Luxury Goods E-COMMERCE: BACK TO THE FUTURE? - CONSUMER, BRANDS & RETAIL WHITE PAPER JULY 2018 - Bryan, Garnier & Co
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Luxury Goods E-COMMERCE: BACK TO THE FUTURE? CONSUMER, BRANDS & RETAIL WHITE PAPER JULY 2018
Contents Beyond the slight slowdown expected
in 2018, the luxury industry should remain
dynamic, benefiting from the ramp-up
in digitalization and e-commerce as a source
1. EXECUTIVE SUMMARY 2 of additional growth. At a time where
2. SOLID GROWTH IN THE LUXURY MARKET... 4
no single model is really emerging, we bet
Growth of 6% in 2017… 4
on brands taking greater internal control
…thanks to China! 4
of e-commerce over the medium term.
Healthier momentum in our view 6 After a very good year for the sector in 2017, when our
E-commerce ramping up… 7 sample of luxury groups saw average sales growth of 8%,
we are forecasting further positive growth in 2018 (+6%
on average), which could nonetheless be reduced to just
3. …UNDERPINNED BY THE RAMP-UP IN E-COMMERCE... 8
1% by negative forex effects.
E-commerce becoming a growth driver 8
Brands catching up their lag in online sales 11 Combined with the rising importance of the millennial
generation, one of the engines behind this positive sector
via multi-brand e-tailers
momentum is the acceleration in e-commerce, which
Bringing e-commerce in house seems preferable 16 represented 9% of the market in 2017 but is set to account
from an omnichannel stance for 25% in 2025. Almost 40% of market growth in coming
years could therefore stem from this channel.
4. …AND BY MILLENNIALS 21
At this stage, it is difficult to establish which luxury brands
Rising weight in global population 21 will be the most capable of benefiting from the trend,
A very active generation in the luxury market 26 because in our view, luxury e-commerce is in its teething
stages and no single business model is dominant. Overall,
5. CONCLUSION: BACK TO THE FUTURE? 29 the more wholesale and affordable a luxury brand is, the
more present it is in e-commerce. Each brand could be
seen to have its own specific business model, whether
via a partner, a multi-brand or an internal platform.
Further out, we expect e-commerce to be brought in-house,
as is already the case for the most emblematic brands.
Loïc Morvan Clement Genelot
Equity Research Analyst Equity Research Analyst
Luxury & Cosmetics Retail & E-commerce
1
1. Executive summary
In a luxury market set to remain dynamic in 2018 (+8% organic growth on Although millennials (the so-called As a consequence of the growing However, ecommerce’s 9%
‘generation Y’ born between 1980 presence of millennials, the presence in the luxury market
average for our sample of luxury groups) in line with 2017 performance, and 2000) already accounted for amount of e-commerce in the masks differences between
we have tried to analyze in more depth the potential and challenges that 30% of the luxury market in 2017 luxury industry is also increasing groups: less than 3% of sales
vs 27% in 2016, the figure is expected constantly and this trend should for hard luxury players such as
millennials and e-commerce present for luxury groups and brands. to reach 45% in 2025 according continue in coming years. While Richemont and The Swatch Group
to Bain & Co estimates. For some e-commerce only accounted for (and even 0% for Chanel), 4% at
brands, millennials represent an even 6% of the entire market in 2014, Gucci and Louis Vuitton, probably
higher share. At Gucci, for example, it represented 9% in 2017 on Bain 9% at Burberry but almost 20%
online sales accounted for 56% of & Co estimates and should even for certain affordable luxury fashion
2017 sales. While millennials tend reach 25% in 2025. This implies brands such as Tory Burch.
to shop more frequently than their a CAGR in sales of 20% in online
elders, especially in China, where commerce between now and then, Overall, online sales tend to be
they make almost eight times more compared with 3% for offline. higher when a brand is more exposed
purchases a year, they often shop E-commerce could therefore account to the wholesale market, present in
for cheaper and more entry-level for 43% of growth in the market the fashion segment and positioned
products such as small leather goods, out to 2025. This type of distribution in affordable luxury.
footwear and entry-level bags. In is therefore strategic for luxury
addition, millennial customers are brands and groups. While it is difficult to say which
far less loyal to brands and almost group is better equipped to face
find the purchase experience more Several business models coexist, the challenge and opportunity
important than the brand itself. Luxury with no one really standing out presented by e-commerce, we
brands are aiming to make these at this stage as the most relevant. believe that major winners further
more fickle customers loyal by using Directly operated websites, third-party out will be 1) groups with the
social media to increase retention brand distributors (Yoox, Net-A- highest financial means to finance
rates and attract them into stores Porter, mytheresa) and marketplaces the investments associated with
in a bid to boost sales per square (Farfetch, Luxury Pavillon) are the the development of digital; and
meter. Millennials also influence older most common models. Each brand 2) brands that put in place digital
generations through social networks. has developed its own model, strategies coherent with their physical
However, given the volatile nature of sometimes within the same group distribution channels. Finally, over
millennials, it seems essential that depending on its size, product the next five to 10 years, we could see
brands do not focus their strategies offering and its exposure to retail moves to control digital distribution
on these customers alone, but instead or wholesale markets. The model better and bring it in-house, as
present a balanced offer between the developed can also differ from one happened 10-15 years ago with
generations. country to the next. physical distribution of luxury brands.
