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Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth
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Luxury Forecasts: Optimism Reigns plus Strategies for Global Growth

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Global Luxury CEO Survey by DEPARTURES (American Express Publishing) and Ledbury Research. …

Global Luxury CEO Survey by DEPARTURES (American Express Publishing) and Ledbury Research.
Inaugural Edition, 4th Quarter 2013

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  • 1. DEPARTURES GLOBAL LUXURY CEO SURVEY INAUGURAL EDITION, 4TH QUARTER 2013 LUXURY FORECAST OPTIMISM REIGNS PLUS STRATEGIES FOR GLOBAL GROWTH CONDUCTED WITH LEDBURY RESEARCH
  • 2. WELCOME TO THE INAUGURAL DEPARTURES GLOBAL LUXURY CEO SURVEY   This first in a series of quarterly reports assesses the state of the global luxury industry from the perspective of its business leaders. Conducted with renowned London agency Ledbury Research, the DEPARTURES Luxury Forecast examines how global luxury business leaders feel about the health of our industry and the drivers for growth as we look to the next quarter. I hope you will find these results as enlightening as we have.   STEVEN DELUCA Senior Vice President / Publisher —
  • 3. SURVEY RESPONDENTS   Nearly 70 Luxury CEOs responded to our survey Position of respondent within company: 14% OWNER/FOUNDER 35% 14% CHAIRMAN GLOBAL CEO/PRESIDENT/ MANAGING DIRECTOR REGIONAL CEO/PRESIDENT/ MANAGING DIRECTOR 57%
  • 4. SURVEY RESPONDENTS   Nearly 70 Luxury CEOs responded to our survey Companies’ annual sales: 21% USD 1 BILLION+ USD 250M - 999 MILLION 14% 21% USD 100M - 249 MILLION USD 50M-99 MILLION < USD 50 MILLION 14% 29%
  • 5. SURVEY RESPONDENTS Industry breakdown: TRAVEL/HOSPITALITY 29% APPAREL/CLOTHING 29% HOME/DESIGN 29% JEWELRY 21% WATCHES 21% FOOTWEAR 18% LEATHER GOODS/ ACCESSORIES 18% 7% FRAGRANCE/BEAUTY ELECTRONICS OTHER 4% 7%
  • 6. OPTIMISM REIGNS Luxury CEOs are overwhelmingly positive about the state of the industry TRUE LUXURY HAS EITHER TREMENDOUSLY RECESSION-PROOF, OR TREMENDOUSLY RECESSIONRESILIENT, CLIENTELE. — SURVEY RESPONDENT
  • 7. CEO FORECAST: THE NEXT 12 MONTHS 7% 4% For the coming 12 months: LUXURY INDUSTRY 89% of CEOs are optimistic about the luxury industry •  Proven history of outperforming the wider economy •  Recent rapid luxury recovery trend 89% •  No signs of slowdown 14% 18% 14% OPTIMISTIC GLOBAL ECONOMY LOCAL ECONOMY 65% 40% 46% NEUTRAL PESSIMISTIC 65% are optimistic about the local economy 40% are optimistic about the global economy
  • 8. CEO FORECAST: THE NEXT 12 MONTHS CEOs expect sales to rise by an average of 9% Double digit growth 0 - 10% growth 40% 57% Single digit decrease 4% 4% 7% YOUR COMPANY 4% YOUR GROUP OPTIMISTIC NEUTRAL PESSIMISTIC 96% 89%
  • 9. ECONOMIC GROWTH   and online commerce are making a real difference to the industry What external factors are impacting luxury businesses and to what extent? POSITIVE FACTORS ONLINE COMMERCE +66% •  Online ranks #1 (more on why later) US GROWTH RATE +58% CHINESE GROWTH RATE +45% •  58% of respondents are confident of the US’ recovery. 45% also think the Chinese growth rate is an advantage MOBILE COMMERCE +35%
  • 10. ECONOMIC GROWTH   and online commerce are making a real difference to the industry What external factors are impacting luxury businesses and to what extent? §  NEGATIVE FACTORS POLITICAL UNREST -30% COMPETITOR ACTIVITY -30% WORK VISA POLICIES “Travel is very emotional, so when you don’t have to take a chance, you won’t. [Travellers] will absolutely stay away from unrest.” -60% EXCHANGE RATE 60% believe political unrest is impacting them negatively, though with mixed results. -28% but… “They are not only used to bad news; they expect it. So they design a lifestyle that accommodates a certain amount of bad news.” §  Exchange Rate, Competitor Activity, and Work Visa Policies tied for second place
