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Luxury Goods in Emerging Markets 2013 - Competitive Analysis
 

Luxury Goods in Emerging Markets 2013 - Competitive Analysis

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    Luxury Goods in Emerging Markets 2013 - Competitive Analysis Luxury Goods in Emerging Markets 2013 - Competitive Analysis Presentation Transcript

    • W H I C H B R A N D S DID THE BEST IN 2 0 1 2 ?
    • Luxury Goods 2013 – Competitive Analysis The 2012 financial results are in! Which brands will outperform amidst a Chinese slowdown and more discerning customer tastes? Data compiled from annual reports, Bain & Co., BNP Paribas and Bloomberg, 2012 33 29 17 16.4 16 13 9 8.2 7.6 6 Bottega Veneta Prada Christian Dior Couture Hermes Salvatore Ferragamo Yves Saint Laurent Richemont Gucci Tod's Louis Vuitton Revenue Growth at Constant Exchange Rates (%) Industry  Growth  Rate,  2012  
    • T H E C H A N G I N G L U X U R Y L A N D S C A P E
    • Luxury Goods 2013 – Competitive Analysis The Spread of Luxury Model in Emerging Markets Subjugation • Authoritarian rule • Poverty and deprivation Start of Money • Economic growth • Elites start buying luxe Show Off • Acquire symbols of wealth • Display economic status Fit in • Large scale adoption of luxe • Fueled by need to conform Way of Life • Locked into luxe habit • Confident, discerning buyers HSBC & The Cult of the Luxury Brand, 2012 India, Brazil China Taiwan/S. Korea Hong Kong, Singapore Japan HSBC estimates that over 25% of global luxury goods sales are made by the Chinese in 2012, meaning that China essentially holds great power to make or break a brand’s profits
    • Luxury Goods 2013 – Competitive Analysis Increasing customer sophistication in China ❧ Luxury customers are getting younger and more knowledgeable ❧ First-mover disadvantage: Louis Vuitton & Gucci ❧ “In the Show”  “In the Know” ❧ Leather > Coated Canvas   
    • Luxury Goods 2013 – Competitive Analysis Where did LV and Gucci’s market share go?             Adapted from HSBC, 2012 Dior, Chanel Bottega Veneta, Goyard, Valextra, Tom Ford, VBH Designer Apparel & Accessories Louis Vuitton, Gucci, Tod’s, Prada, Burberry Coach, Polo Ralph Lauren, Tory Burch, Tommy Hilfiger, Agnes B, Longchamp Designer Eyewear Designer Cosmetics & Fragrances Armani Exchange, Abercrombie & Fitch, Jack Wills, Topshop, Wildfox Couture Superpremium Premium Core Accessible Core Affordable Luxury Everyday Luxury >5,000 >1,000 >300 >100 Price points in USD Number of points of sale SUBSTITUTION Hermes
    • Luxury Goods 2013 – Competitive Analysis “Mass” vs. “Class”  Exclusivity Accessibility Ubiquity Rarity Adapted from Financial Times Research, 2012
    • C R E A T I N G A R T FROM COMM E R C E
    • Luxury Goods 2013 – Competitive Analysis Background ❧  Founded in Italy, 1913 ❧  Currently headed by Patrizio Bertelli and Miuccia Prada ❧  Targets an international customer base that is “modern, sophisticated, attuned to stylistic innovations, and expects craftsmanship of the highest quality”
    • Luxury Goods 2013 – Competitive Analysis Background ❧ Core business: Bags, 57% of total revenue ❧ Produces 8 collections each year ❧ Positioned at slightly higher price points than LV, Gucci, Burberry
    • Luxury Goods 2013 – Competitive Analysis Resources - Tangible Financial Resources ❧ Listed in HK and raised $2.14 billion in its IPO ❧ Market Capitalization: HKD 185,642.69 M at 28/4/13
    • Luxury Goods 2013 – Competitive Analysis Resources - Tangible Physical Resources ❧ Distribution network of 283 directly-operated Prada stores ❧ 4 Epicenter flagship stores ❧ 10 factories in Italy and a network of 480 external manufacturers, 20% of them abroad
    • Luxury Goods 2013 – Competitive Analysis Resources - Tangible Technological Resources ❧ Patented fabric “Pocone” - a waterproof type of nylon with a fine twisted weave that appeared as light as a silk
    • Luxury Goods 2013 – Competitive Analysis Resources - Tangible Technological Resources ❧ Saffiano leather with a patented diagonal cross-hatch pattern
    • Luxury Goods 2013 – Competitive Analysis Resources - Intangible Human Resources ❧ Highly specialized and dedicated production employees – most have worked over 20 years for Prada ❧ Business acumen and risk- taking disposition of Patrizio Bertelli, CEO 