2 | LUXURY GOODS 3
2. Solid growth in the luxury market... FIG. 1: GROWTH IN THE GLOBAL LUXURY MARKET (2007-2018E)
13%
12% 278
The luxury market restored some color in 2017 after a very difficult 2016, and 8%
251 250
262
7% 7%
the situation should remain favorable during 2018. The year was characterized 5%
218
224 6%
192 212
by a rebound in China, a mixed situation from one brand to the next, a polarization 170 1% 173
3%
1%
153 0%
of the market, younger customers and the faster ramp-up in e-commerce. 167
-11%
GROWTH OF 6% IN 2017… driven, among other factors,
Renewed growth in the luxury
by the middle and upper middle
market in 2017 (+6%) Bain & Co estimates the entire classes in China, the new
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018e
World luxury market (EURbn) Growth at constant FX
luxury market (including luxury generations (Y and Z) and
Source: Bain & Co; Bryan, Garnier & Co
yachts, private jets, luxury hotels, the boom in e-commerce.
upscale wines and spirits and luxury
cars) at almost EUR1,160bn, up 5% …THANKS TO CHINA!
in 2017. The personal luxury goods The duty-free market increased by rose by more than 10% in 2017 after market) rose by almost 2%. However,
market gained 6% on a constant Beyond Mainland China, where almost 20% according to Global a decline of 3% in 2016, in line with compared with the 2012-2015 period,
currency basis in 2017 (Bain & Co market growth reached almost Blue figures (+8% in France), thanks the trend seen between 2012 and Chinese consumers did not make their
and Altagamma estimates) to reach 20% last year to EUR20bn (Bain also to the positive trend in local 2015. We estimate that Chinese clients purchases in the same geographical
EUR262bn after virtually stable & Co estimates) driven partly by consumption prompted by the more account for more than 50% of The regions. Growth with Chinese
sales in 2016. The rebound that the acceleration in consumption buoyant backdrop. Swatch Group sales, close to 45% customers was particularly strong
we expected as of November 2016 by middle classes, note also the at Richemont, around 35% for Louis locally, thanks to omnichannel sales,
exceeded our hopes, which were excellent performance in the rest Sales to Chinese customers (35% Vuitton and Gucci but below 30% at the reduction in price gaps between
initially based on growth of around of Asia (+9%), especially in Hong of the total market according to our Hermès. Sales to US customers (22% China and Europe, and stricter border
4%, and the uptick even gained Kong and Macau, which returned estimates, of which more than two- of total) remained stable while sales controls. It was also robust in Europe
momentum throughout the year. to positive territory in 2017 after thirds were outside Mainland China) to European customers (18% of total and Japan.
The positive trend was the highest double-digit declines in 2015 and
since 2013 and was driven by 2016. In contrast, the Americas
recoveries in Greater China and region showed modest growth FIG. 2: CHANGE IN LUXURY MARKET BY MAJOR REGION FIG. 3: GROWTH IN LUXURY SALES WITH
in Europe. of only 2%, due to the crisis CHINESE AND NON-CHINESE CLIENTELE
affecting US department stores,
EURbn change change
For 2018, in a first assumption, even though various indicators
2017 (%) Fx-n (%) 12-15 2016 2017
Bain & Co forecasts growth in the showed a robust year-end, partly In % CAGR change change
sector of between 6 and 7%, in thanks to wealth created by China 20 15 18
Chinese clientele 13 -3 11
line with 2017. We are therefore outstanding financial market Rest of Asia 36 6 9
Non-Chinese clientele -2 2 3
witnessing a normalization in the performances. However, the Europe 87 6 7
Total market 2 0 6
pace of growth. US market remains complicated. Japan 22 4 8
In Europe, the luxury industry Americas 84 2 2 Source: Bain & Co; Bryan, Garnier & Co
In addition, Bain & Co is forecasting posted robust growth of 7% to
RoW 13 1 0
an average annual growth rate almost EUR87bn on Bain & Co
TOTAL 262 5 6
in the luxury market of 4-5% by estimates, thanks to the rebound
Very dynamic Chinese customers (+11%)
2025 to reach almost EUR350bn, in tourist flows (especially in the UK). Source: Bain & Co; Bryan, Garnier & Co
4 | LUXURY GOODS 5
FIG. 4: LUXURY MARKET BY GENERATION FIG. 5: NATIONALITIES AND PLACE OF PURCHASE
(PERCENTAGE OF TOTAL)
In % of total market 2016 2017
12 8
Generation X (1965-79) 38 38 15
Generation Y (1980-2000) 27 30 27
Generation Z (2000…) 0 2 24 2
others 35 30 98
89
Source: Company Data; Bryan, Garnier & Co 28
59
22
CHINESE JAPANESE EUROPEAN AMERICAN
Domestic Europe Rest of Asia Americas Japan RoW
Source: DFS, Deloitte; Bryan, Garnier & Co
HEALTHIER MOMENTUM In 2017, momentum was particularly Y and Z generations. Millennials are As such, in our view, it is risky limitation of credit card purchases sites (Yoox.com and Farfetch.com
robust in footwear (+10%) and jewelry penetrating the luxury market and for a brand to focus its product abroad, and the FX-driven price for example) and generalist distributor
The rebound in the luxury market (+10%), whereas the ready-to-wear have very clear tastes and behavior development strategy on millennials gap reduction and omnichannel sites such as neimanmarcus.com,
in 2017 was primarily underpinned and watches segments, two markets patterns that also influence older alone. A good balance between sales. Chinese customers buy Saksfifthavenue.com and Sephora.
by positive momentum in the retail particularly sensitive to the wholesale generations. Brands that benefited modernity and heritage, such as luxury products primarily during com. We discuss the challenges of
segment (+8% including +5% network, posted growth from this trend were capable Louis Vuitton’s, is better in our view. trips to Europe and the rest of Asia e-commerce in more detail further
same-store with a low scope/surface of 3% each. of adapting their offer to these (especially Hong Kong). on. Nevertheless, these figures hide
effect of 3%), compared with customers. In our view, the three Different purchase behaviors some very different figures according
growth of 3% for the wholesale Younger customers best examples are Louis Vuitton, depending on nationality E-COMMERCE to brands (luxury or affordable luxury
segment, which was affected by Gucci and Balenciaga (Kering). RAMPING UP… for instance).