  • 11. FOCUS SHIFTS BACK TO NORTH AMERICA Less emphasis on emerging markets THE US ECONOMIC RECOVERY IS IN FULL STRENGTH, AND EUROPE IS EMERGING FROM SEVERAL YEARS OF SLUMP. — SURVEY RESPONDENT
  • 12. WHERE WILL GROWTH   come from over the next 5 years? 1.  89% expect North America to be the most important contributor of growth North America 2.  East Asia, comprising Greater China and South Korea, is second East Asia §  Inside and outside of China Western Europe Eastern Europe §  The Chinese are now the world’s biggest travel spenders (UNWTO) on international tourism Central/South §  Europe benefits: 5 of the top 10 countries Chinese luxury consumers visit America
  • 13. WHERE WILL GROWTH   come from over the next 5 years? Middle East Southeast Asia 1.  50% do not anticipate that Middle East political unrest will significantly impact on their businesses Japan 2.  Oceania South Asia Africa Japan continues to decline in importance for growth §  But is still the world’s third largest luxury market 3.  Africa ranks as least important for the next 5 years §  Though one respondent says, “it will probably be an important region in 10 to 20 years’ time”
  • 14. VIPS, SELF PURCHASERS AND TOURISTS ARE FUELLING GROWTH What customer types are fuelling this growth? 95% TOURISTS 70% LOCALS 96% VIP 83% FULL-PRICE DISCOUNT 33% 96% SELF-PURCHASERS GIFT PURCHASERS 63%
  • 15. LEADING GROWTH: THE RICH ARE GETTING RICHER. [THE MARKET IS INCREASINDLY DEPENDENT ON KNOWING AND SATISFYING THEM.] — SURVEY RESPONDENT THE FASTEST GROWING CONSUMER TYPE IS THE TRAVEL RETAIL CONSUMER, WHICH IS LED BY THE CHINESE TODAY. — SURVEY RESPONDENT
  • 16. FUTURE STRATEGIES: Moving upmarket & Investing in digital WHEN YOU’RE DEALING WITH LUXURY, YOU MUST NOT AT ANY POINT, DEPRECIATE THE QUALITY AND THE VALUE. — SURVEY RESPONDENT
  • 17. LUXURY IS ABOUT QUALITY AND SERVICE,   but also Exclusivity and Uniqueness What does luxury mean to leaders of luxury companies today? 1.  Quality 2.  Service 3.  Exclusivity 4.  Unique High prices is not a mentioned as a top term Being expensive is not enough to be luxury Source: Xxxxx xxxxx xxxxx ? WHAT CEOS NEED TO BE CAREFUL ABOUT IS, IS IT APPROPRIATE FOR MY BRAND IMAGE TO BE UBIQUITOUS? — SURVEY RESPONDENT
  • 18. PRIORITIES: Technology Spend How do CEOs plan to evolve their businesses over the next 12 months? Digital initiatives are the number one priority •  Not necessarily because it always translates to direct sales The internet has made information more accessible, and Similarly, another respondent pricing more transparent. This is good for the consumer. I said digital is crucial but can see it contributing to growth as it has allowed us to interact with our (existing) target audience and increase their buying likelihood, but I don’t know if we’ve reached lamented that there is no luxurious element in social media. It is high tech instead of high touch. people who are actual new customers.] — SURVEY RESPONDENT — SURVEY RESPONDENT
  • 19. PRIORITIES: The next highest priority is improving retail distribution §  Includes shifting balance of retail vs. wholesale to directly owned retail distribution plus expanding stores INVEST IN DIGITAL IMPROVE RETAIL BUILD ASIA INCREASE ADVERTISING BRAND COLLABORATIONS IMPROVE SERVICES SHIFT FOCUS BACK TO ESTABLISHED MARKETS BRAND AND PRODUCT EXTENSIONS
