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BCG Luxury Sector Reshaping 2013
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BCG Luxury Sector Reshaping 2013

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BCG Luxury Sector Reshaping 2013 BCG Luxury Sector Reshaping 2013 Presentation Transcript

  • Lux Redux: reshaping the Luxury sector Jean-Marc Bellaiche May 1st, 2013
  • 1Luxury Redux-LuxuryRoundtable-1May13.pptx What is luxury? American Heritage "Something inessential but conductive to pleasure and comfort. Expensive and hard to obtain" Larousse "Caractère de ce qui est couteux, raffiné, somptueux. Plaisir couteux qu'on s'offre sans vraie necessité"  what is costly, refined and sumptuous. Expensive pleasure one can buy without true necessity Wikipedia.it "Abitudine a consumi di elevata gamma qualitativa e di coste. Spesso, superflui, destinati ad ornare il proprio corpo o la propria abitazione"  Habit to consume high quality and expensive range. Rare, non-necessary products to ornate own body or home "必要な程度をこえて、物事に金銭や物などを使うこと。金銭や物などを惜しまないこと。 "  To use money or things for a certain purpose above the necessary level. Not to spare money nor thingsDaijisen "Indulgence in rich and sumptuous living" Collins "внешнее великолепие, богатство, пышность . излишество в жизненных удобствах и удовольствиях, сопровождаемая расточительством изобилие, пышность"  External splendor, wealth, opulence. Extravagance in living comfort and pleasure, with a wasteful abundanceru.wiktionary. org " ‫ﺍﻟﺑﻳﺋﺔ‬‫ﺍﻟﺗﻲ‬‫ﺗﺗﻛﻭﻥ‬‫ﻣﻥ‬‫ﺍﻻﻣﻭﺭ‬‫ﻣﻛﻠﻔﺔ‬‫ﻣﻥ‬‫ﻏﻼء‬‫ﺍﻟﻣﻌﻳﺷﺔ‬‫ﻭﻣﺗﻁﻭﺭﺓ‬ "  Environment which consists of expensive cost of living and sophisticated things Baheth "挥霍浪费钱财,过分追求享受"  Extravagant waste of money, excessive pursuit of enjoyment ZDIC
  • 2Luxury Redux-LuxuryRoundtable-1May13.pptx The market as defined by consumers: 1.1T€ 1,200 900 600 300 0 Total ~1,100 Travel , hotels, yachting 300 Alcohol and food 60 Technology 110 Home & Furniture 60 Arts 65 Luxury cars 270 Cosmetic 35 Watch and jewellery 85 Leather goods and accessories 50 Apparel Estimation of market size in €B 50 1. Luxury car category not included in the survey. BCG estimate Source: IPSOS market research 2009–2011 (sample of 1000+ individuals from top 50% revenue quintile in mature countries (US, Japan, France, Italy, Germany, UK, Spain) and top 10% revenue quintile in emerging countries (China, Brazil, India, Russia...)
  • 3Luxury Redux-LuxuryRoundtable-1May13.pptx Two main drivers of growth 1. High net worth individuals (investable assets > US $ 1 Mio.) Source: Dr. Ziems, Concept M; BCG analysis New money "The Loan Trader" The Russian climber" Old money "The Noble Italian Entrepreneur" 7.5 M people 2.5 M people 30-35% of luxury market 10-15% of luxury market Growth of number of Millionaires1 Rising middle class "The proud business woman" ~ 70M people 25-27% of luxury market Emergence of a middle class Aspirational masses "The trendy metropolitan" ~ 330 M people 25-27% of luxury market
  • 4New world of luxury-9Nov11-JMB-Par.pptx Projections for 2013-14 Continuity scenario GDP growth in line with 2010-12 Growth of HNWI in line with last 3 years Winter scenario GDP growth reduced by 1.5% in Japan, Europe, US and by 3% in Emerging Countries (vs. 2010-12) Growth of HNWI / by 2 vs. last 3 years Spring scenario GDP growth increased by 1% in Japan, Europe, US and by 2% in Emerging Countries (vs. 2010-12) Growth of HNWI in line with last 3 years key hypothesis Output 0% 5% 10% 15% 20% 25% Personal Luxury Goods market 2013-2014 CAGR 7% 0% 5% 10% 15% 20% 25% Personal Luxury Goods market 2013-2014 CAGR 3% 0% 5% 10% 15% 20% 25% Personal Luxury Goods market 2013-2014 CAGR 9% 7% 1% 4% 12% 12% 4% -0.5% 1% 9% 7% 9% 2% 6% 15% 16% Source: BCG simulation
