Luxury destination

Luxury Destination

The European Institute of International
Management invites you to discover to-
day’s world luxury market !

Luxury destination 1 : India, a promising market for the luxury industry ?
India at a glance:
In the global luxury market, India can not be ignored anymore. The figures speak
for themselves : with a 13% growth rate since 2007, 126 000 millionaires and nearly 3 • Surface 3 287 263 km2
millions wealthy households, India has become a must-go destination for luxury brands.
• Number of inhabitants (2011):
1 210 193 422

• Which consumers for the Indian luxury market ? • Luxury market turnover (2010):
600 millions € (source: Berstein
First of all, one should notice that India’s population is very young: 75% of the people Research’s report)
are less than 36 years old and 600 millions inhabitants are under 25! No doubt, In-
dia’s future is assured! Thanks to the important number of millionaires, major brands
won’t have any difficulty to find their clients. However, despite the westernization of the
population, Indian culture shouldn’t be neglected: a cultural approach must be taken
into account to seduce the potential customers.
Sources:
With 18 official languages, more Conclusion:
than 1600 dialects, 80% of Hindu http://mluxe.fr/?p=336
religion, a system of castes that The Indian market presents irregulari-
remains a taboo and hundreds of ties. Despite the important number of http://www.cpp-luxury.com/en/
traditions, India remains a difficult new millionaires, India still shows a po- despite-economic-growth--india-s-
country to invest in for foreigners verty rate of 26% and an illiteracy rate luxury-market-remains-underdeve-
as the cultural gap with western of 39%. Furthermore, the existing in- loped_861.html
countries is deep. frastructure does not fit well the luxury qééé
market and the high tax rate remains a http://karvywealth.blogspot.
• What outlook for this sector? significant barrier. com/2010_10_08_archive.html

Even if India presents a huge potential for the luxury market (quick economical growth) However, India slowly opens its market http://www.inde-en-ligne.com/in-
several aspects slow down its development: to foreign countries and Indians consu- dex.php3
- High tax rate mers evolve rapidly. India remains a
- Numerous regulations highly potential market in which patient
- Lack of infrastructure investors can still wait to reap the fruit
However, millionaires population is increasing (+51% in one year), a progression of their labour.
that offers new opportunities for the luxury market.

IEMI - 52, rue Saint Lazare, 75009 Paris, France - Tel.: +33 (0)1 45 26 59 28 - http://www.iemi.com - Twitter: @IEMImanagement - Facebook: IEMI Management

Luxury destination 2 : Russia, still in the game on the luxury market.

Ever since the Bolshevik revolution in the 19th century, the French luxury has made itself Russia at a glance:
a privileged place in Russia. Boucheron, Cartier, Breguet have settled one after another, followed
• Surface: 17 098 242 km2
today by Chanel as well as Dior or Louis Vuitton. But after the financial crisis and the meteoric
appearance of luxury in Asia or Brazil, what about the Russian luxury market? • Number of inhabitants (2011):
142 914 136

• The luxury market (2009):
• Which consumers for the Russian luxury market? Russia account for about 7% of
the global luxury market
Besides the well-known Russian oligarchs and new rich for which the consumption
growth reaches 20% to 40% depending on the sector, Russia draws wealth from el-
sewhere. Indeed, according to a survey published by HSBC in « Courrier International Sources:
» in 2009, Russia received the world’s richest expatriates. « With almost half of the
foreign workers earning more than 200 000 USD a year, Russia ranks first before
http://www.cpp-luxury.com/en/russia-s-
Qatar, Saudi Arabia and HongKong ». luxury-market-unlikely-to-be-oversha-
dowed-by-newly-emerged-india-and-
• What outlook for this sector? Conclusion: brazil_1283.html

Russia is still in the race, holding a http://www.lecourrierderussie.
The Russian luxury market seems to have indirectly increased: Russian people have com/2011/02/11/marche-du-luxe-en-
growing part of the global luxury mar-
bought up to 20% more luxury goods abroad between 2009 and 2010. This can be russie/
ket, just as India, China or Brasil,
explained by the price difference: on average, 25% more expensive in Russia than in
western Europe and 15% more expensive than in Dubaï ! http://www.abc-luxe.com/arti-
The consumptions patterns in this sec- cle_2_1_8622_le-marche-mondial-
tor have certainly evolved, but Russia du-luxe-remontera-la-pente-des-2010.
Nevertheless, according to the CPP Luxury research, Russian purchasing tends to be
can still count on its billionaires to at- html
regionalized; in the same way, Russian taste in that sector tends to evolve. Until now
tract foreign investors. Bound since a
locked in a very statutory luxury, Russian oligarchs are changing their consumption
long time to the luxury world, the Rus- http://www.voyages-d-affaires.com/
patterns in favor of a less ostentatious luxury. destinations-affaires/villes-et-quar-
sian market has not said its final word !
To be continued … tiers-d-affaires/france-russie-au-vrai-
chic-moscovite


