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

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