ALTAGAMMA 2018 WORLDWIDE LUXURY - THE FUTURE OF LUXURY: A LOOK INTO TOMORROW TO UNDERSTAND TODAY
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ALTAGAMMA 2018 WORLDWIDE LUXURY MARKET MONITOR THE FUTURE OF LUXURY: A LOOK INTO TOMORROW TO UNDERSTAND TODAY CLAUDIA D'ARPIZIO | FEDERICA LEVATO
METHODOLOGICAL FOREWORD – SCOPE REVISION, TO FOCUS PERSONAL
LUXURY GOODS MARKET ON CORE CATEGORIES
Personal luxury goods market | €B
• Market definition as per • Excluding art-de-la-table • Restated new personal
Bain luxury study 2017 (now included into High- luxury goods market1
(May-18) Quality Design and
Homeware) and other
residual categories
GLOBAL
PERSONAL
LUXURY GOODS
MARKET
RESTATEMENT CHI Burberry discussion June 2018v3
Note: (1) Personal luxury goods market includes Apparel, Accessories, Hard luxury and Beauty
2GLOBAL LUXURY MARKETS: ~1.2T€, WITH 5% REAL-TERM GROWTH IN 2018
Global luxury goods markets | €B
@K: Growth at constant exchange rates
+1%
+5%
@K
2018
GROWTH
’17-’18E
@K 6% 5% 5% 4% 6% 6%
CHI 4%
Burberry discussion June 2018v3 -3% 7%
3PERSONAL LUXURY GOODS MARKET OVERPERFORMING OTHER LUXURY
SEGMENTS IN 2018
Global luxury market by category | %
• Personal luxury goods gaining
traction in the last year
• Intimate and less “showy”
experiences are expected to be
more valued by consumers, in
particular younger ones
• Luxury Toys and Out-of-home
experiences keeping a positive
trend, but slowing down vs. the
past, approaching a maturation
phase
@K: Growth at constant exchange rates
Note: At-home luxury includes Fine Art, High-quality design furniture & homeware, Fine Wines&Spirits and Gourmet Food; Out-of-home
CHIluxury includesBurberry
Luxury hospitality,
discussion Cruises and Fine dining; Luxury Toys includes Luxury
June 2018v3
cars, Private Jets and Yachts
4LUXURY TOYS FINE ART & DESIGN FOOD&BEVERAGE OUT-OF-HOME
FURNITURE EXPERIENCES EXPERIENCES
• Positive (but • Recovery of public • Continuing positive • Positive growth in
softening) luxury auctions boosting momentum for real terms for luxury
cars market; fine arts market, Spirits, boosted by hotels; travel
Aspirational segment online penetrating increasing demand becoming a “state
outperforming higher price ranges for exclusive clubs of mind” with hotel
• Lackluster trend for • Solid growth in real and craft spirits evolving into social
luxury yachts, despite terms for high • Low single-digit venues in-sync with
surging interest quality design growth for Wines the city
among Chinese furniture, sustained • Strong Food • Booming demand
consumers by living & market; “ethical for luxury cruises –
• Private jets market bedroom and eating” paramount best performing
on the decline, hit by outdoor; direct trend, with constant luxury market
cannibalization from channel thriving; quest for segment in 2018 in
second-hand ongoing transparency on real terms, with
segment consolidation trend food quality and expedition
origin segment confirmed
CHI Burberry discussion June 2018v3
as star performer
5PERSONAL LUXURY GOODS MARKET IN 2018 CONFIRMED THE “NEW
NORMAL” STARTED IN 2017
New
“Sortie du temple” Democratization Crisis Chinese bulimia Reboot normal
'17-18EYoY
'96-'18ECAGR
+2% Current
CHI
+6%Burberry discussion June 2018v3
+6%
Exch. rate
Constant
Exch. rate
6SOLID MID-TERM GROWTH TO 2025, DRIVEN BY POSITIVE FUNDAMENTALS,
WITH SOME POSSIBLE BUMPS ALONG THE ROAD
Personal luxury goods market forecast | €B
SOLID MID-TERM MACRO
FUNDAMENTALS
• Comforting mid-term macroeconomic
outlook going forward, which will sustain
a positive consumer confidence
+3 / 5 %
18E–25
CAGR
2
+ %
BUMPY ROAD
YoY
• Possible bumps along the road (e.g.
