Estimate of the Australian luxury market Sales by Category
Australia
Free
08 / 2013
Plimsoll Publishing Ltd
Clocks & Watches (France)
Detailed overview of the WATCHES & CLOCK MANUFACTURERS (France) market; analysis on the top 180 companies
France
€ 614
03 / 2014
Plimsoll Publishing Ltd
Manufacture Of Watches And Clocks (Germany)
Detailed overview of the WATCHES & CLOCK MANUFACTURERS (Germany) market; analysis on the top 80 companies
Germany
€ 614
03 / 2014
Plimsoll Publishing Ltd
Watches & Clock Manufacturers (Global)
Detailed overview of the WATCHES & CLOCK MANUFACTURERS (Global) market; analysis on the top 130 companies
Global
€ 1'166
03 / 2014
Plimsoll Publishing Ltd
Watches And Clock Manufacture (Russia)
Detailed overview of the WATCHES & CLOCK MANUFACTURERS (Russia) market; analysis on the top 20 companies
Russia
€ 638
03 / 2014
Plimsoll Publishing Ltd
Clocks & Watches (UK)
Detailed overview of the WATCHES & CLOCK MANUFACTURERS (UK) market; analysis on the top 47 companies
UK
€ 430
03 / 2014
PureData
Jewelry, Watch, Precious Materials Wholesale Lines World Report
Data includes Market Consumption by individual Product / Service, Per-Capita Consumption, Marketing Costs & Margins, Product Launch Data, Buyers, End Users & Customer Profile, Consumer Demographics.
Worldwide
€ 2'394
03 / 2014
Shullmann Research Center
Insights into Luxury ; Generational Differences in Luxury Consumers’ Attitudes and Buying Plans
Expectations, behaviors, and plans of adults; attitudes and behaviors regarding luxury products and services
Global
Free
07 / 2013
Simon-Kucher Partners
China luxury survey 2013
Changing tides: catching the next profit wave
China
Free
01 / 2014
Suppliers Relations US LLC
Watch, Clock, and Part Manufacturing Industry in the U.S. and its International Trade
Watch industry's key financial data, competitive landscape, cost and pricing, and trends during the current environment; 150 charts and tables, Trends through 2017
USA
$ 599
02 / 2014
TechNavio
Global Smartwatches Market 2014-2018
Global Smartwatches market has also been witnessing an increase in R&D spending. key vendors
Global
€ 1'845
11 / 2013
TechSci Research
Global Gems and Jewelry Market Forecast and Opportunities, 2019
Markets by brands and countries, developing countries, gems & jewelry demand
Global
€ 2'214
03 / 2014
Unity Marketing
US Luxury Watches Snapshot Report 2013: Affluent Customers' Watch Brand Preferences
Watches brands consumer data, affluency, trendy brands in terms of purchase incidence and spending
USA
€ 439
05 / 2013
Unity Marketing
Luxury Consumer Tracking Study
Habits of Luxury Consumers. Buying luxuries major luxury business statistics amount of luxury purchases spendings
Worldwide - USA
€ 9'224
03 /2014
University of Bekasi
The attitude motivation influence people's buying luxury goods. A survey of chinese in China
Questionnaire and survey concerning China shopper attitude
China
Free
11/ 2013 12 /2013
Veraart Research
Jewellery & Watches retailers in Europe and main countries worldwide
Watches brands; Turnover in Mio €, Number of outlets, Management, International turnover
Worldwide
€ 365
03 / 2014
Wealthinsight Ltd
2020 Foresight Report: Luxury Investments
Comprehensive analysis on market potentials and key trends and drivers impacting the growth of the luxury investments market
Global
€ 3'040
10 / 2013
Wealthinsight Ltd
2020 Foresight Report: Luxury Investments
Examines the attitudes of high net worth individuals (HNWIs) to luxury investments jewelry and watches are analyzed and insights provided into where future growth and opportunities, Analysis of Key Trends and Drivers
Global
€ 2'804
10 / 2013
Xerfi-Precepta
Luxury Groups – World
LMVH, L’OREAL, RICHEMONT, SWATCH GROUP, PPR/KERING, RALPH LAUREN CORPORATION, COACH, HERMES, PRADA GROUP, TIFFANY
Worldwide
€ 1'500
July 2013
All the studies are published in English except: * in French
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Fondation de la Haute Horlogerie
Fondation de la Haute Horlogerie
9
JOËLLE DE MONTGOLFIER, SENIOR DIRECTOR OF BAIN & COMPANY’S EMEA RETAIL, LUXURY AND CONSUMER PRODUCTS PRACTICES
MARC-ANDRÉ KAMEL, PARTNER AND HEAD OF BAIN’S EMEA RETAIL AND LUXURY PRACTICES
Bain & Company, a leading global business consulting firm, serves clients on issues of strategy, operations, technology, organization and mergers and acquisitions. Bain has analyzed the market and financial performance of more than 230 of the world’s leading luxury goods companies and brands. The database of companies, known as the ‘Luxury Goods Worldwide Market Observatory,’ has become a leading and much studied source for the international luxury goods industry. Bain publishes its annual findings in its ‘Luxury Goods Worldwide Market Study,’ which was first published in 2000. www.bain.com Follow Bain on Twitter @BainAlerts
10
Fondation de la Haute Horlogerie
Heterogeneous mix of 330 million consumers spend €217 billion on luxury goods globally Changing Generational Shifts and Unprecedented Fragmentation Form Rise of the “7 New Faces of the Global Luxury Consumer” The number of luxury consumers worldwide has more than tripled over the past twenty years, from roughly 90 million consumers in 1995 to 330 million at the end of 2013; this according to Bain & Company, the leading advisor to the worldwide luxury goods industry, in an extensive study of 10,000 luxury consumers, conducted in collaboration with Redburn Partners, Europe’s largest independent equities broker, and Millward Brown, a leading consumer research agency. A net total of 10 million additional consumers yearly enter the luxury market to reach an estimated 400 million luxury consumers worldwide by 2020, and an estimated 500 million luxury consumers by 2030. In its analysis of approximately 10,000 luxury consumers, the report finds significant differences within the global luxury market and its consumer base, which is shifting from its historicallyhomogeneous base of affluent consumers worldwide to a broader and highly heterogeneous class of luxury shoppers. “The race is on to capture an explosion in worldwide luxury consumer growth,”said
Fondation de la Haute Horlogerie
Claudia D’Arpizio, Bain partner in Milan and lead author of the report. “But the luxury consumer of the future will become increasingly heterogeneous and luxury brands and operators need an immediate upgrade to their consumer strategies to recognize and react to this growing diversity, else risk falling behind.” Within luxury’s current 330 million consumer base, 55 percent (180 million) shift between luxury and merely “premium” purchases, including products such as designer 2nd lines, beauty products and small accessories. This group comprises approximately 10 percent of global spending purchasing an average of €150 per capita annually. The remaining 45 percent (150 million) represent ‘true luxury consumers’ who consistently dedicate part of their discretionary spending to personal luxury products of various nature, usage occasions and price point and make up roughly 90 percent of global spending, purchasing an average of €1,250 per capita annually. Additionally, the top 10 percent spenders (15 million) within this group capture over half of its spending. “Of the two main types of luxury consumers, only ‘true luxury consumers’ purchase luxury watches” explains Marc-André Kamel, a Bain partner in Paris and the head of Bain’s EMEA Retail and Luxury practices.
11
Key to the report is its focus on the shift in the heterogeneous global picture for the new luxury consumer and what Bain defines as the ‘7 New Faces of the Global Luxury Consumer,’ a comprehensive profiling of seven luxury consumer segments, displaying a divergence of tastes and buying behaviors, while straddling national and generational boundaries: 1 | The Omnivore (25 percent of spending, at an average €2,350 per year): These shoppers are typically new entrants to luxury. On average, they are younger than the other clusters and have a high willingness to experiment with products and brands. They are primarily women. They tend to purchase high ticket items, focusing on the jewelry and watches categories. They prefer to shop in brands’ own stores. Many of their purchases are made while travelling. They prefer aspirational brands, and while they have high advocacy for luxury brands, their loyalty level is relatively low. These attitudes are common among Chinese consumers from Tier Two and Three cities.
4 | The Hedonist (12 percent of spending, at an average €1,100 per year): These shoppers are infatuated with luxury goods and the luxury shopping experience. They have a high affinity for brand logos and much of their purchasing is within accessories categories. They are most influenced by advertising. Despite their interest in luxury for show, they exhibit the lowest levels of advocacy for brands, often due to cognitive dissonance sometimes following purchase. This is the only cluster represented across all nationalities and generations. 5 | The Conservative (16 percent of spending, at an average €1,000 per year): These are mature and mainstream shoppers, both men and women. They favor watches and jewelry from big-name brands. They shop in multibrand stores, and are influenced primarily by what friends and family recommend. They are mainly in mature markets, but also in China.
2 | The Opinionated (20 percent of spending, at an average €1,750 per year): These are highly educated Generation X and Y shoppers. They favor leather goods and watches, and are highly aware of the differences between brands. They shop often within their hometown, and are influenced by online information, and social networks. They dominate China’s Tier One cities and are also prevalent in Western Europe and the United States.
6 | The Disillusioned (nine percent of spending, at an average €800 per year): These are mostly baby boomer shoppers who suffer from “luxury fatigue.” They purchase leather goods and beauty products. They look for products that last more than one season, but are unswayed by brand messaging or advertising. They tend to shop infrequently, and like shopping online when they can. The segment is dominated by women. They are found in the United States, Europe, and Japan.
3 | The Investor (13 percent of spending, at an average €1,450 per year): These shoppers pay the greatest attention to the quality and durability of luxury materials. They favor long-lasting leather goods and watches which can be handed down from generation to generation. They carefully evaluate luxury purchases with research and referrals from other consumers. The segment is skewed to shoppers from Japan, the Middle East and mature markets where discretionary spending is more cautiously allocated.
7 | The Wannabe (five percent of spending, at an average €500 per year): These predominantly female shoppers look for entry-level items in beauty and shoes, valuing affordability, and are highly likely to mix and match outside of the luxury spectrum. They are impulse shoppers who demonstrate little brand loyalty, primarily influenced by what their friends say and what they see in fashion publications. They come from the global middle class, especially in the United States, Western Europe, and new consumers in Eastern Europe.
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“Amongst the 7 new types of luxury consumers, ‘the Conservatives’ are the ones that prioritize luxury watches as they seek quality and durability above all. ‘The Omnivores’, ‘the Opinionated’ and ‘the Investors’ also hold luxury watches high on their list of preferred luxury goods, the former as a sign of their social status and the latter as a sound investment”, states Bain & Company also finds that while the 7 segments may be concentrated in specific geographies, there are shoppers from every segment in every major global luxury market. There is a global cycle from the enthusiasm of Chinese and other emerging market consumers to the mature caution of markets such as the United States and Western Europe to the detachment of older shoppers and consumers in Japan. But within this cycle there are significant country-level differences. Chinese shoppers are increasingly diverse and nuanced, ranging from a high degree of sophistication and luxury experience to luxury novices. Overall, Chinese consumers
are the most “generous” nationality, with about half of shopping for gifting (versus an average of 40 percent at global level). The study finally confirms that the luxury market is still in the hands of baby boomers (45 percent of luxury consumption worldwide), whose behaviors and preferences are quite different from the boomers’ children (Generation Y). Younger generations, consumers of the future, continue to maintain positive attitudes to luxury and present the most disparate profiles: from newbies to experts, from classic to edgy, from enthusiast to detractors; the fragmentation in luxury tastes of this group makes the consumer picture ever more complex to handle. “We have observed that luxury watches are mainly purchased by Generation X and Baby Boomers. Luxury watches attract the wealthiest kind of luxury consumers as well as the more prudent and farsighted who choose to purchase luxury watches as a form of investment,” concludes Marc-André Kamel.
APPENDIX BAIN & CO
in collaboration with
powered by
Lens on the worldwide luxury consumer Relevant segments, behaviors and consumption patterns Nationalities and generations compared Claudia D'Arpizio Federica Levato Paris, 10th February 2014
Fondation de la Haute Horlogerie
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APPENDIX BAIN & CO
Our Partners
Founded in 2003, Redburn is Europe's largest independent equities broker. It is focused on providing institutional clients conflict-free research and high-touch execution across pan-European equity markets. Annabel Gleeson is the Luxury Goods analyst at Redburn.
Millward Brown is a leading global research agency specializing in advertising, marketing communications, media and brand equity research. It has been a true pioneer in brand tracking since 1973, we have conducted more than 18,000 brand tracking studies. In addition, it has tested more than 80,000 campaign in 86 countries across 5 continents with its Link™ platform, and maintains Firefly, the world's largest qualitative network for brand research.
MIL
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Methodology and sources of the study
Consumer research
Bain point of view
• Quantitative research (CAWI methodology) on a panel of ~10.000 luxury consumers across 10 most relevant countries • Qualitative research (in-depth interviews) to complement findings on geographies and consumer types not significantly represented by the web research • Bain & Company industry knowledge: - 150+ cumulated years of consulting experience in fashion-luxury space - 1.000+ projects performed in the industry in last 15 years
• Integration of findings within Bain Luxury Study on market size and trends MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
Today's presentation Luxury consumers worldwide: key figures
Who luxury consumer is
Consumer Profiles
Consumer Nationalities
Consumer Generations
360째 consumer insight: from knowledge to action MIL
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Today's presentation Luxury consumers worldwide: key figures
Who luxury consumer is
Consumer Profiles
Consumer Nationalities
Consumer Generations
360째 consumer insight: from knowledge to action MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Fondation de la Haute Horlogerie
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APPENDIX BAIN & CO
330M luxury consumers worldwide in 2013 GLOBAL LUXURY CONSUMERS (2013|M PEOPLE) • Population by age • Household composition • Personal wealth • Household income • Urbanization • Education
• Saving rate • International mobility • Disposable income allocation • Attitude towards discretionary spending • Propensity towards branded goods • Exposure to global luxury
World population
Luxury consumers MIL
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Luxury consumers more than tripled in less than 20 years, reshaping the pyramid and supporting market growth LUXURY CONSUMERS EVOLUTION (1995-2013E|M PEOPLE)
ABSOLUT E
ABSOLUT E
ABSOLUT E
ASPIRATIONAL
ASPIRATIONAL
ASPIRATIONAL
ACCESSIBLE
ACCESSIBLE
ACCESSIBLE
GLOBAL LUXURY MARKET EVOLUTION (1995-2013E|B€)
SORTIE DU TEMPLE
DEMOCRATIZATION
CRISIS & UPTRADE
MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
Emerging markets offer already almost 130M luxury consumers, with Chinese being the top nationality LUXURY CONSUMERS DISTRIBUTION BY NATIONALITY (2013E|M PEOPLE)
EAST ERN EUROPEAN NORTH AMERICAN
JAPANESE
WEST ERN EUROPEAN CHINESE MIDDLE EAST ERN & ROW
OTHER ASIAN
LATIN AMERICAN
MIL
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Chinese: the top nationality of the market with the third largest consumer base and second highest spending LUXURY CONSUMERS DISTRIBUTION AND SPENDING BY NATIONALITY (2013E) SPENDING PER CAPITA RANKING BY SPENDING ~650€ AVG
MIDDLE EASTERN & ROW LATIN AMERICAN EASTERN EUROPEAN OTHER ASIAN JAPANESE
~1.400€ ~500€ ~500€ ~750€
1 5 5 4
~800€
3
~1.250€
2
~450€
7
~400€
8
CHINESE
WESTERN EUROPEAN
NORTH AMERICAN
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APPENDIX BAIN & CO
2 macro-segments of consumers, of which "true luxury" ones account for almost 90% of the market value LUXURY CONSUMERS DISTRIBUTION BY SPENDING (2013E) spending Per capita
True luxury consumers ~330M consistently dedicate part of their discretionary spending to personal True luxury luxury products of various ~150M nature, usage occasions Focus of ~1.250€ the study and price points
PremiumPremium-toto-luxury ~180M ~150€
Luxury Market
Luxury Consumers
Occasional consumers desire to purchase luxury goods but can afford only few entry items among designer 2 nd lines, beauty products, small accessories MIL
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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
True luxury consumers are also very heterogeneous: top 10% of them capture around 50% of global spending LUXURY CONSUMERS DISTRIBUTION BY SPENDING (2013E) spending Per capita
~330M
True luxury ~45%
~150M
~15M
Top ~10%
Ultim Ult imate imate ~1%
~100K€
~6,5K€
~1.250€
Ultra ~6 %
Core ~20%
Superhigh ~26%
~1.250€
~10K€
PremiumPremium-toto-luxury ~55% ~55 %
Entry ~70%
~150€
Total Luxury consumers
Total Luxury market
High ~67%
~500€
True luxury consumers
~2,5K€
Top luxury True luxury market consumers MIL
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~25K€
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APPENDIX BAIN & CO
Enlarging consumer base (10M+ new consumers per year) and uptrade of the current base will fuel market growth • Increasing number of consumers - The potential base has been growing relentlessly in the last 20 years and demographics are sound going forward ABSOLUTE
ABSOLUTE
ABSOLUTE
ASPIRATIONAL
ASPIRATIONAL
ASPIRATIONAL
ACCESSIBLE
ACCESSIBLE
ACCESSIBLE
• Bulk of consumers aspiring to buy luxury
True luxury
- Premium-to-luxury consumers could become true luxury consumers in the Premium-to-luxury next years increasing their spending
• Up-trade opportunity
• Emerging consumers progressively enlarging their share - Increasingly relevant emerging consumers, with their higher spending, will further sustain market growth
- Entry consumers could move to the next level when able to afford if attracted by tuned value proposition
MIL
Top Core
Entry
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Today's presentation Luxury consumers worldwide: key figures
Who luxury consumer is
Consumer Profiles
Consumer Nationalities
Consumer Generations
360° consumer insight: from knowledge to action MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
7 key segments to describe worldwide luxury consumers
Conservative
I buy it safe
Opinionated
I know it!
Disillusioned
Hedonist
I'm so over it!
I love it!
Omnivore
Wannabe
I want it all!
I desire it!
Investor
It's worthy? I buy it! MIL
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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
Conservative the largest segment overall; Omnivore and Opinionated making up more than half of top luxury market TRUE LUXURY CONSUMERS AND SPENDING
TRUE PREMIUMTO-LUXURY
TOP CORE ENTRY
TOP LUXURY CONSUMERS AND SPENDING
SPENDING RANKING PER CAPITA
SPENDING RANKING PER CAPITA
Avg: 6.500€
Avg: 1.250€
Investor Wannabe Omnivore Hedonist
~1.450€
3
~7.000€
2
~500€
7
~2.500€
7
~2.350€
1
~9.000€
1
~1.100€
4
~5.300€
5
Disillusioned
~800€
6
~5.000€
6
Opinionated
~1.750€
2
~6.500€
3
~1.000€
5
~5.500€
4
Conservative
MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
Omnivore: curious and compulsive shopper, the more the better PURCHASING DRIVERS
Who
Brand Name Exclusivity
FEATURES AND BEHAVIORS
Visible Logo
Male 38% Female 62% • Mainly Chinese consumers starting to approach luxury, from 2nd and 3rd tier cities • Youngest segment, between 30s and 40s Shopping Habits
Product Fit
Status
• Monobrand is the preferred channel, often shops abroad during vacations
Quality & Durability
KEY PERSONAL LUXURY CATEGORIES
KEY ENLARGED LUXURY CATEGORIES
1
Jewels
1 Design
2
Watches
2 ….
Only personal luxury matters
Hard luxury!
• Low price sensitivity, always buys in-season
Favourite brands
• Gifting has a strong role (more than half of luxury purchases) Brand Attitude
• Highest interest and expenditure on personal luxury goods
• Strongest advocacy, pairing with structural disloyalty to brands • Prefers Aspirational brands Sources of influence
• Low sensitivity to advertising
• Influenced by social networks MIL
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Opinionated: educated and both-brained luxury consumer PURCHASING DRIVERS Brand Name Exclusivity
FEATURES AND BEHAVIORS Male 45%
Visible Logo
Female 55%
Who
• Mainly Chinese living in Beijing and Shanghai, followed by Western EU and US • Highly educated manager in his/her early 40s, with good penetration in Gen Y Shopping Habits
Product Fit
Status Quality & Durability
KEY PERSONAL LUXURY CATEGORIES
KEY ENLARGED LUXURY CATEGORIES
1
Leather Goods
1 Travels
2
Watches
2 Electronics
Accessories
Experience and Tech Favourite brands
• Shops repeatedly during the season • Home town/country is the main location to shop during work-days; abroad in leisure time • Leverages new technologies and tablets Brand Attitude
• Strong luxury connoisseurs: highest brand awareness • High loyalty and advocacy, from renown brands to niches with low price sensitivity Sources of influence
• Superior in-store service and targeted communication is crucial to drive purchases • Influenced by social networks MIL
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APPENDIX BAIN & CO
Conservative: a mature mainstream consumer PURCHASING DRIVERS
Who
Brand Name Exclusivity
FEATURES AND BEHAVIORS Male 51%
Female 49%
Visible Logo
• Mainly in mature markets, followed by China
Product Fit
• Multibrand store still an important channel, one-to-one relationship with store assistants
• 50 years old, with high penetration of Generation X Shopping Habits
Status
• Gifting plays an important role, especially for significant other
Quality & Durability
KEY PERSONAL LUXURY CATEGORIES
KEY ENLARGED LUXURY CATEGORIES
1
Watches
1
Electronics
2
Jewels
2
Hospitality
Work and functionality
Hard luxury!