  • 5Luxury Redux-LuxuryRoundtable-1May13.pptx New rules of the game New World of Luxury The new world of luxury Key trends that are changing the rules of the game New consumer values: from "having" to "being" from extrinsic to intrinsic, from conspicuous to meaningful ... and more segmented views New epicenters of Luxury: Major rise of emerging markets... and continuous potential in mature ones New business models (licenses, co-branding, new retail formats...) New platforms multiplication of touchpoints, digitalization of the brands 1 2 3 4
  • 6Luxury Redux-LuxuryRoundtable-1May13.pptx Growth coming from "being" vs. "having" 1. Luxury car category not included in the survey. BCG estimate Source: BCG-IPSOS market research 2009–2011 (sample of 1000+ individuals from top 50% revenue quintile in mature countries (US, Japan, France, Italy, Germany, UK, Spain) and top 10% revenue quintile in emerging countries (China, Brazil, India, Russia...) 1,200 Estimation of market size in €B 900 600 300 0 Total ~1,100 Travel , hotels, yachting 300 Alcohol and food 60 Technology 110 Home & Furniture 60 Arts 65 Luxury cars 270 Cosmetic 35 Watch and jewellery 85 Leather goods and accessories 50 Apparel 50 CAGR 2009–11 (%) 8 9 7 7 12 18 12 10 10 8% 12% “Experiential Luxury” : ~ € 600B Personal Luxury Goods: € 220B Luxury cars: ~ € 270B 98 1
  • 7Luxury Redux-LuxuryRoundtable-1May13.pptx Fundamental differences between luxury goods and luxury experiences Experiential luxuryPersonal goods luxury Having For self only Usually visible to other For the mid-long term Being Often with others Not always visible Instant pleasure Character- istics Examples Hybrid • iPad • High-end kitchen • High end furniture • .... Source: Internet research • Luxury hotel or resorts • High-end restaurant • Spas... • Watches with diamonds • Jewelry • Bags, apparel • ... 1
  • 8Luxury Redux-LuxuryRoundtable-1May13.pptx -40 8 -16 16 -16 13 -12 19 -12 19 -10 21 -18 23 -14 18 -10 21 -9 21 -11 17 -4 25 -6 24 -11 18 -9 20 -28 12 -6 32 -5 39 -20 16 -4 28 -6 27 -7 36 -3 35 -3 34 -6 33-3 37 -4 40 -6 41 -3 47 Luxury values clearly challenged Moreimportant1 Lessimportant1 1. Than two years ago 2. Survey question: Below is a list of terms and values. For each, please indicate if this is something that you would see as being more or less important to you than it was two years ago 3. Respondents who ranked the term as equally important as two years ago have been excluded. Note: Graph excludes answer "no change"; EU includes EU Big5 (Germany, UK, Spain, Italy and France); Developing markets include Brazil, China, India, Russia; Bottom income quartile cut and sample reweighed to represent real income distribution in each country Source: BCG Global consumer sentiment survey 2011 US JapanEU 5 % of respondents2,3 -36 8 Bright colors -21 9 Conviviality -21 12 Altruism -14 13 Excitement -15 14 Professional success -22 19 Wealth -18 20 Change -10 20 Convenience -12 22 Local communities -7 22 Naturalness -8 22 Authenticity 3 24 Tradition -6 26 Craftsmanship -5 27 Religion -13 29 Education -11 30 Environment -9 32 Spirituality -10 33 Friends -3 34 Ethics -3 Luxury Locally grown products -6 37 Calm -2 37 My home -3 38 Wellness -1 47 Family 36 48 Stability -1 52 Saving -2 58 Value for money -1 59 -50 5 Status -1 -30 23 -8 48 -18 30 -11 39 -13 36 -12 37 -12 45 -7 52 -11 38 -5 48 -14 34 -9 37 -12 35 -10 36 39 -12 33 -7 44 -5 59 -5 56 29 -16 32 -7 56 -7 48 -8 42 -9 -19 42 -8 -2 62 -6 45 -5 57 -6 48 BRIC 250 -35 4 -12 9 -2 18 -8 20 -4 15 -8 16 -17 14 -1 33 -7 11 -4 21 -3 19 -3 25 0 31 -5 11 -9 12 -13 -1 44 -9 36 19 -1 30 -14 9 -3 24 -2 17 -3 5 23 -1 38 -3 25 0 55 -1 35 -1 39 -2 1
  • 9Luxury Redux-LuxuryRoundtable-1May13.pptx Value challenges also coming from blurring boundaries between Luxury & mass Stella McCartney for Adidas Jil Sander for Uniqlo Jimmy Choo for H&M Lagerfeld for Macy's 1