6
+ %
socio political issues, government
@k
commercial policies, possible short-term
soft recessions,…) could make the path
less smooth
CHI Burberry discussion June 2018v3
@K: at constant exchange rates
7LUXURY IN 2025 WILL BE A DIFFERENT PLACE
E-COMMERCE, ONLINE, FOOTPRINT
MORE CHINESE-DRIVEN
DIGITAL CONSOLIDATION
PURCHASES
…PERMEATING EVERY …RESHAPING THE STORE
…HAPPENING IN CHINA
SINGLE PURCHASE OF THE FUTURE
CULTURES AND
A YOUTHFUL MARKET ONE MARKET
(SUB)CULTURES
…DISRUPTING GROWTH …SERVING MARKETS OF
…TAKING OVER
PATHS ONE
CONSUMPTION TRENDS
DIFFERENTLY PROFITABLE BRANDS
…NIMBLE IS THE NEW BLACK
CHI Burberry discussion June 2018v3
8MORE CHINESE-DRIVEN PURCHASES… HAPPENING IN CHINA CHINESE CUSTOMERS WILL ACCOUNT FOR 45%+ OF THE MARKET… AND HALF OF THEIR LUXURY PURCHASES WILL HAPPEN IN THEIR HOME COUNTRY
CHINA AND CHINESE CONSUMERS TO CONTINUE DRIVING THE INDUSTRY:
LION’S SHARE IN 2025; MATURE MARKETS DECREASE THEIR RELEVANCE
Personal luxury goods market Personal luxury goods market
by geography | €B by consumer nationality | €B
TREND 17-25E @K TREND 17-25E @K
~
CHI Burberry discussion June 2018v3
Note: RoW = Rest of the World @K: At constant exchange rates
Trend at constant exchange rate (increasing, decreasing, flat) 10CHINA IS EXPECTED TO REMAIN THE MAIN GROWTH ENGINE OF THE LUXURY
MARKET IN THE COMING YEARS
Personal luxury goods market
by nationality and consumption location | €B • Chinese consumers continuing to grow
their purchases: both enthusiastic
international shoppers and local
consumers
• Chinese local consumption booming
and expected to grow rapidly going
forward, due to healthier fundamentals
- Lower price differentials
- Improved customer experience and reach
(safer to buy also online vs. the past)
- Possibly reduced import taxes
- Chinese government policies on boosting
internal consumption (e.g. Daigou channel
crack down)
CHI Burberry discussion June 2018v3
11POSITIVE GROWTH ACROSS THE BOARD IN 2018. CHINA AND CHINESE
CONSUMERS LEADING THE GROWTH
Personal luxury goods market Personal luxury goods market
by geography | €B by consumer nationality | €B
TREND 17-18E TREND 17-18E @K
-6% ±0% @k
+7% +9%
+18% +20%
+3% +6%
-1% +5%
+1% +3%
CHI Burberry discussion June 2018v3
Note: RoW = Rest of the World @K: At constant exchange rates
Trend at constant exchange rate (increasing, decreasing, flat) 12OVER THE LAST 3 YEARS, CHINESE SPENDING IN CHINA HAS CONTRIBUTED
TWICE AS MUCH GROWTH AS CHINESE SPENDING ABROAD
Chinese spending growth contribution: Local Spending major drivers:
Locally vs. abroad | €B Price-Volumes effects
LOCAL SPENDING
2x • Price harmonization
PRICE • Global price evolution
• Product mix effect
• Currency effect
• New-to-market
VOLUMES customers (Mid-class
and Gen Z)
• Government import tax
reduction
CHI Burberry discussion June 2018v3
13EUROPE LAGGING BEHIND DUE TO STRONG CURRENCY; SOLID AMERICA
(IN REAL TERMS); ASIA AND CHINA OUTPERFORMING
China Asia Japan Europe Americas RoW
• Lion’s share of the • Good performance • Soft local • Mildly positive local • Boost of local • Negative Middle
growth of HK and Macau, purchases, consumption, with purchases, driven by East due to low local
• Consumers valuing benefitting from increasingly pushing mixed country positive US consumer
trendy products and Chinese purchases brands to find new performance economic cycle; yet confidence,
tailored initiatives • Dynamic S. Korea, solutions to bring brands are mindful hit by government
• Online booming, with strong local them back to stores • Strong currency of a possible short- spending restriction
impacting tourist term soft recession
supported by consumption • Brands starting to
increased • Brisk growth in other rethink distribution spending • Strong dollar
investments Asian countries model in light of impacting Asian and
(Singapore, Thailand increased touristic Latam tourists
& Taiwan) consumption • Canada and Mexico
strong; Brazil
impacted by political
@K: +20%
uncertainties
+9%
€80B €12B
+6% +5%
€23B €39B €22B €84B +3% ±0%
'18E VS '17 Note: RoW = Rest of the World @K: Growth at constant exchange rates
CHI Burberry discussion June 2018v3
14AMERICAS AND ASIA ENJOYING ROBUST LOCAL DEMAND, WHILE EUROPE