• Highly price sensitive Brand Attitude
• Feels more at ease in buying big names • Overall, higher advocacy on Aspirational brands • Alternate attitudes between genders: men are luxury neutral/detractors, women are discrete promoters
Favourite brands
Sources of influence
• Looking for partner's and friends' approval and suggestions MIL
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Investor: the rational actors of luxury market PURCHASING DRIVERS Brand Name Exclusivity
FEATURES AND BEHAVIORS Who
Male 44%
Visible Logo
Female 56% • Mature markets consumer (+ Middle Eastern) • High penetration of Baby boomers Shopping Habits
Product Fit
Status Quality & Durability
KEY PERSONAL LUXURY CATEGORIES
1
Leather Goods
2
Watches
Long lasting
KEY ENLARGED LUXURY CATEGORIES
1 Travels 2 Cars
FamilyFamily -mobility Favourite brands
• Prefers to shop alone and for him/herself since every purchase is programmed • Hard luxury playing a core role in the basket • Online increasing its role as channel, with multi-brand having a strong role Brand Attitude
• Product quality and durability key drivers • More loyal to big Accessible brands; product-rather-than-brand approach and preference for absolute high-ticket items Sources of influence
• Rather than being influenced by advertising, follows other consumers' referrals MIL
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APPENDIX BAIN & CO
Hedonist: loves luxury and to show it off PURCHASING DRIVERS
Who
Brand Name Exclusivity
FEATURES AND BEHAVIORS
Visible Logo
Male 54%
Female 46%
• Most transversal cluster across nationalities and generations Shopping Habits
Product Fit
Status
• Shops on working days & business travel
Quality & Durability
KEY PERSONAL LUXURY CATEGORIES
1 2
• Not a "solo" shopper: needs to have approval from others also during the shopping occasion
KEY ENLARGED LUXURY CATEGORIES
Shoes Watches
1 Cars 2 Design furniture
Accessories!
Show off outdoor & indoor
• Low interest in Mix and Match Brand Attitude
• Loves luxury but experiences cognitive dissonance
• Not loyal to specific brands; purchases range from big names to emerging fashion icons • Looking for brands easy to be recognized by others rather than product quality Sources of influence
Favourite brands
• Strongly influenced by advertising • Appreciates personal shoppers' services MIL
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Disillusioned: a detached luxury "survivor" PURCHASING DRIVERS Brand Name Exclusivity
FEATURES AND BEHAVIORS Who
Male 42%
Visible Logo
Female 58% • Highest penetration in mature markets: US, Europe and Japan • Baby boomers as the core generation Shopping Habits
Product Fit
Status Quality & Durability
KEY PERSONAL LUXURY CATEGORIES
Leather Goods 2 Beauty 1
ExittoExit -to -luxury
KEY ENLARGED LUXURY CATEGORIES
1 Gourmet food 2 Travels
Experience 2.0 Favourite brands
• Lowest income: pays more attention on what to buy, especially on mark-downs • Shops rarely and mainly during spare time • Prefers to shop alone in home town & web Brand Attitude
• Starting to be detached and disinterested in traditional luxury values • Rather neutral attitude vs. luxury industry overall • Prefers big heritage and iconic brands Sources of influence
• Rarely influenced, not interested in following trends, prefers products that last more than one season MIL
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APPENDIX BAIN & CO
Wannabe: a value-hunter fashionista PURCHASING DRIVERS
FEATURES AND BEHAVIORS Who
Brand Name Exclusivity
Male 25% Female 75% • US and European middle class, and Russian aspirational consumers starting to approach luxury
Visible Logo
• Transversal cluster across generations Product Fit
Status Quality & Durability
KEY PERSONAL LUXURY CATEGORIES
1
Beauty
2
Shoes
EntryEntry -prices
Shopping Habits
• High price sensitivity
• Impulse shopping according to discounts presence • Strong role of online for convenience
KEY ENLARGED LUXURY CATEGORIES
1 Travels
• Shops during spare time Brand Attitude
• Mix & match with more affordable brands, with high knowledge of fashion trends • Disloyal to brands, switches from one brand to the other looking for bargains
ShoppingShopping -driven experiences
• Prefers big brands especially for RTW Sources of influence
Favourite brands
• Relies on friends' word of mouth
• Constantly updated by specialized press MIL
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Omnivore and Wannabe coexist at the extremes of this rather heterogeneous picture
100% Luxury
PRICE SENSITIVITY BY CLUSTERS
Luxury when valuefor-money justifies it
Mix & match
∆
Luxury as a real state of mind
Exit-to-luxury?
Luxury in-a-budget
High Sensitivity
Low Sensitivity
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APPENDIX BAIN & CO
With respect to 5 years ago, segments at the "extremes" of luxury showed a significant evolution path LUXURY CLUSTERS EVOLUTION IN LAST 5 YEARS
∆
High Spending
DISILLUSIONED
OMNIVORE • New consumers (young and Chinese mainly) Low Spending
• Over economic crisis and ageing, consumer progressively changed priorities and now underspend in luxury
• Omnivores, not changing their behaviors Low contribution
WANNABE
High contribution
• Rising middle class from new markets approaching for the first time luxury
• Former "Omnivores" whose tastes evolved towards clearer preferences
• Mature "aspirational" luxury consumers from historic markets
• Mature opinionated consumers, not changing their behaviors MIL
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Unmet aspirations cause cognitive dissonance for Hedonist; Omnivore the most enthusiastic segment Would you recommend luxury brands to a friend?
NPS BY SEGMENT
Extremely likely
0-6
Minus
% Detractors Pa ne l
Extremely unlikely
Net Promoter Score (NPS)
H ed on is is ill t us io ne d In ve Co st or ns er va ti v O pi e ni on at ed W an na be O m ni vo re
7-8
% Promoters
D
9-10
NPS
MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
Luxury affection not always correlated to spending
∆
Low Spending
High Spending
LUXURY SPENDING VS. ADVOCACY BY CLUSTERS
Luxury addicted: the more the better High aspirations leading to cognitive dissonance
Wannabe, you name it!
Mild-to-detached approach to luxury
Detraction
Low Advocacy
High Advocacy
MIL
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Today's presentation Luxury consumers worldwide: key figures
Who luxury consumer is
Consumer Profiles
Consumer Nationalities
Consumer Generations
360° consumer insight: from knowledge to action MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
Chinese consumers are spendthrift, mature Europeans and Americans are penny-pinching TRUE LUXURY CONSUMERS AND SPENDING BY NATIONALITY (2013E)
Middle Eastern & RoW Other Asian Chinese Japanese Latin American North American Eastern European
SPENDING PER CAPITA
RANKING BY SPENDING
~1.800€
2
~1.350€
3
~2.000€
1
~1.350€
3
~1.100€
5
~850€
8
~1.100€
5
~900€
7
Western European
MIL
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Evolutionary path: from enthusiastic Chinese to detached Japanese consumers LUXURY CONSUMERS BY NATIONALITY (2013E)
"Enthusiastic" "Maturing"
"Mature"
"Detached"
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APPENDIX BAIN & CO
Polarized attitudes: Chinese & ME seek brand and advertising power, detached Japanese product quality PURCHASING DRIVERS AND SHOPPING BEHAVIORS
Average
Luxury mature & detached QUALITY & DURABILITY
Product 5
2 3
6
4
BRAND & LOGO
4
PRICE INSENSITIVITY
Price
VALUE FOR MONEY LOW ADVERTISING INFLUENCE
Luxury enthusiastic
3
1 5
6
Promotion 3
1
2
5
4
6
HIGH ADVERTISING INFLUENCE
Place OWN COUNTRY
2
6
ABROAD
4
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40% of luxury purchases worldwide are for gifting; Chinese the most "generous" nationality WEIGHT OF LUXURY GIFTING BY NATIONALITY
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APPENDIX BAIN & CO
The relative weight of individual consumer clusters varies across regions TRUE LUXURY CONSUMERS BY NATIONALITY AND CLUSTER (2013E|M PEOPLE) Top cluster among Middle Eastern but also very relevant in Japan and in mature markets where discretionary spending is more cautiously allocated
TOT ~150M people
Top cluster for Eastern European but also relevant among less wealthy Western European and North Americans
Investor Wannabe Omnivore
Top cluster for Chinese representing almost half of the Omnivore segment worldwide The most "global" segment, showing a consistent weight across nationalities
Hedonist Disillusioned
Top or 2nd top cluster in mature markets where consumers have been exposed to luxury for long
Opinionated
2nd top cluster for Chinese also relevantly represented in mature markets but on average by older generations
Conservative
Overall the largest cluster worldwide, but ranks first only in Europe and Japan MIL
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Traditional luxury markets: mature consumers for tastes and approach to luxury
Hedonist
Western European
North American
Luxury consumers by cluster
Luxury consumers by cluster
Disillusioned Opinionated
23%
Investor
Wannabe
20% 19%
Conservative Disillusioned Hedonist
Conservative
14%
10%
Wannabe Investor Opinionated
Disillusioned
Hedonist
Opinionated
Omnivore
5%
Omnivore
20%
Disillusioned
16%
Investor
Wannabe
Conservative Omnivore
15%
13%
12%
Investor Hedonist
Conservative Opinionated
9%
Omnivore
Wannabe
Behaviors and Habits
Behaviors and Habits
• Key purchasing drivers across generations: quality of the materials, durability and value for money
• Mature luxury community looking for product fit, high quality of materials and value for money
- Italy and France have the most savvy consumers, British show a detached attitude
• Luxury has been losing share of wallet in the last 2 years, impacted by the financial crisis and by a changing consumer attitude • Luxury consumption is mainly domestic and monobrand stores are the key channel
- Multibrand format is particularly relevant in Italy and France - Outlet increasingly important
• E-commerce shows different penetration through the countries with UK ahead of others
• For Generation Y logo visibility and brand name are even less important, showing a sophisticated approach • Strong advocacy towards accessible brands confirmed by superior NPS • Luxury goods mainly bought domestically and department stores are still the first channel followed by online and monobrand stores • First area for ecommerce penetration, with convenience and assortment the two main drivers to buy luxury online MIL
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APPENDIX BAIN & CO
Chinese: a universe of its own, strongly dynamic and with very diverse consumer profiles Luxury consumers by cluster Hedonist
Disillusioned Opinionated
32%
29%
Omnivore
Investor
Wannabe
17%
Opinionated
Conservative Omnivore
12%
Conservative
Behaviors and Habits
4 %
5%
Hedonist
2 %
Wannabe Investor
Disillusioned
Concentration index vs. global average 19%
• Strong polarization towards Omnivore and Opinionated, accounting for more than 60% of total consumers • Key purchasing drivers reflect different souls of Chinese luxury consumers - Overall, luxury seen as a "social enabler": preference for well-known brand names, sense of belonging is crucial - Generation Y moving their attention to product quality and subtle brands - Beijinger refusing ostentation and logos redirecting their interest towards personalized super-luxury products
• Female on average top spenders: +20% vs. male
13%
• Chinese purchase mainly overseas and monobrand stores are by far the most relevant channel -3%
• Luxury gifting still a strong cultural ritual driving luxury expenditure
-3% -6% -8% -13%
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Japanese: Detached luxury consumers looking for high quality products at the right price Luxury consumers by cluster Hedonist
Disillusioned Opinionated
25%
Conservative
Investor
Wannabe
22%
Investor
Behaviors and Habits
Conservative Omnivore
12%
Hedonist
Disillusioned
7%
Wannabe
6%
5%
Omnivore
Opinionated
Concentration index vs. global average 10%
• Investor, Conservative and Disillusioned most relevant clusters, strongly above global average • The most sophisticated luxury community - Dislike of visible logo - Strong attention to product intrinsic values: fit, quality, durability and value for money - Own taste and superior fashion perception - Young consumers appreciating only niche and edgy brands
• Overall detachment from luxury - Strong detraction across all brands and lowest brands loyalty rate (except for hard luxury) - "Lonely and self-centered" consumers
11%
• Market almost entirely domestic, with department stores key destination channel for luxury consumers
5%
• Weakest luxury e-commerce penetration
-2% -5% -10%
-8% MIL
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APPENDIX BAIN & CO
French: very polarized behaviours of sophisticated consumers Luxury consumers by cluster Hedonist
Disillusioned Opinionated
24%
Conservative
Investor
Wannabe
22%
19%
Disillusioned
Hedonist
Behaviors and Habits
Conservative Omnivore
12%
9% 8%
6%
Opinionated Omnivore Investor Wannabe
Concentration index vs. global average +7% +4%
+5% +0%
-7%
Concentration index vs. W. European average +1%
+2%
+1%
+0% -2%
-1%
-2%
• Highest presence of Baby Boomers, accounting for more than half of consumer base, redirecting their disposable income to other-than-personal luxury categories • Luxury share of wallet has been losing ground in the last 2 years with premium segment gaining relevance • Still, quality of materials and product fit still the key purchasing drivers, confirming consumer sophistication
-3% -6%
• Dichotomic vision of luxury: Conservative and Disillusioned are the core consumer segment, with very different attitudes
- Importance of tailors and artisan laboratories as distribution channels
• Overall, neutral NPS with strong polarization among product categories - Negative NPS for RTW brands - Slightly positive NPS for soft accessories brands - Positive double digit NPS for hard luxury brands MIL
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Today's presentation Luxury consumers worldwide: key figures
Who luxury consumer is
Consumer Profiles
Consumer Nationalities
Consumer Generations
360° consumer insight: from knowledge to action MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
Baby boomers are the mass of the market, Generation X, at the top of their careers, the top spenders TRUE LUXURY CONSUMERS DISTRIBUTION AND SPENDING BY GENERATION (2013E) SPENDING PER CAPITA
Silent Generation
~900€
68+ Years
Baby Boomers
~1.250€
4949-67 Years
Generation X
~1.600€
3434-48 Years
Generation Y
~900€
1313-33 Years
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Baby boomers, core luxury generation, behaving very differently from Boomers' babies (Gen Y) TRUE LUXURY CONSUMERS BY CLUSTER AND GENERATION (2013E|M PEOPLE) Lowest share across clusters, in particular for Omnivore
TOT ~150M people
Silent gen.
Baby boomers
Generation X Generation Y
Only in the case of Disillusioned the Silent generation is larger than the Generation Y Top generation in nearly all clusters, overrepresented among Conservative, Disillusioned and Investor Relevant generation across clusters but underrepresented among Disillusioned Generation mostly represented among Opinionated and Omnivore, due to high share of Chinese MIL
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APPENDIX BAIN & CO
Age impacts on attitude towards luxury: from status seeker to product maniac PURCHASING DRIVERS Generation Y
Y
Generation X
X
BB
Average
STATUS ("Inclusivity")
X
Y
BRAND
QUALITY
BB
X
Y
X
PEOPLE'S APPROVAL
EXCLUSIVITY
BB
X Y
LOGO
Baby boomers
NO/SUBTLE LOGO
BB
Y
PERSONAL TASTE
BB
What luxury stands for? Status and appearance NPS
Sense of belonging with a personal taste
Product Intrinsic values
18%
3%
18%
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Each generation shows strong preferences in categories, brands & shopping attitude; Generation Y buys more online
Generation Y 1313-33 Years
What
Leather goods and shoes brands
Generation X 3434-48 Years
Baby Boomers 4949-67 Years
RTW and hard luxury brands
Hard luxury brands
they love (NPS)
What they buy (loyalty)
How
Alone
Not alone
Alone
Not alone
Alone
Not alone
For myself
For others
For myself
For others
For myself
For others
they shop
Programmed
On impulse
Programmed
On impulse
Programmed
On impulse
Where they shop
1
Monobrand
1
Monobrand
1
Department stores
2
Online
2
Multibrand
2
Monobrand
3
Multibrand
3
Department stores
3
Multibrand
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APPENDIX BAIN & CO
"Touch and feel" is not a driver for Generation Y, but there are still important gaps perceived in the online experience Global Internet channel penetration over luxury purchases
Generation Y Generation X 15%
12%
Baby Boomers 10%
12%
What are the main reasons not to buy on the internet? Generation Y Generation X
--
I prefer the physical experience I don't like the online experience
Baby Boomers
=
++
++
=
--
+ +
= =
-
I don't find what I want I don't trust the service
Generation Y demands an updated and more engaging digital experience to better fulfil consumers’ new desires MIL
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Y & X, luxury consumers of the future, the most disparate: newbies & experts, classic & edgy, enthusiast & detractors
Generation Y
Generation X
Baby Boomers
1313-33 years
3434-48 years
4949-67 years
Silent Generation 68+ years
Who are they? (M people)
3
3
3
3
2
2
2
2
1
1
1
1
MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
Polarized advocacy among generations and nationalities makes handling luxury consumer extremely complex Net Promoter Score®
Generation Y
Generation X
Baby Boomers
21%
31%
45%
26%
23%
39%
17%
19%
41%
19%
22%
-17%
15%
7%
4%
-10%
-23%
-31%
• Positive NPS across all generations • Baby boomers are still strong luxury supporters
• Luxury impacts more Generation X&Y • Progressive detachment from luxury for old generations • Luxury disillusioned consumers • Baby Boomers completely detached MIL
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Today's presentation Luxury consumers worldwide: key figures
Who luxury consumer is
Consumer Profiles
Consumer Nationalities
Consumer Generations
360° consumer insight: from knowledge to action MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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35
APPENDIX BAIN & CO
A complex and variegated population of clearly distinct luxury consumers that span across regions and age groups LUXURY CONSUMER POPULATION COMPOSITION (2013|M PEOPLE)
ME & RoW Other Asian
Silent generation
Investor Wannabe
Core
Chinese Japanese
Top
Omnivore Baby boomers Hedonist
L. American N. American
Disillusioned Generation X
Entry Opinionated
E. European W. European
Conservative
Generation Y
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What's this all about? • Luxury consumers are a large and heterogeneous group of ~330M people… - ~150M of them are True luxury consumers, consistently purchasing branded luxury goods and representing around 90% of the total market in 2013
• 7 different profiles stand out from this crowd: unevenly distributed across nationalities and generations, showing diverse evolutionary patterns, with distinctive attitudes and behaviors… - …from preferred channels to favorite brands, from shopping habits to source of influence, from luxury advocacy to spending - Conservative, the most 'mainstream' of consumers diffused in mature markets, is the most common profile, while the Omnivore and Opinionated, absolute top spenders, represent the true dichotomy of 'young' consumers, among Chinese in particular
• Despite the comparable size of mature and emerging consumers' base, the latter outspend the former by far, representing a disproportioned share of the market, with Chinese being the nationality with the highest spending per capita • Baby boomers are still by far the largest generation across profiles, but strong growth of Generation X and Y, sustained by emerging consumers, imposes new needs and attitudes, reshaping the rules of the game
A standard approach cannot work anymore, a tailored and responsive strategy for each targeted segment is required to succeed MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
The key execution gap in luxury: mono-directional & monocultural industry vs. multi-faceted & multi-cultural consumer INDUSTRY PRODUCT
• Products are not differentiated enough and sometimes perceived as just variations on the theme, brands' interpretations of macro-trends
DISTRIBUTION
• The distribution is rather standardized leveraging the same channels with geographic differentiation forced by local peculiarities
COMMUNICATION
CONSUMERS
• Communication is undifferentiating with aspirational and still-life campaigns often unrecognizable without the brand name
CUSTOMER EXPERIENCE
• Costumer experience is not entertaining: very formal, seems more adequate for elder generations but with limited appeal on the young
DIGITAL E-COM
• Digital strategies of many brands look like attempts of tackling new media without a deep understanding of their potential
• Not a proactive after sales service aiming at solving problems, with AFTER-SALES debatable success, rather than enhancing consumer satisfaction MIL
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The "new covenant" between luxury brands and consumers Trigger the mind-set revolution Smart-segment your target consumer Design segment-based strategies Deliver impeccable execution
• Face reality and acknowledge the change, across the company • Embrace the change now and gain first mover advantage
Pretending this is not happening, won't make it less painful • Adopt consumer-insight practices and enhance the consumer segmentation variables to match the increased complexity
Your current CRM doesn't answer the most compelling questions about consumers(behavioral consumers( behavioral profiles, deep why, desired experience, …) • Choose the consumer segments you want to win (call for priorities) • Design strategies that are "tailor made" on the target segments
There's not "one size fits all" value proposition • Execute the strategy in a compelling way for the target segment • Be excellence-obsessed along all touch-points, day in day out
Execution is the only strategy consumers see MIL
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APPENDIX BAIN & CO
Luxury value proposition must be re-shaped on the basis of the new paradigm VALUE PROPOSITION
PREDOMINANT VALUE DRIVER
Material Old paradigm
New paradigm
Product
High quality
Right quality
In-store experience
Detached selling ceremony
Tailored entertainment
Service
Needs response & "customer relationship"
Desires anticipation & personal touch
Self identity
Consistency with monolithic identity
Contribution to multifaceted-self
Social identity
Status and belonging
Community and social meaning
Symbolic MIL
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"I do, I do, I do": the three crucial moments to be maximized in the brand-consumer love story CONSUMER CORRIDOR BRAND LEVER
The courtship The date The marriage
Awareness & desire
Purchase Repurchase & advocacy
Old paradigm
New paradigm
• Press and PR focus
• Omni-channel (new codes, fluid, social…)
"I do" moment
"I do" moment
Communication
Store Sales associates
• "Don't turn me off"
Post-sale service CRM NPS
• "Don't disappoint me… too much"
• "Turn me on"
"I do" moment • "Make me fall in love again and again"
"I do" moment
Winning consumer's heart at the early stage won't be enough anymore, the love promise must be renewed at every stage MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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APPENDIX BAIN & CO
Luxury consumers of the future: global picture will get increasingly heterogeneous… You cannot afford to lag behind! LUXURY CONSUMERS EVOLUTION (M# |2013-2030) ~500
New consumer segments -Z generation -African -New profiles (?)
~400 ~330
New consumers from current profiles -Mainly Y generation -Mainly Chinese and from emerging markets -Omnivore and Opinionated from new markets -Wannabe and Conservative from mature markets
Evolution of current consumer base 2013
2020F
2030F
-Mainly X & Y generations -More Opinionated and Hedonist -More Chinese MIL
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Contacts
Authors of the study CLAUDIA D’ARPIZIO PARTNER AND DIRECTOR
Luxury Goods Research ANNABEL GLEESON LUXURY GOODS ANALYST
+39 02 58288 522
+44 20 7000 2086
+39 335 7615 191
+44 7968 035 965
claudia.darpizio@bain.it
annabel.gleeson@redburn.com
FEDERICA LEVATO PRINCIPAL
GEOFF LOWERY PARTNER, NON-FOOD AND LUXURY RETAIL
+39 02 58288 413
+44 20 7000 2131
+39 335 7529 917
+44 7968 772 535
federica.levato@bain.it
geoff.lowery@redburn.com
MIL This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
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OLIVIER ABTAN, PARTNER AND MANAGING DIRECTOR AT THE BOSTON CONSULTING GROUP
The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-forprofit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. www.bcg.com.
