Drapers Luxury Report


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Drapers Luxury Report

  1. 1. The Compiled by ANA SANTI Illustrations by NATHALIE LEESLuxuryReportSPONSORED BY
  2. 2. Introduction I Luxury reportSponsored by ‘We ask how the luxury market is faring and what the future holds’ _ Ana Santi T he fashion industry has had market? We decided to find out by launching its fair share of ups and Drapers’ first in-depth report into the sector. downs since the global In September, we compiled a survey and asked recession of 2008, but for businesses in the luxury fashion market – including the luxury fashion sector, boutiques, brands, etailers, department stores, the ‘downs’ have been few multiples and agents – to tell us how they’re faring and far between. The today and their expectations for the future. Over the mainstream market looked on with envy as next 14 pages, we analyse these findings across profits in the luxury sector soared and huge, different business segments, from ecommerce and shiny flagships opened as quickly as those in the social media to tourism, international retailing and Drapers / November 17 2012 _ 25 mid-market closed. distribution and buying strategies. Luxury fashion seemed invincible, but then Further in-depth analysis also comes from Burberry posted a profit warning in September. Guy Salter, deputy chairman of Walpole, the Warning bells began to ring as China – the darling membership group for the British luxury industry, of growth for luxury – saw growth in its economy whose insights help to interpret our findings. slow. So what does this mean for the UK luxury Ana Santi, deputy editor, Drapers ‘It’s vital to know your customers and how they identify with you’ _ Robert McKee I nfor is proud to sponsor Drapers’ By its very nature, couture will remain the Luxury Report. In the constantly seductress for luxury fashion. Much of luxury evolving world of fashion fashion still manufactures many of its own it is essential to know your customers products but, as their product lines have evolved, and understand how they identify many are now sourcing globally. with you. Brand identity must be Infor is no stranger to the luxury goods market. ingrained in the entire production Our first luxury goods customer was signed in process, from initial design to shop-floor delivery 1992 and they are still with us today. For more to meet the ever-demanding expectations of than 18 years, we have helped more than 1,100 luxury consumers. fashion companies in 194 countries improve Luxury was founded with the model ‘seduce their processes to become more efficient and the customer, control the supply chain’. While this competitive. But why do four of the top 10 luxury model is still intact today, we find that many in the fashion companies use us? Because we luxury sector have found success using a model understand every business’s individual needs and that relies on ‘listen-react-respond to the tailor our products accordingly. customer and collaborate with the supply chain’. Robert McKee, director, fashion industry strategy, Infor
  3. 3. luxury report I the current outlook Luxury S ince the global recession of 2008, one sector of the fashion industry has appeared, perhaps unsurprisingly, to weather the storm. While the mid-market lifestyle began to witness plummeting sales and business closures, the luxury sector boomed. But then, this September, UK luxury fashion bellwether Burberry posted a profit warning. Admittedly, investors breathed a sigh of relief this month, as Burberry reported an 8% increase in revenues for the first half, but pre-tax profits dropped almost 30% due to a one-off payment to end its fragrance and Drapers finds out how the luxury fashion sector beauty licence. Yet last month, global consultancy Bain & is faring and its expectations for the future Company released its annual Luxury Goods Worldwide Market Study showing a slowdown in luxury goods sales. According to the report, Words by ANA SANTI Illustrations by NATHALIE LEES the value of the total luxury goods market is expected to rise by 5% at constant exchange rates to €212bn (£170bn) this year, comparedDrapers / november 17 2012 _ 26 with an increase of 13% last year. In the same week, LVMH – the largest luxury goods group by sales – said organic sales growth in the third quarter had fallen to 6%, compared Was your turnover with 15% growth in the same period last year. for 2011 up or Mulberry soon followed, also posting a profit down on 2010? warning, which took almost one third off its market value. Down 14.9% On average, by how much did Up turnover increase? 85.1% 23.2% On average, how much did your profits increase? Was your profit for 2011 up or down on 2010? Down 22.6% 18.5% If you have bricks-and-mortar stores, how many do you expect to have by the end of 2013? 6.3% 60.9% 32.8% Up 77.4% Same More Fewer 100% of department stores said turnover was up in 2011 against 2010