Luxury destination 3 : Luxury brands to conquer Brazil !

LVMH, Cartier, Chanel,... They all noticed the exponential growth of Brazilian market in the Brazil at glance:
luxury sector. Brazil currently booming economy sees the purchasing power of the middle class
and the number of millionaires increase rapidly. According to Forbes, Brazil presently counts 18 • Surface: 8 512 000 km2
billionnaires, i.e. a fortune of about 90.3 billion USD. All these reasons make the major luxury
brands, and especially the French ones, want to invest quickly in this country now the largest • Number of inhabitants (2010):
consumer of luxury in Latin America. 192 759 333

• Luxury market (2009):
Brazil represents approximately
• Which consumers for the Brazilian luxury market? 1% of global luxury goods market.
Despite the increase in living standards of the middle class, the consumption of luxury
goods is reserved for an elite. Indeed, customers in this sector only represents 10% of Sources:
the population (still equivalent to a market of nearly 20 million consumers ). The profi-
les of these luxury consumers is quite clear: 40% are between 26 and 35 years, 20%
between 36 and 45, and 63% are women. http://stats.oecd.org/index.
aspx?queryid=23113&lang=fr
Also, tastes and behaviors of this target are moving from a slightly ostentatious luxury
heavily influenced by fashion, to a preference for sophistication and quality. A trend http://www.ubifrance.fr/
Conclusion: conseil/001B1100995A+le-
clearly understood by the French luxury brands which already enjoy an excellent repu-
marche-du-luxe-au-bresil.
tation in the country.
html?SourceSiteMap=168
Brazil currently generates billion dollars
• What outlook for this sector? while its economic and social situation http://www.abc-luxe.com/bulletin_de_
is changing rapidly. presse2.php?id_art=11727
The Brazilian luxury market is very promising : Brazil achieves sales rising steadily, http://www.francemondexpress.fr/le-
with a turnover estimated at $ 8.2 billion this year, and rising by over 28% in 2010! Yet, the luxury market has not yet rea-
marche-de-luxe-au-bresil,1085.html
But much more than Rio, Sao Paulo is attracting investors with 75% of the luxury ched that of Europe and the United
sector consumption. States. Brazil remains a market under http://www.abc-luxe.com/arti-
construction, full of hope and opportu- cle_2_1_8622_le-marche-mondial-
Hermes opened its first store in 2009 and is about to repeat the experience. The fashion nity for the luxury sector. du-luxe-remontera-la-pente-des-2010.
house Chanel launched its first store in November 2010 and Petrossian, the caviar html
merchant, has just opened its first store in April 2011! In addition, LVMH, has just acqui-
red the Brazilian website Sack’s, which sells 270 luxury brands on the internet!


Luxury destination 4 : China, the new Eldorado of luxury ?
China at a glance :
A survey by Credit Lyonnais Securities Asia last February, estimated that 44% of luxury
goods sales will be carried out in China by 2020 against 15% currently. With more than 10,7 • Surface: 9 640 821 km km2
billion USD spent in luxury items in the first quarter of 2011, China is currently the world’s se-
cond largest customer in this sector. • Number of inhabitants (2010):
1 370 536 875