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Shock of the New Chic
Dealing with new complexity in the business of luxury
Although global markets for luxury goods and services are not racing ahead at the pace seen in recent years, they will continue to grow at around 7 percent a year, handily outpacing GDP in many economies around the world. And the luxury business continues to be kinetic; it’s the scene of enthusiastic start-up activity and bold acquisitions in several sectors. Yet luxury providers still risk being half a step behind the markets they are meant to serve. They must do more to adapt to new levels of complexity. They face new types of consumers who engage in new kinds of purchasing behaviors. They must extend their reach into new geographies and cities — and must do so in new ways. They are obliged to explore and evaluate innovative business models that may be alien to the approaches that have served them so well for so long. And there is much more they can do to ride the revolution in digital technology. The global appetite for luxury is not sated—but shoppers are changing it in dramatic ways. - Consumers’ ongoing urge to splurge is evident in the latest study by The Boston Consulting Group, which reveals that consumers spent an annual aggregate amount of more than $1.8 trillion world-
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wide on items the respondents defined as luxuries. That figure far outstrips the approximately $390 billion globally that is usually cited as total annual sales of luxury goods such as apparel, cosmetics, watches, and jewelry. - The business of luxury experiences — from private airline services to five-star restaurants — is growing very rapidly, and is already worth almost $1 trillion of the $1.8 trillion total. - This rapid shift from owning a luxury to experiencing a luxury — along with other equally dramatic shifts in demographics, economics, technology, and consumers’ attitudes and behaviors — make it imperative that brands undertake more detailed segmentation of customers and customization of products. Twenty years ago, luxury consumers were less sophisticated and more homogeneous. Today, they are educated about brands, more demanding, and more likely to shop across multiple channels. Rigorous consumer research can yield fresh insights about market segmentation and go-to-market approaches. Global demand is shifting, but the story isn’t just about emerging markets. While the BRIC countries (Brazil, Russia, India, China) and beyond offer real opportunities,
41
not every city in every one of the developing countries holds the same promise. Also, parts of many developed-economy markets continue to be very lucrative places to sell luxury items. These realities make cities—rather than countries—the best lens through which to view consumer attitudes and demand. - Luxury buyers in Shanghai and Beijing have more in common with their counterparts in Paris and Tokyo than they do with those in Zhenjiang and Panjin. For this reason, brands must deeply understand the demographic and sociographic fundamentals in cities rather than, for instance, allowing consumer research conducted in a capital city to represent buying behaviors across an entire country.
Brands and retailers must therefore rethink the benefits of collaborating to drive top-line growth. - Brands should reframe the value of licenses and joint ventures. Although some luxury houses have begun buying back licenses to better control their brands, it may be better to enrich partnerships than to cancel them. Joint ventures can appropriately align both parties’ interests. - Luxury brands need to build vertical ecosystems. Some players have started to take equity stakes in—or acquire— supplier companies. Their objectives vary from retaining rare know-how and access to scarce materials to creating competitive advantage.
- Brands can benefit from city-level analytics not only to better target individual cities but also to enable them to cluster similar cities together—and to then develop sophisticated, localized go-to-market strategies that better serve local customers and tourists.
For luxury brands as for every other type of business, the digital domain is here to stay. But it’s a domain where companies are still feeling their way. This leaves an enormous opportunity for the luxury brands that are quickest to distinguish what works from what doesn’t.
- To help luxury brands address these issues and answer such questions as where they should optimize existing retail footprints rather than opening new stores, BCG has developed the BCG Metroluxe Indices. The three indices measure the luxury status and growth potential of the world’s 550 richest cities (defined by GDP per capita).
- Brands must excel in e-commerce. To do so, they have to grasp the “3Cs”: commerce, content, and community. They must also focus on deploying omnichannel strategies and on integrating e-commerce and offline retail. BCG’s research suggests that omnichannel consumers spend twice the amount that consumers who purchase only through offline or only through online channels do.
Brands must now recognize that their future growth relies heavily on success with new technologies and in new market categories, cities, and channels— aspects they know they cannot master alone. Consequently, they must pursue new business models that help them forge links to other entities and weave themselves into self-sustaining networks. - Brands can reinforce partnerships with retailers. The availability of big data and tools for customer relationship management (CRM) means that more information about customers is accessible.
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- Brands have to rethink channel roles and resolve new channel conflicts because in many luxury categories, consumers experience brands through multiple channels. It’s necessary to redefine each channel’s contribution to brand building, sales volume, and profit. - The luxury sector has yet to master social media as a valuable way of increasing customer engagement, developing new markets, and encouraging and enabling buyers to be brand advocates.
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APPENDIX BCG
Shock of the New Chic
DEALING WITH NEW COMPLEXITY IN THE BUSINESS OF LUXURY
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CONTENTS
3
EXECUTIVE SUMMARY
63
A KINETIC INDUSTRY CALLS FOR FOUR AREAS OF CHANGE
8 5
NEW CUSTOMERS—AND THE NEW WAYS THEY BUY The Shift Toward Luxury Experience The Push for More Detailed Segmentation and Customization
1411
NEW GEOGRAPHIES: NOT THE COUNTRY MARKETS YOU THOUGHT YOU KNEW A New Index of Luxury Buying Insights to Help Brands Succeed as Demand Patterns Shift Worldwide
22 19
NEW BUSINESS MODELS: WHY ALTERNATIVE APPROACHES NOW MATTER SO MUCH Reinforcing Partnerships and Sharing with Retailers Reframing the Value of Licensing and Joint Ventures Leveraging Vertical Ecosystems
2421
THE PERSISTENT RISE OF DIGITAL The Importance of E-commerce and Omnichannel Mastery Revisiting Channel Roles and Sorting Out New Channel Conflicts Benefiting From the Rise of “Social” Marketing
28 25
TEN TOP AGENDA ITEMS FOR LUXURY EXECUTIVES
30 27
FOR FURTHER READING
31 28
NOTE TO THE READER
2 | Shock of the New Chic
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A KINETIC INDUSTRY CALLS FOR FOUR AREAS OF CHANGE
C
onsumers remain smitten by luxury. Their urge to splurge was revealed in a 2013 study by The Boston Consulting Group, which found that consumers spent an annual aggregate amount of more than $1.8 trillion worldwide on items the respondents defined as luxuries.1 (See Exhibit 1.) That figure far outstrips the approximately $390 billion globally that is usually cited as total annual sales of luxury goods such as apparel, cosmetics, watches, and jewelry. Of the $1.8 trillion in annual luxury spending BCG has identified, sales of luxury cars account for more than $400 billion worldwide, and the business of luxury experiences— from private airline services to five-star restaurants—is already worth almost $1 trillion of the total.
Experiential luxury continues to surge in emerging as well as mature markets. In this context, the luxury market continues to buck the slow- and no-growth trends typical of many other industry sectors. BCG forecasts that after the past two years of 11 percent annual growth, the personalluxury-goods sector will expand annually at
around 7 percent over the next few years, outrunning the increases in GDP seen in most economies. But what those raw statistics don’t show is how kinetic the luxury industry really is. We still see launches of lustrous new brands, bold acquisitions, equity stakes purchased by private-equity firms, and even start-up activity. Recently, LVMH Moët Hennessy Louis Vuitton spent $2.6 billion to buy cashmere clothier Loro Piana and then acquired Nicholas Kirkwood, J.W. Anderson, and Hotel SaintBarth Isle de France.2 Many of the shifts in consumer behavior highlighted in our 2010 and 2012 reports on the global luxury market continue to propel the sector in more challenging directions— and in more complex ways. (For more about the trends see Luxe Redux: Raising the Bar for the Selling of Luxuries, BCG Focus, June 2012; and The New World of Luxury, BCG Focus, December 2010.) Emerging-market buyers are becoming prominent: together, Chinese, Brazilians, Russians, and Indians account for more than 30 percent of luxury consumption worldwide. Furthermore, experiential luxury continues to surge in emerging as well as mature markets; in China, for example, annual growth in luxury experiences tops 15 percent, highlighting both threats and opportunities for traditional luxury players accustomed to selling product there.
63 | Shock of the New Chic
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Exhibit 1 | The Luxury Market, as Defined by Consumers, Is Valued at $1.8 Trillion Worldwide “Experiential luxury” ~€715 billion ($980 billion)
Estimated 2012 market size, sales in €billions (amounts in parentheses are in $billions)
1,500 Luxury cars ~€320 billion ($440 billion)
1,200 Personal luxury goods ~€285 billion ($390 billion)
900
320 (440)
600 300 0
60 (80)
Watches and jewelry
Leather goods and accessories 10
13
70 (95)
60 (80)
150 (205)
50 (70)
1,300 (1,800)1
40 (55)
120 (165)
65 (90)
Apparel
CAGR, 2010–2012 (%)
50 (70)
335 (460)
Luxury cars Cosmetics
11
8
11%
Home and furniture Arts
13
9
Alcohol and food
Technology
11
Other (e.g., spas, yachting) Total
Travel and hotels
25
12
11
11
13
14%
Source: BCG-Ipsos market research. Note: This measure of luxury reflects the consumer perspective; for example, the watch and jewelry sales are larger than many traditional estimates because consumers include both branded and nonbranded products. 1 The final totals are rounded.
Brands must match such complicated changes with appropriate responses. BCG observes that success in luxury is linked increasingly to a brand’s mastery in four areas of change:
•
New consumers, different segments, and buying behaviors that are not easy to decode
•
A need to understand new geographies and the new specifics of cities as unique markets
•
New and innovative business models, requiring openness and cultural changes
•
Disruptions in marketing and selling enabled by new digital technologies
This report elaborates on those four dimensions of change, identifying where the leadership teams at luxury providers must place most of their energy and efforts in the future.
Notes 1. To conduct the study, BCG partnered with research firm Ipsos, polling roughly 1,000 affluent individuals in eight developed nations (Germany, France, Italy, Japan, South Korea, Spain, the U.K., and the U.S.) and four emerging countries (Brazil, Russia, India, and China). 2. “LVMH to Buy Control of Loro Piana for $2.6 Billion,” New York Times, July 8, 2013.
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NEW CUSTOMERS—AND THE NEW WAYS THEY BUY
R
ecently, a wealthy Chinese individual spent $1.5 million on a luxury travel package that will take him to nearly 1,000 UNESCO World Heritage sites during a two-year trip. Meanwhile, his son, who had just bought his second Piaget watch, signed up to dive with hammerhead sharks.1
These stories about the two men and two very deluxe experiences drive home two critical points about the changing face of luxury. First, the kind of luxury experiences, customized to their individual needs and interests, that both men are planning to enjoy are becoming increasingly common—and more and more of them are arising in the emerging world, from places such as Chengdu, Jakarta, and Santiago. Second, while the son still buys plenty of luxury goods, the father says he now favors experiences over new “things.” The different attitudes signal the importance of identifying and serving more detailed customer segments than has been typical of traditional market-scoping efforts. Both points deserve closer scrutiny.
The Shift Toward Luxury Experience Worldwide, luxury is shifting rapidly from “having” to “being”—that is, consumers are moving from owning a luxury product to experiencing a luxury. BCG flagged this trend in its 2012 Focus report, Luxe Redux: Raising the
Bar for the Selling of Luxuries. Experiential luxury, such as exotic holidays, gourmet meals, and art auctions, now accounts for 55 percent of global luxury spending. Sales of experiences also outpace product sales: BCG’s research has found annual growth in the category running at 14 percent compared with 11 percent for sales of personal luxury products such as watches, jewelry, and handbags. Within experiential luxury, growth levels of individual sectors have varied, with the technology sector achieving the highest compound annual growth rate: 25 percent. This is not altogether surprising given the nearly universal strength of technology brands today. In BCG’s 2013 Consumer Sentiment survey, affluent consumers praised Apple as the “most aspirational brand” in Canada, France, Germany, Italy, Spain, the U.K., and the U.S. Sony was in the top 10 in six of these seven countries; Samsung made the list in five of them. Yet Chanel, Dior, Gucci, and Louis Vuitton ranked in the top 10 in only a few of the countries. (See Exhibit 2.) Consumers in emerging markets such as China and India are also rapidly shifting to highend experiences, although spending on such experiences still represents a small portion of total luxury expenditures. BCG’s 2013 Global Consumer Sentiment Survey revealed that 29 percent of consumers in China prefer enriching experiences over products, versus
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Exhibit 2 | Many Auto and Technology Brands Are Top Aspirational Brands Among Select Consumers Number of seven selected countries in which consumers ranked a brand as a Top 10 aspirational brand
6
4
2
0 Apple
Samsung
Mercedes
Porsche
Jaguar
Lexus
Dior
Coach
Volkswagen Sony
Technology
BMW
Audi
Ferrari
Automobile
Aston Martin
Chanel
Giorgio Armani
Louis Vuitton Gucci
Tommy Hilfiger Nike
Prada
Apparel and accessories
Source: BCG Global Consumer Sentiment Survey, 2013. Note: The selected countries are Canada, France, Germany, Italy, Spain, the U.K., and the U.S. The consumers were asked, “Across any and all categories, what brands do you most aspire to own or wish that you could afford to own more of than you already do?”
51 percent of consumers in the U.S. (For more about the Global Consumer Sentiment Survey, see The Resilient Consumer: Where to Find Growth amid the Gloom in Developed Economies, BCG Focus, October 2013.)
ing in line behind them is the Millennial generation—those in their twenties who are geared to pleasure rather than possessions. To these young people, owning something usually comes second to sharing new ideas and new experiences.3
This reflects a natural purchasing trajectory: newly affluent buyers tend to amass tangible goods that show off their wealth. “The new Indian luxury consumer is pursuing a lifestyle where owning exclusive items and owning them first is a clear sign of wealth and power,” a senior executive for Lamborghini told Reuters.2 Those who have acquired the “things” they want tend to move on to one-ofa-kind experiences that they can share with others.
Enter the true luxury-experience categories. Luxury experiences are no longer limited to special occasions—the high-end restaurant, the deluxe spa, the yachting vacation, the private safari in Botswana. Now they are expanding to touch more of a consumer’s everyday activities.
In addition to this maturation in the consumption cycle, the move from “having” to “being” is driven by demographic factors. Baby boomers, now into retirement, are leading the way. As the first real purchasers of “democratic luxury,” these sixtysomethings and seventysomethings already own the watches and cars they want, so they seek enjoyable and often novel experiences on which they are prepared to spend handsomely. Fall-
Consider the branding and expansion of services ranging from superior dining to cosmetic surgery and exercise classes. Such services have several characteristics in common. First, they consistently enjoy demand that outstrips supply; waiting lists are long, and the lists themselves further spur the brands’ desirability. Second, the services’ pricing is far north of what is charged for functional versions of the same offering. Third, these “experience”
Luxury companies must embrace these key trends in the following three ways.
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brands regularly have a celebrity following. For example, Mick Jagger sometimes dines at New York City’s Café Boulud; actress Katie Holmes takes indoor cycling classes at SoulCycle. Fourth, makers of luxury products gladly tie their offerings to the experience brands. For instance, cosmetics brand Clarins collaborated on a summer offer with Barry’s Bootcamp, a high-end U.S. fitness studio. SoulCycle is an excellent example of an “experience” brand that is reaching the everyday. Founded in 2006, SoulCycle offers high-energy indoor-cycling classes designed to help people enjoy working out; the instructors themselves have star billing. Priced at $30 to $40 a class, SoulCycle’s activities come in tiers of service.4 The SuperSoul series offers 50 classes for $3,500 (which comes to more than twice the regular price of a single class), and the package comes with early registration and priority placement on waiting lists. SoulCycle uses plenty of social-media marketing, with the instructors tweeting and using Facebook to energize customers—and of course to spur demand for their classes. The company also sells plenty: it offers its own branded attire and has strategic ties to established luxury-goods firms.
Turning sales activities into deluxe experiences is reaching new levels of excellence across a widening range of luxury segments and across all channels. Similarly, a number of high-end metropolitan hotels are expanding their offerings beyond mere hotel rooms to featured experiences. For instance, some organize exclusive events such as fashion shows, art gallery tours, or wine tastings that help their guests enjoy the city. Furthermore, some luxury automakers, noting that their exotic vehicles often sit in garages or are quickly resold after purchase, are striving to enhance the experience of owning their vehicles by offering selective
memberships with perks to keep owners behind the wheel and talking about their cars. Enrich the selling process. Turning sales activities into deluxe experiences in their own right is nothing new. But the practice is reaching new levels of excellence across a widening range of luxury segments—from automobiles to fashion—and across all channels. The intent is clear: to help consumers better connect with and experience a brand. Customization is one “selling experience” technique. After customizing a desired model online, a Bentley buyer can track the manufacture and distribution of his or her car in real time. At least one maker of exotic cars invites its purchasers to its manufacturing facilities to participate in the experience of building the vehicle. Burberry provides an even more sophisticated experience that spans several sales and marketing channels: its Runway Made to Order customization service. Just after its autumn show, the company offered a two-week window in which to order its Prorsum bags and outerwear online or in stores. Consumers could order items with a personalized engraved nameplate; during the nine-week turnaround period, they could view, on their smartphones, original sketches and videos of their item being constructed. They are slated to then receive their purchases before the collections arrive in stores. Neiman Marcus has its NM Service, a personal shopping app that lets customers interact directly with “their” sales associates. Once a customer downloads the app, she receives access, via her smartphone, to a preferred personal shopper who can give advice live or set aside specific products for the customer to try on during her next store visit. When the customer enters the store, the NM Service launches, informing the preferred personal shopper, who can then greet and wait on the customer. The app also highlights upcoming store events, new product arrivals and sales, and emerging fashion trends.5 Elsewhere, Louis Vuitton has taken experience selling to another level—literally—with
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an invitation-only floor in its new superluxury “maison” shop in Shanghai. Geared to China’s super-wealthy, the floor is decorated like a deluxe private residence. When shopping there, customers can have their hair styled while an artist designs personalized bags for them.6 These examples just begin to explore the nearly endless range of possibilities. Brands can do much more to reinvent in-store service and to add experience to the selling process so the “theater of the brand” transcends the physical store. Participate in new “experiential” business models. Recently, there has been a surge of innovative business models in which the experience of “sampling” luxury brands is the product. One such approach is the rental or subscription model. In the fashion and accessory category, the approach has been realized in new businesses such as Rent the Runway, Lacquerous, and Bag Borrow or Steal, whose “members” enjoy high-end fashion products for as little as 10 percent of the retail price. Rent the Runway allows women to rent designer clothes and accessories. Rentals range from $50 to $200 for a four-night loan.7 Lacquerous presents itself as “a new club that allows you to try and wear the latest in red carpet and runway nail trends without splurging on a full bottle every time.”8 Bag Borrow or Steal offers a similar service in handbags, jewelry, and other accessories.9 Together, these three brands boast more than 3 million members and offer access to products from 170 designers. Although some see such businesses as democratizing luxury—perhaps even diluting the participating brands—the new model clearly resonates with consumers, especially Millennials. Similarly, customers can subscribe to receive boxes of fragrance and beauty samples. The emphasis is on the experience; Birchbox appeals to the thrill of discovery. Launched in 2010, Birchbox was one of the first startups to jump into the subscription-based business of selling fragrance and beauty products. For a
$10 monthly fee, subscribers get a monthly package of four to five samples. Many customers have signed up to multiple so-called beauty box services; some admit to being hooked.10 There is even a blog called My Subscription Addiction to cater to this new demographic.11 Others cannot resist putting their “unboxing” experiences on YouTube. This model also lends itself to social media. Rent the Runway recently introduced a social-shopping platform, Our Runway, which allows women to shop based on user-generated photos of real women with body types similar to their own. And the model even translates into the physical world: Rent the Runway now has showrooms in Manhattan.
Luxury markets are fracturing again—although not along the usual fault lines. Some traditional luxury-goods brands and retailers have started to catch on to the power of these subscription models for marketing, driving conversion, and capturing data; a few are partnering with the startups to bring experiential consumerism to their shoppers. U.K.-based department store Harrods has teamed up with Glossybox to offer a curated box of sample sizes of cosmetics brands that Harrods already carries. One promotion gave subscribers a 20 percent discount at Harrods for the full-size versions of the products.
The Push for More Detailed Segmentation and Customization If the 1990s was the decade when luxury brands began to reach broader segments of society, now is the time when luxury markets are fracturing again—although not along the usual fault lines. Twenty years ago, luxury consumers were a more homogenous group. The single greatest factor that united them was their keen interest in accumulating logos as visible signs of status and wealth. Today, these same consumers come from all over the world; they are The Boston Consulting Group | 11 8
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more educated about brands, more sophisticated in general, and much more demanding. They are likely to shop across multiple channels, and they routinely communicate online. Importantly, they are anything but homogenous—meaning that yesterday’s age-bracketed or geography-specific market labels matter far less. Consider the “Chinese consumer” segment. In practice—as many leading luxury brands have discovered—grouping all the luxury consumers in China into one segment makes no sense. While some generalizations may still apply, there are dramatic differences in China that transcend the already huge economic variations across regions and across cities. (See Exhibit 3.) One example of the new and better segmentation is the so-called Sugar Generation. The label describes China’s affluent young consumers who have grown up with abundance. They have been exposed early on to luxury brands and lifestyles, so their expectations and buying habits are “prewired.” BCG estimates that the Sugar Generation now accounts for 13 percent of China’s affluent population—and that it will grow to more than 30 percent within five years, as the “wealth
history” of the average Chinese family becomes longer. Both women and men in the Sugar Generation espouse very different buying habits than, say, China’s successful entrepreneurs do—most of the latter group are men and many of whom are the parents of Sugar Generation children. These young people know much more about luxury brands, and their purchasing behaviors are spread across a greater number of luxury categories, including experiential luxury. (For more information, see The Age of the Affluent: The Dynamics of China’s Next Consumption Engine, BCG Focus, November 2012.) So what do such newly revealed market segments mean for luxury brands and retailers? Unlike mainstream consumer companies, many luxury firms have kept their distance from formal consumer research and analytics. Some might say their preference for “art” over “science” has indicated aloofness—perhaps even skepticism—for proven methods. Yet, for more than a few luxury firms, fierce brand protection and a defense of creative approaches seems justified by the considerable success that the firms have achieved.