  4. 4. Sponsored by So, should the luxury sector in the UK be In terms of investment in 2012, 54.1%worried? Our survey found a healthy industry, of respondents (the highest percentage) / Industry View /confident of further growth in the next year. invested in their staff, with 51.4% also ‘Luxury ecommerceBut few businesses were complacent. Therewas an air of caution, with the majority not investing in digital marketing and the same figure investing in new products and brands. will continue to grow’expecting the economy to pick up until the Digital marketing topped the investment list Guy Salterend of 2014. for brands. For multiple retailers, staff and While that overview paints a good picture of digital marketing were most important, while It seems counterintuitive to those outside thethe state of the overall luxury fashion market in department stores ploughed money into staff, industry that the luxury sector has experiencedthe UK, the most interesting nuggets lie in the new brands and digital marketing. strong growth despite the challengingdetails of our survey. Some 85.1% of economic environment. This resilience hasn’trespondents said their turnover was up in 2011 Looking ahead, 92% and 89% of businesses surprised me but the level of performance has.against 2010 and 77.4% echoed the sentiment expect turnover and profits to rise respectively Conditions have worsened recently, so wein terms of profits. Splitting this down further, over the next year. Luxury brands forecast must be ready for a tougher ride but I remaindepartment stores and pure-play etailers turnover to increase by an average of 27%, sure our business model is well suited tocame out on top, with 100% of respondents while indies expect a 15% rise. continue to benefit from the type and patternin each segment recording a rise in turnover Optimism is clearly in the air and, over of affluent spending.over the same period. For brands, the number the next few pages, we look at how luxury The luxury department stores and the pure-was 90% and for indies it was 73%. On businesses hope to fulfil these ambitions. play luxury etailers have held up particularlyaverage, turnover increased by 23.2% and well. Those department stores who strain everyprofit by 18.5% across all segments. sinew to keep maximum freshness, product Luca Solca, senior luxury goods analyst at Do you expect profits to rise next year? variety, exceptional in-store experience andinvestment company Exane BNP Paribas, Drapers / november 17 2012 _ 27 service will remain appealing to the luxuryis not surprised that independent boutiques, consumer and international tourists.which had a good year nonetheless, didn’t It’s good to see that businesses havefare as well as department stores and brands continued to invest in their online presence andlast year. “Brands are integrating their Yes digital marketing, although it would have been 89%distribution more and more, particularly shortsighted not to do so, as luxury brands’with mono-brand stores. The traditional ability to produce high-quality content givesindependent has less of a role to play and them an advantage. Luxury ecommerce willthey find it harder to finance their businesses,” continue to grow for those that offer a truly No 11%he explains. “And department stores are integrated customer experience. Few are now.performing more of a selection function. Look Simple things like user experience, navigationat Liberty – it has come up with an interesting and checkout could be much improved.selection of brands and products, with nicher Deputy chairman, Walpolebrands and designers to offer consumerssomething different. Luxury consumers are What did you invest in this year?keen to find novelty. They’re paying moreattention to their spend, to differentiation New EPoS system Opening storesand distinction.” The average increase in profit 16.2% 27% of multiples wasDo you expect turnover to rise next year? 28% Digital marketing M-commerce Yes 51.4% 16.2% 92% Union Pay Personal / VIP shopping Indies expect turnover to rise 16.2% 27% by an average of 15% in the next year Interiors / shopfit Staff 48.6% 54.1% Mandarin speakers CRM systems No 8% 16.2% 29.7% New products / brands Paying down debt 51.4% 27%