• Which consumers for the Chinese luxury market ? 40 billion EUR (tourism and
consumer good)
The number of millionaires in China has risen dramatically in the recent years, going
from 24 in 2000 to 1363 in 2010! Moreover, these new millionaires are 15 years youn- Sources:
ger than those in other countries. This factor is an explanation to the growth forecasts
of CLSA in this market for 2020.
http://www.lefigaro.fr/flash-
eco/2011/02/02/97002-
This new customer class goes together with a rise of living standards of the Chinese 20110202FILWWW00338-la-chine-le-
middle class. Luxury brands have already spotted it well and try to diversify their sales 1er-marche-du-luxe-en-2020.php
channels to adapt by investing in e-commerce for example.
Conclusion: http://www.chinadaily.com.cn/fr/selec-
tion/2010-04/28/content_9786766.htm
• What outlook for this sector ? The chinese consumption of luxury
goods is expected to reach 27 billion http://french.peopledaily.com.cn/Eco-
U.S Dollars by 2015.   With such pre- nomie/7427803.html
Percentage of sales Leather goods, ready to wear or jewelry dictions, China is becoming the largest
performed in China are facing a big hit with the Chinese, but consumer of luxury goods in the world. http://www.agentsolo.com/ca/en/blog/
not only in their own territory. China has in- orchimedia/la-chine-1er-marche-du-
deed overtaken Russia for the purchase A bright future but let’s keep some re- luxe-d-ici-2020
of authentic luxury goods while traveling serves. Recall that in terms of econo-
http://www.marketing-chine.com/eco-
in Europe. « On average, Chinese tourist my, the GDP per capita in China is far
nomie-chine/les-touristes-chinois-une-
spent 107% more compared to the pre- behind many other countries (1/10th of cible-privilegiee
vious year in duty-free shopping abroad some developed countries). In addition,
in 2010, with a peak of 130% in September adaptation to the Chinese market is still http://www.energie7.com/NET/fr/
compared to the same month in 2009 ». difficult for Western investors. document/2/bloc_home/elemdroite/
la_chine_en_bref/


Luxury destination 5 : south Korea, a rapidly growing market

The fast growth of the Asian market is often mentioned with China or India in mind, but South Korea at glance:
South Korea is no exception! With a business volume estimated at 1.8 billion euros in 2009,
Korea is one of the countries where the consumption of luxury goods shows the fastest growing • Surface: 99 274 km2
rate.
48 754 657
• Which consumers for the Korean luxury market ?
• Luxury market (2010):
Appearance plays a major role in Korean society today. Luxury goods are seen as a • 10% of the population owns 52%
guarantee of success and affirmation of the hierarchical status. The media and the of national wealth.
authorities also support this trend by encouraging the Korean consumer. Moreover, the • 89% of Koreans have at least
increase in living standards has opened the luxury market to a diverse clientele that one luxury item.
even includes teenagers!
Sources:
The graph shows that the Koreans are
less embarrassed to show ostentatious http://www.ubifrance.fr/coree-du-
luxury than their Western or Asian peers. sud/001B1102764A+le-marche-du-
(Source: McKinsey Report - «I feel that showing off Conclusion: luxe-en-coree-du-sud.html
luxury goods is in bad taste» % of respondents who
selected agree and strongly agree») http://coreeaffaires.com/2010/12/23/
Nowadays there are nearly 120,000
les-department-stores-une-institution-
Korean millionaires. With 19% growth en-coree/
in one year, this is the fourth highest
rate in the world after India, China and csi.mckinsey.com/~/.../CSI_2010%20
• What outlook for this sector ? Brazil. Korea%20Luxury%20Report.ashx

Socially and culturally speaking, Ko- http://www.asianarchitecture.info/Buil-
For now, the best performers are accessories (jewelry, handbags, watches), ready- reans are very concerned about the ding/4324/The-Galleria-Department-
to-wear as well as cosmetics. There is a constant progression of men’s fashion. But image they relate and therefore very Store-Luxury-Hall-West.php
luxury is not limited to these products and the trend is a diversified consuming. Today sensitive to luxury items. Thanks to its
leisure, housing, decorating and travel come into force on the sector. dynamism, Korea is expected to reach
Department stores such as The Galleria are still the preferred distribution network, but at the end of 2011 the highest growth
duty free stores and especially online sales have encountered for some time a very rate (4%) in the OECD.
strong growth.