  • 20. LUXURY COMPANIES   are mixed on widening their ranges OPERATE AN INCREASING NUMBER OF PRODUCTS/ SERVICES THROUGH BRAND EXTENSIONS 57%* 43% *Mentioned mainly by those in Home/Design DECREASE BRAND EXTENSIONS & FOCUS MORE ON CORE CATEGORY EXPERTISE 57% want to increase brand extensions Enable brands to “touch different people with different interests at different stages of their lives”. •  Bentley’s limited edition handbags •  Bugatti’s launch of a collection of men’s clothing and accessories. 43% want to decrease brand extensions Brand extensions can go wrong. Poor execution, moving into a completely unrelated or non-relevant product category, increased visibility, can impact the brand negatively
  • 21. LUXURY COMPANIES   are focusing on going up the wealth ladder INCREASE FOCUS ON LOWER PRICED PRODUCTS/ SERVICES TO ATTRACT A WIDER CUSTOMER BASE RAISE PRICES AND/OR INCREASE FOCUS ON HIGHEND PRODUCTS/SERVICES TO TARGET THE WEALTHIEST CUSTOMER SEGMENT 86% 14% Universally, respondents agreed their strategy is to raise prices and focus on high-end While price alone does not define luxury (see slide 9), price affects the perception of the product. — SURVEY RESPONDENT
  • 22. LUXURY COMPANIES   are mixed on global consistency Emerging market customers currently make up almost 50% of global luxury sales. Should luxury brands should tailor their products and services to individual local markets, or to offer the same experience worldwide? TAILOR PRODUCTS/ SERVICES TO THE TASTES OF CONSUMERS IN EMERGING MARKETS 39% 61%* *Mentioned mainly by those in Apparel/Clothing 61% of our survey’s respondents believe it is vital to have a consistent offering globally for brand image consistency 39% are taking a localized approach, tailoring products and services to the tastes of emerging markets VITAL TO HAVE GLOBALLY CONSISTENT OFFERING
  • 23. LUXURY CEOS   overwhelmingly believe country of origin counts How important is country of origin in the luxury business? 93% 89% % IMPORTANT NOW IN 10 YEARS 93% of respondents believe “Made in” is important today, with virtually no change in the next decade. §  Provenance represents knowledge that is passed on through generations §  Being “Made in” a brand’s home country therefore conveys a sense of authenticity which cannot be replicated
  • 24. CONCLUSIONS & IMPLICATIONS VIP customers are fuelling growth •  Focus on: 1.  Service: quality & speed 2.  Unique, higher-end pieces 3.  Premium price points / raising prices Emerging markets are less important for their home market than they are for the tourists they create in Western markets •  Make your Western stores not only speak the language of the tourists, make sure the offerings speak to tourists’ tastes and other tourist-friendly services are in place Digital continues to grow •  Though its primary importance continues to be as a branding vehicle and information source rather than a strong sales channel (online sales will continue to grow in importance, however) Global consistency in offering still seen as important, but regional customization is also a force •  Maintain and monitor a ratio between the two Authenticity remains key •  Retain focus on original production standards and country of origin •  Enter brand extensions with thought to effect on brand dilution to core, affluent market
  • 25. DEPARTURES GLOBAL LUXURY CEO SURVEY INAUGURAL EDITION, 4TH QUARTER 2013 LUXURY FORECAST OPTIMISM REIGNS PLUS STRATEGIES FOR GLOBAL GROWTH CONDUCTED WITH LEDBURY RESEARCH

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