  5. 5. luxury report I going global Sponsored by Do you sell internationally? No 18.2% Yes 81.8% If you sell internationally is it via: A website 85.7% A licensing agreement 17.9% An agent 14.3% Own international stores 7.9% Multi-brand retailer 10.7% What percentage of your business is from international sales? Less than 10% 37% 10%-20% 18.5% 21%-30% 7.4% 31%-40% 7.4% 41%-50% 3.7% 51%-60% 11.2% 61%-70% 7.4% 71%-80% 7.4% 81%-90% 0%Drapers / NOVEMBER 17 2012 _ 28 91%-100% 0% What percentage of your sales in the UK come from tourists? 41%-50% More 5% than 50% 10% Less than 10% 31%-40% 10% 30% 40% of department stores 21%-30% 5% sell internationally via their website 10%-20% 40%
  6. 6. International exchange Luxury businesses are looking overseas for growth Drapers / NOVEMBER 17 2012 _ 29 Words by ANA SANTI Illustrations by NATHALIE LEESW 32% hen Burberry merchandise making its way into all the markets posted its profit globally. Are luxury brands doing all they can warning in of indies sell to combat this dilution to both brand equity and September, the internationally revenue? It would seem that a key to combatting brand blamed via their website luxury counterfeiting comes through the use of in part the technology to verify product pedigree. From 44% slowdown in the serialisation to the use of embedded RFIDChinese economy. Bain & Company’s annual [radio-frequency identification] through thereport also attributed the decline in growth of of respondents entire supply chain – from concept to consumerthe luxury goods market to Chinese consumers said Western – the products and all their components havespending less at home and giving fewer gifts. Europe is their to be traceable throughout the value chain.” best-performingClearly, luxury businesses have been relying Of those who sell to international markets, international marketheavily on thriving international markets, 85.7% do so via a website. Other methods such 100%notably China, to drive overall growth. as licensing agreements, via multi-brand stores In the UK, according to our survey’s and own stores, remain relatively low, withrespondents, international sales will continue less than 20% of respondents choosingto be important to overall growth, but these of multiples sell each model, thereby highlighting potential internationally; 82%businesses have far from saturated their sales via a website; 36% new sales channels.opportunities abroad. Although 81.8% of via their own bricks-respondents sell to international markets, and-mortar stores Drilling into these numbers, we found37% of businesses (the highest percentage) that 57% of brands and all multiple retailerssaid less than 10% of their turnover comes from sell to international markets, and 32% of indiesinternational sales, with 18.5% (the second do so. Andrew Robb, chief operating officer athighest percentage) claiming international sales Farfetch.com, which facilitates independentmake up between 10% and 20% of turnover. retailers’ online businesses, says 32% is actually “The luxury sector has seen solid growth in quite high. “It’s really difficult for independentseconomically emerging Asia with the rapid to sell online internationally because they haveevolution of the Chinese and other economies,” to deal with the complexities of pricing, returnssays Robert McKee, director, fashion industry and marketing,” he explains. “To be both a greatstrategy at Infor. “The recent slowing in the rate online and offline retailer you need to invest, butof that rapid economic evolution will have an most boutiques are small. Matches and Brownsobvious impact on that rate of growth – but it have put serious online teams in place anddoesn’t have to impact profitability. Of equal investment. But if you don’t have an onlineconcern has to be the dilution of luxury brand channel, you’ll suffer. The boutiques that do itequity stemming from counterfeit luxury well will be fewer [in the future]. It comes down u
  7. 7. luxury report I going global to the owners having a passion and intuitive understanding of the online space, and in particular, online marketing. You need massive international appeal.” In terms of specific international territories, Western Europe gets the top spot, with 44% of 46% respondents saying it was their best-performing Which are your best-performing market. The US topped the list for 36% of international markets? businesses. Other territories were more balanced, with 28% placing China fourth in the rankings, of respondents said the majority of tourists come from China while Western Europe the same percentage putting Brazil in fifth place 18% of multiples said this 31% said Western Europe was the was their number one market while 36% said Australia was their eighth second biggest tourist group best-performing market. Looking ahead, 60% of businesses expect the above