the department store situation in The tendency to find increasingly In general, most luxury brands As Fig. 5 shows, the place of
the US. While in 2012, brands in the younger customers in the luxury say that millennials purchase more purchase of a luxury product varies Online sales were particularly robust According to certain experts,
luxury sector opened almost 1,000 market amplified during 2017. often (around 8 times for Chinese from one customer to another. in 2017, gaining 24% to almost 30-40% of growth in the luxury
directly-operated stores, in 2017, Bain & Co estimates that the share millennials) than generation X and Figures by DFS and Deloitte show EUR23bn, or 9% of the total market. market in coming years is set
this figure had risen by “just” 350, of generation Y customers (born baby boomers, but with a lower that European and US luxury goods This trend follows on from a CAGR in to stem from the online segment,
but with considerably more renovations between 1980 and 2000) in the total average spend than other generations consumers most often buy in their e-commerce sales of 25% between illustrated by recent moves in the
and extensions. In addition, growth market rose from 27% in 2016 to 30% and with a higher propensity to respective domestic markets, followed 2013 and 2016. The share of online industry: the the acquisition of
in the market was driven more in 2017 to almost EUR78bn, or an buy footwear, especially sneakers. closely by Japan. In contrast, Chinese sales in the global luxury market YNAP and watchfinder.com by
by volumes (for example, the rise increase of 16%, whereas the share Similarly, generation Z (born after 2000) customers from continental China stood at just 5% in 2014, meaning Swiss group Richemont and the
in volumes at Louis Vuitton exceeded of generation X consumers remained is beginning to emerge in the luxury still shop very little in their country that it virtually doubled between stake taken (amount not disclosed
10% in 2017) than by prices. For stable, at 38% of the market. market. Y and Z generations are less (28%), despite the trend that emerged 2014 and 2017, even though it still but clearly minority) by Chanel
these two reasons (no price increase loyal to brands and more volatile. last year showing a repatriation of remains modest. The online market in the UK group Farfetch (2016
and no store openings), we consider We estimate that almost 80% They ascribe more importance their purchases to China following is divided into three equal parts sales of GBP160m, or a gross
that momentum is healthier since of growth in the luxury market to the purchase experience and government policies such as lower between the brands’ own websites merchandise value – GMV –
it is more sustainable. in 2017 stemmed from the less to the brand itself. taxes, strengthened border controls, (Gucci.com par example), e-tailer of GBP547m or EUR630m).
6 | LUXURY GOODS 7
3. …underpinned by the
ramp-up in e-commerce...
E-COMMERCE BECOMING aim to preserve the exclusive nature
A quarter of luxury sales could A GROWTH DRIVER of their products, especially in terms
be generated online by 2025 of image and price control, as well
Sector growth is now more as the upscale purchase experience
‘normalized’. Inflation has virtually offered to customers. This explains
disappeared; penetration of emerging online penetration rates close to 0%
markets is no longer a major growth at the start of the 2000s. However,
Source: TechCrunch
driver now that the majority of luxury four factors have prompted luxury
groups have already taken positions; brands to turn towards the digital
and store openings are limited or market and invest in this segment:
often offset by closures, especially
in Asia-Pacific and above all in 1. Younger customers, millennials,
China, where many brands were for whom digital is essential.
overly aggressive and not sufficiently
selective in terms of network 2. The curiosity of older generations
expansion. So, luxury brands toward e-commerce and digital.
now have fewer options in order
to outperform the sector. 3. The already well-established
density of physical store networks.
They can:
4. Difficulties in the wholesale
1. Place the focus on product network, especially in the US.
innovation while respecting the
“modernity - heritage” paradigm As shown in Fig. 6, this trend
in order to seduce consumers, started to take shape in 2010, when
especially new ones, and keeping the e-commerce represented just 3%
legacy of the brand’s image intact. of the total luxury market and began
to materialize in 2014, driven by
2. Reshape distribution, whether the emergence of online distributors
via the physical store network specialized in multi-brand platforms
(closures, relocations, extensions and the development of directly
and store renovations) by operated e-commerce sites.
improving the purchase experience By 2015, e-commerce’s share
in stores, or and above all, had risen to 6% of the market.
by betting on e-commerce
and more generally digital. Bain & Co figures suggest online
should reach 25% of the total
Historically, luxury brands have been luxury goods market by 2025,
sceptical about e-commerce given their vs 9% at present.
8 | LUXURY GOODS 9
FIG. 6: CHANGE IN INTERNET PENETRATION RATE IN GLOBAL LUXURY MARKET
E-commerce accounts for 7% of brands such as Louis Vuitton and found on any e-commerce websites.
sales at LVMH or a total of almost Gucci will generate 25% of their However, Chanel’s recent acquisition
DIGITAL BRANDS' FIRST MULTI-BRANDS REINTERNALIZATION
SKEPTICISM DIGITAL INITIATIVES RETAILERS BOOM AND OMNICHANNEL EUR3bn annually. Within the group sales online by 2025. of a minority stake in Farfetch points
25%
some e-commerce figures exceed at the very least to the beginnings
this level, for example almost 10% According to the majority of of a change in stance.
20%
for the wholesale brands Givenchy, observers, directly operated stores
15% Kenzo, Benefit and over 15% for or the retail network – as opposed In the eyes of most industry
Sephora based on our estimates to the wholesale network – remain observers, the common point
10% (these figures are not communicated vital for the industry. These stores for all the groups and brands
by LVMH). However, the Louis Vuitton are the crucial addresses that in the sector is the lag in digital
5% e-commerce figure of approximately reflect a brand’s strength and development, whether deliberate
4%, lowers the group’s total online enable it to present the whole or not. Groups are now appointing
0% sales to 7% as mentioned before. of its range, which is clearly less digital directors: LVMH nominated
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2025E
the case for e-commerce sites, Ian Rogers (ex Apple) as Chief
LVMH was an early mover in whether directly-operated or Digital Officer in 2015 (although
luxury e-commerce with the launch not. The major challenge for he has not joined the group’s
FIG. 7: E-COMMERCE IS BECOMING A KEY GROWTH ENGINE
in 2000 of a multi-brand platform brands is to get digital consumers executive committee), while Grégory
in the US called E-luxury. However, to visit their stores, improve Boutté (former CEO of eBay France)
2017-2025E CAGR IN THE LUXURY MARKET BREAKDOWN OF LUXURY MARKET GROWTH OUT TO 2025 this site was closed in 2009 due conversion rates, and ultimately joined Kering in December 2017
to a lack of success and technological sales per square metre, which as Digital and Customer Relations
difficulties. The launch of 24Sevres.com is synonymous with growth Director and member of the
400 43% OF THE GROWTH
in 2017 is therefore not the group’s in profitability. executive committee.