Exhibit 3 | Among Chinese Consumers, Luxury Shopping Patterns Vary Greatly
Successful entrepreneurs
Demographics
Luxury attitude
Primary categories of luxury purchases
Newcomers
Sugar Generation
• Mostly men • Age 30–45 • High assets, high income (above 150,000 RMB) • All cities
• Men and women • All ages • Mid-level income (60,000 RMB) • Tier 3 and 4 cities
• Men and women • Younger • High assets (inherited), income irrelevant (can be low) • Tier 1 and 2 cities (mostly)
• Ostentatious, status oriented • Little education on or knowledge of luxury brands • Big spender
• Ostentatious, status oriented • Little education on or knowledge of luxury brands • Attracted to big brands • Attracted to lower prices
• Discernment • Status oriented, but wants to convey status and taste • Big spenders • Knows luxury brands • Attracted to niche brands • Heavy users of the Internet
• Watches • Small leather goods • Business gis
• Skin care • Bags • Watches
• All categories including fashion, jewelry, and experiential categories such as travel
Source: BCG analysis.
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Although BCG agrees that consumer research should never detract from the importance of creative, brand-enhancing product strategies, we contend that the formulas for success have become much more complicated. Luxury brands can now benefit significantly from consumer research that can yield fresh insights about market segmentation and goto-market approaches. Such insights should inform decisions about store assortment, levels of in-store service, allocation of marketing spending, and pricing. The research can also help companies respond to complex and fast-changing challenges such as understanding the life cycle of consumer values—that is, learning to distinguish the values that are becoming less prominent (ostentatious luxury), today’s dominant values (uniqueness, craftsmanship), and the emerging new values (sustainability, experiential luxury). Because richer segmentation is needed to properly understand the new directions in which luxury markets are headed, BCG is working closely with Altagamma Foundation to derive unique customer insights based on deep research of more than 40,000 consumers in 20 countries. The first release of the re-
port will be presented in the first quarter of 2014, and it will be updated annually.
Notes 1. “To Infinity and Beyond: The Next Frontier of Luxury Travel,” LuxurySociety.com, September 4, 2013, http:// luxurysociety.com/articles/2013/09/to-infinity-and-beyond-the-next-frontier-of-luxury-travel. 2. “India’s Flashy New Rich Drive Luxury Car Boom,” Reuters, January 3, 2012. 3. “Why Millennials Don’t Want to Buy Stuff,” Fast Company, July 13, 2012. 4. “SoulCycle Is a Booming Exercise Chain for the 1 Percent,” The Daily Beast, July 19, 2013, http://www. thedailybeast.com/articles/2013/07/19/soulcycle-is-abooming-exercise-chain-for-the-1-percent.html#url=/ articles/2013/07/19/soulcycle-is-a-booming-exercisechain-for-the-1-percent.html. 5. “Neiman Marcus Introduces NM Service, a Personal Shopping App,” Neiman Marcus press release, March 1, 2012. 6. “Louis Vuitton Lures China’s Super-Rich with Custom Leather ‘Art,’” Reuters, July 18, 2012. 7. Rent the Runway, http://www.renttherunway.com/ how_it_works. 8. Lacquerous, https://www.lacquerous.com/how-itworks. 9. Bag Borrow or Steal, http://www.bagborroworsteal. com/howitworks. 10. “Seeking a Solution, One Tiny Tube at a Time,” New York Times, October 31, 2012. 11. My Subscription Addiction blog, http://www. mysubscriptionaddiction.com/about.
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NEW GEOGRAPHIES
NOT THE COUNTRY MARKETS YOU THOUGHT YOU KNEW
M
ost luxury players are planning for strong growth in what are still called “emerging markets.” Overall, this seems a valuable approach, given that the BRICMIT group of nations—Brazil, Russia, India, China, Mexico, Indonesia, and Turkey—will contribute around 55 percent of growth in global GDP between 2012 and 2017.
least on strategies that target a cluster of cities whose inhabitants have roughly similar buying behaviors. We contend that brands must become much more specific in sizing and scoping markets; they need to plan their go-to-market strategies more systematically—including marketing, assortment, merchandising, and pricing—at the city or city-cluster level.
Recently, however, BCG has seen several leading brands starting to revisit their emerging-market strategies. While the reasons differ by country and company, we observe consistent themes that are tied to macroeconomic factors, shifting government policies, the advancing stages of urbanization and development, and changing tastes.
A comparison of Mumbai and New Delhi shows why. While both cities have large populations of high-net-worth individuals (HNWIs), Mumbai is the more multilingual and cosmopolitan of the two since it is home to residents from all over India. (Some liken the difference between the two cities to that between Washington, D.C., and New York City.) New Delhi, the capital, has many inhabitants from the north of the country, and migrant workers from Uttar Pradesh and Bihar to the southeast.
Consider China, for example. Consumer tastes there are changing very quickly, in part because the new Chinese government is cracking down on luxury gift-giving, in part because the one-child policy has spawned a generation of so-called little emperors, and partly given the rapid rise in consumers’ incomes. These changes are palpable, and many luxury companies have reported slowdowns in sales despite their years of investment in China. BCG believes that luxury players must anticipate such changes by focusing not on country-level strategies—often their conventional market lens—but on city-level approaches or at
While both cities have their share of entrepreneurs and businessmen, Mumbai has proportionately more professionals—especially in financial services. Cultural, regional, and professional differences mean that New Delhi’s affluent prefer more flamboyant displays of wealth than their Mumbai counterparts. Ahmadabad is another interesting Indian city; it is often called the “Manchester of India” thanks to its deep industrial roots. Its fast-growing per-capita incomes are twice the national average. So shouldn’t it be a prime
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target for brands? Not automatically: earning power and disposable income are only some of the many specifics to consider. The city’s affluent are largely Gujarati, an entrepreneurial community that puts investing ahead of spending, cherishes family values, loves travel, and prefers “lifestyle” purchases—that is, experiences—over luxury goods. Of course, diversity among cities in the same country is not unique to emerging markets. Consider the differences between consumers in Minneapolis and Houston compared with those in New York, or between shoppers in Paris versus those in Lyon or Cannes. BCG’s finding is that cities are rapidly becoming more relevant than countries as target markets for luxury products and services. Luxury buyers in Shanghai and Beijing have more in common with their counterparts in Paris and Tokyo than they do with those in Zhenjiang and Panjin. For this reason, brands must deeply understand the demographic and sociographic fundamentals in cities rather than, for instance, allowing consumer research conducted in a capital city to
represent buying behaviors across an entire country.
A New Index of Luxury Buying So where will growth come from? And which cities should be priorities for luxury brands? Where should luxury brands focus on optimizing their existing retail footprints rather than opening new stores? In which cities are tourists spending freely? Which categories of tourists are spending the most? To begin to explore these questions, BCG has developed the Metroluxe family of indices (collectively called the BCG Metroluxe Indices) to measure the current luxury status and growth potential of the world’s 550 richest cities as defined by GDP per capita. Collectively, the cities in the index drive nearly 50 percent of global GDP. The individual indices are the BCG Local Metroluxe Index, the BCG Metroluxe Growth Index, and the BCG Total Metroluxe Index. (See Exhibit 4.) Together, BCG’s family of indices balances both demand and supply factors.
Exhibit 4 | BCG Metroluxe Indices Measure Luxury Buying in Cities Worldwide BCG’s proprietary Metroluxe Indices of the 550 wealthiest cities Number of cities in each index’s top 50
25
20
15
10
5
21
12
14 10 7
6
9
8
9
8
11 8
5
5
4
6
6
1
0 U.S.
China1
BCG Local Metroluxe Index, 2017
Other Asia (excluding China)2
Western Europe
BCG Metroluxe Growth Index, 2012–2017
Middle East
Other3
BCG Total Metroluxe Index, 2017
Source: BCG analysis. 1 Includes Hong Kong and Taiwan. 2 Includes North and Southeast Asia. 3 Includes Latin America, Russia, and Australia.
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•
Local Demand. This measure takes into account HNWIs and the mass-affluent demographic. BCG defines HNWI households as those with more than $1 million in investable assets and defines massaffluent households as having more than $100,000 in yearly household income, adjusted for local purchasing power parity and taxes. We also consider, at a country level, the propensity of local affluent consumers to spend on luxury.
•
Tourist Demand. This measure calculates the impact of domestic and international tourism on luxury spending in the city.
•
Supply-Side Drivers. This measure accounts for the infrastructure that supports luxury sales. It reflects, among other factors, the maturity of the distribution network (department stores, malls, and key shopping locations), logistics (such as the competence and quality of logistics services and customs clearance), and the sophistication of local fashion designers and the city’s design community.
Taken in its entirety, the collective index helps identify and prioritize future luxury growth by city, making it easier to explore each location’s distinct drivers of growth—for example, tourism versus local domestic spending. Let’s look at the BCG Local Metroluxe Index first. This index projects the intrinsic potential of local luxury demand for each city in 2017, excluding tourist demand, supply, and other factors. While it does not capture where actual purchases will take place, it can help brands decide where to focus their marketing expenditures. The BCG Local Metroluxe Index reveals that despite high GDP growth in key cities in emerging markets, U.S. cities account for 60 percent of the top 10 cities and more than 40 percent of the top 50 cities ranked by local luxury demand. Houston, Boston, and Philadelphia are in the top 15, indicating higher potential demand in these cities than in Shanghai, which is ranked 16th on the index, Beijing at 22nd, or even Seoul at 15th. Minneapolis, San Diego, and Detroit—ranked between 25th and
30th on this index—are better positioned than Kuala Lumpur at 36th, Mumbai at 43th, and São Paulo at 49th. This reflects the unsurprising reality that the U.S. is highly affluent, contributing about 20 percent of global GDP, 40 percent of the world’s millionaires, and 40 percent of ultra-high-income consumers (those with more than $30 million in assets). North and Southeast Asia are prominent on the BCG Local Metroluxe Index; these regions have 9 cities ranked in the top 50. China (including Hong Kong and Taiwan) has six cities in the top 50. Interestingly, the whole of Western Europe is nearly as well-represented, with only London, Paris, Zurich, Berlin, and Munich among this index’s top 50.
The index makes it easier to explore each city’s distinct drivers of growth. The BCG Local Metroluxe Index gives a static view of local demand; however, another interesting index—the BCG Metroluxe Growth Index—provides a dynamic perspective, giving retailers’ viewpoints of projected absolute growth in dollars, by city, from 2012 through 2017. This index shows China and the U.S. relatively balanced as the two main contributors to the “top 50” ranking of cities. China (including Hong Kong and Taiwan) has 10 cities among the top 50. The nation boasts the highest absolute growth in luxury, measured in U.S. dollars—spurred, no doubt, by that country’s high GDP growth. The U.S. has 12 cities among this index’s top 50—largely a reflection of relative U.S. affluence and strong trends in tourism. Given the upcoming relaxation of U.S. visa restrictions, tourism is likely to keep U.S. cities ranked high on the growth index. Western European cities are better positioned when tourism is factored in, with nine cities from the region in the top 50. The Middle East places well, with five cities on the list, two of which are in Turkey. (See the sidebar “What Istanbul and Chicago Have In Common.”)
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WHAT ISTANBUL AND CHICAGO HAVE IN COMMON Luxury brands have often viewed market segments in terms of demographics and countries. But BCG’s analysis confirms that it makes more sense to think in terms of clusters of cities regardless of nationality— conurbations whose affluent buyers have more in common with each other than they do with others in their own nations. Istanbul is a perfect case in point. With its population of nearly 14 million, the city accounts for most of the nation’s luxury market, which is valued at more than $10 billion and has been growing at about 15 percent annually. Like largely urban luxury markets elsewhere, Istanbul has seen its growth fueled not so much by the super-rich but by an expanding middle class, along with rising numbers of tourists from Europe and the Middle East.
hotels, compared with only six percent in Spain. Upscale dining, where a meal costs $50 or more, is expanding rapidly, with the number of such restaurants in Istanbul growing by about 10 percent a year. With already 50 high-end restaurants per 1 million affluent people, Istanbul will soon be on a par with London, which has 100. (See the exhibit “High-End Restaurants on the Rise in Istanbul.”) Much of the luxury purchasing in the city is of brands familiar to affluent consumers everywhere from Chicago to Tokyo: everything from Maserati cars to Gucci fashion accessories. In line with the global trend, experiential luxury is also luring Istanbul’s well-heeled—hence the rapid increase in high-end restaurants, for instance.
A few statistics tell the story. Thirty percent of the hotel beds in Turkey are in five-star
High-End Restaurants on the Rise in Istanbul
Penetration
1
Number of luxury restaurants
Affluent population (in millions)
51
0.45
207
1.87
218
2.17
60
1.2
113
Paris
111
New York 100
London 50
Istanbul Ankara
17
8
0.47
Izmir
16
6
0.38
0
50
100
150
Number of restaurants per 1 million affluent people Sources: American Community Survey 2010, U.S. Census Bureau; New York Times Restaurant Key, Family Resources Survey 2010/11, U.K. Department of Work and Pensions (DWP); Harden’s Guides; TUIK (Turkish Statistical Institute); BCG analysis. 1 Penetration was calculated as the high-income population divided by the number of boutique restaurants. High income was defined as $100,000 in annual income in New York, £52,000 annual income in London, 100,000 TL (Turkish lira) in Turkish cities. Boutique restaurants were defined as those with price ratings of $$$$ by the New York Times restaurant reviews (this rating reflects restaurant dinners costing $55 or more per person), those with dinner prices of £60 per person for London, and those with dinner prices of 100 TL per person for Turkish cities.
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What about the world’s other supercharged cities? Moscow ranks 16th, and São Paulo is 12th. Mumbai and New Delhi have their share of affluent individuals, but neither makes the top 10. Although Indian cities’ demand for luxury goods will grow and the nation’s trade infrastructure will improve (currently, modern format stores account for only 38 percent of Indian spending on apparel, for instance), the changes will not be enough to move them high up the rankings, in part because many of India’s affluent do their luxury buying overseas. (See the sidebar “Who Is the Mystery Shopper?”) The third index—the BCG Total Metroluxe Index—is especially useful when its results are compared with those of a complementary measure, called the Bernstein-BCG Store Index, which provides a city-by-city view of the store coverage of particular city markets. (See Exhibit 5.) The Bernstein-BCG research shows that some cities in which brands have concentrated—for instance, Beijing, Seoul, and Taipei—have become “overpenetrated.” One conclusion: some brands may choose to scale back their retail footprints in some of those cities. In other cities such as Dallas, Berlin, New Delhi, Mumbai, and São Paulo—where there is a larger gap between expected growth and the penetration of existing stores—we expect
leading brands and retailers to open more retail outlets. There are also quite a few existing luxury “capitals”—New York and Milan among them—which seem surprisingly underpenetrated. Those cities are magnets for luxury spending by international tourists.
Insights to Help Brands Succeed as Demand Patterns Shift Worldwide
BCG envisions three ways in which these indices can help brands and retailers. Conduct deeper market analyses at the city and cluster-of-city levels. Brands and retailers armed with a deeper understanding of local demand and consumer behaviors as well as more information about tourism and infrastructure at a city level can cluster cities beyond the geographic boundaries of countries. To begin with, such companies will discover that go-to-market strategies will need to vary across cities in a given country. Consider Dongguan, for instance. This factory city is quite affluent; it is home to 2 percent of the Chinese individuals who have assets of more than $1.6 million. Yet the city also lacks major transport networks and a convenient airport. As a result, many of its wealthy shop internationally or in nearby Hong Kong.
WHO IS THE MYSTERY SHOPPER? Where is Mr. S. from? He’s married, with two children. He works for an international bank and has a master’s degree in business administration from Columbia Business School in the U.S. He wears Brioni, Canali, and Zegna suits, and he has a collection of watches that includes Breitling, Patek Philippe, and Hublot. He wears shoes by Ferragamo and Mauro Volponi. Mr. S—he’s a real person—likes to shop in specialty boutiques; he frequently travels internationally and often shops while a-
broad. He is very discerning about what he buys: he prefers to buy handmade, highquality products rather than “buying a brand.” Is Mr. S. from Chicago? London? Paris? Yokohama? No. Rahul Sangupta (not his real name) was born in New Delhi and lives in Mumbai. He’s one of India’s elite—the nation’s highest earners. Sangupta has more in common with other affluent individuals in London and Singapore than he does with consumers in most cities in his native country.
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Exhibit 5 | The BCG Total Metroluxe Index Suggests Some Cities May Be “Over-Stored” by Luxury Brands Bernstein-BCG Store Index 20121
Hong Kong
Tokyo
Seoul
London
Shanghai Paris
Beijing Taipei
Singapore
New York
Los Angeles
Shenyang Honolulu Hangzhou Busan Chengdu Nanjing Shenzhen Munich
Dubai Osaka Moscow Florence Mexico City Bangkok Miami Las Vegas Istanbul Rome Chicago Dallas Sao Paulo Berlin Zurich Barcelona Mumbai New Delhi
City potentially over-stored given current stores versus luxury potential
Milan City with potential for additional stores given current stores versus luxury potential BCG Total Metroluxe Index, 2017
Sources: Brand websites; Sanford C. Bernstein; BCG analysis. 1 Store counts for 24 luxury brands; weightings adjusted for store size and sales/square foot.
Although marketing in Dongguan still matters for luxury brands, a retail presence there is less critical. Sydney and Melbourne are other interesting cities where expected long-term increases in wealth, coupled with burgeoning tourism from China and Japan, will buoy local demand for luxury brands for years to come. From a marketing perspective, therefore, brands need to keep marketing locally and also market well in tourists’ countries of origin. From a retail perspective, assortments need to cater to demand from locals as well as tourists. Localize go-to-market strategies. It is no longer enough for brands to target the elites in emerging markets with splashy ads for existing “Western” products and retail assortments. Now, astute brands are localizing their products and approaches. For example, Hermès has created its sari collection in India. L‘Oréal bought Yue Sai, a Chinese cosmetics brand, and in Brazil, LVMH bought Sack’s.
Montblanc is one company that is taking its localization initiatives to the city level. The pen maker successfully operates retail points in first- and second-tier cities in India, and it has regionalized its marketing materials accordingly. Store assortments also deserve to be localized. After surveying assortments offered in stores worldwide, BCG has found that best-practice luxury brands aggressively customize the retail assortment across cities. For example, a comparison of monobrand stores in New York and Houston revealed that 31 percent of the items sold in the New York stores cost more than $2,000 compared with just 14 percent of those sold in the Houston stores. (See Exhibit 6.) Store format can also benefit from localization. These days, one-size-fits-all flagship stores in every city are far less effective than different formats applied to different tiers of cities. Gucci’s new approach to China is a good example. François-Henri Pinault, chairman and CEO of Gucci parent company Kering, explained it this way to Jing Daily: “Gucci The Boston Consulting Group | 19 16
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Exhibit 6 | Best-Practice Luxury Brands Customize Assortments to Individual Cities Pricing at luxury monobrand store in New York City (% by price range)
Pricing at luxury monobrand store in Houston (% by price range)
100
100
80
80
60
60
40
40
20
20
0
20 Apparel
40
60 Shoes Bags
Prices (US$) <4,000 <2,000 <1,000 <500 <300 <100 <50
80 100 Jewelry
Small leather Misc.1 goods
% of assortment 9% 22% 30% 22% 17% 0% 0%
31% 69%
0 20 Apparel Bags Prices (US$) <4,000 <2,000 <1,000 <500 <300 <100 <50
40 Shoes
60
80 Jewelry
100 Misc.1
Small leather Fragrance goods % of assortment 1% 13% 24% 31% 26% 5% 0%
14% 81% 5%
Source: BCG store visits and analysis. 1 Includes hats, gloves, ties, socks, scarves, and underwear.
is having to contend in China with a growing gap between consumer spending in major urban centers like Shanghai and Beijing and in secondary cities where luxury brands are still a novelty.”1
isting cities—moving stores as well as renovating and expanding existing locations.
The phenomenal proliferation of tourism will continue to drive growth for brands.
With localized go-to-market strategies comes a need for simplicity of branding. Early efforts are under way: in 2012, Dolce & Gabbana folded its secondary D&G brand into the main label. Similarly, U.S. department store Barney’s has decided to rename all the Co-op stores as Barney’s, even though it may mean that smaller-format stores offer different assortments than those at the flagship stores.
Gucci’s tiered approach to retail and merchandising means that in cities where the brand already has good business, the full product offering is available. By contrast, in new locations Gucci will offer “entry-level leather goods and accessories before gradually introducing ready-to-wear and other accessories as consumer tastes mature.” In addition to the new tiered model, the brand will pay more attention to optimizing within ex-
Develop aggressive strategies for reaching tourists. The phenomenal proliferation of tourism will continue to drive growth for brands. Brazilians, Chinese, and Indians have been especially keen spenders while on vacation abroad. China is set to become the largest “source market” for outbound travel; tourists from that country are now the world’s biggest group of tax-free shoppers. By 2020, its overseas vacationers will constitute roughly 10 percent of the inbound tourists in
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the U.S., 30 percent of tourists visiting Japan, 30 percent of those in Sydney and Melbourne, and 20 percent of foreign travelers in Singapore. In South Korea, Chinese tourists already constitute 30 percent of the foreign visitor tally—a number that is expected to reach 50 percent just four years from now. Chinese visitors typically spend 40 percent of their travel budgets on shopping once they reach their destinations, mostly on luxury goods and premium brands. Similar patterns play out in the Middle East. Istanbul is a strong beneficiary of this trend, drawing visitors from Syria, Iran, Iraq, and Azerbaijan, for example. The key for luxury brands and retailers is to understand the tourist mix at a city level and to then develop strategies that create brand
awareness before the tourists’ journeys begin, starting in their home countries. At the most fundamental level, brands must provide signage and other assistance in the tourists’ native languages at the holiday destinations. And they must invest in travel retail, given tourists’ propensity to buy luxury goods while in transit. (For more information, see Winning the Next Billion Asian Travelers—Starting with China, BCG Focus, December 2013.)
Note 1. “What Gucci’s New Tiered Model Could Mean for China’s Luxury Market,” Jing Daily, February 21, 2013, http://www.jingdaily.com/what-guccis-new-tiered-model-could-mean-for-chinas-luxury-market/24109/.
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NEW BUSINESS MODELS
WHY ALTERNATIVE APPROACHES NOW MATTER SO MUCH
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here once was a time when luxury companies were essentially “brand islands”—havens of haute couture and high-priced exclusivity whose isolation from other business entities was essential to the luster of their brands.