mix to change over the next five years. What is interesting from the results is the way that different territories will, on the whole, be on a more level playing field. For example, Western Europe is still predicted to be the number one second biggest tourist group. Further down the make shopping a priority when travelling. international market for the respondents, but only list, 23% said Russians were at number six and Products are becoming more diversified and 30%, rather than 44%, believe so. There could be 46% said Brazilians were ranked seventh. the demand for high-end, luxury productsDrapers / NOVEMBER 17 2012 _ 30 two reasons for this. Either the respondents are “Non-EU international spend in the UK has and tailor-made services is increasing among simply unsure or, as growth in emerging markets shown continual growth year on year – with China international shoppers. Due to the tax refund slows, businesses are more reluctant to put all leading this growth, reporting spend increases policy and exchange rate, many European luxury their eggs in one Chinese basket and are, instead, of 29% year on year between January and products are estimated to be up to 20% to 30% spreading themselves across territories depending September,” says Richard Brown, vice-president lower than in their home nations, and often on their business type and those territories’ of tax-free shopping operator Global Blue UK. overseas tourists will still choose to buy an item different demographics. Having said that, 53% “Europe is seen as the world’s leading destination from London, even if it is available in their home of respondents said China is having the biggest for luxury shopping, especially among those who country, so that they are able to talk about buying impact on the global fashion industry, followed it from a famous London store.” (far behind) by the US at 13%. China also leads the way in tourism – 40% of / Industry View / Brown adds that China and the Middle businesses said between 10% and 20% of their ‘Luxury attracts East remain the top international spenders, sales in the UK come from tourists, with 46% of representing 54% of all international non-EU businesses ranking the Chinese top of their tourist a global clientele’ spend. “Chinese spend has seen steady year-on- table. 31% said Western Europeans were their Guy Salter year increases. However, it is the Middle Eastern nations who have seen the most substantial I am surprised that of the businesses surveyed, increases – 50% year on year in September, 40% of them noted that only 10% to 20% of with some individual transactions exceeding China the country their UK sales came from tourists and that 37% said international sales made up less than 10% £1m,” says Brown. He believes that the top international of their turnover. I would expect those figures spenders are unlikely to change dramatically impacting most on the global to be higher, with tourists and international in the next few years, but adds that Global Blue fashion sector sales accounting for a much bigger percentage has seen significant increases in spend from at the moment of overall sales of the UK luxury businesses Nigerian and Indonesian visitors. “These two surveyed. But a factor in this could be the countries, which account for only 9% of the 30% different trading patterns experienced in total non-EU spend, have shown enormous 2012 with the Jubilee and the Olympics. year-on-year growth in September compared of brands Luxury is a global business attracting with last year – Indonesia at 54% and Nigeria said they a global clientele. Perhaps some UK luxury at 32%,” says Brown. “For Nigerians, London didn’t expect more sales brands need to work harder to become more has become a top shopping destination, with to come from commercial and more relevant in certain many visiting to purchase UK items cheaper tourists in key overseas markets. Likewise all brands are than imported and sold in their native Lagos, the next year now looking seriously at how to get better and Nigerian men particularly enjoy getting at attracting and selling to affluent visitors. suited and booted in UK designer brands. I am not surprised that the Chinese are “Nigeria is forecast to become Africa’s biggest ranked top of the tourist table and we economy by next year. Meanwhile, Indonesia is are working closely with the Government only in the 15 top international spenders in the to help further increase Chinese visitor UK, and only 1% of the population are able to numbers to the UK. travel for holiday or business reasons, but their Deputy chairman, Walpole September average monthly sales are comparable to China and the Middle East.”