AND JAPAN CONTINUING ON A SOFT TREND
2017-2018E Personal luxury goods market by consumers: local vs. tourists
TREND 17-18E EUROPE AMERICAS M. CHINA JAPAN ASIA ROW
LOCALS
TOURISTS
MAIN • Strong Euro • US strong economy • Lower price • Continued interest • Local consumption • Oil price drop in
affecting tourists’ driving up differentials and from Chinese on the rise Middle East
DRIVERS purchasing power disposable income stricter controls tourists sustained by strong affecting locals’
and spending from on borders fueling economic growth of disposable income
• Tourists leveraging
locals local consumption emerging markets
cheap flights to • Turbulent political
(Vietnam,
• US West Coast still reach main situation impacting
Philippines)
17-18E “hot destination” shopping cities tourist flow (both
GROWTH for tourists, yet offset (e.g. Kyoto and • Chinese tourists extra and intra
by drop of tourists Osaka) continuously regional)
+ 4% LOCAL
SPEND elsewhere
CHI
providing an extra-
Burberry discussion Juneboost
2018v3
+ 0%
TOURIST
SPEND Growth trend (increasing, decreasing, flat) 15STRONG EURO IMPACTING TOURIST SHOPPING, EXCEPT FOR FRANCE;
AVERAGE TICKET INCREASE PARTIALLY OFFSETTING VOLUME REDUCTION
2017-2018E European personal luxury goods tax free shopping growth in local currencies
FRANCE ITALY SPAIN UK GERMANY
(in GBP)
AVERAGE TICKET
TRANSACTIONS
CHI Burberry discussion June 2018v3
NOTE: figures refer to Jan-Sep period
16E-COMMERCE, ONLINE, DIGITAL… PERMEATING EVERY SINGLE PURCHASE
ONLINE CHANNEL WILL REPRESENT 25% OF THE
MARKET VALUE.
100% OF LUXURY PURCHASES WILL BE INFLUENCED
BY AN ONLINE INTERACTIONONLINE FASTEST GROWING CHANNEL, CONTINUING ITS FULL INTEGRATION
WITH PHYSICAL: FROM 10% IN 2018 TO 25% BY 2025
Personal luxury goods market by channel | €B • Online accelerating and
gaining share toward physical
GROWTH TREND
17-18E 18E-25F @K channel: ecosystem of
business models, going
+7%
beyond regional boundaries
+7%
-4% • New technologies will further
enrich shopping experience
and connectivity: mobile and
+1% beyond
• Physical channels will re-
shape their purpose and
+0%
ONLINE mission, focusing on the core
elements of value: Airport
+22% retailing and Off-price to reach
full-potential; more traditional
channels downsizing and
CHI evolving their roles
Burberry discussion June 2018v3
Trend at constant exchange rate (increasing, decreasing, flat) 18IN 2025 ONLINE WILL INFLUENCE EVERY SINGLE LUXURY PURCHASE AND
DIGITAL WILL ENABLE ~50% OF THEM
Online-INFLUENCED purchases in the luxury market
Awareness Continuous integration and convergence between
70% 2018 e-commerce websites and digital
content/marketing platforms:
• Social media enhanced with E-commerce
capabilities
Consideration ~100% 2025 • E-commerce website enriched with editorial
content
Digitally ENABLED purchases in the luxury market
Implementation of technologies throughout the
Purchase entire value chain to support the digital enabling:
15-20% 2018 • Virtual Reality
• Internet-of-Things
• Mobile payments
Loyalty ~50% 2025
• “Smart” Inventory and Supply Chain
CHI management
Burberry discussion June 2018v3
19ASIA CHAMPION REGION, BOOMING HARD LUXURY AND KEY PARTNERSHIPS
AMONG PLAYERS ENABLING THE ONLINE CHANNEL
Personal luxury goods online market ONLINE ONLINE
by key segment | €B '13-'17 24% '17-'18E 22%
TREND 17-18E CAGR YOY
• Asia still the main growth engine, yet with room to
further grow in some countries
• Europe with positive trend; US growing slower than other
regions
• Booming hard luxury, enjoying the initial focus of
specialized players on the channel
• Accessories and beauty confirming to be “ideal”
categories for an online purchase (e.g. no fit issues)
• Apparel lagging behind, penalized by the category
slowdown in the market
• Brands implementing dedicated strategies to take the
channel at full potential through their own websites
• E-tailers continuously innovating their value proposition
CHIalso leveraging exclusive
Burberry discussion June 2018v3 partnerships with brands
China incl. official channels only
20FOOTPRINT CONSOLIDATION… RESHAPING THE STORE OF THE FUTURE
DIGITAL PENETRATION WILL LEAD TO PHYSICAL
DISRUPTION: NETWORK CONSOLIDATION.
