LUXURY 2020: NEW MARKET DYNAMICS - g - Strategies Internationales Conseils
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LUXURY 2020:
NEW MARKET
DYNAMICS
g
Club ESSEC Luxe
Paris – December 1st, 2016
DRAFT
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
BAIN & COMPANY HAS UNRIVALLED EXPERTISE IN LUXURY
•Unparalleled experience, working with all
key sector players
- Leading global Luxury Groups
- Major fashion houses
- Other luxury good producers (jewellery, watches,
furniture, etc.)
- Specialty chains, department stores and luxury
distributors
- Private equity funds
•Unique market observer and expert
OBJECTIVES OF THIS PRESENTATION
Quickly share the latest on
2016
Present eight trends that
will shape luxury by 2020INCLUDING ALL CATEGORIES, THE LUXURY MARKET EXCEEDED ONE TRILLION
EUROS IN 2016
WORLDWIDE LUXURY “MARKET OF THE MARKETS” (2016E|€B)EXPERIENCE GAINING TRACTION OVER PRODUCT IN GLOBAL LUXURY
GLOBAL LUXURY GOODS SEGMENTS (2008-2016E|€B)
Out-of-home luxury experiences gaining traction,
benefiting from the growth of luxury travelers and Luxury Cars
increasing self-indulgence consistently top
performing
In-home luxury segment, especially
experiences on the Absolute
accelerating on segment, fostered
both high quality by the Chinese
design and art market growth
Luxury goods
slowing down in
recent years after
Luxury “toys” being the fastest
less dynamic than growing category
top cars, still
waiting to surf a
Chinese wave in
Luxury consumable experiences consistently positive fostered by luxury
Yachts and Jets
consumers redirecting their spend toward new and more personal high-end
cocooning
NOTE: Out-of-home luxury experiences include hotels, cruises and restaurants, luxury toys includes private jets &yachts, luxury consumable
experiences include beauty, wines & spirits and food & beverage, in-home luxury experiences including high quality design and fine artTHE MARKET FOR PERSONAL LUXURY GOODS HAS TRIPLED OVER THE PAST 20
YEARS
GLOBAL PERSONAL LUXURY GOODS MARKET TREND (1994-2016E|€B)2016 AT A GLANCE Stable market in both nominal and real terms Geopolitical tension impacting consumer confidence, touristic flows and consumption trends Still a Western market, but dependent on global tourists US continuous struggle, Europe losing touristic support, the revitalization of China A growing impact of currency fluctuations
LUXURY 2020: 8 THEMES THAT WILL RESHAPE THE SECTOR
The persistent The critical role of The unstoppable rise
The importance
dominance Chinese globe- of alternative
of megacities
of Western markets trotters channels
The great A truly omnichannel Green as the new The next frontier of
generational change world black technologyTHE PERSISTENT DOMINANCE OF WESTERN MARKETS IN GLOBAL
LUXURY…STARTING WITH THE US
Personal luxury goods, top countries, 2015 (€B)
79
22 18 17 17 16
12 11 8 7
3
US Japan China Italy France UK Germany Korea M.East Hong Russia
KongTHE US AND EUROPE ARE LARGELY SUPPORTED BY TOURISTS
Personal luxury goods spending by local consumers
vs. tourists, by region, 2016E, €B
82 82 22 17
Extra-
regional
tourists
Regional
tourists
Local
consumers
Europe Americas Japan Mainland
ChinaBUT US AND EUROPEAN CONSUMERS PRIMARILY BUY IN THEIR DOMESTIC
MARKETS
Where consumers shop for personal luxury goods, by
nationality, 2016E, €B
~47 ~57 ~28 ~74
Rest of world Europe Europe Rest of world
Americas Japan
Americas
Americas
Asia
China
Americas
Europe Asia
Japan
Europe
European American Japanese Chinese
consumers consumers consumers consumersMEGACITIES: THE TOP 20 CITIES ACCOUNT FOR 60% OF THE GLOBAL
PERSONAL LUXURY GOODS MARKET
Personal luxury goods, top countries,
2015E €B
London 12
Moscow
Munich 3
4
New York Tokyo
Paris 9
27 Beijing
Las 13 Milan 6
Los Vegas 5 Rome
4 Seoul Osaka
Angeles 6
8 3
5
Shanghai
5
Miami Hong
3 Kong Taipei
7 4
Dubai
3
Honolulu
5
Singapore
3
Source: Bain & CompanyBY 2020, CHINA SHOULD CONTRIBUTE 80% OF NEW LUXURY CONSUMERS
GLOBALLY
Number of global luxury consumers,
2013 – 2020F
13M 400M
57M
330M New consumers
Chinese
other nationalities