  8. 8. Sponsored byWhat percentage ofyour total turnover55%comes from wholesale? What percentage of your turnover do you expect wholesale to contribute over the next five years? 39.5% “The wholesale model does not have enough margin. Only a few established wholesalers will survive – those who are able to review their business and approach to consumers, including investments in e-business, to become more internationally known,” said one respondent Doing it for themselves With sales from wholesale divisions expected to continue to decline over the next five years, brands in the luxury sector are turning their attention to retail Words by ANA SANTI Illustrations by NATHALIE LEES
  9. 9. 19% of brands are producing more collections than 46% 27% a year ago of respondents said of respondents said womenswear accessories sales were sales were up between 10% and up between 10% and 20% 20% compared with a year ago compared with last year 50% of footwear sales were up between 1% and 10% compared with a year agoO ver the past few years, brands are taking steps to manage their own Hudson Walker International. “Nobody used we’ve seen many luxury distribution. But brands have to be prepared to talk heavily about sales [in the luxury sector] brands report stronger to invest more capital back into their business to but brands are developing much more aggressive sales from their retail, finance directly-operated stores, for example.” business models with underlying sales ethics. It’s rather than wholesale, He also expects fewer independent boutiques a very sales-driven environment now with more divisions and, as a result, to enter the market. “The more sophisticated commercially-oriented roles.” have focused their efforts boutiques will become masters of selection,on growing the former. The luxury brands in a smaller scale to department stores.” As for buying strategies among retailers,surveyed said 55% of sales come from their This shift is also affecting the skillset among forward order remains the norm, representingwholesale channel but, over the next five years, luxury professionals, says Mathew Dixon, 62% of total budget. But in the next year, thisthey expect wholesale to make up less than director at luxury recruitment consultancy is expected to contribute to more than half ofhalf of total turnover – 39.5%. Respondents buyers’ budgets – 53%. Respondents listedexplained the reason for this predicted change, the following as their best-selling brands (in nowith one saying “the wholesale model does not / Industry View / particular order): Vivienne Westwood, J Brand,have enough margin”. Another added: “The ‘Wholesale is Equipment, Isabel Marant, Alexander McQueen,wholesale segment is falling down. Only a fewestablished wholesalers will survive, those who tougher than ever’ Stella McCartney, Diane von Furstenberg, Louis Vuitton, Rick Owens and By Malene Birger.are able to review their business and approach Guy Salter Looking at specific markets, sales wereto consumers, including investments in generally up on a year ago for the majoritye-business, to become more internationally Wholesale will always be with us but it is of respondents – 89% – across womenswear,known.” One respondent simply said this is tougher than ever. It’s not just the squeeze menswear, kidswear, accessories, footwear andnow the “rule of thumb”. on margins but the lack of control. There is a lingerie. Only 10% of respondents said sales trend towards getting out of accounts that are were down in womenswear, kidswear, footwearAs investment firm Exane BNP paribas’ either too accessible or don’t present the right and lingerie, with menswear and accessoriesLuca Solca says: “If wholesale isn’t dead, then it’s environment for luxury, even if that means showing a clean sheet. 25% of respondentsseverely damaged.” Solca explains that industry- taking a short-term hit on revenues. said menswear sales were up between 10%wide, deep discounting over the past few years The strength of menswear and accessories and 20%. Meanwhile, 50% said footwearhas led brands with a traditional wholesale model isn’t a surprise and in my view is based on sales had increased between 0% and 10%,to become more protective and take more control underlying strong fundamentals. and 46% said womenswear sales had risenof all elements of their business, from pricing, Deputy chairman, Walpole by between 10% and 20%, while 27% saidto marketing and distribution. “The strongest accessories had seen the same increase. u