Such a rarified approach is less tenable today. In a world of increasing openness—between customers and suppliers and between shoppers and brands, and with lines blurring between competition and cooperation—companies benefit by bringing in ideas and expertise from the outside. (For more information, see Luxury Ecosystems: Controlling Your Brand While Letting It Go, BCG Focus, June 2013.) In most other business sectors, senior executives have long accepted that their organizations’ future growth relies heavily on success with new technologies and in new market categories, cities, and channels—aspects they know they cannot master alone. So they have deliberately forged links to other entities and woven themselves into self-sustaining networks. Luxury brands must do the same. Although many already have rich partnerships with other businesses, on the whole, they have been neither as focused on partnering nor as skilled at it as companies in other retail sectors. In short, luxury firms must do more to partner better. Three facets of partnering in particular deserve greater attention; we explore these below.
Reinforcing Partnerships and Sharing with Retailers
Historically, brand-retailer relationships have been less developed in the luxury sector than in mass-market categories. With products such as household supplies, food and beverage, and beauty, those relationships can be deep and broad, helping to accelerate top-line growth by increasing conversion rates, reducing out-of-stock incidents, improving promotion, and so on. Many makers of fast-moving consumer goods have “category captains”— managers or supervisors dedicated to driving those growth factors. Luxury brands have not developed comparably strong ties for many reasons: their own need for tight control of their brands, the relative scarcity of customer data, and the fact that many retailers have been unwilling to share their customer data and have been keen to cultivate their own brand identities. But these days, big data and customer relationship management (CRM) tools mean that more customer data is accessible. There are now realistic grounds to believe that brands and retailers can share a little to get a lot. For example, brands might seek from retailers greater visibility of store- or SKU-level sales data in exchange for exclusive rights to sell new products for a period of time before a broader market launch. Or they might offer retailers exclusive packaging or
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unique events to gain direct access to highspending customers so that the brands can glean deeper insights through feedback surveys or product trials. In short, brands and retailers today have greater opportunities to boost sales by bringing the right products to customers at the right times through the right channels. They can also gain by using tailored customer experiences to strengthen brand equity for both parties, and by joining forces to push omnichannel approaches to the next level.
Reframing the Value of Licensing and Joint Ventures Although brands have a history of developing licenses, those arrangements have not always been of lasting benefit. There have been intrinsic conflicts of interest—the duration of typical contracts, for instance, and royalty structures that are generally driven by sales rather than profits. Consequently, some luxury houses have begun buying back licenses to gain more control over their brands. Thierry Andretta, CEO of Lanvin, put it this way: “Collaboration only if it’s right; licensing, no. We want to control our destiny.”1 But buying back licenses might not always be the right path. These days, enriching partnerships can be more effective than killing them. Joint ventures can be a prime way to appropriately align both parties’ interests. For instance, Kering, whose brands range from Brioni and Stella McCartney to Puma and Bottega Veneta, has joined forces with Yoox, the online luxury channel, to develop e-commerce for several of its brands.
Leveraging Vertical Ecosystems In the last two decades, many luxury brands have moved to partner or acquire ownership of either upstream or downstream elements of their value chains—and sometimes both. The reasons are many—to assure suppliers, to reduce risks to quality, or to capture more manufacturing margin, for instance.2 Chanel has taken a different approach with the creation, in 1997, of its Paraffection company. The company comprises independent
ateliers d’art; almost all are firms such as the makers of fabric flowers, buttons, or embroidery. Chanel’s twist on verticalization is to let these workshops operate independently— even letting them supply its competitors. Lesage, for instance, supplies its couture embroidery to Dior.3 On average, these specialists get about 40 percent of their revenues from clients other than Chanel.4 Chanel describes Paraffection as a framework for ensuring the survival of the “ecosystem” of couture specialists rather than as a mechanism for maintaining economic control. By contrast, Swatch Group has cut back on third-party deals to focus on its own brands. One key business segment—production—manufactures watches and chronological watch movements along with jewelry. Its electronic- systems unit develops and produces electronic components and systems related to watches. The company has also established direct distribution and retail channels, which include monobrand stores and a network of multibrand prestige-watch and jewelry boutiques. There is no one approach to verticalization that works for all. But the strategy significantly affects the luxury business. It telegraphs to potential newcomers that the barriers to entry are exceptionally high. It also confers greater negotiating power for resources ranging from retaining rare “know-how” and access to scarce materials to creating competitive advantage.5
Notes 1. “FT Business of Luxury: Licensing vs Collaboration,” LuxurySociety.com, June 10, 2011, http://luxurysociety. com/articles/2011/06/ft-business-of-luxury-licensing-vs-collaboration. 2. Franck Delpal, “Vertical Integration in Luxury Companies: Objectives and Effects,” Université Paris-Dauphine, Institut Français de la Mode, June 2011. 3. “Maison Lesage Atelier—Realizing Dreams,” CoutureNotebook.com, November 17, 2012, http:// couturenotebook.com/2012/11/17/maison-lesage-atelier/. 4. “Par Affection—Les Métiers d’Art,” Daily Luxury blog, December 10, 2007, http://dailyluxury.blogspot. com/2007/12/les-mtiers-dart.html. 5. Franck Delpal, “Vertical Integration in Luxury Companies: Objectives and Effects,”Université Paris-Dauphine, Institut Français de la Mode, June 2011.
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THE PERSISTENT RISE OF DIGITAL
F
or luxury brands as for every other type of business, the digital domain is here to stay. But it’s a domain where companies are still feeling their way. This leaves an enormous opportunity for the brands that are quickest to distinguish what works from what doesn’t.
Affluent consumers are leading the digital charge in luxury, as in other sectors. In the U.S., about 40 percent of affluent consumers (those earning more than $100,000 a year) own a tablet and 65 percent own a smartphone.1 Three-quarters of affluent buyers made purchases online in the past year. About 80 percent of the consumers in this demographic use social media, with Facebook, LinkedIn, and Twitter among the networks used most. Although use of social media skews toward younger people, mature affluent consumers are highly engaged online too. Until very recently, business leaders made definite distinctions between their digital channels and their “conventional” sales and communications paths. But those boundaries are quickly disappearing. One consumer might research handbags online and then purchase a bag offline. Another might buy a jacket online and then pick it up in a “bricks and mortar” store. And still another individual might try on shoes in a store but purchase them online in order to get a different color.
The proliferation of smartphones and tablets has accelerated this trend; “mobile” is everywhere, anytime—and at all stages of purchasing. Even before buyers enter a store, they are researching and accessing information. While in the store, they are checking product reviews, ordering out-of-stock items, and using mobile payment solutions. And after they leave the store, they are writing reviews and posting recommendations. The interplay of offline and online channel behaviors varies by category. For example, furniture and decor sees more activity in the research-online-then-purchase-offline pattern, whereas shoes are susceptible to showrooming, in which consumers research a brand or product offline—often in a store—and then purchase online. Slowly but surely, luxury brands have been responding to consumers’ digital enthusiasm. Online sales are too big to ignore: BCG estimates that e-commerce brings 17 percent of U.S. luxury sales today and that luxury e-commerce is growing twice as fast as the overall U.S. luxury market. Luxury e-commerce includes brands’ Web sites—which account for 20 percent of online luxury sales—and multibrand online sites, such as those of department stores, specialty stores, and single-category (such as shoes) online players. The multibrand sites account for 80 percent of total online sales of luxury products. Many are
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attracted to the economics of the digital world—particularly its relatively low investment costs. In general, brands are becoming more comfortable with how their reputations can be managed in the difficult-to-control environment of e-commerce.
The Importance of E-commerce and Omnichannel Mastery For those with established e-commerce operations in developed online markets such as the U.S. or the U.K., Internet sales can account for 10 to 20 percent of total retail sales. Richemont reported eye-opening results for its online Cartier presence: in its first year, the online operation became Cartier’s fourth-largest revenue generator, behind the physical stores on Madison Avenue and in Beverly Hills and Costa Mesa.2 Lifestyle brand Tory Burch now gets more of its business from toryburch.com than from any physical store.3
In luxury e-commerce, brands must master the “3Cs”: commerce, content, and community. To be successful in luxury e-commerce, brands must master the “3Cs”: commerce, content, and community. First, it is important to have a great site for commerce that allows consumers to see the product and that offers easy and intuitive navigation; on its site, for example, Saks Fifth Avenue displays every clothing product with a short catwalk video. Second, such sites must provide unique, rich content about brands; Net-a-Porter, for instance, has its own fashion magazine. Third, it is critical to build a strong consumer community; Sephora offers an example of this by encouraging consumers to share their purchases and recommendations with their friends and others via posts on Facebook and Pinterest. But mastery of the 3Cs is not enough. Beyond developing attractive e-boutiques, brands must also focus on omnichannel strategies and integrate e-commerce and offline retail. As brands seek to maximize the lifetime value of consumers, they will want to focus on
one of the key findings of BCG’s study: omnichannel consumers are more engaged and spend at least twice as much as offline-only or online-only consumers do. Tory Burch appears to be on top of the omnichannel mandate. To entice consumers to use mobile channels, the brand’s mobile app provides exclusive products (SKUs that aren’t promoted through other channels), exclusive offers (automatic free shipping), and exclusive content (Tory City Guides). U.S. department stores are also leading the charge, offering delivery from, pickup at, and return to stores—often for free because the margins for luxury products can generally accommodate the extra cost. One challenge to omnichannel success is the requisite rethinking of the organization model. It is difficult for a single department to encompass separate online and offline teams and still provide a seamless customer experience across channels. Fully merged teams aren’t the answer either; they can detract from the flexibility and agility of the online groups. Hybrid models are probably the optimal solution; each brand must find the right hybrid approach for its case.
Revisiting Channel Roles and Sorting Out New Channel Conflicts
Although some luxury brands might be able to focus largely on their own e-commerce channels, the fact is that in many categories, consumers experience brands—and buy them— across multiple channels. Therefore, brands must constantly consider the full spectrum of channels. There is no shortage of options: multibrand e-retailers such as saksfifthavenue.com and harrods.com; specialist e-retailers such as sephora.com and tourneau.com; pure online players such as Net-a-Porter and Zappos; flashsale sites such as Gilt and vente-privee; and even marketplaces such as Amazon and eBay. Although these channels offer all kinds of opportunities, they also raise big issues, such as:
•
More Intense Competition Across Channels. Many retailers provide customer propositions—such as cross-selling suggestions, videos of the products, better zoom The Boston Consulting Group | 22 25
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functionality for the product images, enhanced size guides, and product reviews, for instance—that are better than those on the brands’ own sites.
•
•
Total Price Transparency. While this isn’t an issue for all luxury brands, some find that price variations that were not obvious in the physical world are all too evident online. For firms that have many sub-brands and deep distribution across multiple sales channels, this is a huge hurdle; for those that discount as well, transparency becomes even more challenging. Risk of Overexposure. The wide-open accessibility of the Web contrasts sharply with the inherent limitations of exclusive physical stores.
Luxury brands must redefine what role each channel should play in terms of brand building, volume contribution, and profit generation. BCG’s proprietary analysis shows that the main drivers of economic value online are price (more expensive items generally cost more to ship), store turns (SKUs that turn fast incur lower inventory costs), and the weight and size of items (fragrances and beauty products cost relatively little to ship). For instance, shipping a high-priced jar of facial moisturizer or serum can yield very attractive margins. When all the requisite factors are considered, brands’ margins can vary greatly across chan-
nels, as seen in the example of one provider of beauty products. (See Exhibit 7.) Unsurprisingly, department stores are less profitable for brands, largely due to their high-service models. E-retailers can be more profitable than a brand’s own e-boutique, unless a marginal view is taken (that is, an assessment based on marginal costs, before the allocation of fixed costs) or unless an e-boutique reaches a certain scale. With a deeper understanding of the economics and consumer purchasing behavior unique to each channel, luxury companies can redefine the roles, resources, and approaches (including target consumers, assortment and marketing, and cost to serve) appropriate to each channel. They can sharpen differentiations in product assortment, pricing policy, and marketing and communication. And they need to assume more of a testand-learn approach rather than striving for the “perfect” channel strategy. None of this will be easy—omnichannel mastery doesn’t come overnight—but the payoff is substantial. It must be a key area of focus for luxury brands in the coming years.
Benefiting From the Rise of “Social” Marketing Social media is the other digital domain that brands must master. As noted earlier, affluent consumers spend plenty of time on Facebook and other social sites. BCG has been tallying
Exhibit 7 | The Profitability of Luxury Brands Varies Greatly by Channel Illustrative example: luxury beauty products Product profitability index by product
150
100
130
140 115
100 75
50
0 Masstige department store
Luxury department store
E-retailer
E-boutique/ brandname.com
E-boutique/ brandname.com (marginal view)1
Source: BCG experience. 1 Marginal view refers to assessment of profitability based on marginal costs, before the allocation of fixed costs.
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Facebook “fans” of leading brands for more than three years, and the figures show steep increases over that period, a surprising finding given that Facebook is now a relatively mature social network. The luxury sector has more work to do to understand how best to use social marketing to increase customer engagement, develop new markets, and encourage and enable buyers to be brand advocates. It is not enough simply to collect “fans” and celebrate the number of “Likes.” BCG finds that social media can be especially effective for reaching new customers in developing economies. In emerging markets, there is a “straight to social” trend: for example, India and Indonesia have Internet penetration of 10 percent and 25 percent, respectively, and 80 to 90 percent of those online are already using social media. (For more information, see The Internet Economy in the G-20: The $4.2 Trillion Growth Opportunity, BCG Report, March 2012.) Increasing social engagement among customers. As noted, it’s one thing to amass a lot of fans but quite another to engage them deeply and then convert that engagement into sales. Engagement is more challenging in social media because brands and retailers have less control over their messages. “Prosumerism” is one way to bolster engagement; consumers proactively participate in the design, manufacture, or development of a product or service. For example, Estée Lauder launched contests in which Facebook fans selected older products that they would put back into production. And Tiffany & Co. is working with prosumers to cocreate content—for instance, consumers upload their own photos to its site and tell personal love stories on Tiffany’s “The Art of Romance” and “What Makes Love True” pages. Overall, these brands are creating relevant, attractive, and authentic content with which to establish dialogues with consumers and boost engagement and ultimately sales.
improve, consumers are beginning to suffer from information overload. That’s why they are going back to “trusted sources”—that is, other users—to help filter information. In a recent BCG survey, 76 percent of consumers in the U.S., 74 percent in Brazil, and 78 percent in China said word of mouth is a trusted source of information for purchasing decisions. This compares with 37 to 53 percent (depending on the country) of consumers citing brands’ Web sites as a trusted source, 26 to 36 percent citing advertising, and 29 to 44 percent citing advice from in-store salespeople. (For more information, see The Resilient Consumer: Where to Find Growth amid the Gloom in Developed Economies, BCG Focus, October 2013.) With that in mind, many companies have been striving to master advocacy marketing. There is nothing new about the idea of creating brand advocates—those enthusiasts who willingly and independently evangelize about a brand. But the rise of paid advocacy is worth watching. Many brands are now paying the travel costs of influential bloggers and even “gifting” them. This approach should be practiced with caution because consumers may see it as inauthentic at best and unscrupulous at worst. BCG argues that there is more power in developing altruistic, reciprocal relationships with the most-critical influencers to turn them into authentic advocates. (For more information, see Harnessing the Power of Advocacy Marketing, BCG Focus, March 2011.) Advocacy initiatives, as stand-alone programs or coupled with CRM systems, can have a huge impact—in ways that are invisible to competitors.
Notes 1. The 2013 Ipsos Affluent Survey. 2. Luca Solca, “Digital Frontier” BNP Paribas, September 2013. 3 “The Best Brand Content, Fashion Edition,” Fast Company, July 27, 2012.
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TEN TOP AGENDA ITEMS FOR LUXURY EXECUTIVES
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o how should luxury executives start to steer their organizations toward the future? The following ten themes should be on the agenda at the next leadership meeting. 1. Raise the level of consumer understanding. Luxury companies have not been particularly consumer-oriented. Today, their markets comprise many specific segments, each with different aspirations, behaviors, and attributes. It is crucial to understand the motivations and needs of each distinct segment—and then customize relationships and go-to-market strategies.
holiday countries; and customized in-store experiences in the holiday destinations (for example, ads in the tourists’ languages). 4. Invest in experiential luxury. No luxury firm can ignore the accelerating shift from “having” to “being.” There are now many ways to diversify a brand—through renting or sampling, for example. Brands can also deliver outstanding in-store experiences for each customer; retailtainment—using events such as art installations and fashion shows to make the in-store experience more theatrical and memorable—is a good way to do that.
2. Localize by city or cluster of cities. It is increasingly important to decide what to sell to whom and how. It is even more important to make these decisions city by city (or by clusters of cities) in order to cater to affluent local clients and international tourists. Cities rather than countries provide the most valuable lens through which to view consumers.
5. Do not overlook the myriad of opportunities in countries where luxury buying is longestablished—even as you keep pushing into emerging countries. U.S. cities rank as 12 of the top 50 cities worldwide experiencing growth in luxury purchases—that’s two more cities than China (including Hong Kong and Taiwan) has on the list.
3. Develop a clear tourist and travel strategy. Such a strategy must encompass three elements: a revised incentive and organization structure that promotes tourist-and-travel retail and cuts across a company’s internal silos; significant marketing in tourists’ home countries, with some support marketing in the
6. Simplify brand architecture. Today’s consumers are unwilling to deal with the complications of multiple brand identities under a corporate brand. The same “brand name” can be stretched across price points and categories or used to target different consumer segments while maintaining a consistent image.
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7. Build new ecosystems of partnerships. Luxury firms must find ways to be in control of their brands while being more open with retailers and suppliers. For most firms, new growth will come from new categories, new geographies, new channels, and new technologies. Luxury firms are unlikely to master all these new fronts on their own.
9. Rethink channel priorities and strategies. Promote e-boutique and e-retailing approaches with clear objectives and differentiated roles and assortments. 10. Build advocacy marketing. Generate positive â&#x20AC;&#x153;word of mouthâ&#x20AC;? by leveraging close relationships with key influencers.
8. Apply the 3Cs to boost e-commerce. Find ways to excel in commerce, content, and community. Promote omnichannel marketing so that online and offline interactions become part of the same experience for consumers.
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FOR FURTHER READING The Boston Consulting Group publishes other reports and articles on the topic of luxury that may be of interest to senior executives. Recent examples include:
Winning the Next Billion Asian Travelers—Starting with China
A Focus by The Boston Consulting Group and TripAdvisor, December 2013
The Resilient Consumer: Where to Find Growth amid the Gloom in Developed Economies A Focus by The Boston Consulting Group, October 2013
Luxury Ecosystems: Controlling Your Brand While Letting It Go A Focus by The Boston Consulting Group, June 2013
The Age of the Affluent: The Dynamics of China’s Next Consumption Engine
A Focus by The Boston Consulting Group, November 2012
Luxe Redux: Raising the Bar for the Selling of Luxuries A Focus by The Boston Consulting Group, June 2012
Harnessing the Power of Advocacy Marketing
A Focus by The Boston Consulting Group, March 2011
The New World of Luxury
A White Paper by The Boston Consulting Group, December 2010
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NOTE TO THE READER About the Authors Olivier Abtan is a partner and managing director in the Paris office of The Boston Consulting Group. Antonio Achille is a partner and managing director in the firm’s Milan office. Jean-Marc Bellaïche is a senior partner and managing director in BCG’s New York office and the global leader of the luxury, fashion, and beauty topic area. Youllee Kim is a partner and managing director in the firm’s Seoul office. Vincent Lui is a partner and managing director in BCG’s Hong Kong office. Amitabh Mall is a partner and managing director in the firm’s Mumbai office. Antonella Mei-Pochtler is a senior partner and managing director in BCG’s Vienna office. Sarah Willersdorf is a principal in the firm’s New York office. Acknowledgments The authors would like to offer their sincere thanks to Sonja Baderschneider (partner and managing director, Helsinki), Olavo Cunha (partner and managing director, São Paolo), Joel Muniz (partner and managing director, Mexico City), Abheek Singhi (partner and director, Mumbai), Miki Tsusaka (senior partner and managing director, Tokyo), Deran Taskiran (former partner and managing director, Istanbul), Jessica Smith (project leader), Paolo Meroni (project leader), Marjorie Condoris (consultant), Aditi Sawhney (consultant), Bobby McWatters (associate), Gillian Moore (senior analyst), and other BCG colleagues for contributing their insights and for helping to draft this article. Special thanks go to Mario Ortelli, senior research analyst in the luxury goods sector at the research firm Sanford C. Bernstein, for his thought partnership.
They would also like to acknowledge John Kerr for his editing and writing assistance, as well as Kim Plough, Katherine Andrews, Gary Callahan, Mary DeVience, Angela DiBattista, Kim Friedman, Abby Garland, and Sara Strassenreiter for their contributions to editing, design, and production.