Chinese New Chinese
consumers
Rest of the World Rest of the World
2013 2020FTHE SHARE OF CHINESE CONSUMERS IN GLOBAL LUXURY SPEND IS
CONTINUOUSLY GROWING
Global luxury goods market by consumer nationalities,
2000 – 2020F, €billions
2000 2010 2016E 2020F
RoW
Other Asian
Japanese
American
European
ChineseCHINESE CONSUMERS ARE ALSO BROADENING THE SPECTRUM OF THEIR LUXURY CONSUMPTION
THE UNSTOPPABLE RISE OF ALTERNATIVE CHANNELS
Share of global personal luxury goods market,
2012 – 2020F, %
2020F: 32%
Airport
2016E: 25%
Online
2012: 13%
Off-price storesLUXURY ONLINE IS REACHING A NEW EQUILIBRUM
Luxury online channel Market evolution
2005-2020F, B€
€2B €19B €33B
New models
Brand.com
E-tailer
Retailer.com
2005 2016E 2020FGENERATIONAL CHANGE: LUXURY MARKET GROWTH WILL BE MAINLY
BOOSTED BY GENERATIONS X AND Y
Silent
Silent
Global personal luxury goods market by consumer Generation
Generation '13-20 CAGR
2%
generation 2013-2020F, B€ 5%
~-5%
Baby
boomer
Baby 25% ~0%
boomer
33%
Generation
X 40% ~6%
Generation
X 37%
Generation
Y 30% ~5%
Generation
Y 25%
Generation
Z 3%
2013 2020FA TRULY OMNICHANNEL WORLD: CONSUMERS EXPECTING A TOTALLY
SEAMLESS EXPERIENCE ACROSS CHANNELS
DISCOVERY
RESEARCH USE &
& PURCHASE FULFILL FEEDBACK
& TRIAL RETURN
ENGAGEMENTA TRULY OMNICHANNEL WORLD: IMPLICATIONS ACROSS THE BUSINESS ROLE OF STORES AND NETWORK EXPERIENCE-ENHANCING TECHNOLOGY AND ADVANCED ANALYTICS SUPPLY CHAIN AND LOGISTICS ORGANIZATION AND CAPABILITIES
GREEN IS THE NEW BLACK: FEW CONSUMERS ACTIVELY PURCHASE BASED ON
BRAND SUSTAINABILITY YET, THOUGH RATE IS INCREASING
WHAT IMPACT DOES A COMPANY’S SUSTAINABILITY
INITIATIVES HAVE ON YOUR CHOICE OF LUXURY BRAND?
9%
14%
of consumers could
Definite impact of consumers influenced
in their purchases
Some impact by companies ethical conduct
consider changing
shopping behavior based
on companies conduct
No impactBUT SUSTAINABILITY IS NEVERTHELESS CRITICAL FOR BUSINESS
STAKEHOLDERS
INVESTORS
Provide access to dedicated funds and
protect share price
EMPLOYEES INFLUENCERS
STAKEHOLDERS
Engage employees, Shape company and
draw talents and brand perception
increase retention
CONSUMERS
Influence consumer loyaltyTHE NEXT FRONTIER OF TECHNOLOGY: NEW PRODUCTS, NEW PROCESSES New futuristic products New production processes
THE “NEW NORMAL” IN PERSONAL LUXURY GOODS: GROWTH SHOULD
STRUCTURALLY STABILIZE AROUND 2-3%
+7%
+6%
SORTIE
DU TEMPLE &
DEMOCRATIZATION
+3% POST-CRISIS RECOVERY
+2-3%
FINANCIAL CRISIS THE
NEW NORMAL
CAGR 1995-2007 CAGR 2007-2011 CAGR 2011-2014 CAGR 2014-2020THE PERSONAL LUXURY MARKET IS EXPECTED TO REACH €280-285B BY 2020,
A CAGR OF 3-4% OVER 2017
~€280-
285B
~€251- Rising Chinese middle class
€251B €249B 254B Recovery consumption in US and recovery of consumers
from mature markets
Rebound of Chinese Gen Y & X to become
global spending XY ever more relevant
A healthier mark-down
Consistent positive
market reducing sales
trajectory of Europe
cannibalization
Challenging situation
in Japan
@ On-line still the
"champion" format
Still challenging HK No clear "champion"
& Macau category nor segment
2015 2016E 2017F 2020FTHE NEW NORMAL: FROM “INDUSTRY INDEX” TO “WINNERS AND
LOSERS”
CAGR OF SELECT LUXURY BRANDS BY PHASE
Global personal luxury
goods market CAGR
% OF BRANDS
WITH…
Note: based on a subset of soft luxury brands; growth rate calculated on revenues in €NEW STRATEGIES AND PLAYBOOKS ARE NOW
REQUIRED TO WIN IN LUXURY
Markets and Value
Route to market
consumers proposition
Design 'locally global' pricing and execute
New role Productivity
1:1 customer of store management
experience Story-
Perfect a value- Cross-
driven "Fast channel
telling 2.0
Stretched offer, luxury" omni-
and model channel
Locally global customer corridor
Scientific
assortment management: from salience to advocacy
Customer winning organizationThis information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PAR Bain & Co - 8 trends that wil ... 28
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PAR Bain & Co - 8 trends that wil ... 29
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