57% OF THE GROWTH first attempt in online sales via
20%
300 a multi-brand platform. BRANDS CATCHING Various business models have
UP THEIR LAG IN emerged via these e-commerce
200
Figures suggest that e-commerce ONLINE SALES VIA players:
is shaping up to be a clear growth MULTI-BRAND E-TAILERS
WHOLE LUXURY
driver in coming years for the luxury Third-party distributors (Yoox
MARKET 4 / 5%
100 products market, with a CAGR Given their lack of experience Net-A-Porter, mytheresa …).
out to 2025 set to run at 20% in digital and in view of the high
3%
vs. just 3% for physical outlets. investments necessary to develop Marketplaces which reserve
0
ONLINE CHANNEL OFFLINE CHANNEL LUXURY MARKET OFFLINE ONLINE LUXURY MARKET This is based on Bain & Co’s forecast a directly operated e-commerce space on their sites for third-party
2017 CONTRIBUTION CONTRIBUTION 2025E
for a CAGR of 4-5% for the entire site, many brands have turned sellers in return for a commission
Source: Bain & Co; Bryan, Garnier & Co market. Luxury groups are expanding to multi-brand e-commerce groups fee levied on the sales (Farfetch,
rapidly online, with e-commerce sales specialized in the luxury market Toplife, Luxury Pavilion …).
in Kering’s luxury division rocketing to extend their exposure at a lower
So for US brand Tory Burch, the by more than 70%. cost. Only certain diehard brands Aggregators which redirect
E-commerce is set to grow almost 10x faster than physical stores weight of e-commerce is above 20%. such as Louis Vuitton, Christian internet users from their site
In addition, for certain US department In other words, between now and Dior and Hermès are not present to that of the brand (Lyst …).
store chains such as Neiman Marcus 2025, online is set to generate more on sites such as Farfetch and Yoox.
This is equivalent to the levels seen and Sak’s, online sales can account than 40% of growth in the luxury And Chanel, with EUR8.6bn in 2017 Alongside directly operated sites
today in more digitalized categories for up to 30% of total sales. market throughout the world vs. has not even developed a directly- such as Hermès.com, Louis Vuitton.
such as cosmetics. The percentage almost 60% for the offline, which operated website. And in a bid to com and Gucci.com.
is generally higher for smaller brands In contrast, no luxury group in Bryan, also shows that physical distribution maintain control over its image,
that focus their development on Garnier & Co’s coverage, with the of luxury products, especially via purchase experience and prices,
the wholesale segment, given their probable exception of Burberry, directly-operated stores, is not its products (excluding perfumes
lower means to adopt a retail model. as yet generates 9% of sales online. dead. We still doubt that retail and cosmetics) can still not be
10 | LUXURY GOODS 11
FIG. 8: NON-EXHAUSTIVE OVERVIEW OF MAJOR LUXURY WEBSITES FIG. 9: SHARE OF LUXURY FASHION BRANDS REFERENCED
ON THE CHINESE SITE OF E-COMMERCE PLAYERS
Platform GMV Business Brands Products assortment Geographic Launch
model reach 85%
76% 78%
YNAP (Richemont) >EUR Mainly 3rd >1,000 brands and Soft luxury, hard luxury Mainly Europe 2000
2,000m parties retail designers and US 72%
mytheresa (Neiman ND 3rd parties >680 brands Soft luxury Worldwide 2006
57%
Marcus Group) retail
Matchesfashion (Apax ND 3rd parties >400 brands Soft luxury Worldwide 1987 48%
Partners) retail
24sevres (LVMH) ND e-retailers >150 brands Soft luxury, hard luxury Worldwide excl. June
China 2017
Brands tend to outsource
Farfetch GBP Marketplace >200 brands and Soft luxury, hard luxury Mainly US June
547m >750 high-end 2007 their online strategy to third-
boutiques & designers
FARFETCH YOOX NET-A-PORTER party distributors specialized
Toplife (JD.com) ND Marketplace First partners: La Soft luxury, hard China October
Perla, Emporio Armani, luxury, beauty, home 2017 2016 2017 in the luxury segment
Source: L2; Bryan, Garnier & Co
Rimowa … furnishings, electronics
Luxury Pavilion ND Marketplace First partners: Soft luxury, hard China August
(Alibaba) Burberry, Hugo Boss, luxury, beauty, cars 2017
Maserati, Guerlain …
Lyst USD Aggregator >11,500 designers and Soft luxury, hard luxury Mainly US 2010
350m brands
Source: Companies Data; Bryan, Garnier & Co
Momentum in multi-brand Their high-tech focus enables scope, important for local designers
e-tailers specialized in luxury them to collect a huge amount that lack the reach of major global
of customer data and analyze it groups. Smaller brands with lower
Brands tend to outsource their online to adjust the product offer and financial means can therefore
strategy to third-party distributors to better target marketing and reach consumers in more distant
specialized in the luxury segment communication campaigns for regions without having to open
The number of online sales platforms each brand. Also, innovations physical stores.
