Developing Luxury Brands for Changing Consumer Trends

Development of luxury brands

MARKETS

Gilles Chavet pour EMC Campus MBA 2012
/ 2013

Development of luxury brands

• Crisis or not ??? (Exemple : Tiffany profits Fall
29.6%)

• Necessity to project a positive image AT ALL
TIMES not to worry investors.

• And Adapt to all situations
/ 2013

The current crisis is changing
consumers trends :

/ 2013

Reduce & Reuse
• Consumers “shop their closets”, reusing
purchases from past years

/ 2013

Reduce & Reuse
• Shoppers are trying to update their wardrobes
inexpensively

/ 2013

Reduce & Reuse
• Shoppers are trying to update their wardrobes
inexpensively
• ... refreshing their looks with few key items
and accessories

/ 2013

Polarize

• Down-trading on fashion items, investing in
evergreen items

/ 2013

Polarize

evergreen items
• Accelerating Cheap & Chic

/ 2013

Polarize

evergreen items
• Accelerating Cheap & Chic
• Fast Fashion players winning the game

/ 2013

Value
for
Money
• Delay high-ticket and classic/basic purchases

/ 2013

Value
for
Money
• Booming season-end sales and discount
channels: outlets …

/ 2013

Value
for
Money
• Booming season-end sales and discount
channels
• Willing to spend only for items and brands
who pass the worth-it test

/ 2013

Understatement
• Austerity is fashionable even for wealthiest
consumers

/ 2013

Understatement
consumers
• Extravagant spending considered irresponsible
or disrespectful

/ 2013

Understatement
consumers
• Extravagant spending considered irresponsible
or disrespectful
• Luxury shame, impacting negatively logo and
showy products: logos are getting smaller

/ 2013

Despite the crisis, long-term
prospects for the
luxury market remain strong

• Despite current negative trends, market
fundamentals remain strong in the long-run

/ 2013

prospects for the

• “New luxury segments” are emerging:
working women, men, new generations,
emerging markets

/ 2013

prospects for the
emerging markets
• Continuing growth of aspirational consumer
base (especially in Asian and emerging
markets)

/ 2013

prospects for the
emerging markets
• Continuing growth of aspirational consumer
base (especially in Asian and emerging
markets)
• New opportunities may come from changing
values and consumption habits

/ 2013

The markets of the Luxury Industry:
Mature, New, Rising

Mature ( 80%): Europe, USA, Japan
New ( 14%):Middle East,Russia,South East
Asia
Rising ( 6%): China, India, South America

/ 2013

How the luxury industry adapts to
those different markets:

Each market is different and there is a
necessity to adapt and diversify the
way of doing things according to
market specificities.
/ 2013

However, CRM everywhere
• Put in place a few years ago, it’s starting to pay
off.

/ 2013

off.
• Data collection

/ 2013

off.
• Data collection
• Development of after sale’s service

/ 2013

off.
• Data collection
• Development of after sale’s service
• Luxury brands loose on average 80% of their
clients after their first buy

/ 2013

Distribution Europe : headquarters
often settled there /Advantages

- Retail network in free standing boutiques and
department stores.
- Franchise stores and identified corners
- Distribution in multi brand stores

/ 2013

Best streets in Europe
• Bond street & Knightsbrige London
• Avenue Montaigne & Fbg St honoré Paris
• La croisette Cannes
• Rue du Rhône Genève
• Via Monte Napoleone Milano
• Via Condotti Roma
• …/…

/ 2013

Distribution USA:
• Presence in department stores : Bergdorf
Goodman, Saks Fifth Avenue, Neiman Marcus,
Barneys.
• Presence with Retail free standing stores in
key streets : Madison in NYC , Rodeo Drive in
Beverly Hills.
• Outlets

/ 2013

Bergdorf Goodman NYC

/ 2013

Distribution Japan :
• Presence in Major Department stores: Isetan,
Takashimaya, Mitsukoshi.
• Presence with Retail free standing boutiques
• Mostly Retail with dedicated structure locally