  10. 10. luxury report I buying & distribution 60% of etailers’ budgets go on forward order Forward order is expected to make up Manufacturing case study Honey Clothing 53% of total buying Mahbub Ullah, accounts managerDrapers / november 17 2012 _ 34 budget in the next 12 months Customers high-end brands are motivated high street London-based Christopher Kane, making some of their brands and designers. manufacturers are Paul Smith, Preen, lines here in the UK Consumers are competing with Roland Mouret and we are benefiting. more aware of where established I think the luxury their clothes are being manufacturers from As a Sedex-certified sector has traded made and they are France and Italy. [an ethical and better than the rest willing to pay extra if Established British responsible supply of the fashion market made well in an ethical designers are also chain standards body] [in the economic working environment choosing to bring back premium outerwear downturn]. in this country. their production from manufacturer, trading The British Fashion We’re experiencing continental Europe to is relatively sound Council has better demand for high- this country. As long as and improving every organised London quality pure wool, and we can keep up the year. More and more Fashion Week in recent specialised leather is quality, the demand British designers and years, which has growing each year. will grow further. Manufacturing case study Johnstons of Elgin James Dracup, group managing director Customers Burberry, which affected our China, which, although Next year I expect Chanel, Hermès customers. slowing down, will continued growth Trading is tough. A A slowdown in developing markets continue to grow. Both private-label with private-label couture and luxury 46% of womenswear sales were mild winter in 2011 left is also affecting our supply to global brands, and a more up between 10% and 20% our customers with global luxury clients. brands and the effective sales effort compared with a year ago too much inventory in The luxury sector development of from our own 50% our product categories has traded better than our own-brand offer company in the resulting in small the wider market, with independent Scottish tourist market, orders for 2012. The however, it has slowed wholesale customers the wider market and of footwear sales were Olympics, weather in terms of growth and via our own retail particularly the US. up between 0.1% and 10% compared with last year and a less competitive potential compared has driven growth. We intend to grow currency in relation to with two years ago. Menswear is our export sales from the eurozone all impacted on tourist Opportunity still exists in markets such as particularly strong as is the local Scottish the current 25% turnover to more 27% of respondents said travel in August 2012, Brazil, India, Russia and tourist market. than 30%. accessories sales were up 10%-20% on last year
  11. 11. Sponsored by How is your buying budget split? Forward order 61.67% Closer to and in-season Manufacturing case study 16.88% Harris Tweed Malcolm Campbell, sales Resort / pre-collections and marketing director 16.88% for the Carloway Mill Customers Brooks Brothers, Chanel, Saks House brands 51.67% Trading is currently very good. We are sampling well for autumn 13, and our top-end customers appreciate the marketing and images we have Own brands created to promote the history and provenance 40.83% of Harris Tweed. We believe the luxury sector has traded well because clients seek quality and products that last. Price deflation over the past 20 years has created a disposable product, which is 58% no longer acceptable. Our customers want a product that is robust and fit for purpose, and they are prepared to pay for it. Drapers / november 17 2012 _ 35 of respondents said menswear We have also developed two new finishes sales were up between 0% and working with WT Johnson textile finishers of 10% while 25% said they were up between 10% and 20% Huddersfield. The new finishes and creative colours and designs will drive sales. Demand in the UK luxury sector is less strong than in other countries such as Japan, the US and Europe, probably because the UK high street brands over the years have driven the price of Harris Tweed down, so it does not reflect the artisan processes of carding, What is your spinning, hand-loom weaving and finishing best-selling brand? that the luxury market tends to respect, appreciate and pay for. Alexander McQueen By Malene BirgerDiane von Furstenberg Equipment Isabel Marant J Brand Manufacturing case study Louis Vuitton Rick Owens Alfred Brown Stella McCartney Ian Brown, joint managing director Vivienne Westwood Customers hold up better than strong, especially Aquascutum, Jaeger, the middle market. slightly bolder colours. Paul Smith Fabric woven in Next year, I expect Britain is still strong traditional English Trade is very good. and this plays into fabrics, with a modern We think people the luxury market. twist, to drive sales. are buying less but The biggest driver I think the Jubilee spending more on is the fact that all our and Olympics have individual items, fabrics are woven in given us a belief in which is helpful to Britain and some of ourselves as a nation us, because being this sentiment is and this encouraged a European weaver beginning to show the demand for British we will always be at in the womenswear manufacturing and the luxury end. market, which is goods. We have had a In difficult growing for us. good year and we will economic climates, Our biggest market be pleased if we can the luxury and bottom though is menswear – maintain this growth ends of the market semi-plain fabrics are in the year to come.