STORES WILL INEVITABLY CHANGE: FROM POINT OF
SALES TO POINT OF TOUCHMONOBRAND NET STORE OPENINGS IN CONTRACTION – DUE TO IN-STORE
TRAFFIC DECLINE – RESHAPING THE ROLE OF PHYSICAL STORES
Fashion & Accessories same-store traffic …impacting future luxury retail
declining in recent years… net store openings
Fashion & Accessories same store traffic YoY change | % Luxury retail net openings evolution (#DOS)
-65% 2018 vs. 2012
CHI Burberry discussion June 2018v3
Source: ShopperTrak and Wells Fargo Securities
22DIGITAL PENETRATION WILL LEAD TO FOOTPRINT CONSOLIDATION WITHIN
LUXURY INDUSTRY, AS ALREADY HAPPENED IN OTHER SEGMENTS
Real estate disruption index by internet penetration level
MAJOR
DISRUPTION
DISRUPTION Real estate disruption
LIMITED
DISRUPTION
MINOR
DISRUPTION
NO
DISRUPTION
Source: Bain elaborations on Cushman & Wakefield data
Note: Real estate disruption measured along different dimensions (real estate vacancy rate, rent/sqm, store closings rate,…)
Internet penetration
CHI
2017 %
Burberry discussion June 2018v3
23ROLE OF THE STORE TO INEVITABLY CHANGE: FROM POINT OF SALES TO
POINT OF TOUCH, A 360° CHANGE IN THE APPROACH TO CUSTOMERS
TODAY TOMORROW
Strategic
REGIONS CITIES
focus
SILOES
Span ECO-SYSTEM
LIMITED (OMNI)CHANNEL
PASSIVELY FOLLOWING PROACTIVELY INTERCEPTING
Customer
THE CUSTOMER THE CUSTOMER
Offer BY FORMAT CURATED
REGIONAL P&L vs. CITY P&L INTEGRATING
Vision
E-COMMERCE P&L CHI
DIGITAL and PHYSICAL
Burberry discussion June 2018v3
24IN 2018 SUSTAINED RETAIL PACE, DRIVEN BY ORGANIC GROWTH; WHOLESALE
SLOWED DOWN DUE TO WEAK DEPT. STORES & SPECIALTY
Personal luxury goods growth by channel | %
WHOLESALE RETAIL
• High-end department store under recovery, accessible segment • Like-for-like performance driving 2/3 of retail channel growth
struggling
• Perimeter expansion sustained also by network buybacks in
• Specialty stores slowing down suffering from tough online specific geographies
competition
38%
37%
2018
2017
62%
63%
2018
2017
XX% Incidence on total market CHI Burberry discussion June 2018v3
25A YOUTHFUL MARKET… DISRUPTING GROWTH PATHS NEW GENERATIONS WILL DELIVER ~130% OF THE MARKET GROWTH… WITH GEN Z SHOWING ORIGINAL TRAITS VS. GEN Y, TO BE PROPERLY ADDRESSED
YOUNGER CUSTOMERS WILL REPRESENT ~55% OF THE MARKET IN 2025 AND
WOULD DELIVER ~130% OF TOTAL GROWTH OVER THE 2018-2025 PERIOD
Personal luxury goods market Personal luxury goods market growth
by generation | €B by generational contribution | €B
CHI Burberry discussion June 2018v3
27GEN Z ALREADY SHOWING ORIGINAL TRAITS vs. MILLENNIALS, WITH LOCAL
SPECIFICITIES EMERGING
FLUID INDIVIDUALISTS
BACK IN THE
GEN Z
UBIQUITOUS STORE
(BUT CONNECTED)
MILLENNIALS
UNIVERSAL LOGO-LOVERS
(BUT NO BRAND LOYAL)
CHINESE GEN Z
SOCIAL
LUXURY-ATTITUDE
NOMAD SOCIAL CONSUMERS
MINDFUL CHINESE PRIDE
CHI Burberry discussion June 2018v3
28YOUNGER GENERATIONS DELIVERED THE ENTIRE MARKET GROWTH IN
2018; GEN Y WITH A LEADING ROLE; GEN Z READY TO TAKE OFF
Personal luxury goods Personal luxury goods millions Contribution to total market growth of Gen Z and
consumers by generation | €B of consumers by generation Gen Y (%)
~100%
2018 ~85%
2017
• Younger generations are the key driver of
“changes” in the industry, forcing brands to evolve
and innovate across different dimensions (e.g.