for luxury goods has multiplied rapidly such as augmented reality, which
since 2010 – at the same time as most would break a historical barrier to This outsourcing trend is emerging
luxury brands, especially the smallest the development of e-commerce fast in complex and highly digitalized
ones, have chosen to outsource the in a sector like luxury, are genuine markets such as China, where luxury
lion’s share of their online strategy advantages and ultimately help a groups prefer to entrust pure players
to third-party distributors. These more targeted communication and such as Farfetch, which has a strong
distributors offer many advantages a greater personalization of the offer. reputation on the ground. Indeed,
for traditional luxury brands/groups: research agency L2 estimated that
Their unrivalled distribution in 2017, 85% of soft luxury brands
Their specialization in the luxury infrastructure enables them were referenced in the Farfetch
market enables luxury brands to deliver parcels faster and marketplace (vs. 76% in 2016) and
to guarantee a secure purchase further. This means within days 78% on the retail site Yoox (vs. 72%
environment for their image as or even a few hours, as offered in 2016) in China. Outsourcing is
well as a coherent and controlled by Farfetch and Gucci in 10 cities, a first key step for brands before
price positioning. and to a widened geographical bringing online sales in-house.
12 | LUXURY GOODS 13
FIG. 10: PRESENTATION OF THE THREE E-COMMERCE GIANTS
Are e-commerce giants credible This value-retailer image, combined The majority of luxury groups in our
distribution channels for the with a business model based partly sample currently refuse to put their
Amazon Alibaba JD
luxury sector? on a marketplace where several products on Amazon and Alibaba,
sellers can compete with each other whereas L’Oréal only sells certain Global GMV (USDbn) 350 700 140
When e-commerce giants such as for the same product (which can even mass-market brands on these Active customers (m) 380 500 300
Amazon, Jing Dong (JD.com) and be a counterfeit), dissuades luxury websites (L’Oréal Paris, Garnier, Business model Retail + marketplace Marketplace Retail + marketplace
B2C B2C and C2C B2C
Alibaba are extending beyond their brands from using these channels. Maybelline) and brands from its
Global platform's pricing image Weak Very weak Weak
original business into areas such Coach withdrew from Alibaba’s Tmall professional products division (L’Oréal
Sub-platform dedicated to luxury Luxury Pavilion Toplife
as food retailing, physical retailing, marketplace in 2016 after just two Professionnel, Kerastase…) but not (Aug 2017) (Oct 2017)
creation and broadcasting of media years of presence. The brand did yet brands from its Luxury division Brands' autonomy/control on the sub-platform High Very high
content, and banking, questions not control either the authenticity such as Lancôme, Armani and Kiehls.
arise about the incursion of these of the products sold or their selling
Source: Bryan, Garnier & Co
operators into the luxury market. prices, creating a significant risk This fact has so far protected pureplay
for its image further out. Research e-commerce sites specialized
In our view, the three global majors agency L2 estimates that in 2017, in luxury from the sector giants
do not have the credibility to rival only 24% of luxury brands present (Amazon, Alibaba, JD.com). However, None of the leading brands (Estée Within just a few years, WeChat has consumers into its stores in order to
e-commerce players specialized in in China had a store on the Alibaba the launch of luxury Alibaba’s Lauder, Lancôme, Dior, Guerlain…) become a key application in China. boost sales per square metre.
luxury such as Farfetch or YNAP Tmall marketplace and 10% on Luxury Pavilion platform in August in this segment are ready to play Major luxury groups have created
or directly-operated websites and the JD.com marketplace. These 2017 and JD’s Toplife in October Amazon’s game yet. However, official accounts on the application, Louis Vuitton created an official
reshape the competitive landscape in percentages need to be minimized, 2017 has reshuffled the pack. These Amazon has already created a section above all from a marketing perspective, account on the WeChat application
luxury distribution. Amazon, JD and bearing in mind that the majority of new marketplaces can offer partner specifically for premium and beauty more than half of them sell via the (with no access to the WeChat Store
Alibaba have built their development brands concerned clearly do not brands a far more selective purchase products on its site (referencing channel, including (Moncler, Coach, option), like Gucci, another example
on the extent of their assortment, the offer a comprehensive assortment in environment – Luxury Pavilion is only brands such as Burberry, Jimmy Dior, Givenchy, Cartier and IWC. of these two brands’ selective
competitiveness of their prices, which their spaces, and that the brands in accessible via personal invitation – and Choo, Rochas, Baxter of California However this is sometimes for a limited strategies. Italian brand Ferragamo
are criteria not associated with the question are not those with the most total control of prices, while benefiting and American Crew). A gradual move amount of time and a small number of is also present on WeChat but only
luxury sector, and speed of delivery. upscale positioning. from the respective clout of Alibaba upscale cannot be ruled out if the lines. US brand Coach is emblematic: as a means of having digital contact
and JD. These are all factors that could discussions concerning a partnership it withdrew from the Alibaba Tmall with customers with no possibility
please luxury brands. Today, JD.com’s between Amazon and luxury beauty marketplace at the end of 2016 to of purchasing via this application.
Toplife, which already counts La Perla, products e-tailer Violet Grey, which refocus on its own website as well as Tod’s is currently negotiating with the
Emporio Armani and Rimowa among sells La Mer by Estée Lauder and Dior, on its WeChat space, including the WeChat application, although nothing
its partners, seems to be the platform prove successful. WeChat Store. has been signed for the moment.