For Further Contact If you would like to discuss this report, please contact one of the authors. Olivier Abtan Partner and Managing Director BCG Paris +33 1 40 17 10 10 abtan.olivier@bcg.com Antonio Achille Partner and Managing Director BCG Milan +39 02 65 59 91 achille.antonio@bcg.com
Vincent Lui Partner and Managing Director BCG Hong Kong +852 2506 2111 lui.vincent@bcg.com Amitabh Mall Partner and Managing Director BCG Mumbai +91 22 6749 7000 mall.amitabh@bcg.com Antonella Mei-Pochtler Senior Partner and Managing Director BCG Vienna +43 1 537 56 80 mei-pochtler.antonella@bcg.com Sarah Willersdorf Principal BCG New York +1 212 446 2800 willersdorf.sarah@bcg.com
Jean-Marc Bellaïche Senior Partner and Managing Director BCG New York +1 212 446 2800 bellaiche.jean-marc@bcg.com Youllee Kim Partner and Managing Director BCG Seoul +822 399 2500 kim.youllee@bcg.com
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FLORENCE DE BIGAULT, DEVELOPMENT DIRECTOR IN CHARGE OF IPSOS WEALTH
Ipsos Wealth has been created to assist brands in the development and consolidation of their business with affluent clients. Ipsos Wealth offers the very best solutions in quantitative and qualitative studies to assist brands in their choices, leading to high-performance strategies among Affluent targets. www.ipsos.fr/ipsos-marketing
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Poor Africa, rich Africans. Say the word “Africa” and it immediately summons up images of misery, drought and famine, rather than Hummers, golf courses, the cosy villas of “black tycoons” and champagne overflowing at private parties. Indeed, it can be hard to believe that a continent where most of the inhabitants live on less than $2 a day can become one of the most dynamic markets in the world for luxury products. And yet, with more than 120,000 “dollar millionaires”, Africa has already surpassed Russia and their number could increase by 117% over the next decade, the second best regional growth rate in the world along with Asia. (New World Wealth report). Moreover, the 2014 Wealth Report devotes an entire chapter to Africa, hailed for the past few years as the new business frontier, with its new “economic dragons”: South Africa, Nigeria, then Angola, Ghana, Kenya, Algeria, Morocco, the Ivory Coast, Cameroon, Tanzania and Zambia. But who are these rich Africans? Driven by raw materials exports during a decade of growth at over 4% a year, an affluent social class of almost 45 million people has come into being in Africa,
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feeding the demand for consumer goods and luxury products. This new prosperity is no longer built on the mines alone but draws from telecommunications, the food and agriculture industry, distribution, finance, the media, the Internet, and in their wake an urban middle class has emerged of around 100 million people. It’s not so surprising to learn therefore that Africa is also home to the largest number of countries with the strongest growth in terms of luxury product consumption. Bain & Company estimates the African luxury market at two billion euros in 2013, an 11% increase over 2012. Total revenue for luxury brands on the African continent should reach 2 billion euros this year as opposed to 1.5 billion in 2011. After all, what’s the point of being rich and powerful if you can’t show it off? From big, overpopulated African capitals to native villages, wealth must be displayed, it must be put on show. Within this context, three luxury products have been established as symbols of status and success: cars, watches and handbags. The image of the luxury watch is still very much attached to the image of power. Many Africans have built their value
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systems and codes according to whatever brands were gracing the wrists of African leaders and their wives. Rolex, Breitling, Chanel, Cartier started out as emblems of domination. Then luxury watches have also been associated with wealth and success. African celebrities from the worlds of sport and music made new brands popular such as Audemars Piguet, Hublot, Omega, Richard Miles. The Cameroonian soccer player Samuel Etoo created his own luxury watch brand, Eto’o World. The luxury watch is first and foremost an expensive item, prompting the idea of ostentation, designed to strike anyone looking at you and whet their admiration. The demand for luxury watches, whether for women or men, is nourished by this aspiration for social distinction, which is basically fairly typical of the budding luxury markets. The desire to display your success, to stand out from the crowd, is nothing new. A taste for beautiful clothes, finery, jewellery, is part of traditional African culture and leaders must show their power and authority through fetish objects. In Africa, the luxury watch is often a gift given to the powerful, or offered as a demonstration of one’s power and wealth. Many of these watches are bought during trips abroad, at stores in New York, Paris, London, Geneva or Dubai or even at international airports, giving a little extra prestige to the object given. Nigerians are now the fourth biggest foreign buyers in the UK and spend an average of £500 in all the high-end shops they frequent. Gradually however, a demand for luxury watches that better integrate African values and aesthetic codes has been emerging. “African bling culture” feeds the tastes of many of these wealthy Africans for luxury watches: a preference for large watches, touches of bright colours, an attraction to personalised cases, dials, straps, exclusive engraving.
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In Lagos, Nairobi, Abidjan, Johannesburg, the “big boys” love to exhibit watches that are visible, big and flashy. However, a growing number of wealthy Africans are no longer content with just exhibiting the codes of western luxury. They are interested in luxury products that better integrate the African identity. Some members of the African elite have learned all about luxury watch brands, have come to judge them and sometimes demystify them. For them, luxury is no longer a blind search for identification, but rather an appreciation of real luxury values: quality and authenticity. The designer Alexander Amosu came up with the idea of customising a Rolex produced in a limited edition of only 50 numbered watches: the Amosu Rolex Submariner, to mark 50 years of Nigerian independence. The first “African” Rolex in the history of watchmaking... that can be handed down from generation to generation, with value as a legacy item. Wealthy Africans are very proud of their heritage and though many are drawn to Western styles, they respond to an African twist. Designers should consider tailoring colours, combinations of materials and forms, accessories and styling to suit the African audience. This demand for Africanised luxury products is also expressed through the need to be able to go shopping, to enjoy the luxury experience in the big African capitals and not just when travelling abroad. Africa may boast more millionaires than Russia, but luxury brands are still hesitant to venture onto the continent. The tradition of making purchases abroad among the African elite can also prove to be a dissuasive factor for luxury retailers. The lack of shopping centers and luxury stores has thus been a barrier to development. But things are starting to move. In 2006, Nigeria opened a new luxury shopping centre, The Palms, a 45,000 m2 space in the Lekki peninsula. 2008 saw the opening
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of the Accra shopping centre in Ghana, the countryâ&#x20AC;&#x2122;s first large-scale, high-end commercial space. Kenya is awaiting the opening of Garden City, a new 130,000 m2 shopping centre in Nairobi, which will be the biggest in East Africa with opening planned for mid-2014. The continent will require more hotels, resorts and attractions of global standards. This presents an opportunity for international luxury hotel brands to expand across Africa.
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A few international brands like Cartier, Louis Vuitton, Burberry, Fendi, Gucci have established their brandâ&#x20AC;&#x2122;s stores in some African countries. Ermenegildo Zegna is slated to open up stores in Nigeria, South Africa and possibly Angola. Their success has recently caught the attention of various international players, who are now watching and waiting for the right opportunities to establish a presence in these markets. A trend that is likely to increase as African becomes richer.
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FRANĂ&#x2021;OISE HERNAEZ FOURRIER, DIRECTRICE AD TRENDS & INSIGHTS, IPSOS ASI
The Ad, Trends & Insights department is a strategic planning structure specialized in brand expression and effectiveness. It is integrated inside Ipsos ASI, the advertising effectiveness research unit. It is made up with senior strategic planners watching and analyzing competitive context, sociocultural trends and specific communication codes used in the different countries and markets. Purpose is to provide intelligence on market trends and brand strategies with crossed analysis combining insights from our database of advertising tests and semiotic highlights. www.ipsos.fr
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Luxury Codes The luxury trends & insights report is based on international luxury advertising campaigns analysis (fashion, perfumes, watches, jewels, travel and cars in Europe, US and Asia since 2013). All media are considered, digital included. Objective is to understand key market concepts, values and insights. Analysis aims at identifying the market representations and their evolution. 2013 shows a challenged luxury market. With a growth by a mere of +2% in 2013, the competition is fierce, challenged by emerging countries where we can see new actors with international ambitions and also by mass market industries focused on premiumness and upscale re-positioning. Not forgetting the massive digitalization and the booming of the second-hand market to offer more facilitation strategies to consumers. These symptoms of renewal’s needs force Luxury to think over itself. In this blurred and new consumer empowerment context,
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our study will facilitate the understanding the new luxury communication codes to be watched in 2014. Our analysis shows that actors have two possibilities: - They can emphasize their know-how and high luxury positioning thanks to more intense and powerful promises - Or they can offer a renewed art of living and presence with more spontaneity and proximity for a “closer” luxury LUXURY CODES What it is really interesting is that the sector is looking for a new place/ relationship to build with consumers. Although main stakeholders want to keep their current status they also look for more proximity to the consumer. They want to be there, in a simpler way. That’s why we can see them go from very bold strategies to more consensual ones and from a kind of closeness to a new opening.
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MYTHICAL LUXURY a story machine
CRAZY LUXURY a sensations machine
This trend is a way to remind the brand status in a very impressive and authoritarian way. The objective is to move from a luxury brand to a mythical one by using emblematic symbols.
Body representation and vital energy are really conveyed this year in the luxury codes. It allows renewing expressiveness and creativity drivers in communication. It underlines the brand intensity and can remind the brand experience in a more intense way. Painting matters or collages are used to highlight the creative process. The objective is to go further with the idea that sky is the limit. Optimism is very strong, characters are moving, dancing, laughingâ&#x20AC;Ś for a sensational and dynamic luxury. Communication will use metamorphosis to express and stage Luxury in motion.
These brands can tell themselves thanks to their highly symbolic places or iconic characters or by evocating their trade secrets. It can go to some museum exhibitions dedicated to the brand and its story. Felines are also very popular this year to express this superiority with iconic creative levers. This trend is very disconnected from the consumption atmosphere and the economic crisis.
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INTIMATE LUXURY an introspective machine
SMART LUXURY a proximate machine
Luxury codes can also be more focused on the introspection dimension. It is conveyed thanks to very intimate and closed places and a play on secrets sharingâ&#x20AC;Ś all is done to show a new way of thinking yourself and the entire world that surrounds you. Theyâ&#x20AC;&#x2122;re even some psychoanalysis codes mentioned in these campaigns. The silence is also used to get a timeless space and more opportunities to confide.
This trend is new in 2013/2014 and is staging brands more integrated in the everyday life. Day-to-day routines are represented such as the street and the city. Luxury brands are in fact playing with urban codes, embodying their presence and their role. This smart attitude can also been used thanks to very tactical and agile strategies to embody luxury actors. Besides it is interesting to see the development of products thanks to hi-tech partnerships. Brands can get closer and useful in the consumers life.
Luxury brands are so really close, but they keep a fascinating dimension with mystery and blurring.
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CĂ&#x2030;LINE GARDEUR, HEAD OF KANTAR MEDIA ADSIGHT
LIVIA LAMON, STUDY LEADER, KANTAR MEDIA ADSIGHT
Kantar Media AdSight Kantar Media AdSight deciphers advertising trends and help brands in their strategic thinking with sociological, semiotic and media cross analysis. Kantar Media AdSight uses Kantar Media Ad Intelligence data bases (creative and investments) to identify the latest evolutions in brand communication and media strategies. www.kantarmedia.com
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Luxury advertising trends in 2013-2014 with Luxury AdSight - a focus on Haute Horlogerie Every year, Kantar Media AdSight takes a look at luxury creatives in fashion, beauty, watchmaking, jewelry, food and alcohols to analyze them and to identify major trends. For the 2013-2014 edition, we have found 7 major themes: MAGIC, HISTORIC, SCENOGRAPHIC, PRAGMATIC, PSYCHOLOGIC, GEOGRAPHIC and URBANISTIC. Haute Horlogerie is particularly present in three of them:
Childhood memories are also a part of this trend, and brands like playing with our regressive side, like DIOR who presents a colorful birthday party in a misty forest, LOUIS VUITTON who invites us to play a goose game online to make our Christmas wishlist, or IWC with a surprising dreamy creative for a special “The Little Prince“ edition watch which uses the delicate imagery of the Saint-Exupéry character.
1 | MAGIC – Wonder lands and dreamy creatives This year, luxury rhymes more than ever with magic. Magic worlds, magic love, magic creatures… Creatives are getting more and more enchanting to make us dream. A trend that takes the form of fairies, fairy tales (Little Red Riding Hood appears in HERMES creatives and in pink for NINA RICCI new fragrance La Tentation), mystical forests or funny animated objects…
2 | HISTORIC – Legacy and expertise More than ever, fine brands have to demonstrate why they are so special. They have to show and tell their history, their savoirfaire to establish themselves as a part of our cultural legacy. On classic media, like print, luxury brands used royal and noble imagery to convey this idea of tradition, as well as sumptuous settings.
Watchmaking expresses itself quite well in this magic world in 2013 and 2014. For example, OMEGA explores the theme of the fantastic journey with an epic viral video that takes us through water, air and finally space. The enchanted travel is as well explored by LOUIS VUITTON with the hot balloon saga and GUERLAIN with its cloudy ad for its new Météorites.
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For example, horseback riding is well represented, as a synonym to high society. GUCCI tells a tale of wealth and simple happiness, GUERLAIN chooses to express masculine energy with the horse as a symbol, and LONGINES asserts its affinity to horse racing with the elegant presence of the actor Simon Baker. When it comes to tell their story, Haute Horlogerie brands have always been very
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expressive, without any surprise, since craftsmanship and legacy is the very core of the watchmaking universe. A large majority of them use print creatives to explain in great detail where they come from, like VACHERON CONSTANTIN (“Founded in 1755 on L’Ile on Geneva’s lake. And still there.”). But the raising of social networks allowed brands to talk about their history more extensively and creatively. CHANEL in particular loves to tell a good story, and do so with the little “Inside Chanel” videos, which are posted regularly on the YouTube channel. GUERLAIN did the same by narrating the conception and the evolution of the iconic Shalimar. And, to celebrate its 180 years, JAEGER-LECOULTRE produced a beautiful web video, narrated by Clive Owen, which presents the innovative spirit of the brand through the years and the breathtaking landscape surrounding the original manufacture in the Vallée de Joux, as a perpetual source of inspiration. 3 | GEOGRAPHIC – Exploration and exotic scenery Luxury is all about change of scenery and, essentially, travel. This trend is still very strong today: there is a lot of jungle and exotic imagery (HERMES latest campaign, where models are like rare and precious animals), road trips (LONGCHAMP new creatives with Alexa Chung), but also pastoral walks… Haute Horlogerie is quite prolific in this trend. Exploration is a main theme of the sector, especially when the product is targeted for men. Brands like PANERAI or BELL & ROSS are particularly adepts of this line of communication. But there is more: sailing for example is used by all luxury sectors, as a symbol of wealth and mastery.
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This year, LOUIS VUITTON and PRADA convey the imagery for couture collections and perfumery, and MICHEL HERBELIN do the same in watchmaking. Travel and exploration can also be seen in a broader way. Space odyssey is a major trend this year, with brands like CHANEL and JIL SANDER in haute couture (for a more imaginary and retro approach), or, in Haute Horlogerie, IWC, where the moon is the core of the creative, and OMEGA where the solar system is mixed with a watch mechanism, the infinite universe in background. As an instrument of measure of tremendous complexity, the luxury watch is very naturally compatible with the space exploration symbolism. 4 | … and everything else! Of course, fine watchmaking is also present in the other creative trends we identified. HUBLOT and LOUIS VUITTON HORLOGERIE are quite SCENOGRAPHIC when they invite Depeche Mode or David Bowie to appear in their creatives; BREITLING and RICHARD MILLE are PRAGMATIC when their models show clearly visible tattoos; MARC JACOBS HORLOGERIE is URBANISTIC when it shows the Eiffel Tower in background day after night in a web video… Progressively, Haute Horlogerie is exploring other communication territories. About Luxury AdSight Luxury AdSight is an exploration of luxury advertising creative trends in high fashion, watchmaking, fragrance, jewelry, fine food and alcohol - and on every media: print, television, display and digital (social networks, web videos, banners…). The study also contains an analysis of the investments made by the sector in France.
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APPENDIX KANTAR
Â&#x2014;Â&#x161;Â&#x2014;Â&#x201D;Â&#x203A; Â&#x2020; Â&#x2039;Â&#x2030;Â&#x160;Â&#x2013; ʹͲͳ͜ Â&#x201D;Â&#x2021;Â&#x192;Â&#x2013;Â&#x2039;Â&#x2DC;Â&#x2021; Â&#x2013;Â&#x201D;Â&#x2021;Â?Â&#x2020;Â&#x2022; Â&#x2039;Â? Â&#x17D;Â&#x2014;Â&#x161;Â&#x2014;Â&#x201D;Â&#x203A; Â&#x192;Â&#x2020;Â&#x2DC;Â&#x2021;Â&#x201D;Â&#x2013;Â&#x2039;Â&#x2022;Â&#x2039;Â?Â&#x2030;
1
ʹͲͳ;njʹͲͳ͜
Luxury AdSight 2014
Unreal
There
Here
Material 2
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Luxury AdSight 2014
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APPENDIX IPSOS
MAGIC
MAGIC ENCHANTED JOURNEY The enchanted journey thematic gains altitude with representations of colorful hot air balloons (Louis Vuitton), which gives an impression of magic and wonder, puffy clouds for Guerlain, or mystical for Omega, through water, air and space.
OMEGA
LOUIS VUITTON 4
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GUERLAIN Luxury AdSight 2014
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APPENDIX IPSOS
MAGIC CHILDHOOD MEMORIES This magical feeling is also expressed through childhood imagery : fine brands playing with our regressive side – big anniversary party in the woods for Dior, dreamy creative for a special « Le Petit Prince » edition for IWC, a digital goose game for Louis Vuitton… LOUIS VUITTON – JEU DE L’OIE (NOËL 2013)
IWC
FRATELLI / ROSSETTI 5
DIOR Luxury AdSight 2014
HISTORIC
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APPENDIX KANTAR
HISTORIC NOBLE HORSES Horseback riding is well represented as a synonym to high society. Gucci tells a tale of wealth and simple happiness, Guerlain chooses to express masculine energy with the horse as a symbol, and Longines asserts its affinity to horse racing with the elegant presence of the actor Simon Baker.
GUCCI
GUERLAIN
LONGINES
Luxury AdSight 2014
7
HISTORIC TELLING STORIES The raising of social networks allowed brands to talk about their history more extensively and creatively. Chanel loves to tell a good story, and do so with the little « Inside Chanel » videos. Guerlain did the same by narrating the conception and the evolution of the iconic Shalimar. And, to celebrate its 180 years, Jaeger-Lecoultre produced a web video which presents the innovative spirit of the brand through the years and the breathtaking landscape surrounding the original manufacture in the Vallée de Joux.
CHANEL
GUERLAIN 8
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JAEGER-LECOULTRE – 180 YEARS Luxury AdSight 2014
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APPENDIX KANTAR
GEOGRAPHIC GEOGRAPHIC SEA ADVENTURES Sailing is used by all luxury sectors, as a symbol of wealth, adventure and courage. This year, Louis Vuitton and Prada convey the imagery for couture collections and perfumery, and Michel Herbelin do the same in watchmaking.
MICHEL HERBELIN
LOUIS VUITTON
LOUIS VUITTON 10
PRADA Luxury AdSight 2014
GEOGRAPHIC SPACE TRAVEL Space odyssey is a major trend this year, with brands like Chanel and Jil Sander in haute couture (for a more imaginary and retro approach), or, in Haute Horlogerie, IWC, where the moon is the core of the creative, and Omega where the solar system is mixed with a watch mechanism, the infinite universe in background.
CHANEL
CHANEL HORLOGERIE 11
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IWC
OMEGA Luxury AdSight 2014
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MARTIN CRÉPY, PARTNER AT SIMON-KUCHER & PARTNERS – LUXURY COMPETENCE CENTER
Simon-Kucher & Partners is a global consulting firm specializing in strategy, marketing, pricing and sales. Founded in 1985, the company focuses on Smart Profit GrowthSM by helping clients to boost their top line instead of cutting costs. With 700 professionals in 27 offices worldwide, our practice is built on evidence-based, practical strategies for profit improvement. Simon-Kucher & Partners is regarded as the world’s leading pricing advisor and thought leader. www.simon-kucher.com
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Changing tides: catching the next profit wave in China The Chinese market is continuously evolving, not only through new regulations and tremendous wealth creation, but also through changes in Chinese consumers’ mindset and consumption patterns. It is becoming clear that many inland areas are very quickly catching up with the more developed coastal zones, and that all of China’s provinces overall are growing ever more interconnected with each other but also with the outside world. Monitoring such macro-economic trends is highly important to firms for which the Chinese market is a key source of growth and profitability; however, much remains to be explored. In particular, Chinese consumers’ needs, consumption patterns and willingness to pay are still insufficiency understood today, with pricing strategies generally defined at far-away headquarters. Access costs and taxes have historically led luxury goods firms to pricing their products in China at around 40% above prices in home markets, depending on the category, but this strategy might reach its limits in the coming years. In order to grow profits sustainably in China, luxury firms must be able to accurately
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measure Chinese consumers’ willingness to pay, as well as to closely monitor its fastpaced dynamics. Our analysis of Chinese luxury buyers has confirmed and revealed many changes in behavior, expectations and needs. In terms of maturity Luxury product purchasing has evolved from a pure mirror of social position to an indication of fashion and expertise: product style, product quality and comfort are now Chinese consumers’ main purchasing drivers while the visibility of brand logo was crucial to them only three years ago. They have developed a “luxury education”, enabling to better appreciate products style, quality and comfort. However, this behaviour varies from one city to another. In Tier 1 cities such as Beijing and Shanghai, luxury product ownership, with visible brand logos, is no longer an indicator of social position. This is due to the generalization of certain products as well as to joint purchasing and shared ownership of property. It is common for people to buy a bag together and to share its usage based on events and needs. Thus, luxury is becoming more discrete. It is the matter of connoisseurs who are able to recognize a luxury product despite the absence of a visible brand logo. Nevertheless, luxury is still an indicator of social position in Tier 2 and Tier 3 cities.
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Moreover, a poor purchasing experience will be disqualifying for a luxury brand. However, given the already satisfying level of purchasing experiences in the country, additional efforts to enhance this experience will not be valued much by consumers.Consequently, existing customer segmentations must be enriched to better reflect changes in the main value drivers and behavior patterns of Chinese customers. Current sales and marketing actions, such as brand communication, sales experience, loyalty rewards, or recognition initiatives must be adjusted. In terms of habits Online shopping has become a privileged buying channel, even for luxury goods. Shoppers are seduced by convenience, permanent product availability and simplicity. However, the current online offers of many luxury brands remain very limited circumscribed to accessories and entry-level products. The Internet strategies of luxury goods manufacturers must thus be rethought. Chinese luxury consumers are structurally younger than luxury consumers in mature markets. This can be explained by the relatively higher proportion of first or only second-generation high-net worth individuals in China. Therefore, their consumption habits and their reference values and expectations are different. They were born or have grown up with mobile phones and the Internet. They are very sensitive to web-based approaches and look for purchasing opportunities online, also for luxury goods. The convenience of buying online 24 hours a day, 7 days a week exceeds their interest for a special in-store purchasing experience. Seventy percent of Chinese luxury consumers look for products on the Internet before buying them in a store, and more than a quarter of them say they would buy more if the products were available on the Internet. Having understood this need, online platforms that do not belong to luxury brands have been launched. Although the fear of counterfeit products remains a constraint for the development of these platforms, their very existence reveal a real need.