product offering, communications territories and
media,…)
CHI Burberry discussion June 2018v3
29CULTURES AND (SUB)CULTURES… TAKING OVER CONSUMPTION TRENDS
CULTURES/SUB-CULTURES AND
NEW CONSUMPTION PATTERNS WILL ARISE…
CATEGORIES WILL BLEND: BRANDS MUST BE
DYNAMIC AND RESPONSIVE TO ADAPTCULTURES AND SUB-CULTURES ARE TAKING OVER THE CONSUMPTION
CULTURES WILL EAT (SUB)CULTURES AND
(PRODUCT) STRATEGY IDEAS WILL BECOME
FOR BREAKFAST FASHION MAINSTREAM
2025
CULTURALLY
INCLUSIVE MODELS
NEW SHAPES EMBRACING
BODY DIVERSITY
(NEW) CHANNELS FOSTERING
2nd LIFE OF LUXURY
C-Millennials Gender
CHI Burberry discussion June 2018v3
M-Millennials Minorities 31…CURRENTLY GENERATING MATERIAL RESULTS
CULTURES WILL EAT (SUB)CULTURES AND
(PRODUCT) STRATEGY IDEAS WILL BECOME
FOR BREAKFAST MAINSTREAM
THE RISE OF FASHION THE LIBERATION OF WOMEN AND
M-MILLENNIALS DEMOCRATISATION OF SHAPES
~40% ~20%
SHARE OF MODEST SHARE OF «INCLUSIVE»
«ACCEPTED» FASHION IN LUXURY APPAREL ON
TOTAL WOMAN LUXURY TOTAL WOMAN LUXURY
READY-TO-WEAR CHI Burberry discussion June 2018v3
READY-TO-WEAR
32LUXURY 2ND-HAND MARKET SURGING SPECIALLY IN EUROPE, ONLINE AND
HARD LUXURY; STRONG TRACTION AMONG YOUNGER GENERATIONS
PRODUCT
Personal luxury goods • Hard luxury (watches mainly) & Accessories (bags)
second-hand market | €B
• Strong presence of Limited editions & Iconic items
9% CAGR ’15-18E
CHANNELS
• Still mainly physical (small local stores)
• Online fastest growing, boosted by emerging specialized platforms
GEOGRAPHIES
• Europe key geography, followed by US
• Dynamism in Japan, while China (still) marginally present
GENERATIONS
• Strong traction from younger generations, particularly
“opinionated” millennials
BENEFITS FOR LUXURY PLAYERS
• New customers acquisition and brand awareness
• Sellers reinvesting their gains in new luxury purchases
CHI Burberry discussion June 2018v3
33SHOES AND JEWELRY CONFIRMED GROWTH DRIVERS IN 2018, FOLLOWED
BY ACCESSORIES AND BEAUTY; APPAREL SUFFERING
Shoes Jewelry Bags Beauty Watches Apparel
• Still on the rise, on • Confirmed among top • Confirmed brisk • Cosmetics driving • Flat performance of • Womenswear
the tailwind of the performing growth, sustained by growth, with make-up watches, with mixed positive growth offset
ongoing category, sustained entry and trendy maintaining a positive regional trends by negative
casualization trend by Asians and items growth, and skincare (lackluster Europe, menswear
growing younger booming more dynamic Asia) performance
customers (particularly from US
• Beauty at the forefront • Women watches
gaining share, & European giants)
of high-tech innovation
mainly on jewel-