  12. 12. luxury report I social media The move to What proportion of your business is online? multichannel None 15.8% 0.1%–20% 32.9% 21%–40% 22.4% 41%–60% 14.5% 61%–80% 6.6% 100% 7.8% Investing in online, particularly social media platforms, is key for retailers’ growth in the luxury sector Words by ANA SANTI Illustrations by NATHALIE LEES W ith digital their game though, with only 57% of brands marketing listed and 45% of indies on Twitter. 57% of brands / Industry View / high among the have a Facebook page, while 41% of indies do so. ‘It’s a powerful wayDrapers / november 17 2012 _ 36 different areas of business that Newman believes social media offers the to build consumers’ respondents biggest opportunities to brands “because they Guy Salter invested in for have a stronger relationship with the end 2012, it comes as no surprise that the internet, consumer, it’s about how you leverage social Social is a hugely influential communications and social media in particular, are crucial to the media and create a community,” he says. “I channel. A lot of luxury brands are reticent growth of the luxury sector. question the traction of Google+, but if a brand about engaging with their consumers via social Almost 33% said up to a fifth of their business isn’t on Pinterest, it’s missing out. Pinterest media, as it can be difficult to retain control. But comes from online sales, while 22% said online seems to have the highest level of engagement if harnessed in the right way, it is a powerful and sales account for between 21% and 40% of where the engagement is very product-focused. effective way to build a brand’s consumer base, turnover. More than 90% expect online sales to Facebook is harder – people are engaging with generating customer engagement and loyalty, account for even more of their total turnover in friends and family on it.” attracting visitors to online stores and driving the next 12 months, with 56% citing online sales Infor’s Robert McKee agrees: “Today, sales. Everyone is still learning. as the biggest growth area for their business. Any Facebook is a community – a very successful Deputy chairman, Walpole reservations that luxury brands had about selling community – but luxury fashion companies their collections online have disappeared, with have the ability to create their own communities. 100% of respondents unconcerned about their Brand loyalty in mainstream fashion is very much Do you have a presence on any of the following? products being sold on a stockist’s website rather ‘easy come, easy go’, but luxury fashion enjoys than a bricks-and-mortar store. a prestige factor that is not afforded to the Twitter 97.1% Martin Newman, chief executive of ecommerce mainstream. Whether it’s brand loyalty or consultancy Practicology, says these figures are conspicuous consumption, the merchandise encouraging and expects bigger growth for the is sought-after. This brand loyalty represents Facebook 94.3% luxury sector from online sales. “The [businesses] a group of people with like interests – or – a who take that leap are the ones that link their community. Luxury companies need to begin Pinterest 57.1% multichannel functions, and I’d say department building their own online social communities stores [have a better chance] because they have a around this brand loyalty. Listen to your Instagram 37.1% broader product proposition,” he says. communities. From colour palettes to silhouettes, Mark Henderson, chairman of the London your community has an opinion and they’re Google+ 37.1% Luxury Quarter and non-executive chairman of anxious to share that with you.” British tailor Gieves & Hawkes, says click-and- Most businesses – 97.1% – use social media collect is a “phenomenal” opportunity for luxury for brand awareness, which topped the list brands: “The majority of luxury purchases are above marketing in second place, customer pre-considered and that is an enormous service in third place and sales ranked last. opportunity for luxury retailers, certainly It is encouraging to see that 68.6% of the [‘collect’] opportunity because shopping respondents have a daily presence on social is an experience of temptation.” media, with 8.6% using different platforms Luxury brands have embraced social media “more than 10 times a day”. With the purpose – 97.1% are on Twitter; 94.3% on Facebook; of social media being instant and regular 57.1% on Pinterest and 37.1% on both Instagram engagement with customers, a strong presence and Google+. Brands and indies need to step up on these sites is a must.
  13. 13. Sponsored by Do you expect your online business to grow in the next 12 months? Does selling your Yes No Yes 6.6% 93.4% collections via a stockist’s website 0% (by 1%–10%) 39.5% rather than a bricks- (by 11%–25% ) 25% and-mortar store (by 26%–50%) 10.5% % 00 concern you? (by more than 50%) 15.8% No Not applicable 2.6% 1 40% 27% of indies have a of department daily presence on stores have a daily the main social presence on media channels the main social media channels 48% 82% of multiples have of brands have a daily presence a daily presence on the main social on the main social media channels media channelsHow active are you on the main social media sites?More than 10 times a day 8.6%Daily 68.6%Several times a week 5.7%Weekly 8.6% Several times a month 0%Monthly 5.7%Less often 2.8% Do you have any of the following? What do you use the main social media channels for? An app 41.2% A mobile- 76.5% optimised site Sales Brand awareness Use of QR codes 35.3% 45.7% 97.1% Customer service Marketing 9% 62.9% 77.1% of indies have an app, mobile-optimised site and use QR codes