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E-commerce would also allow luxury brands to reach the entire Chinese population without having to open new stores in far-flung cities with high fixed costs. The role of the Internet in luxury has been debated for many years, and often been limited to its e-commerce component. However, the Internet actually provides a larger wide range of actionable opportunities to support the customer experience at many stages. Brands now have to deal with an omni-channel consumer, looking for a continuous experience between stores and the Internet, on his computer, tablet or smartphone. All industries are now striving to adjust to and benefit from this structural trend, and so must the luxury industry. Digital efforts should be seen positively as a way to grow income and not simply as a costly and risky burden that has to be developed defensively. To achieve the full potential of the Internet, luxury brands need to build a new digital brand equity, by working simultaneously on the Price, Products and Services delivered online, as well as the digital experience before, during and after the purchase itself. Therefore, luxury brands have to rethink their overall digital strategies (pricing, category management, sales animation) to better leverage Chinese consumerâ&#x20AC;&#x2122;s internet-savvy. They have also to move from a pure branding website to a real distribution channel. In terms of profile In the coming years, the share of women in overall luxury expenditure will grow. However, men will keep on spending more than women. Despite recent anti-corruption laws, Chinese men will continue to buy luxury goods both for personal use and as gifts to their wives and families. It is thus as essential as ever for luxury firms to be able to accurately measure men as well as womenâ&#x20AC;&#x2122;s willingness to pay, and to be closely monitor the fast-paced changes of all the characteristics of these consumer groups. In terms of loyalty Increases in luxury maturity have led to greater loyalty of Chinese shoppers to their favorite brands. Chinese luxury consumers
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know and recognize ever more luxury brands, demonstrating their gradual shift to a position of experts. Chinese consumers expect to consume “luxury” across the entire spectrum of consumer goods and services. It is perfectly legitimate for them to be offered luxury products and services in different consumption universes such as perfumes, cosmetics, restaurants, hotels, or travel. Generally speaking, Louis Vuitton and Hermes are still, and will remain for the foreseeable future, the two leading brands in China. But all brands should leverage their consumers’ loyalty by developing new product categories. In terms of price sensitivity and price knowledge purchases abroad account for more than half the money spent by recurring
luxury buyers. At the same time, the study has revealed some untapped willingness to pay: price knowledge has increased, and the perceived fairness of luxury prices in China seems more important than the absolute price level Chinese consumers are now more aware of price differentials between China and European countries, pushing them to buy more and more abroad. This price differential has to be maintained. However, luxury brands must strive to control its potential impact by optimizing product launch patterns between Europe and China in particular, and managing products scarcity. Luxury brands must also implement dynamic tools to monitor competitor prices around the world and precisely assess price sensitivity per customer segment.
Simon-Kucher & Partners’ recommendations in a nutshell: – Enrich customer segmentation and adjust current sales and marketing actions – Rethink digital strategies by providing the right product and service offer, and an improved purchasing experience – Move from a pure brand website to a real distribution on channel – Accurately measure willingness to pay, especially for men, and closely monitor fast-paces changes of consumer purchasing criteria – Leverage brand loyalty by developing new product categories such as perfume and cosmetics
APPENDIX SIMON KUCHER
SIMON-KUCHER & PARTNERS Luxury Goods
China Luxury Survey 2013 Changing tides: catching the next profit wave
Paris office 17 Square Edouard VII 75009 Paris – France Internet: www.simon-kucher.com
The results presented in this document cover all the brands surveyed. Brand-specific results are available upon request.
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Martin Crépy Tel: (33) 1 56 69 23 70 Mob: (33) 6 17 03 53 10 e-mail: martin.crepy@simon-kucher.com
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APPENDIX SIMON KUCHER
Introduction: the knowns and unknowns of China
Discover in this study the potential of the next Chinese profit wave
The Chinese market is continuously evolving, not only through tremendous wealth creation, but also through changes in consumers’ mind-set and consumption patterns It is becoming clear that many inland areas are very quickly catching up with the more developed coastal zones, and that China’s provinces overall are growing ever more interconnected also with the outside world Monitoring such macro-economic trends is highly important to firms for which the Chinese market is a key source of growth and profitability; however, much remains to be explored In particular, Chinese consumers’ needs, consumption patterns and willingness to pay are still insufficiency understood today, with pricing strategies generally defined at far-away headquarters. Access costs and taxes have historically led to pricing products in China at around 40% above prices in home markets, depending on the category, but this strategy might reach its limits in the coming years. In order to grow profits sustainably in China, luxury firms must be able to accurately measure Chinese consumers’ willingness to pay, as well as to closely monitor its fast-paced dynamics -1-
Set-up and methodology of the China Luxury Survey The respondents are a representative sample of Chinese luxury goods buyers
Geographic distribution
Gender distribution
Education
Other 1%
Men 34%
Beijing 39%
Women 66%
PostCollege 12%
College 88%
Shanghai 60%
Age distribution
Bellow College 0%
Monthly income distribution (¥ ‘000) 34%
53%
22%
17%
4% 18 to 25
25 to 30
30 to 40
40 to 50
Source: Simon-Kucher China Luxury Survey 2013 – 200 respondents
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3%
1%
50 to 60
>60
10%
10%
25 to 30
30 to 35
16%
15%
15%
35 to 40
40 to 45
45 to 50
More than 50
-2-
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APPENDIX SIMON KUCHER
The maturity of Chinese luxury buyers has changed Value drivers have evolved from a pure mirror of social position to an indication of fashion and expertise: product style, product quality and comfort are now essential for Chinese consumers. Purchasing criteria* Product features Quality of overall product
Customer distribution Overall
Men 74
Add. VIP services provided by brand
71
68
67
Quality of service by sales people
73
69
69
Overall brand image
65
66
68
66
65
65
66
Visibility of brand logo
65
65
65
Ability to purchase products online from official store
65
62
65
Chinese luxury buyers are now luxury educated and they are essentially looking at product features when purchasing luxury products Prices are less important than might be expected
66
Price
Purchasing experience
74
70
70
Comfort of use
76
72
71
Style of product
Women
The visibility of brand logo is less crucial to them
67
63
66
Source: Simon-Kucher Survey, Question 10: What factors are most important -3when you are deciding on which product or brand to purchase? (0 = not important at all, 100 = extremely important) * Ranked by importance
The maturity of Chinese luxury buyers has changed This trend away from status towards fashion and expertise is visible for all product categories.
Purchasing criteria*
Customer distribution Men
Women Bags and Small leather luggage goods
Bags and luggage
Watches
1
1
1
1
Style of product
2
3
4
3
Comfort of use
3
2
2
2
Overall brand image
4
4
4
4
Quality of service by sales people
5
7
10
7
Add. VIP services provided by brand
6
5
6
10
Purchasing experience
7
7
3
7
Visibility of brand logo
8
6
8
9
Price
9
10
7
6
Ability to purchase products online from official store
10
9
9
5
Product features Quality of overall product
Source: Simon-Kucher Survey, Question 10: What factors are most important -4when you are deciding on which product or brand to purchase? (0 = not important at all, 100 = extremely important) * Ranked by importance
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APPENDIX SIMON KUCHER
The profile of Chinese luxury buyers is still a men Despite recent anti-corruption laws, Chinese men are still the main consumer of luxury goods in all products categories except bags & luggage. In the coming years, the share of women in overall luxury expenditure will continue to grow and will catch-up men Average expenses in the past two years (¥ ‘000) Women
Overall 57.3
Jewelry
48.8
Watches
29.7
Bags & luggage
18.4
Small leather goods
16.4
Shoes
14.4
Accessories
Men
48.2
75.7
42.7
60.8
34.1
21.3
20.6
14.3
16.2
17.0
13.6
Source: Simon-Kucher Survey. Question 4: How much money did you spend on western-brand luxury products in the past 2 years? Note: €1 = ¥8
16.0
-5-
The habits of Chinese luxury buyers have changed 70% of Chinese luxury consumers look for products on the Internet before buying them in a store, and 27% of them say they would buy more if the products were available on the Internet. Elements encouraging online purchasing*
Customer distribution Overall
Men
Home delivery at preferred time with free return
67
Ability to easily view all product prices online
67
Online fitting room
64
Official group shopping
64 62
66
65
67 65
65
64
Exclusive products available online only
67
66
65
Invitation for special events
68
66
65
Ability to personalize products for free
68
66
66
Special loyalty program for online purchase
70
67
67
Add. services such as free maintenance and extended product warranty
Discount available online only
66
67
Availability online of all sizes incl. specific sizes
Women
62
65
62
65 64
64 61
63
Source: Simon-Kucher Survey. -6Question 15: How strongly would the following elements encourage you to purchase luxury goods online? (0 = not encouraging at all, 100 = extremely encouraging) * Ranked by preference
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APPENDIX SIMON KUCHER
The loyalty of Chinese luxury buyers has changed Changes in luxury maturity have increased the loyalty of Chinese shoppers to their favorite brand. Louis Vuitton and Hermes are by far the 2 most preferred brands. Brand *
Customer distribution Overall
Men 24.3%
Louis Vuitton 21.3%
Hermès
9%
11.8%
Gucci
14%
Bottega Veneta
3.6%
Burberry
3.0%
Céline Tiffany & Co
4% 3% 0%
1.8%
0%
1.2%
5%
5%
1.8%
Cartier
11%
8%
5.3%
Prada
18%
0%
8.9%
Christian Dior
28%
9%
9.5%
Chanel
1%
4% 4% 3% 3% 2%
IWC
1.2%
0%
4%
Mont Blanc
1.2%
0%
4%
Omega
1.2%
0%
4%
Rolex
1.2%
0%
Bulgari
0.6%
0%
Jaeger-LeCoultre
0.6%
0%
Patek Philippe
0.6%
0%
Salvatore Ferragamo
0.6%
Ermenegildo Zegna
0.6%
0% 0%
Source: Simon-Kucher Survey, Question: What is your favorite luxury brand? * Ranked by attractiveness
Women 32%
21%
4% 1% 2% 2% 1% 1%
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The loyalty of Chinese luxury buyers has changed For bags and luggage, Louis Vuitton and Hermès are spontaneously mentioned as the favorite brands. 1st choice among 10 listed brands
Spontaneous answer
Brand *
Louis Vuitton
39%
Hermès
42%
25%
18%
2nd choice among 10 listed brands
12% 4%
Gucci
12%
Chanel
4%
5%
Prada
4%
6%
Giorgio Armani
4%
Not listed **
Not listed **
Burberry
4%
3%
1%
Bottega Veneta Christian Dior Salvatore Ferragamo Others
1%
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9%
1%
8% 15%
12% 17%
2% Not chosen
Not cited 4%
Source: Simon-Kucher Survey, Question: What brands do you find most attractive? * Ranked by attractiveness ** Not listed in the brands list proposed on the survey
26%
15%
1%
4% 2%
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Knowledge of prices has changed among Chinese luxury buyers Purchases abroad currently represent more then 50% of the money spent by regular luxury buyers. Purchasing location China and abroad*
Amount spent per location
Only China
China
Only abroad*
Abroad*
Accessories
71%
18%
12%
Shoes
50%
50%
Bags and luggage
69%
21%
10%
Jewellery
50%
50%
Shoes
69%
22%
10%
Small leather goods
47%
Small leather goods
66%
17%
Jewellery
64%
24%
Watches
56%
20%
17% 11% 24%
Bags and luggage
44%
Accessories
43%
53% 56% 57%
40%
Watches
60%
% of the sample
% of total amount spent
Reading example: 71% of the sample has purchased western-brand luxury jewelry in the past two years both in China and abroad, 18% in China only and 12% abroad only Source: Simon-Kucher China Luxury Survey 2013
Reading example: 50% of the money spent on westernbrand luxury shoes in the past two years was spent in China and 50% was spent abroad -9-
Knowledge of prices has changed among Chinese luxury buyers Even for accessories or shoes, regular luxury buyers spent 50% of their amount abroad.
Comments
Average expenses in the past two years (¥ ‘000) China
Overall 57.3
Jewelry
Abroad*
33.8
34.4
48.8
Watches
29.7
Bags & luggage
18.4
Small leather goods
10.7
16.4
Shoes
10.6 10.7
14.4
Accessories
25.3
36.7 19.7
15.4
9.0
11.7
The respondents spent more money abroad* than in China in all categories Even more so for watches: the average expenses abroad are 1.5 times larger than those in China However, shoes and small leather goods purchases are balanced between China and abroad
11.8
Source: Simon-Kucher Survey. - 10 Question 4: How much money did you spend on western-brand luxury products in the past 2 years? *Abroad includes Hong-Kong and Macao Note: €1 = ¥8
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APPENDIX SIMON KUCHER
Knowledge of prices has changed among Chinese luxury buyers Price and product availability are the two main obstacles to luxury good purchases in China. Customer distribution
Obstacles to luxury purchases in China* Overall The newest products are launched too late in China
84%
The products I want are not available in China
64%
The service quality is better abroad
64%
Women
90%
80%
73%
The price is higher in China
Comments
Men
83%
68%
56%
61%
The biggest obstacle is the deferred launch of products in China Even if respondents do not seem to see price as essential, nearly 75% of them mention it as an obstacle to purchases in China (more than 80% for men) Respondents also mention lack of availability and a poorer quality of service
68%
Other obstacles include concerns about fake products, lack of after-sales services and fear of poor product quality
65%
Source: Simon-Kucher Survey, - 11 Question 12: What prevents you from buying more luxury goods in China (mainland) rather than abroad? * Ranked by preference
The price sensitivity of Chinese luxury buyers has changed Despite higher Chinese prices, there is untapped willingness to pay for some products/ categories. Relative Value Perception Bags
Illustration ¥25'000
¥24'000
25% of the respondents were willing to pay more than ¥ 24,000
¥23'000 ¥21'000 ¥19'000
¥18'900 ¥17'600
¥17'000
¥15'800
¥15'000
50% of the respondents were willing to pay over ¥18,500, more than the actual price of ¥17,800
¥13'500
¥13'000 ¥11'000
¥20'000 ¥18'500 ¥17'800
P75 ¥11'000
P50 P25
¥9'000
Actual price* ¥7'000 Bag 1
Bag 2
Bag 3
Source: Simon-Kucher Survey, - 12 Question 9: If the current price of Bag 1 is ¥ 11 000, what prices do you expect the following 2 products to have? * Actual price = price as of June 2013 Note: €1 = ¥8
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APPENDIX SIMON KUCHER
Chinese luxury buyers expect luxury brands to expand into new categories Luxury goods buyers are very interested in perfumes and cosmetics. Women are also interested in technology products and men in home interior design and yachting. Universes to Expand in*
Customer Distribution Overall
Perfumes
92%
Cosmetics
74%
Home interior design
74%
Hotels
74%
Automotive interior design
72%
76%
Spa / wellness SPA
52%
Yachting
50%
77%
71%
81%
73%
75%
69%
70%
Travel
79%
68%
79% 73%
65%
67%
66% 47% 45%
93% 86%
81%
77%
Technology products (ex: smartphones)
Women
89%
84%
Fine food, wine & spirits
Restaurants
Comments
Men
68%
Respondents would be very interested in new products in perfumes and cosmetics Men and women differ on some points: men prefer fine food and wine, interior design and yachting whereas women prefer technology products and restaurants Other universes include articles for daily use, cars, clothes, computer accessories, entertainment, food, office supplies, real estate, sports and health products
55% 61%
Source: Simon-Kucher Survey, - 14 Question 13: If your favorite luxury brand were to expand into the following universes, would you be interested? * Ranked by preference
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APPENDIX SIMON KUCHER
Executive summary: Chinese Luxury Survey 2013 (1/2) Our study reveals that Chinese luxury buyers have changed in terms of: Maturity Luxury product value drivers have evolved from a pure mirror of social position to an indication of fashion and expertise: product style, product quality and comfort are now Chinese consumersâ&#x20AC;&#x2122; main purchasing drivers
Profile Spending among men has increased, in all product categories, resulting in a higher average amount spent than for women: Men are still the main buyers of luxury in China but women is a promising segment
Habits Online shopping has become a privileged buying channel, even for luxury goods. Shoppers are seduced by convenience, permanent product availability and simplicity: luxury digital strategies must be rethought
Loyalty Changes in luxury maturity have increased the loyalty of Chinese shoppers to their favorite brands
Price sensitivity and price knowledge Purchases abroad account for more than half the money spent by recurring luxury buyers, however, untapped willingness to pay remains in China: price knowledge has increased, and the perceived fairness of luxury prices in China seems as important as the absolute price level
Source: Simon-Kucher China Luxury Survey 2013
- 15 -
Executive summary: Chinese Luxury Survey 2013 (2/2) With each change comes a strong call for action Maturity Customer segmentation must be enriched to better reflect Chinese customer value drivers and developments in luxury behavior. Also current sales and marketing actions (brand communication, sales experience, loyalty rewards/recognition, â&#x20AC;Ś) must be consequently adjusted
Profile Accurately measure willingness to pay, especially for men, and closely monitor fast-paced changes of consumer purchasing criteria, specially for women
Habits Rethink digital strategies (pricing, category management, animation) to better leverage Chinese consumerâ&#x20AC;&#x2122;s internet savvy by providing adapted services and an improved purchasing experience. Move from a pure brand website to a real distribution/e-commerce channel
Loyalty Leverage brand loyalty by developing new product categories such as perfumes and cosmetics
Price sensitivity and price knowledge Implement dynamic tools to monitor competitor prices around the world, assess price sensitivity per customer segment and changes in purchase areas
Source: Simon-Kucher China Luxury Survey 2013
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PIERRE ANTOINE, FOUNDER AND CONSULTANT AT SMARTPULSE
SmartPulse is a Consulting company delivering tailored Market Research and Market Intelligence services such as insight communities, proprietary panels and quantitative online surveys. SmartPulse provides international companies and start-ups with ad-hoc Market Intelligence services based on an extended knowledge of Mobile Devices, Consumer Electronics and mobile technologies. www.smartpulse.fr
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How Luxury Brands Can Take Advantage of Wearable Technologies And The Internet of Things The Internet of things and wearable devices are expected to become the next revolution in technology. In theory, they seem quite incompatible with the values of the luxury industry. In reality, they could turn into interesting opportunities for brands. A weak signal When the iconic and successful Burberry CEO Angela Ahrendts and former Yves Saint-Laurent CEO Paul Deneve joined Apple in mid-2013, most Hi-Tech experts saw a strong signal that the Cupertino firm was preparing some important move inspired by the luxury fashion industry. Curiously, nobody seemed to have perceived a weaker signal: wearable devices in particular and the Internet of things in general are not just for “geeks”. They can actually become a tremendous growth reservoir, even for more traditional companies. The next big thing in technology But what are we talking about exactly? The Internet of things is a scenario in which objects, animals or people are provided with unique identifiers and the ability to automatically transfer data over a network without requiring human-to-human or human-to-computer interaction (1). Wearable devices play an important part in this scenario, incorporating electronic
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technologies into items of clothing and accessories to perform many of the same computing tasks as smartphones, tablets or computers. Most of the time, these devices have some communication capabilities and allow the wearer access to information in real time. Examples of wearable devices include watches, glasses, contact lenses, e-textiles and smart fabrics, headbands, beanies and caps, jewelry such as rings, bracelets or earings. There is a wide range of objects that can enhance the way we use information to change our user experience. For instance, the Recon goggles allow skiers and snowboarders to see important data such as speed or maps of the slopes while they practice. As pointed out recently by Bill Wasik in Wired Magazine (2), wearable devices “(…) provide the ability to see all the crucial data, and only the crucial data, at times when it would otherwise remain inaccessible. This is the promise of wearable technology: bringing the power of the smartphone out of your pocket and into your field of vision, accessible any time you glance its way (…)”. Using current technologies, every manufacturer or service provider can imagine connected objects and services delivering
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key contextual data to their customers. This is why, once potential users have accepted usage scenarios, the Internet of things and wearable devices will become a revolution comparable to smartphones. Diamonds are forever By essence luxury objects are meant to be eternal. They follow their own path. As Jean-Claude Biver, Chairman of Hublot recently pointed out in an interview (3): “Luxury cannot afford obsolescence”. It is all about hand-made fine objects made by craftsmen with unique know-how and precious materials. Whereas on Hi-Tech markets, product life-cycles are short, to say the least: it took only 6 months to Samsung to replace their first connected watch Galaxy Gear by a Galaxy Gear 2. Seen from this perspective, there is little room for technologies that epitomize obsolescence and mass production within the luxury product categories. Actually they are at the exact opposite of luxury values. So, is there really no future for wearable devices as luxury items? Some people think there is. James Bond is a good example, considering the wristwatch developed by Jaeger-LeCoultre in collaboration with Aston Martin. This watch can replace the key of an Aston Martin car thanks to sophisticated embedded transponders. This is a brave attempt to include technology into a luxury object, showing that it can enhance the whole user experience. The watch alone is a beautiful handcrafted item. The fact that it can open your luxury car makes it even more unique and desirable. Not only you own a gorgeous watch and a fabulous car, but also, you are James Bond. This is what we should call the “007 effect”: the fact that a technology far away from luxury standards can take the user experience to a much higher level. This is also what wearable devices are about: allowing brands to find their own “007 effect”. The future is now Things are moving fast as some players of the value chain have already identified areas where they can start investigating wearable devices. This is the case of Luxxotica Group, a luxury eyewear maker
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for brands like Chanel, Bulgari or Prada, who announced in March 2014 an agreement with Google. This partnership “will establish a team of experts devoted to working on the design, development, tooling and engineering of Glass products that straddle the line between high-fashion, lifestyle and innovative technology”. The first branded connected glasses will most probably arrive on the market in 2015. Of course, for glasses it seems quite natural to look into wearable technologies opportunities, especially as Google tries to create a favorable ecosystem that includes third parties such as glassmakers. But for most players on the luxury market, things are obviously more complex. However, this should not be a reason for luxury brands to neglect the Internet of things. Some of them have started making their own experimentation. Hermès is currently working on a connected purse with the designer Alison Lewis (4). Should this project be only a “concept-purse” used to showcase what the product of the future might look like, it is yet evidence that traditional savoir-faire and modern technology can work together. If not the products themselves, Internet of things and wearable technologies offer a wide range of possibilities to enrich the customer journey. For instance, the whole customer relationship services could be personalized thanks to small accessories. Imagine a bracelet, a wallet or a purse that, if activated, would automatically identify the customer once he or she arrives at a point of sales or at point of contact like a concierge desk. This would allow the brands and stores to treat their customers even better through personalized offers or services. With customization and unique experiences being the hallmarks of modern luxury, wearable technologies can play a central role here. Be prepared because Internet of things is not a fad If the leading technological firms like Samsung or Google (and soon Apple) have been natural pioneers, it would be
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a great mistake to restrain the Internet of things and wearable technologies applications to the sole Hi-tech market. Applications can go much further than the gadgets presented during the last Consumer Electronics Show in Las Vegas. As the technologies are already there, affordable and mature, it is only a matter
of finding the right “007 effect” for brands and products. This is undoubtedly the most difficult part of the job, but probably the most exciting as well. As for players of the luxury industry, they need at least to investigate soon if they can or cannot take advantage of this revolution. Because Internet of things is certainly not a fad.