  • 10Luxury Redux-LuxuryRoundtable-1May13.pptx Luxury brands adapting to new values: is it enough? From sex to craftsmanshipFrom extra-luxury to intro-luxury Dior Couture, 2009-10Dior Couture, 2002 Chanel N°5, 2001 Chanel N°5, 2009-10 LV, 2007 LV, 2009-10 Gucci, 2001 Gucci, 2009-10 Source: Press 1
  • 11Luxury Redux-LuxuryRoundtable-1May13.pptx What new sense of purpose for Luxury? Improving every day's life of people Aesthetic/ art, quest for the beauty Craftsmanship, preservation of know-how Well-being and pleasure quest Heritage, be part of the history Performance, pushed to the limit Learning/ cultural quest Green (?) 1
  • LuxuryOutlook2012-China-21Feb13-NO-v2.pptx 12Draft—for discussion only Copyright©2013byTheBostonConsultingGroup,Inc.Allrightsreserved. Chinese Luxury consumption accounts for 120-130B€, heavily skewed towards "having" Personal Luxury Goods Cars Experiential Luxury Total Chinese consumption (in and outside China) ~45 B€ ~50B€ ~30B€ ~125 B€ Share of total market 20%+ 20% 5% 12% 2
  • 13Luxury Redux-LuxuryRoundtable-1May13.pptx More than 330 "Shanghais" in 10 yrs in China -30,000 -20,000 -10,000 0 10,000 20,000 30,000 40,000 50,000 # of cities 2020 city disposable income per capita vs. 2010 Shanghai level RMB (2020 UDI/capita – 2010 Shanghai UDI/capita) 2020 Shanghai UDI/capita (RMB 38,024) 318 cities 332 cities Source: BCG 2010 Urban Income Forecast Model 2010 Shanghai disposable income per capita (RMB 23,492) 2
  • 14Luxury Redux-LuxuryRoundtable-1May13.pptx Very different segments of luxury consumers in China : Illustration of 3 segments The successful entrepreneur Mostly men 30-45 High assets, high income (e.g. >150k RMB) All cities Ostentatious, status oriented Low education on / knowledge of luxury brands Big spender Travel a lot Watches Cars Bags Self-purchase and gifts The new comers Men and Women All age Medium income (e.g. 60k RMB) Tier 3 and 4 cities Ostentatious, status oriented Low education on / knowledge of luxury, go for big brands Low tickets Do not travel much Cosmetics Accessories The "Sugar 2" generation Men and Women Younger High assets (inherited), income irrelevant (can be low) Tier 1 and 2 cities (mostly) Discernment, knows luxury brands, will go for niches Still status oriented, want to show Big spender Very hooked on the internet Travel a lot All categories including fashion, jewelry and more experiential categories (travel...) Demographics Luxury attitude Main categories 2
  • 15Luxury Redux-LuxuryRoundtable-1May13.pptx Uncontrolled licenses can hurt the brand3
  • 16Luxury Redux-LuxuryRoundtable-1May13.pptx Breaking compromises between Control and Openness 3 Openness Control HighLow High Low
  • 17Luxury Redux-LuxuryRoundtable-1May13.pptx 1 Flash memory DRAM memory Applications processor Bluetooth Wireless Gyroscope Accelerometer Touch screen controller Baseband Power management Touch screen Camera 2 4 Music Podcasts TV Movies Books Games Others … Multiple app developers Apple gives product design and specifications One best in class manufacturer for each component Apple takes finished handsets Best in class assembler Supply components Apple gives exclusive distrib. agreement Apple gets assured sales and subsidized pricing for customers Multiple content creators Apple opens the development platform Build apps for clients Take fees Apple gives a platform to sell content Apple takes 30% cut from sales of content 53 Three network providers Apple beats Nokia with an Eco-system "Our competitors aren't taking market share with devices; they are taking share with an entire ecosystem." – Stephen Elop, CEO of Nokia 3