    • Luxury Goods 2013 – Competitive Analysis
    • Luxury Goods 2013 – Competitive Analysis Resources - Intangible Reputational Resources ❧ 6th most valuable luxury brand in 2012, with brand value of $5,788 M (Millward Brown Optimor) ❧ Reputation for  – Sophisticated and subtly appealing apparel – High quality and durable leather goods
    • Luxury Goods 2013 – Competitive Analysis Capabilities Fabric innovation ❧ Close partnership with Italian fabric mills to create unconventional fabrics every season ❧ Unorthodox use of traditional fabrics Kid Mohair  in 02 S/S Menswear “I was forbidden to use it,  and of course, it became a best seller for us.”  – Miuccia Prada  
    • Luxury Goods 2013 – Competitive Analysis Capabilities Avant-garde design philosophy of Miuccia Prada ❧ Non-conformity to trends ❧ Subtle branding ❧ Dedication to create something completely new every season   “If you want to make something new, you need to make your mind blank and just look with your eyes, just judge with your eyes.” – Miuccia Prada
    • Luxury Goods 2013 – Competitive Analysis Capabilities Global sourcing of skilled artisans ❧ Miuccia Prada went in search of the most specialized craftsmen all over the world –  eg. Alpaca wool knitters from Peru, leather weavers from India, traditional kilt makers in Scotland ❧ Incredible skill of the artisans were uncovered to the world through Prada’s design and direction in 2010’s “Made in…” collection
    • Luxury Goods 2013 – Competitive Analysis Capabilities Effective management of diverse product portfolio ❧ Products with a range of price points from high to low ❧ PR and distribution for each product line tailors to each target segment
    • Luxury Goods 2013 – Competitive Analysis Capabilities Intimate connection with the art world ❧ Fondazione Prada is a non-profit organization that sponsors art projects for public display –  Miuccia Prada and Patrizio Bertelli are both lovers of contemporary art –  Highly reputed for choosing artists before they are successful ❧ Long-term partnership with architect Rem Koolhas
    • Luxury Goods 2013 – Competitive Analysis Capabilities Quirky, edgy advertising with all-star directors and cast ❧ Short films and videos are often light-hearted and infused with humor 
    • Luxury Goods 2013 – Competitive Analysis Porter’s Value Chain Research & Development Production Marketing & Sales Customer Service Company Infrastructure Technology Materials Management Human Resources Support Activities Primary Activities INPUT OUTPUT
    • Luxury Goods 2013 – Competitive Analysis “Austere Individualism” – Prada’s unique design aesthetic Fabric Innovation Intimate connection with the art world Global network of skilled artisans Miuccia Prada’s avant-garde design philosophy Value Creation – R&D
    • Luxury Goods 2013 – Competitive Analysis “Austere Individualism” – Prada’s unique design aesthetic Value Creation – R&D Prada’s contemporary designs allow customers to express their intelligence, individuality and sophisticated taste by challenging common ideals of beauty.
    • Value Creation – Production “Made by Prada” – Quality-cost balance Highly specialized craftsmen in owned factories Global network of skilled artisans Effective management of diverse product portfolio Patented Saffiano leather and Pocone fabric
    • Value Creation – Production “Made by Prada” – Quality-cost balance Prada outsources 20% of production overseas with strict quality controls, delivering superior products to customers in a shorter time and with lower costs.
    • Value Creation – Marketing & Sales “Accessible avant-garde” – dual facets of Prada’s brand identity Intimate connection with the art world Quirky, edgy advertising with all- star director and cast Strong retail network with architect designed flagships Effective management of diverse product portfolio
    • Luxury Goods 2013 – Competitive Analysis “Accessible avant-garde” – dual facets of Prada’s brand identity Cinema and art projects enriches Prada’s brand identity with experimental creativity. Art installations and the 4 Epicenter flagship stores increases customer engagement. Value Creation – Marketing & Sales With its diverse product range, customers of all price points are able to own a piece of the cultured refinement Prada represents.