that grants the most autonomy to
brands in terms of assortment, price Emergence of WeChat as the new Unlike many other e-merchants, Exporting this new sales model to
and design while helping them with online sales channel in China WeChat disintermediates numerous western countries seems very likely
marketing and logistics. However, it’s stages of the sales process, giving at a time when brands are aiming to
too early to speculate on the success In a digitalized world increasingly based brands total control of their image attract younger generations via mobile
of these forays into the luxury market. on mobile technology and where young and prices. A brand can therefore devices and more targeted marketing
Chinese people are often proving to be post content on a news line to attract campaigns, while maintaining strict
In contrast, at Amazon, a move into trendsetters, it is interesting to look at users to a page that it has created control of the purchase experience
luxury seems even more unlikely. the momentum of WeChat, the mobile itself or even directly to its website. and prices. Among the applications
Yet with the aim of extending its messaging application developed by In addition to selling a product via the already existing in Europe and the
product and services offering to satisfy Chinese tech group Tencent in 2011, as application, the brand can undertake US, Instagram and Pinterest already
all the needs of its Prime members, a new sales channel for luxury brands. surveys, obtain feedback on customer have a few similarities with WeChat
the prospect of the group entering Most of WeChat’s 900m active monthly experience, offer click & collect and that would be worth expanding on
the upscale cosmetics/perfumes users live in China. The commercial interact directly with customers via in order to attract luxury brands.
division seems more feasible in our arm of WeChat, WeChat store, was private messages. The brand’s final Nearly all luxury brands are already
view, albeit not in the near future. launched in 2014 and only in China. objective is nevertheless to attract present on Instagram.
14 | LUXURY GOODS 15
FIG. 11: HEADING FOR BORDERLESS ONLINE/OFFLINE OMNICHANNEL FIG. 12: CONSUMERS WANT MORE CONTACT POINTS
“TO WHAT EXTENT IS IT IMPORTANT THAT A BRAND Heading for a perfectly
SINGLE CHANNEL MULTI CHANNEL CROSS CHANNEL OMNI CHANNEL CAN BE ACCESSIBLE VIA DIFFERENT CHANNELS”
homogenized ecosystem
14% 16% of channels creating a fluid
25%
purchase experience
40% 40%
39%
46% 44%
36%
MILLENNIALS GENERATION X BABY BOOMERS AND ELDERLY
Not negotiable/very important Somewhat important Not important
Source: Bryan, Garnier & Co
NO. OF CONTACT POINTS GENERATED DURING THE
PURCHASE JOURNEY FOR A LUXURY PRODUCT
BRINGING E-COMMERCE made in stores were preceded by This can also be seen from a UK
IN-HOUSE SEEMS internet searches on the brand’s defensive stance given its 50% stake US
PREFERABLE FROM AN website or on specialized websites. in YNAP dating from the Yoox and FRANCE
OMNICHANNEL STANCE Net-A-Porter merger in October 2015. JAPAN
For consumers to buy any product BRAZIL
Players in the luxury sector now from the brand at the right price, Could this be the first stage of WORLDWIDE
need to satisfy rising customer wherever they are, whenever they a deeper trend that could see ITALY
expectations in terms of purchase want and via any means they other luxury groups take control SOUTH KOREA
experience and contact points want (online, physical stores), of platforms such as Farfetch, CHINA
0 2 4 6 8 10 12 14
(stores, tablets, smartphones etc.) luxury groups therefore need Matchesfashion.com or
Offline touchpoints Online touchpoints
For brands in Kering’s luxury division, to switch from a multichannel mytheresa.com. Farfetch is seriously
60-70% of internet searches are to an omnichannel model. This considering an IPO on the New York
Source: BCG; McKinsey; Bryan, Garnier & Co
made via a smartphone or a tablet means moving away from several Stock Exchange by the end of the
and almost 50% of online purchases distribution channels and multiple year at an estimated valuation of
are already made by the same consumer touch points, or a cross- EUR5bn, APAX has a majority stake
channels, in a good example of channel approach that aims to in Matchesfashion and Neiman
omnichannel distribution. While it integrate channels for a more fluid Marcus controls mytheresa. Time 84% of generation X, and even rate (89%) than those that without appears to be where the purchase
is true that the majority of luxury consumer experience, to a perfect will tell, but this is a prospect that 75% for baby boomers and older one (33%) Retention rate is vital journey for a luxury product is the
purchases are still made in stores, convergence of offline and online. cannot be ruled out at this stage. generations. Luxury brands realize that because millennials switch easily longest, with 13 contact points
digital plays an essential role in the an ambitious digital strategy benefits from one brand to another. The rise (including sales in physical stores,
purchasing journey, as a research The recent acquisition of Yoox-Net- It is not just millennials who want all customers, regardless of age. in the retention rate for a luxury website, mobile app, TV advertising,
tool, for price comparison and for à-Porter (YNAP) by Swiss group a purchase journey that is standardized brand is often synonymous with digital advertising, SMS, etc.).
after-sales service. Customers want Richemont is interesting in this respect. across many channels. In a study According to Invesp, a software a genuine visit to the brand’s stores, This compares with a global average
to be able to navigate seamlessly It illustrates the desire of a major undertaken by BCG with 10,000 and services provider specialized in building sales per square metre of almost nine contact points.
between channels in order to luxury sector player not to be left luxury product consumers in 10 conversion rates, if we take distribution and profitability. China is also the most digitalized,
benefit from the most fluid purchase behind by e-commerce or specialized countries, it is “fairly important” that as a whole as a proxy, retailers and/ with seven online contact points
experience possible. We estimate platforms, and to understand this a brand is accessible via different or brands with an omnichannel model Chinese consumers again seem compared to a global average of five.
that 70% of luxury product purchases distribution format in depth. channels for 86% of millennials, have a significantly higher retention to be the reference point as China South Korea is not far behind.