  14. 14. Brands expect online sales to be the biggest growth driver next year36%of multiples believethe economy willpick up from 2014 Are you confident aboutonwards, while 15% business over the next 12 months?believe the economywill pick up at the Not at all. 0%end of next year I am worried my business might fail Not really. I think 13.6% it’s going to be tough Outside London, which are the other I think things will 23.7% hot spots in the UK? remain the same Manchester I am quite confident 30.5% Liverpool trade will begin to pick up Birmingham Leeds I am confident my 27.1% Oxford business will grow Cambridge Bicester Village Very. Things are 5.1% going really well When do you believe the economy will start to pick up? Start of 2013 14.8% End of 2013 18.5% Not until 2014 25.9% Not until 2015 25.9% Not until 2018 14.9%International What is the biggest growthand online area of your business?expansion 55.6% Onlineare two ofthe mostpopular areasof growth for 27.8% Internationalmultiples 38.9% Sales in store
  15. 15. future prospects I luxury report Sponsored by Great expectations While few expect the economic gloom to lift in the near future, many in the luxury sector are optimistic that their business will continue to grow Drapers / november 17 2012 _ 39 Words by ANA SANTI Illustrations by NATHALIE LEESD espite respondents’ earlier Henderson cites Harrods as a great example side by side. The future looks pretty good. I am comments that they expect of the type of business that will lead growth in hugely optimistic.” turnover and profit to grow the luxury sector. “We seem to have particularly next year, 25.9% (the joint good department stores in this country. Harrods For Infor’s Robert McKee, the success of the highest percentage) do not is an outstanding business, and [managing luxury sector lies in its analysis of information. expect the economy to pick director] Michael Ward is a genius,” he says. “At the core is business intelligence, pulling in up until 2014, while the “It’s a fabulous experience of temptation as information from different sources. The luxurysame number think it will be even later – not until you can move from one brand to another. industry is much more right-brained, therefore2015. Meanwhile, 18.5% believe there could be Equally, walking into the Louis Vuitton store it has a great deal of difficulty in intellectualisingsome improvement by the end of next year, while is not the same as walking into the Louis Vuitton its business models. Luxury often makes moneythe optimistic few – nearly 15% – think it could concession. I think they [department stores in spite of itself, because of its prestige, but thebe early in the new year. and own-brand stores] live incredibly comfortably luxury sector has huge potential, even beyond Over the next 12 months, 30.5% are “quite its current results; it needs to be more technology-confident” that trade will pick up, with 27.1% attuned,” he explains. “Too much emphasis is“confident” that their business will grow. Nearly / Industry View / put on high margins rather than efficient businessa quarter believe trading will remain the same, ‘Long-term prospects practices. History is littered with luxury apparelwhile 13.6% predict “it’s going to be tough”. Themajority – 55.6% – believe growth next year will are extremely good’ companies that forgot to run an efficient business. Let’s not forget that when all the glamour isbe driven by online sales. Guy Salter stripped away, you still have a business to run. If you have to flatten growth, it doesn’t meanThe Bain report estimates that the luxury Forecasts for continued growth in luxury are you have to flatten profits. You should begoods market will grow by 4% to 6% from 2013 positive across all markets and categories, but able to control your profitability with betterto 2015, pushing the sector to between €240bn the next 12 months could be challenging, and operating efficiencies.”(£192.3bn) and €250bn (£200.3bn) by 2015. sales increases are likely to be more modest While luxury businesses do have reason to be Mark Henderson, chairman of the London than in recent years. Ongoing uncertainty in optimistic, the industry is likely to experienceLuxury Quarter and non-executive chairman of the eurozone, the muted outlook for the UK a readjustment. Recent profit warnings andGieves & Hawkes, believes the luxury sector will economy and concerns about China’s slowdown in markets such as China mean thatcontinue to grow “because people want the best”. slowdown could have a short-term impact. companies will need to work harder to find He adds: “Tourism is growing, and London’s However, long-term prospects look good. I’m pockets of growth. There may be a short-termreputation is growing. The trend at the moment as excited as I have ever been about the future. slowdown, or even short-term losses, butis towards craftsmanship and individualism, Deputy chairman, Walpole businesses that understand their brand’s valueswhich supports the luxury sector’s values.” and adapt to a changing market will prosper.