• Indie brands (skin care
watches
and make-up) on the
'18E VS '17 rise thanks to new
business models
• Flattish performance of
fragrances
€60B
€19B €18B €51B €56B €37B
CHI Burberry discussion June 2018v3
34ONE MARKET… SERVING MARKETS OF ONE GROWTH MODEL WILL OVERCOME CURRENT BOUNDARIES, SHAPING NEW COMPETITIVE MAPS. BRANDS WILL BECOME EXCELLENCE/IDEA PLATFORMS, ENLARGING THEIR RELEVANCE
BRANDS WILL CROSS-OVER TYPICAL COMPETITIVE BOUNDARIES,
CONVERGING INTO ONE MARKET
Fashion & sportswear cross over Cross-segment competition in 2017 personal goods market
PRODUCT SEGMENT
LIFESTYLE
Luxury €200B
FASHION
BRANDS
€158B Premium
STYLE
FASHION SPORT
€319B Mass
SPORT
WEAR €186B
BRANDS
SPORT SPECIALISTS
2017 Global Burberry
CHI personal goods
discussion market: soft (apparel, shoes, leather goods,
June 2018v3
accessories) and hard (watches and jewelry)
36THE GROWTH MODEL WILL EVOLVE LEADING TO THE RISE OF
MONOGRAPHIC BRANDS AND ANTHOLOGICAL BRANDS…
S
P
E X T E N S I ON
C
I
A
L LIFESTYLE
I
BRAND
S
A
T ANTHOLOGICAL
I SPECIALIST
O BRANDS BRANDS
N TODAY
MONOGRAPHIC
BRANDS
TOMORROW
CHI Burberry discussion June 2018v3
37…DRIVEN BY A CONSOLIDATION OF THE POST-ASPIRATIONAL VALUE DRIVERS:
THE REDISCOVERY OF EXCELLENCE AND THE GROWING POWER OF IDEAS
EXCELLENCE EMOTIONS IDEAS
CHI Burberry discussion June 2018v3
38ALREADY CLEAR SIGNS OF THIS TRAJECTORY AS COMPANIES ARE RATHER
DEFINED BY THEIR CORE COMPETENCES THAN THEIR CONTINGENT OFFER
FROM TO
“IT BAG” “IT (***)”
CORE OFFER CORE COMPETENCES
POSITIONING ONE MARKET
CHI Burberry discussion June 2018v3
39AS SIGN OF THIS ERA, THE TWO CENTRAL FUNCTIONS OF THIS INDUSTRY
ARE CONVERGING, DESPITE IN CONSTANT TENSION
A
3 r
t
A DE S IGN
MER CHAN d
-
f
P
v i
r
a c
i
n i
n
A n a l y t i cs a
t
e Intell igence
i
d
n
CHI Burberry discussion June 2018v3
g 40DIFFERENTLY PROFITABLE BRANDS… NIMBLE IS THE NEW BLACK
DIGITAL DISRUPTION CHANGING PROFILE AND
NATURE OF OPEX AND CAPEX… NIMBLE APPROACH
TO SUSTAIN MARGINSDIGITAL DISRUPTION SHIFTING PROFILE AND NATURE OF EXPENDITURE
ITEMS; PROFITABILITY LIKELY TO STABILIZE IN THE COMING YEARS
WHAT COULD IMPACT
Evolution of EBIT of selected personal PROFITABILITY GOING FORWARD?
luxury goods brands | % of revenues
Reboot & New • Network consolidation reducing
normal “brick-and-mortar” investments,
changing Capex into “rolling”
maintenance needs
• Increasing headquarter Capex (e.g.
systems, infrastructure, logistics…) to
align toward omnichannel
environment
• Lower Opex on physical retail
network following consolidation (e.g.
rents)
• Higher Opex on digital channel (e.g.
digital marketing,…)
• Slightly higher Central Opex (e.g.