  • 18Luxury Redux-LuxuryRoundtable-1May13.pptx Examples of collaboration3 Core processes Product design Manuf. Sales Marketing/ Opinion building Post sales/ CRM Industria- lization
  • 19Luxury Redux-LuxuryRoundtable-1May13.pptx Ecommerce and luxury: already a reality Sales 2011(%) 100 0 Offline sales Online sales Estee Lauder(e) Lancome US(e) Coach(e)TiffanySephora 25 Macy’s1 9 Nordstrom 8 Neiman Marcus 16 Saks 25 80 60 40 20 Tory Burch(e) 1. Includes Bloomingdale's Source: Internet retailer, BCG Estimates 4 7-15%
  • 20Luxury Redux-LuxuryRoundtable-1May13.pptx The best websites address the 3C's Example: New Sephora.com Commerce • Aesthetically pleasing with trendy homepage • Equipped with advanced product finder • Clear description of products and customer reviews • Layout easy to navigate, quick to buy products • Free shipping with purchases over $50 • Selection of three samples with every purchase • Products easy to return (online and offline) Content • Purchase history available • Product discussion forums • 'The Sephora Glossy' online magazine • 'Beauty Talk' forum with instant peer & professional advice • Sephora TV introducing & educating on new F&B products • 'Beauty and the Blog' update on new products Community • On demand advice from peers and professionals • Active consumer forums linked to product reviews • 'Beauty Insider' membership community • Updated rich in content social media platforms (e.g., Twitter, Facebook, Youtube, Pinterest, Instagram) • Pinterest pin button to easily pin products and images Source: Sephora website, Retail interviews 4
  • 21Luxury Redux-LuxuryRoundtable-1May13.pptx New competition between Brands & Dept Stores ...but Saks utilizes online technology to engage the customer with the product Ralph Lauren presents the product authentically...  Women size guide addresses potential hesitation to shop online  Detailed product description aids product positioning  Product reviews button enable opinion seekers to engage and gather more information  Video and zoom used to display product from all sides  Suggests additional Ralph Lauren products to complete the silhouette  Clear display of product brand  Limited viewing options  No additional product suggestions  Standard size chart  Short product description 4
  • 22Luxury Redux-LuxuryRoundtable-1May13.pptx New competition wit Amazon as well4 +500 Cartier watches on sale on Amazon Many reviews Real price difference vs Cartier (-10 to 25%) Real price difference vs Cartier (-10 to 25%) Incomplete name of the product 1 click Free shipping (prime) Up to 9 e-retailers in the marketplace (Jomashop, WatchSaving, Finebrand, PricePro, Certified Watch Store, Swiss Luxury...)
  • 23Luxury Redux-LuxuryRoundtable-1May13.pptx Call for actions to our luxury clients 1. Don't consider it is back to normal. Things have changed in depth 2. Expand into new experiential categories vs traditional personal goods; boost experiences as part of traditional offering 3. Reinvent new codes vs mass players, make sure you deliver a unique luxury value added and in product and experience 4. Stretch your pricing accordingly! 5. Invest to understand the aspirations /frustrations of various consumer segments 6. Attack specific segment e.g. women self-purchaser or senior segment 7. Do not forget to farm in mature countries while hunting in emerging ones. Chase the globetrotters from China, Brazil etc Build fully international executive teams (with senior talent from China) 8. Consider new business models, consider licenses and co-branding, while maintaining control; Develop new distribution format, create surprises at POS 9. Increase your bond with consumers; Develop more intimacy/ CRM 10.Create a real web presence for the brand (ecommerce, branding, blogs an social media etc); digitalize your brand! Up your ambition level online.