16 | LUXURY GOODS 17FIG. 13: DIRECTLY OPERATED SITES AND WECHAT SEEM TO BE THE MOST COMPATIBLE WITH AN OMNICHANNEL STRATEGY
The luxury sector has already brand stores (at least the most 2. Internalizing online sales
understood the challenges strategic ones), or to be omnipresent. of “in-season” ranges
of diversifying its marketing Digital in stores helps create strong In contrast, to offer a digitalized
communication channels with ties between the store, the online in-store purchase experience that DISCOUNTERS
THIRD PARTIES MARKETPLACES AND DIRECT SELLING
RETAILERS AFFILIATES
consumers. So the potential to sales platform and the brand’s official is coherent with the e-commerce
digitalize distribution channels and website. Interactive digital terminals offer, selling online directly seems BRANDS’
ABILITY TO OWN
BUILD AN WEBSITE
integrate them into an ecosystem enable shoppers to discover the necessary or at least preferable. OMNICHANNEL
seems huge. It would also avoid brand and the products, and order We believe that in coming years, OFFER
LUXURY
PAVILION WECHAT
the cannibalization that is still too articles not available in the shop. bringing online sales of current
frequent between online and offline. Decentralized cash registers, where “in-season” collections back
FARFETCH TOPLIFE
However, in the roll-out of a genuine mobile sellers are equipped with in-house, at least partially, will YNAP
omnichannel strategy, we believe that digital tablets, click & collect points be a necessary move, given that
the major luxury brands should firstly and augmented reality mirrors in these sales relate to the collections MATCHES
FASHION MYTHERESA
get to work on three major projects: stores all help to both enhance and also available in physical stores. SECOO
digitize the purchase experience. This is likely to hamper expansion
1. Renovating physical of multi-brand in-season websites VIP.COM
store networks Brands such as Hugo Boss, Burberry, such as Net-A-Porter, whose offer
The central question is how to interact Moncler and even Hermès have of major luxury brand products could BRAND AND PRICE
CONTROL
the most with consumers in stores in already implemented digitalization therefore decline further out, and
order to make the purchase happen. in certain stores, using sellers with to a lesser extent Farfetch, whose
From this perspective, technology tablets and CRM management. marketplace model is based more
Source: Bryan, Garnier & Co
deserves a higher presence in luxury on small local designers.
Sales via WeChat can also be seen directly operated sites. However, times offered by e-commerce giants,
as a direct distribution channel that aware of the need to develop its luxury groups also need to emphasise
is compatible with an omnichannel digital vision by offering an extended the efficiency of their home delivery
strategy, where the brand has total range of products, the group process in order to improve the
control of its image and its price completely updated its US website purchase experience.
policy, and can link the online offer last year, with the immediate result
to its physical stores. of increasing footfall, connection Smaller brands and local designers
times and conversion rates. This with no digital expertise and/or
Kering and LVMH are present on digital transformation is due to take the means to efficiently develop
WeChat. LVMH uses the platform place in Europe during H1 2018 and their own websites are likely
for targeted sales operations, in China towards the end of 2018. to rely more on marketplaces
for example with Christian Dior; to adopt an omnichannel strategy.
sales operations with bloggers 3. Improving logistics networks Farfetch enables smaller stores
or influencers (Givenchy); or for Standardizing offline and online to sell their products on its site,
interacting with customers (Louis channels also involves the roll-out to link their stocks with the platform
Vuitton). The main Kering brands are of an efficient logistics network. to offer click & collect and in-store
also present on WeChat, but as for Transversal stock management returns, and to negotiate more
LVMH, the platform is more a means (where all distribution channels share attractive delivery prices with logistics
of multiplying contact points. the real-time state of stocks) is vital groups, all for a commission fee
to be able to offer a click & collect estimated at 25%. The platform
In line with its very exclusive vision service or to satisfy showrooming generated business volumes in 2016
of distribution, Hermès is only present fans. At a time when consumers are of almost GPB547m and sales of
in the online sales market via its getting used to the shorter delivery GBP160m, up 70% year-on-year.
18 | LUXURY GOODS 194. ...and by millennials
The millennial generation, born between 1980
and 2000, contributed significantly to growth
in the luxury market in 2017 and should continue
to do so in coming years.
Millennials already account for nearly far more aware of sector trends.
30% of the luxury market and often They are increasingly selective and
set new trends that are sometimes demanding in terms of quality and
followed by older generations. availability, as well as the offline
However, millennials are also the and online purchase experience.
least loyal to brands and more volatile
in their choices since they are more RISING WEIGHT
sensitive to fast-changing fashion IN GLOBAL POPULATION
trends. The challenge for luxury
brands, and especially those in the soft The millennial generation accounted
luxury segment, is to retain millennials for 31% of the population in 2015
without becoming too dependent on according to UN statistics. By 2020
them. This will limit risks for the future it is set to account for 41% of the
and leave space to develop product global population, rising to 54%
lines targeting other customer types, in 2025. In 2020, the combined X
often marketed at higher prices. and Y generations, huge consumers
of luxury products, will account for
Millennials buy their first luxury 85% of the global population.
products at a younger age than
older generations. Above all, they Millennials are mostly
shop more frequently, but typically located in Asia
spend less than average, so they Most of today’s millennials are
can switch rapidly from one brand either Indian, Chinese or American.
to another. This trend is particularly Indeed, statistics show that 58%
true for Chinese and Asian consumers of today’s two billion millennials live
and is noticeable to a lesser extent in Asia with almost 385m in India.
in the US and Europe. In Japan, which accounts for an
important 8% of the luxury market,
Millennials are also more digitally an ageing population means its
connected than their elders and share of millennials is much lower.
20 | LUXURY GOODS 21FIG. 15: MILLENNIALS AND INCOME PER CAPITA
In countries with very means, leading to an eventual rise Their use of smartphones and
low income per capita in luxury industry spending. social networks makes them more
Most millennials live in regions connected – and they buy different
where per capita income is the This trend of the emerging middle class1 things, for example more sneakers 40%
BANGLADESH
lowest in the world. The exception is especially true in Asia. According in the footwear segment. One out of IRAN
PAKISTAN
is China, where certain millennials to McKinsey, it will account for 51% two pairs of shoes bought by female 35% SOUTH AFRICA
already have very high purchasing of total Chinese households in 2025 millennials are sneakers. They shop EGYPT
INDIA
power, sometimes higher than that vs. 27% in 2015, while the percentage far more often than their elders, PHILIPPINES
of their European and American of lower middle class is expected to especially in China, but spend less. 30% CHINA AUSTRALIA
counterparts. It’s here where the remain the same (17%). Cap Gemini Their purchases are focused mainly UNITED STATES
middle class is set to grow the figures also point to increasing wealth on entry-level ready-to-wear and CANADA
25% VIETNAM
most in coming years in our view. creation in Asia-Pacific, noting that leather goods, mostly branded and
This is reassuring for sustainability there were 5.5 million HNWIs in 2016 with a higher “fashion” component.