brand/marketing/merchandising
CHI
competences,…)
Burberry discussion June 2018v3
Impact on profitability (positive, negative, neutral) 42LUXURY BRANDS WILL NEED TO ADOPT A MORE “NIMBLE” APPROACH IN
ORDER TO SUSTAIN THIS PROFITABILITY LEVEL
A MORE “NIMBLE” APPROACH
“TEST & LEARN” CASH “CIRCULAR”
PROCESS LIGHT OPERATING MODEL
• Manage processes and • Progressively switch to a • Transition from a cascade
spending through a “micro demand-driven model, with operating model (from market
battle” approach faster lead times insight, to design, to
• Testing for results to enable a • More efficiently manage manufacturing,…) to a circular
approach, based on real time
“smart” spending and inventory and logistics (e.g.
data, impacting cross-functional
allocation of budget Stock mutualization, Mega-City
learnings and improvements
hubs,…)
INCREASED INCREASED CASH INCREASED
PERFORMANCES GENERATION EFFICIENCY
CHI Burberry discussion June 2018v3
43LUXURY IN 2025 WILL BE A DIFFERENT PLACE
CHINESE CUSTOMERS WILL ONLINE CHANNEL WILL DIGITAL PENETRATION WILL
ACCOUNT FOR 45%+ OF THE REPRESENT 25% OF THE LEAD TO PHYSICAL
MARKET… MARKET VALUE DISRUPTION: NETWORK
CONSOLIDATION
…AND HALF OF THEIR LUXURY 100% OF LUXURY PURCHASES STORES WILL INEVITABLY
PURCHASES WILL HAPPEN IN WILL BE INFLUENCED BY AN CHANGE: FROM POINT OF
THEIR HOME COUNTRY ONLINE INTERACTION SALES TO POINT OF TOUCH
GROWTH MODEL WILL
NEW GENERATIONS WILL CULTURES/SUB-CULTURES AND OVERCOME CURRENT
DELIVER ~130% OF THE NEW CONSUMPTION PATTERNS BOUNDARIES, SHAPING NEW
MARKET GROWTH… WILL ARISE COMPETITIVE MAPS
…WITH GEN Z SHOWING CATEGORIES WILL BLEND: BRANDS WILL BECOME
ORIGINAL TRAITS VS. GEN Y, TO BRANDS MUST BE DYNAMIC EXCELLENCE/IDEA
BE PROPERLY ADDRESSED AND RESPONSIVE TO ADAPT PLATFORMS, ENLARGING THEIR
RELEVANCE
DIGITAL DISRUPTION CHANGING PROFILE AND NATURE OF OPEX AND CAPEX…
…NIMBLE APPROACH TO SUSTAIN MARGINS
CHI Burberry discussion June 2018v3
44LUXURY IN 2025: NEW TECHNOLOGIES PLAYING A CRUCIAL ROLE AS A
FUNDAMENTAL ENABLER OF LUXURY BRAND STRATEGIES
E-COMMERCE, ONLINE, FOOTPRINT
MORE CHINESE-DRIVEN PURCHASES…
DIGITAL… PERMEATING EVERY CONSOLIDATION… RESHAPING THE
HAPPENING IN CHINA
SINGLE PURCHASE STORE OF THE FUTURE
BIG DATA AND ADVANCED ANALYTICS TO
DYNAMIC PRICING AND ADVANCED OPTIMIZATION OF SHOPPING EXPERIENCE
DRIVE RETAIL EXCELLENCE – TRACKING
MERCHANDISING STRATEGY TO OVERCOME (E.G. HAPTIC FEEDBACK) OVERCOMING
CONSUMERS IN A PURELY OMNICHANNEL
INTERNATIONAL DIFFERENCES AND DIGITAL BARRIERS AND FULLY INTEGRATING
SETTING; AUGMENTED REALITY TO
CAPITALIZE ON CONSUMPTION BACK IN PHYSICAL AND
PROVIDE THEM WITH A TAILORED
LOCAL BORDERS DIGITAL CHANNELS
EXPERIENCE
A YOUTHFUL MARKET… CULTURES AND (SUB)CULTURES… ONE MARKET…
DISRUPTING GROWTH TAKING OVER SERVING MARKETS OF
PATHS CONSUMPTION TRENDS ONE
CRM AND CXM TO BE TAKEN TO THE NEXT EXTREME PERSONALIZATION
“SMART AND AGILE” PROCESSES
LEVEL: BIG DATA, AFFECTIVE TECH AND TECHNOLOGIES (E.G. 3D PRINTING)
RESPONSIVE IN CAPTURING EMERGING
EMOTIONAL ADVERTISING TO CUSTOMIZE TOGETHER WITH ONLINE CUSTOMIZATION
CULTURES AND SUB-CULTURES AND TIMELY
CUSTOMER EXPERIENCE BY TASTE, AND FITTING TO DELIVER UNIQUE
ADAPTING VALUE PROPOSITIONS
TOUCHPOINT PREFERENCES AND PRODUCTS, RESULT OF A CO-CREATION
ACCORDINGLY
EMOTIONAL SPECIFICITIES WITH CONSUMERS
DIFFERENTLY PROFITABLE BRANDS PREDICTIVE ADVANCED ANALYTICS AND ROBOTIC PROCESS AUTOMATION TO OPTIMIZE COST