Luxury destination 6 : Turkey, a country in economic boom.
Turkey at glance:
Turkey, currently the 17th largest economy, shows unprecedented growth: 8.9% in
2010 (almost 2 points higher than government projections) and 11% in first quarter 2011. • Surface: 783 562 km2
Where does the luxury industry stand in this booming economy?
78 785 548

• Which consumers for the Turkish luxury market ? Turkey is about 0,5% of global
luxury market.
The major luxury brands concentrate in Istanbul. Beyond the products, tourism meets
the most success in this market of nearly 270 billion euros. Turkey has many benefits Sources:
for travelers: a sunny location, leisure resorts but also a rich cultural history.
http://www.cpp-luxury.com/en/turkey-
Indeed, Istanbul was appointed “European Capital of Culture” by the European Union boasts-the-most-dynamic-luxury-mar-
in 2010. It attracted many visitors from Europe or neighboring oil-producer countries ket-in-eastern-europe_692.html
such as Syria The results of retail sales of clothing and luxury accessories are encou-
raging, with a 5% growth in 2010 (CCP). Conclusion: http://www.hurriyetdailynews.com/n.
php?n=turkey8217s-luxury-consump-
tion-market-may-grow-2011-01-30
• What outlook for this sector ? After some hard times in 2009, the
Turkish luxury market seems to re- http://www.propgoluxury.com/EN/Pro-
Today Turkey accounts for 0.5% of the global luxury goods market. However, accor-
cover with a stronger economic bac- pertyNews/Turkey/1174-real-estate-
kground. activity.html
ding to the «The New World of Luxury» report of The Boston Consulting Group, the
opportunities in this sector should increase in the upcoming years. http://www.turquie-news.fr/spip.
Tourism, leisure and luxury real es- php?article6669
Moreover, Turkey is attracting more and more foreign investors. Indeed, it has attrac- tate seem to benefit from this econo-
ted, in 2010, Foreign Direct Investment (FDI) worth a total of $ 9.1 billion, ranking mic boom, making Turkey an attrac- http://www.cpp-luxury.com/en/the-tur-
the 27-th place on the list of the most attractive destinations in terms of FDI from the tive country for foreign investors. kish-luxury-market-drops-despite-pre-
United Nations Conference on Trade and Development (UNCTAD). vious-reports_490.html


Luxury destination 7 : italy, a pillar of the world of luxury.

Along with France and Switzerland, Italy has been bearing for a long time the values of Italy at glance:
luxury. Leather goods, jewelry, fashion, design... Italian know-how is recognized and appreciated
• Surface: 301 338 km2
all around the world. But the European market of luxury is now mature and growth has slowed
sharply because of the economic crisis. What is the future like for Italian luxury leaders such as • Number of inhabitants (2010):
Prada, Armani, Versace or Salvatore Ferragamo? 60 642 308

• Which consumers for the Italian luxury market ? Italy is about 20% of global luxury
market.
After a very bad year in 2009, the European luxury market is slowly recovering (+3% in
2010). But if the wealthy Italian customers contributed to this rebound, especially with
regard to «Ultraluxe» sales, the Italian luxury revival is not due to European consump- Sources:
tion. Again, the market leaders have turned to the Eastern countries to find promising
customers. Chinese, Korean and Indian are sensitive to the prestigious image of http://www.nytimes.com/2011/06/25/
Italian brands that embody a guarantee of social success. business/global/25iht-luxury25.html?_
r=2&pagewanted=all
Thus, Prada entered the Hong Kong Stock Exchange on June 24th and the executive
director of the foundation Altagamma, Armando Branchini, does not hide the group http://www.cpp-luxury.com/en/ita-
consisting of the biggest Italian luxury names wish to invest in India in the coming
Conclusion: lian-luxury-hospitality-market-still-in-
years. red_1222.html
While the Italian economy slows, the
luxury sector is dynamic and boosted http://www.bfmbusiness.com/tags/
• What outlook for this sector ? by Asian grotwh. For several months, armani/le-luxe-italien-en-pleine-muta-
big changes are occuring in the most tion-55780
The Italian luxury is dominated by medium-sized family businesses, it is also what beautiful Italian brands.
http://www.altagamma.it/sezione2.
allowed the French giants LVMH and PPR to buy Fendi, Pucci, Gucci, Bottega Ve-
php?Id=10
neta and recently the jeweler Bulgari. If emerging markets are the current
But despite this situation, the Italian luxury market is doing well. According to Alta- target for Italian brands, no mistake www.entreprises.ccip.fr/c/document_li-
gamma, the strongest growth this year should be recorded by the leather products, should be made: Europe remains a key brary/get_file?uuid...c8d3...
footwear and accessories (12.5%), watches and jewelry (11.5%) and clothing (10 %). market. The luxury brands still made a
Perfumes and cosmetics are expected to grow by 6.5% and tableware by 3.8% large part of their turnover in Europe.


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