    • Luxury Goods 2013 – Competitive Analysis Value Creation – Customer Service Decreases customer satisfaction and sours retail experience Unpleasant, unhelpful, and impolite staff Reluctant to repair faulty items Inability to give public feedback on Facebook
    • Luxury Goods 2013 – Competitive Analysis Core Competencies ❧ Forerunner of style and trends ❧ Iconic nylon bags and Saffiano leather bags ❧ Brand identity infused with cinema and art
    • M O R E T H A N T H E T R E N C H A N D C H E C K 
    • Luxury Goods 2013 – Competitive Analysis Background •  Founded in 1856 in Britain •  Currently headed by Angela Ahrendts and Christopher Bailey •  Targets customers who want functionality as well as timeless elegance, across genders and generations •  Core business: Outerwear
    • Luxury Goods 2013 – Competitive Analysis Background Burberry Prorsum Burberry London Burberry Brit
    • Luxury Goods 2013 – Competitive Analysis Financial Resources ❧ Listed in London since 2002 ❧ Market Capitalization:  GBP 5,968.76M as at 29/4/13 Resources - Tangible
    • Luxury Goods 2013 – Competitive Analysis Resources - Tangible Physical Resources ❧ Wide network of distribution channels –  192 Mainline stores –  208 Concessions within department stores –  44 Outlets ❧ 2 factories in Britain and 90 external manufacturers, mostly in Italy 
    • Luxury Goods 2013 – Competitive Analysis Resources - Tangible Technological Resources ❧ Patented fabric “Gabardine” – waterproof, anti-wrinkle twill widely used in Burberry’s trench coats ❧ Patented trademark check pattern 
    • Luxury Goods 2013 – Competitive Analysis Resources - Intangible Human Resources ❧ 1,500 employees worldwide ❧ Artistic vision of Christopher Bailey – British – Designer of the Year (2009), British Fashion Awards – Menswear Designer of the Year (2007, 2008)
    • Luxury Goods 2013 – Competitive Analysis Resources - Intangible Reputational Resources ❧ 10th most valuable luxury brand in 2012, with brand value of $4,090 M (Millward Brown Optimor) ❧ Reputation for  – Rich British heritage – Casual, wearable, affordable luxury with high fashion appeal
    • Luxury Goods 2013 – Competitive Analysis Capabilities Close association with all things British ❧ Diverse cast of British musicians, actors, and models in ads  –  “It” Girls like Kate Moss, Emma Watson, Cara Delevingne ❧ Burberry Prorsum stages runway shows in London Fashion Week ❧ Burberry Acoustic showcases emerging British bands
    • Luxury Goods 2013 – Competitive Analysis Capabilities Pioneer in Digital Marketing ❧ Well-established presence on social media platforms ❧ “Art of the Trench”  –  Users could upload photos of themselves wearing Burberry trench coats –  Aspirational customers can participate by commenting, liking, and sharing –  Existing customers can click-through to make a purchase
    • Luxury Goods 2013 – Competitive Analysis Capabilities Burberry at Regent Street: Retail Entertainment ❧ Flagship store that has become a local and tourist attraction ❧ Museum-like brand exhibits ❧ Huge event space with monthly music gigs by Burberry Acoustic ❧ Mirrors transform into screens and display relevant video content when triggered by RFID tags in products
    • Luxury Goods 2013 – Competitive Analysis Capabilities Burberry Bespoke: Mass Customization of trench coats
    • Luxury Goods 2013 – Competitive Analysis Capabilities Commitment to corporate responsibility ❧ Sustainable production ❧ Burberry Foundation - helps young people develop their skills, confidence and connections in the fashion industry ❧ Extensive employee training and performance-based remuneration
    • Luxury Goods 2013 – Competitive Analysis Capabilities Operational Excellence ❧ Streamlined supplier, IT, and logistics networks ❧ Use of SAP worldwide
    • Value Creation – R&D “Classicism with a Twist” – Non- stop reinvention of the iconic trench and plaid Iconic and patented check pattern and garbadine trench Artistic vision of Christopher Bailey Burberry Bespoke: Mass Customization Operational Excellence
    • “Classicism with a Twist” – Non- stop reinvention of the iconic trench and plaid Value Creation – R&D Burberry’s relentless reinterpretation of the trench and plaid allow customers to capture a slice of British heritage that reflects modern trends and personal tastes.
    • Value Creation – Production “Designed in Britain” – delocalization of production Close association with all things British Reputation for rich British heritage 2 factories in Britain, one specialized in trench coats Operational Excellence
    • “Designed in Britain” – delocalization of production Value Creation – Production Delocalization of production does not disassociate Burberry with Britain.The lower labor costs and faster delivery allow more collections to be delivered to customers, who continue to identify Burberry with British high society. 
    • Value Creation – Marketing & Sales “Great Brand, Great Company” – inspiring emotional connections Pioneer in Digital Marketing Regent Street flagship: Retail Entertainment Commitment to Corporate Responsibility Operational Excellence
    • “Great Brand, Great Company” – inspiring emotional connections Value Creation – Marketing & Sales Aggressive digital and in-store marketing reaches a broad audience and invites them to participate in the world of Burberry and foster a deep identification with the brand. Efforts in corporate responsibility builds an image of conscientiousness as well.
    • Value Creation – Customer Service “Democratic Luxury” – building positive relationships Pioneer in Digital Marketing Regent Street flagship: Retail Entertainment Commitment to Corporate Responsibility Operational Excellence
    • “Democratic Luxury” – building positive relationships Value Creation – Customer Service Flexible communication channels online and friendly, courteous, helpful staff in stores enable Burberry to understand their customers better and provide an accessible, human touch to the brand.