…NIMBLE IS THE NEW BLACK STRUCTURE, SUPPLY CHAIN AND INVENTORY, INCREASING PERFORMANCE AND EFFICIENCY
CHI Burberry discussion June 2018v3
45AS WE LOOK AHEAD: 3 STRATEGY MANTRAS AND 1 FUNDAMENTAL ENABLER
TO BEAR IN MIND
Personal luxury goods market forecast | €B
• Win by developing dedicated and
BE PROACTIVE… proactive strategies for
customers
• Stand-out by designing a
…DISTINCTIVE… “unique” winning formula shaped +3 / 5 %
around consumer needs 18E–25F
CAGR
+ %2
YoY
• Focus effort and strategy on
… NEXT GEN
MINDED…
winning younger generations as + %6
key engine of future market growth @k
… AND NEW • Leverage new advanced
TECH technologies as fundamental
ENABLED enabler of the strategy
CHI Burberry discussion June 2018v3
@K: Growth at constant exchange rates
46PEOPLE PASSION RESULTS!
Claudia D’Arpizio, Partner
Bain & Company Luxury goods vertical
Claudia has spent 24 years advising multinational luxury and fashion clients on everything from
strategy and new product development to innovation and organizational change.
She is the lead author of the Bain Luxury Study, one of the most cited sources of market
information in the luxury industry.
In 2009, Claudia was also recognized as one of the ‘Top 25 Consultants in the World’ by
Consulting Magazine.
Federica Levato, Partner
Bain & Company Luxury goods vertical
Over the last 14 years, Federica has led more than 200 assignments in the fashion and luxury
industry on issues relating to corporate and brand strategy, portfolio management,
merchandising, retail and wholesale excellence, digital acceleration, millennial strategies,
marketing and communication, and more.
Alongside Claudia D’Arpizio, Federica is the co-author of the Bain Luxury Study, one of the
most cited sources of market information in the luxury industry.
CHI Burberry discussion June 2018v3
48BAIN CONTACTS
For any questions or further discussion, please contact: For a copy of the study, please contact:
Claudia D’Arpizio International press
- Partner (Milan) - Katie Ware
- Email: claudia.darpizio@bain.it (katie.ware@bain.com or +1 646-562-8107)
- Dan Pinkney
Federica Levato (dan.pinkney@bain.com or +1 646-562-8102)
- Partner (Milan)
- Email: federica.levato@bain.it
Italian press
- Giulia Zanichelli
(giulia.zanichelli@bain.it or +39 02 58288 252)
CHI Burberry discussion June 2018v3
49METHODOLOGY OF THE STUDY
Revenues at • Revenues at retail value represent total sales valued at retail price.
retail • Each player consolidated sales are retailized through the following methodology:
equivalent Retail Retail
value + + Application of estimated mark ups by
Wholesale Wholesale at retail value geography and category
+ +
Licenses Licenses at retail value Application of estimated royalty rates
and mark ups by geography and
PLAYER CONSOLIDATED SALES PLAYER SALES AT RETAIL VALUE product category
Bottom-up
Bottom-up Top-down
and top-down
estimates • Industry-specific (e.g. watches vs. beauty) data in the main geographical markets
• Comparison between market breakdown and turnover breakdown for key players
• Tens of industry experts interviews (top management of brands, distributors,
department stores, …)
• Consistency check on the data and fine tuning
• We add brands individual retail values... ...we cross check results
CHI Burberry discussion June 2018v3
50PEOPLE PASSION RESULTS!
You can also read