/ 2013

Isetan

/ 2013

Distribution Middle East:

• Boutique on Franchise contracts
• Wholesale thru agent or distributor
• Very rare to have Retail unless key man in
country

/ 2013

Beware : Villa Moda

/ 2013

Villa Moda

/ 2013

Princess Deena Jeddah

/ 2013

DNA

/ 2013

Distribution Russia

• Very rare to have Retail

/ 2013

Tsum Moscou

/ 2013

Distribution South East Asia :

country

/ 2013

Focus on Luxury Business in CHINA

a singular market
?

/ 2013

/ 2013

British carmaker Bentley sells more Mulliner
728 limousines, the world’s most expensive
car at US$1.2 million each, in Beijing than in
any other city in the world.

/ 2013

Facts :
• 80% of sales of luxury goods are purchased
by mens
• As of 2010, China is the world's second largest
consumer market for luxury goods, next only
to Japan,and having surpassed the United
States in 2009.
• By 2014, China could surpass Japan by
representing 26% of luxury goods sales

/ 2013

Facts ( cont .):
• Chinese luxury goods consumers are younger than their
European counterparts, belonging to the 18-50 age group,
compared to Europe's consumers who are generally in the
over 40 age group. For this reason, China's luxury goods
market is expected to grow faster than that of Europe's.
Many of the young luxury goods buyers are self-employed
or professionals. According to the consulting firm McKinsey
& Company, 80% of Chinese luxury goods buyers are under
45, compared with 30% of luxury goods buyers in the
United States and 19% in Japan. According to a report by
the World Luxury Association, Chinese consumers spend a
larger proportion of their income for luxury goods
compared to the world average of 4%.

/ 2013

Facts ( cont. ):
• According to 2007 Global Luxury Survey by
Time magazine, most luxury goods buyers in
China buy luxury products as a status symbol.
The top five luxury watch brands in the
country are Rolex, Omega, Cartier, Vacheron
Constantin, and Breitling.

/ 2013

Cosmetics, perfumes and personal
care
1.Chanel
2.Lancôme
3.Dior

/ 2013

Watches

1.Rolex
2.Omega
3.Cartier

/ 2013

Suitcases and handbags

1. Louis Vuitton
2. Gucci
3. Chanel

/ 2013

Menswear

1.Giorgio Armani
2.Ermenegildo Zegna
3.Versace

/ 2013

Jewelry

1.Cartier
2.Tiffany and Co

/ 2013

Shoes

1.Prada
2.Chanel

/ 2013

Womenswear

1. Chanel
2. Burberry
3. GiorgioArmani

/ 2013

How luxury brands have to adapt to
Luxury market in China:

• Implement retail networks, dealing with local
landlords and possible investors. Necessity to
increase margin to overcome duty cost &
implantation costs ( rent, fees to investors,
banks …)
• Lack of workforce at the managing level:
necessity of settling training programs.

/ 2013

Cont. :
• Necessity of not manufacturing locally
• Watch and deal with counterfeits production.
• Adapt communication to this particular
market : choose “icons”: Nicole Kidman,
George Clooney
• Adapt to younger age group

/ 2013

Distribution in China :

country

/ 2013

Distribution : India's Luxury Market
Up 20% in 2010

/ 2013

Distribution India :

country
• Very often stores are being developped with
luxury hotel chains

/ 2013

Depatment store in Bombay

/ 2013

Distribution South America :

• Very few wholesalers thru agent or distributor
country
• Exemple Daslu in Sao Paulo

/ 2013

Daslu

/ 2013

Quizz
1. Bergdorf Goodman is a store in London ?
2. Luxury brands have to adapt to market’s
specificities ?
3. Chinese women are bigger spenders that
men?
4. It’s easy to start retail operations in China ?
5. On average,chinese luxury goods consumers
are younger than their European
conterparts?
/ 2013

Developing Luxury Brands for Changing Consumer Trends

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