    • Luxury Goods 2013 – Competitive Analysis Core Competencies ❧ Inimitable British heritage ❧ Signature trench coat and plaid pattern ❧ Integrated online and offline marketing to deliver synchronized products and experience
    • W H E N Y O U R O W N I N I T I A L S A R E E N O U G H 
    • Luxury Goods 2013 – Competitive Analysis Background ❧ Founded in 1966, Italy ❧ Acquired by PPR in 2001 ❧ Currently headed by Marco Bizzari and Tomas Maier ❧ Targets uber-wealthy, modest and discreet customers 
    • Luxury Goods 2013 – Competitive Analysis Background ❧ Core business: Bags, 85% of revenue in 2012 ❧ Price points much higher than competitors, most over 2000 euro and reaching 50,000 euro for some
    • Luxury Goods 2013 – Competitive Analysis Resources - Tangible Financial Resources ❧ Company under PPR, listed in Paris since 1988 ❧ Market Capitalization of PPR: €20,977.02M
    • Luxury Goods 2013 – Competitive Analysis Resources - Tangible Physical Resources ❧ 1 factory in Vicenza, Italy ❧ 196 directly-operated retail stores
    • Luxury Goods 2013 – Competitive Analysis Resources - Tangible Technological Resources ❧ Intrecciato – a leather weaving technique that allows thin leather to work with sewing machines while achieving the strength and body for leather accessories
    • Luxury Goods 2013 – Competitive Analysis Resources - Intangible Human Resources ❧ Over 100 artisans in BV’s factory, all skilled in Intrecciato ❧ Tomas Maier, head designer –  Precise perfectionist who seeks understated elegance –  Saved BV from the brink of bankruptcy and increased sales by 800% since joining in 2001 
    • Luxury Goods 2013 – Competitive Analysis Resources - Intangible Reputational Resources ❧ Reputation for  – Artisanal craftsmanship – High quality and durable leather goods
    • Luxury Goods 2013 – Competitive Analysis Capabilities Philosophy of “Stealth Luxury” Branding ❧ No logo on its products ❧ Maintains high quality ❧ Generates a sense of exclusiveness 
    • Luxury Goods 2013 – Competitive Analysis Capabilities Long-term sustainability of craftsmanship ❧ Craftsman school in Italy – Generates a new generation of craftsman ❧ Only those with more than 15 years of experience with the brand will participate in the production of Intrecciato
    • Luxury Goods 2013 – Competitive Analysis Capabilities Effective management of a less diverse product portfolio ❧ Products with very limited discounting and sales ❧ Focuses mainly on leather goods with high quality
    • Value Creation – R&D “Covetable classics” – Timeless designs with a singular, evolving vision Contemporary functionality Impeccable quality and craftsmanship Tomas Maier’s understated yet current design aesthetic Gradual expansion of diversified product lines
    • Value Creation – R&D “Covetable classics” – Timeless designs with a singular, evolving vision Bottega Veneta focuses on the fundamental integrity of the product, making sure that they are rare and valuable in themselves, not because of a logo or a tag.The timeless designs make it easy for customers to wear or use them for a long period of time, regardless of trends.
    • Value Creation – Production “Made in Veneto” – The assurance of uncompromising quality Production takes place even before runway shows Higher quality materials than other luxury brands Produced pieces are handpicked by creative director Tomas Maier Goods are only made in Veneto, Italy
    • Value Creation – Production “Made in Veneto” – The assurance of uncompromising quality With its price points set in a higher and narrower range than most luxury brands, Bottega Veneta knows its target customer expects higher quality materials and craftsmanship from them. “Made in Veneto” promises as much. But they took it one step further and started the manufacturing process before the runway shows, ensuring first dibs on the finest materials. 
    • Value Creation – Marketing & Sales “Less is More” – discreet yet recognizable to the initiated Logoless, understated designs BV Initials Project: When your own initials are enough Slower expansion into emerging markets Less discounting than other luxury brands
    • Value Creation – Marketing & Sales “Less is More” – discreet yet recognizable to the initiated The high net worth individuals in Bottega Veneta’s target segment do not aspire to own products marked by logos to prove their status. Instead, the brand molded itself to represent the anti-thesis of many other luxury brands – a quiet, stealth type of luxury that wealthy customers in the know appreciated.
    • Luxury Goods 2013 – Competitive Analysis Core Competencies ❧ Bottega Veneta applies Intrecciato across most of its categories. ❧ “Stealth luxury” branding to position itself in the market positioning  ❧ Able to capture consumers’ changing tastes and preferences
    • The End,Thank You!