Developmentof luxurybrands part 2

Gilles Chavet pour EMC Campus MBA 2012 / 2013

Development of luxury brands

MARKETS

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

The current crisis is changing

consumers trends :

Reduce & Reuse

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

Reduce & Reuse

• Shoppers are trying to update their wardrobes inexpensively

Reduce & Reuse

• Shoppers are trying to update their wardrobes inexpensively

• ... refreshing their looks with few key items and accessories

Polarize

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

Polarize

• Accelerating Cheap & Chic

Polarize

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

Valuefor

• Delay high-ticket and classic/basic purchases

Valuefor

• Delay high-ticket and classic/basic purchases• Booming season-end sales and discount

channels: outlets …

Valuefor

• Delay high-ticket and classic/basic purchases• Booming season-end sales and discount

channels• Willing to spend only for items and brands

who pass the worth-it test

Understatement

• Austerity is fashionable even for wealthiest consumers

Understatement

• Extravagant spending considered irresponsible or disrespectful

Understatement

• Extravagant spending considered irresponsible or disrespectful

• Luxury shame, impacting negatively logo and showy products: logos are getting smaller

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

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

• Despite current negative trends, marketfundamentals remain strong in the long-run• “New luxury segments” are emerging:working women, men, new generations,emerging markets

• Despite current negative trends, marketfundamentals remain strong in the long-run• “New luxury segments” are emerging:working women, men, new generations,emerging markets• Continuing growth of aspirational consumerbase (especially in Asian and emergingmarkets)

• Despite current negative trends, marketfundamentals remain strong in the long-run• “New luxury segments” are emerging:working women, men, new generations,emerging markets• Continuing growth of aspirational consumerbase (especially in Asian and emergingmarkets)• New opportunities may come from changingvalues and consumption habits

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

Mature ( 80%): Europe, USA, Japan New ( 14%):Middle East,Russia,South East

AsiaRising ( 6%): China, India, South America

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.

However, CRM everywhere

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

• Data collection

• Data collection• Development of after sale’s service

• Data collection• Development of after sale’s service• Luxury brands loose on average 80% of their

clients after their first buy

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

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• …/…

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

Bergdorf Goodman NYC

Distribution Japan :

• Presence in Major Department stores: Isetan, Takashimaya, Mitsukoshi.

• Presence with Retail free standing boutiques• Mostly Retail with dedicated structure locally

Isetan

Distribution Middle East:

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

country

Beware : Villa Moda

Villa Moda

Princess Deena Jeddah

Distribution Russia

• Boutique on Franchise contracts• Wholesale thru agent or distributor• Very rare to have Retail

Tsum Moscou

Distribution South East Asia :

country

Focus on Luxury Business in CHINA

a singular market ?

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.

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

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%.

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.

Cosmetics, perfumes and personal care

1.Chanel2.Lancôme3.Dior

Watches

1.Rolex2.Omega3.Cartier

Suitcases and handbags

1. Louis Vuitton2. Gucci3. Chanel

Menswear

1.Giorgio Armani2.Ermenegildo Zegna3.Versace

Jewelry

1.Cartier2.Tiffany and Co

1.Prada2.Chanel

Womenswear

1. Chanel2. Burberry3. GiorgioArmani

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.

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

Distribution in China :

country

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

Distribution India :

country • Very often stores are being developped with

luxury hotel chains

Depatment store in Bombay

Distribution South America :

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

country • Exemple Daslu in Sao Paulo

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?

Developmentof luxurybrands part 2

Business

Transcript of Developmentof luxurybrands part 2

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