(1) Definition inspired by Margaret Rouse (2) Why Wearable Tech Will Be as Big as the Smartphone By Bill Wasik – Wired Magazine 17th December 2013 (3) Journal du Net 14th February 2014 (4) Journal du Net February 2014
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OLIVIER VAN BOCKSTAEL, ASSOCIATE EDITOR
SoonSoonSoon is a crowed-sourced webplatform & magazine about lifestyle innovations. Its bi-weekly newsletter informs professionals in marketing, innovation and strategic planning about the main consumer trends in food, design, mobility, culture and media. SoonSoonSoon has built a fresh and innovative expertise in lifestyle prospective, nourished by a full community of qualified and pro-active contributors. SoonSoonSoon also publishes a quarterly trend-book (Soonoscope) and realizes on demand studies for companies, agencies and brands (Soonoshots). www.soonsoonsoon.com
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Re-defining the concept of time Sector in which tradition and know-how seem to be a requirement, horology also constitutes an ideal field of exploration for artists, designers or brands to rethink the item, away from its original mission (indicate the time). Substituting watch hands by colors, numbers by perfumes or seconds by seasons, they thus question our relationship with time. When she was asked to create a watch that reflects her conception of time, Aisen Caro Chacin, design student at The New School in New York, saw an opportunity to go beyond the traditional duo digits/clockwise. Her prototype Scent Rhythm is a chemical-based watch. Instead of indicating the exact hour, it releases flagrances in tune with circadian cycle of the human body. This internal body clock regulates the 24-hour cycle of the body’s biological processes and should be, according to Chacin, the only time measure. A warm flagrance of coffee in the morning, a smell of money in the afternoon, a relaxing whiskey scent in the evening and a soothing chamomile flagrance at night... Her watch thus replaces
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a rational and mathematical vision of time by a sensory perception that directly affects the part of the brain that integrates circadian rhythms. Aisen Caro Chacin is far from being isolated in her will to bring innovative clockwork project. Like her, many artists and designers rethink the item, question its format and its vocation. Their aim: offering a new definition of time, and interrogating our perception of seconds, minutes and hours. Some concepts fall under pure poetry, others raise heavy metaphysical questions. Some are intended to change our daily lives while others are only concepts willing to illustrate researches from neuroscientists. They all have in common to replace the tick-tock of modern time with less precise units of measure. After all, who can pretend to know what time really is ? Saint Augustine himself felt unable to give a final answer: ”What then is time? If no one asks me, I know what it is. If I wish to explain it to him who asks, I do not know”. Tel-Aviv design firm StudioVe wants to challenge our perception of time. It
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developed the Perspective Series, a collection of five original clocks, to explore the way time is experienced by different people in different ways. The first one, D Clock, looks totally ordinary head-on, but as the user shifts his point of view, he’ll realize that each hand is really a triangle, meaning time will look ever-so different depending on where you stand in relation to it. In this sense, D Clock captures our abstract relationship with time. Its young sister K Clock goes further. Its minute and hour hands are not composed of the standard simple lines, but of several lines, configured in a burst pattern. As hours and minutes rotate, it feels like hundreds of lines are clashing at once, preventing the user from being able to read the time. StudioVe wanted to underline the ephemeral nature of every ever-shifting moment, showing that time is anything but predictable. Some people pretend that by changing the way to indicate time they found ”a new way to cherish every moment” which allowed them to ”receive a Carpe Diem whisper every day to their ears”. These testimonials can be found on the website of The Present, a clock in which the base unit of measurement is not seconds, but seasons. Designed by Scott Thrift, this annual clock tells the story of the seasons using subtle shifts in color as it sweeps across the spectrum of the entire year. A project its authors conceived as a ”meditative time piece for the 21st century”. The Present offers a more organic sense of time and space. A simple shift in perspec-
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tive where users get the shape and relative speed of a year. ”The space in our lives when time dissolves becomes the time we live for the most”, says the designer. Those who feel like time is moving too fast need to familiarize themselves with a deeper sensation of time. That’s what two Norwegian designers from the collective Skrekkøgle believe. Theo Tveterås and Lars Marcus Vedeler have imagined an original process: Durr, a wristband that vibrates every five minutes. By cutting time not in minutes or second but with a short period, they invite the user to rethink its notion of time. The wristband provokes an awareness of what
can be done in 5 minutes, and allows to realize how one’s brain alters the lenght of time: 5 minutes surely fly differently whether you’re waiting in line in the post office or enjoying a fresh beer with your friends afterwork. Or, as Albert Einstein once said when asked to explain his theories in layman’s terms: ”When a man sits with a pretty girl for an hour, it seems like a minute. But let him sit on a hot stove for a minute and it’s longer than any hour. That’s relativity”. Yes, time is subjective, and Durr aims to make us more aware of the actions we take as well as the amount of time we spend on certain tasks. Durr was only produced in 50 copies which sold out pretty fast, and the designers are planning a new series.
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Similar to Durr is USMA, a display-less clock that has no visual interface at all: instead, this plain wooden block relies on sound to mark the current time. This features time-keeping mechanisms within, where it emits a standard chime to mark the turn of an hour, with a single chime at each half hour. USMA was created by Lisbon-based studio Cabracega and designer André Gonçalves. In Germany, Max Schmidt decided to materialize time not with perfumes or sounds, but with a visual metaphor. His Breathing Clock is a balloon that tells time by representing the act of breathing. It is controlled by a valve that inflates and deflates a foil balloon inside a glass capsule. Users can set the deflation rate in intervals of 10 minutes, all the way up to a half hour. The aim of this original clock is to encourage people working on tight deadlines. As Schmidt describes it on his site, ”the ticking clock is too concise for the creative workflow. Why not create an inconspicuous indication of time, which fades into the background?”. The whole point of the Breathing Clock is to loosen a rigid grasp on time and replace it with a hazier, less stressful interpretation. Some projects go even further into the idea of materializing time. Siren Elise Wilhelmsen is a Norwegian product designer based between Bergen and Berlin. She produces objects that challenge the concept of traditional functionality and transform natural materials into intricate mechanical objects. Through her practice she seeks to find ”a conceptual way to stimulate ideas and discussions around our everyday objects, rituals and culture”. One of her last creation is 365, a ”knitting clock” that mechanically creates a 6ft long scarf by stitching together a loop of thread every 30 minutes for a year. Her clock demonstrates the passage of time by
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mechanically knitting a scarf throughout the year, creating a unique piece of apparel at the end of the process. More romantic, less metaphysical is the dual-time clock designed by Hong Kong based agency Kitmen Keung for the company Verso. Their Long Distance Watch is a sleek, elegant timepiece that features two clocks in one face, one telling the wearer’s time and the other showing the timezone of the wearer’s paramour. It is designed for people who need to keep an eye on the time in two locations, whether because they travel between those places a lot, or because their lover lives on the other side of the globe. In the second case, the Long Distance Watch acts as conscious reminder of the distance between the user and his connection abroad. One person may be waking up while the other may be preparing to go to bed. Sandrine Gill, neurophysiologist from Poitiers University, France, recently pointed out that ”although we have five senses with which to measure the universe around us, our brains have no specific receptors with which to measure time”. By inviting us to experience time beyond counting seconds and minutes, but rather with colors, flagrences and emotions, the artists and designers we mentioned allow a new perception of time, less precise, yet more sensitive.
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TAMAR KOIFMAN, INTERNATIONAL CLIENT DEVELOPMENT DIRECTOR
About Digital Luxury Group Digital Luxury Group (DLG) is the digital partner of forward-thinking luxury brands. With offices in Geneva, New York and Shanghai, DLG combines leading brand intelligence with bespoke digital marketing services. From creation to implementation, we empower brand strategies with our proprietary data and research. www.digital-luxury.com
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The State of Haute Horlogerie in 2013 According to the WorldWatchReport™ Global consumer interest for Haute Horlogerie continues to grow rapidly (+12%). Every year at the occasion of the Salon International de la Haute Horlogerie (SIHH), Digital Luxury Group unveils the results of the Haute Horlogerie category (18 brands) of the WorldWatchReport™, the leading market research in the luxury watch industry published in partnership with Europa Star, and the gracious support of the Fondation de la Haute Horlogerie. Amongst the key Haute Horlogerie trends identified: 1 | Haute Horlogerie brands continue to grow rapidly (+12%). Interest in Haute Horlogerie is here to stay. The highest-end category of luxury watches, experienced a double-digit growth in global interest. “This marks the fourth year in a row that we’ve observed the category increasing in the WorldWatchReport™, showing the continued strength of Haute Horlogerie within the overall market,” comments David Sadigh, Founder & CEO at Digital Luxury Group. 2 | Despite decreasing sales in the mainland, interest for luxury watches still booming in China.
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Chinese consumers showed the strongest global interest for Haute Horlogerie with a +57.9% increase versus last year, accounting for over 30% of total interest in the segment. According to David Sadigh, Founder & CEO, at Digital Luxury Group, “Despite lower reported sales in the mainland, Chinese consumers’ interest for Haute Horlogerie watches continues to grow. This love story is not ready to end anytime soon and will continue to drive a substantial amount of sales outside of China.” 3 | U.S. and U.K. showing signs of recovery The second and third biggest players in the segment showed signs of rebound since last year’s decreases. The United Kingdom had the strongest increase in Europe, posting a healthy +7.7% evolution (vs. -8.5% last year), whilst the U.S. market stabilizes at -1.5% (vs. -11.6% last year). 4 | Patek Philippe consolidates leadership of the Haute Horlogerie segment. Patek Philippe remains and by far the leading Haute Horlogerie watch brand with 28.1% of brand interest share, growing an impressive +21.4% since last year. Not to be dismissed, Vacheron Constantin in 2nd place this year and Audemars Piguet in 3rd position. It’s a tight race at the top - both
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brands having very close market shares (13.4% and 13.0% respectively). 5 | Interest in last year’s rising star, Richard Mille, slows down (-2% vs. +61% growth the previous year). Last year’s fastest growing Haute Horlogerie brand, Richard Mille, which saw an impressive +61% growth at the time, sees signs of a slowdown in interest experiencing a -2.7% decrease. Swatch Group brand, Glashütte Original, was the fastest growing in the category this year, with +40.2%. Amongst the bigger brands, Vacheron Constantin, displayed solid growth increasing by +33.9%. 6 | Glashütte Original and Vacheron Constantin, which had strongest yearto-year evolution also showed the strongest rise in interest in Forums. Among the Top 10 most popular Haute Horlogerie brands on selected Watch Forums (PuristSPro, TimeZone and iWatch365), Vacheron Constantin showed the strongest increase in interest, up +53.4% in total number of views, followed by Glashütte Original (+48.7%). Haute Horlogerie brands tracked in this preview report: A. Lange & Söhne, Audemars Piguet, Blancpain, Bovet, Breguet, De Bethune, Franck Muller, GirardPerregaux, Glashütte Original, Greubel Forsey, Jaeger-LeCoultre, Jaquet Droz, Parmigiani, Patek Philippe, Richard Mille, Roger Dubuis, Ulysse Nardin, Vacheron Constantin. Brands which belong to other
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categories, exhibiting at the Salon International de la Haute Horlogerie (such as Cartier, IWC, Panerai, and Piaget) have not been analyzed in this year’s Haute Horlogerie preview research but are included in the full WorldWatchReport™ 2014, results of which will be released in March at the time of Baselworld. Markets analyzed: Brazil, China, France, Germany, Hong Kong, India, Italy, Japan, Mexico, Qatar, Russia, Saudi Arabia, Singapore, Spain, Switzerland, Thailand, Taiwan, United Kingdom, United Arab Emirates, and the United States References to last year’s market evolutions may vary due About the WorldWatchReport™ Celebrating 10 years since its first edition, the WorldWatchReport™ measures and benchmarks over fifty unique indicators to analyze the performance of 60+ luxury watch brands across 20 international markets. The report identifies and analyzes over 1 billion watch-related search queries typed into major global search engines and translates them into the client preferences driving the industry. It has been published since 2004 by Digital Luxury Group in partnership with Europa Star and the gracious support of the Fondation de la Haute Horlogerie. For more information about the WorldWatchReport™, please visit www.worldwatchreport.com
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APPENDIX DIGITAL LUXURY GROUP
The Leading Market Research in the Luxury Watch Industry. Since 2004.
HAUTE HORLOGERIE PREVIEW JANUARY 2014
The Leading Market Research in the Luxury Watch Industry. Since 2004.
2014 HAUTE HORLOGERIE PREVIEW
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§ 10th Edition § 18 Haute Horlogerie Brands § 20 Markets § 1 billion searches analyzed using DLG’s proprietary semantic analysis technology DemandTracker™ (see Appendix) § Published in partnership with Europa Star and the gracious support of the Fondation de la Haute Horlogerie
2014 Haute Horlogerie Preview
§ Full version of report, covering 60+ brands, available at Baselworld © Digital Luxury Group, DLG SA, 2014
Fondation de la Haute Horlogerie
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APPENDIX DIGITAL LUXURY GROUP The Leading Market Research in the Luxury Watch Industry. Since 2004.
18 HAUTE HORLOGERIE BRANDS
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Note: Other brands exhibiting at the Salon International de la Haute Horlogerie such as Cartier, IWC, Panerai, and Piaget, have not been analyzed in this year’s preview research as this is dedicated to the Haute Horlogerie category only. Full results of the report covering the 5 categories will be released at Baselworld. References to last year’s market evolutions may vary due to an upgrade to our proprietary technology tool, which was applied retroactively on the data. See Appendix for more information. 3
© Digital Luxury Group, DLG SA, 2014
The Leading Market Research in the Luxury Watch Industry. Since 2004.
20 GLOBAL MARKETS ANALYZED
© Digital Luxury Group, DLG SA, 2014
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APPENDIX DIGITAL LUXURY GROUP The Leading Market Research in the Luxury Watch Industry. Since 2004.
Key Insights on the Haute Horlogerie Market in 2013
© Digital Luxury Group, DLG SA, 2014
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APPENDIX DIGITAL LUXURY GROUP
The Leading Market Research in the Luxury Watch Industry. Since 2004.
The Most Popular Haute Horlogerie brands in 2013 Haute Horlogerie Search Market Share
30.00% 28.13%
25.00%
20.00%
15.00%
13.87% 13.03% 12.29%
10.00%
6.29% 5.92% 4.17% 3.92%
5.00%
3.25%
2.58%
1.91%
0.00%
1.30% 1.17% 0.78% 0.67% 0.34% 0.27% 0.11%
Jan – Nov 2013
§
Patek Philippe leads the Haute Horlogerie segment, by a landslide with over ¼ market share. 7
© Digital Luxury Group, DLG SA, 2014
The Leading Market Research in the Luxury Watch Industry. Since 2004.
Growth Rates of Haute Horlogerie Brands in 2013 vs. 2012 Glashütte Original Ulysse Nardin Vacheron Constantin A. Lange & Söhne Patek Philippe Blancpain Jaquet Droz Jaeger-LeCoultre Greubel Forsey Average Breguet Roger Dubuis Richard Mille Girard-Perregaux Parmigiani Audemars Piguet De Bethune Franck Muller Bovet -30.00%
-20.00%
-10.00%
+40.17% +38.79% +33.93% +21.58% +21.37% +20.61% +20.17% +19.73% +15.61% +12.22% +1.00% +0.60% -2.72% -3.38% -3.41% -5.47% -10.54% -17.00% -22.15%
+0.00%
+10.00%
+20.00%
Y/Y Evolution of Global Brand Interest
+30.00%
+40.00%
+50.00% Jan – Nov 2013
§ Glashüce Original is the fastest growing Haute Horlogerie brand while Vacheron Constantin shows the strongest evolution within the bigger brands. Last year’s rising star Richard Mille, showing signs of slowdown.
© Digital Luxury Group, DLG SA, 2014
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APPENDIX DIGITAL LUXURY GROUP The Leading Market Research in the Luxury Watch Industry. Since 2004.
Top 10 Most Sought-After Haute Horlogerie Collections in 2013 2013
2012
Brand
Models
Total
1
1
=
Audemars Piguet
Royal Oak
13.37%
2
2
=
Audemars Piguet
Royal Oak Offshore
8.87%
3
4
æ
Jaeger-Lecoultre
Master
8.04%
4
3
è
Jaeger-Lecoultre
Reverso
7.87%
5
6
æ
Patek Philippe
Nautilus
5.90%
6
5
è
Patek Philippe
Calatrava
5.45%
7
7
=
Blancpain
Fifty Fathoms
2.80%
8
11
æ
Ulysse Nardin
Marine Collection
2.74%
9
9
=
Breguet
Type Xx / Type Xxi
2.01%
10
8
è
Franck Muller
Crazy Hours
SUB-TOTAL
#1 Haute Horlogerie Model [13.37% market share]
1.87% 58.92%
OTHERS
41.08%
TOTAL
Royal Oak Audemars Piguet
100.00% Jan – Nov 2013
§ Audemars Piguet’s Royal Oak reinforces its leadership as the #1 Haute Horlogerie model 9
© Digital Luxury Group, DLG SA, 2014
The Leading Market Research in the Luxury Watch Industry. Since 2004.
Global Haute Horlogerie Watch Preferences Differ France’s #1 [18.74% market share]
Reverso Jaeger-LeCoultre
Russia’s #1 [8.94% market share]
Sky Moon Tourbillon Patek Philippe
China’s #1 [8.42% market share]
Overseas Vacheron Constantin Jan – Nov 2013
§ Royal Oak + Royal Oak Offshore lead in 14 markets, however in the remaining 6 markets (FR, TH, JP, RU, TW, CN) local preferences arise. © Digital Luxury Group, DLG SA, 2014
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APPENDIX DIGITAL LUXURY GROUP
The Leading Market Research in the Luxury Watch Industry. Since 2004.
Online Watch Forums Show Slight Slowdown Number of Brand Post Views Jan – Dec 2013
[Top 10 Most Popular Haute Horlogerie Brands on Selected Watch Forums]
10,000,000 Purist pro
8,000,000
Time Zone
Iwatch 365
6,000,000 4,000,000 2,000,000 0
-4.48%
-9.69%
-29.96%
-43.79%
+48.67%
+53.36%
-44.47%
+5.73%
-42.47%
-43.12%
Jan – Dec 2013
§ 35 million total brand post views, decreased by -‐‑17% from 2012. § Glashüce Original and Vacheron Constantin, which had strongest year-‐‑to-‐‑year evolution also showed strongest rise in interest in Forums.
© Digital Luxury Group, DLG SA, 2014 116
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APPENDIX DIGITAL LUXURY GROUP The Leading Market Research in the Luxury Watch Industry. Since 2004.
WHO ARE WE? About Digital Luxury Group Digital Luxury Group (DLG) is the digital partner of forward-thinking luxury brands. With offices in Geneva, New York and Shanghai, DLG combines leading brand intelligence with bespoke digital marketing services. From creation to implementation, we empower brand strategies with our proprietary data and research. Since 2004, DLG has been publishing the WorldWatchReport™ a baseline market study for the watchmaking industry in partnership with Europa Star and with the precious support of the Fondation de la Haute Horlogerie.
Contact: Tamar KOIFMAN International Client Development Director +41 22 702 07 60 tkoifman@digital-luxury.com Visit our website to get detailed information: www.worldwatchreport.com or www.digital-luxury.com 13
© Digital Luxury Group, DLG SA, 2014
The Leading Market Research in the Luxury Watch Industry. Since 2004.
METHODOLOGY
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Search Queries Extracted from search engines, the search queries collected in the WorldWatchReport™ encompass a large semantic field of 17k+ keywords related to the brands including synonyms, plurals and misspellings. Languages Search queries are tracked in all major languages according to each key market: Portuguese, Russian, simplified and traditional Chinese, Taiwanese, Japanese, French, Italian, Spanish, German, Thai and Arabic. Search Engines Based on Google, Bing, Yandex in Russia and Baidu in China, the WorldWatchReport ™ covers an average of 85% search market share globally. Data Collection and Analysis Public and professional tools are used to automate search volume collection, thanks to Digital Luxury Group’s strong partnerships with search engines. Once collected, this data is filtered, analyzed and translated into 14 intentions (brands, models, replicas, etc.) using exclusive Digital Luxury Group’s proprietary semantic analysis technology. Brand Grouping Thanks to the contribution and feedback from several watchmaking industry experts from the media, brands and retailers, the following criteria have been taken into consideration to define 5 coherent watch brand categories: - Brand positioning (market and target audience) - Offer (average entry price of key collections) - Volume (similar volume of online demand) - Competitive environment Harmonization As multi products brands, such as Cartier, Chopard or Bulgari, may generate significantly more search volume than watch-only brands, data is harmonized to identify watch-only demand and exclude demand for other products (for ex. “Cartier jewelry”, “Tag Heuer mobile phone”, etc.). Similar corrections have been made for brands whose names could be associated with other products, such as Montblanc, Omega or Zenith. Social Media engagement rate The engagement rate is a qualitative indicator measuring the level of interactivity between a brand and its community on each Social Media platform. Its calculation is based on the average number of feedback (“Likes” and “Comments”) per individual post published by the brand (“Status Updates”), divided by the number of Fans on date of publication. Brand Forums Popularity on Forums is a quantitative measurement calculated as the total number of views of each post published on the dedicated sections of brands in TimeZone, PuristsPro and iWatch365 from January 1st to Dec 31st, 2012.
© Digital Luxury Group, DLG SA, 2014
Fondation de la Haute Horlogerie
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Impressum Fondation de la Haute Horlogerie Avenue du Mail 22 | 1205 Geneva | Switzerland Tel +41 22 705 83 00 | Fax +41 22 705 84 95 hautehorlogerie.org Fondation de la Haute Horlogerie research and study centre Emmanuel Schneider, Catherine Goudounèche Publication coordinators | Julien Pfister, DÊborah Godat Graphic design | atelier zuppinger Printing | Graphic Services SA
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Fondation de la Haute Horlogerie
Avenue du Mail 22 | 1205 Geneva | Switzerland Tel +41 22 705 83 00 | Fax +41 22 705 84 95 hautehorlogerie.org