INDONESIA JAPAN
of growth in the luxury market and versus 3.3m in 2010. 20% UNITED KINGDOM
leads us to expect high medium- A highly connected generation FRANCE
GERMANY
term growth in the sector. AN ACTIVE GENERATION
IN THE LUXURY MARKET Fig. 18 shows the degree to which 15%
0 5,000 15,000 25,000 35,000 45,000 55,000
Growth in the middle classes, buyers of luxury products on global
especially in Asia-Pacific, but also Following on from millennials, scale are more connected than the ASIA MIDDLE EAST & NORTH AFRICA SUB-SAHARAN AFRICA LATIN AMERICA NORTHAMERICA EUROPE
in the Middle East and Latin America, generation Z, born after 2000, average population, ]broken down
could also drive growth in the market is beginning to emerge and already by generation. Among 46-55-year-
Source: Company Data; Bryan, Garnier & Co
over the medium term. Growth in accounted for 2% of the luxury olds, 90% of those who purchase
the percentage of millennials is very goods market in 2017. Combined, luxury products used the internet
closely tied to the rising percentage the X, Y and Z generations are in 2016 versus 55% of the generation
of the middle classes. Millennials projected to account for more than as a whole. High purchasing power,
FIG. 16: CHANGE IN SIZE OF MIDDLE CLASSES
in emerging countries today are 75% of the total market in 2020 an international mindset and
very likely to become the future vs. 62% in 2015. Millennials have professional occupations are
middle and upper middle classes different purchase habits to baby all factors explaining this trend. Size of the Middle Class (m) 2010 2020e 2030e Current millennials are the
in countries with higher financial boomers and gen-Xers. World 1 845 3 249 4 884 future middle classes and
North America 338 333 322 have a strong appetite for
Europe 664 703 680
luxury brands. The generation
Central and South America 181 251 313
FIG. 14: PERCENTAGE SHARE OF VARIOUS Asia Pacific 525 1 740 3 228 is highly connected, especially
GENERATIONS IN GLOBAL POPULATION
Sub-Saharan Africa 32 57 107 those that purchase luxury
Middle East and North Africa 105 165 234 products
10% 8%
12%
15% Source: Company Data; Bryan, Garnier & Co
26%
31%
45%
49%
FIG. 17: BREAKDOWN OF THE LUXURY MARKET BY GENERATION
56%
54%
In % of total market 2016 2017
41% Generation X (1965-79) 38 38
31%
Generation Y (1980-2000) 27 30
2015 2020E 2025E 2030E Generation Z (2000…) 0 2
Gen Z Millennials Gen X Boomers Silent Others 35 30
Source: UN; Bryan, Garnier & Co Source: Company Data; Bryan, Garnier & Co
1: Middle class: Brookings defines this socioeconomic category as households with per capita
incomes between USD10 and USD100 per person per day in 2005 Purchasing Power Parity (PPP) terms
22 | LUXURY GOODS 23FIG. 18: INTERNET USAGE OF LUXURY PRODUCTS PURCHASERS
The management team at Kering However, while millennials represent
Millennials should account showed its understanding of millennials 56% of sales at Italian brand Gucci,
LUXURY PRODUCTS BUYERS (%): AVERAGE POPULATION (%):
for 45% of the luxury market when changing management at Gucci. the percentage is slightly lower
in 2025 vs 30% at present From early 2016, the brand changed at Louis Vuitton (45-50%) and far
its product offering under new creative lower at Hermès. With a less fashion-
director Alessandro Michele, who saw oriented image and relatively high
the logo as part of the luxury brand’s prices, especially in soft luxury,
DNA and considered a more fashion- Hermès is less attractive to millennials
100 100 97
focused offer necessary to capture the despite having its own website since 90
83
76 77 73
millennial clientele. Previous creative the middle of the 2000s.
55
director Frida Giannini had pushed the
34
brand too far upscale between 2013 Fig. 20 highlights the huge share of
and 2015. Louis Vuitton’s strategy, e-commerce in younger generations’ 15-25 26-35 36-45 46-55 >56 15-25 26-35 36-45 46-55 >56
by contrast, has always been more first-time purchases of luxury goods, Internet users Non users Internet users Non users
balanced between modernity (fashion- especially generation Z. Bain & Co
focused and branded products, often estimates that 14% of consumers Source: Bain & Co; Bryan, Garnier & Co
with an entry range positioning), and in the 18-24 age group bought their
heritage (classic products, fewer logos first luxury product online, while for
FIG. 19: WEIGHT OF MILLENNIALS IN THE LUXURY MARKET
and more upscale). the 25-34 age group, this percentage
is 9%. This reflects new generations’
Bain & Co estimates that purchases digital purchase habits, often via
made by millennials could reach a smartphone or a tablet, which
MILLENNIALS MILLENNIALS
45% of the total luxury market multiplies retail contact points. Luxury 30% 45%
in 2025 vs. 30% in 2017, testifying brands cannot ignore this trend and
to the importance of this customer need to prepare for it. Contrast these 2017 2025e
,
base for the majority of luxury brands. figures with the percentage of luxury , OTHERS
OTHERS ,55%
Assessing the generational mix for goods purchases made online by the 70%
the brands themselves is difficult. 55-64 age group, which is around 2%.
Source: Bain & Co; Bryan, Garnier & Co
FIG. 20: FIRST ONLINE PURCHASE OF A LUXURY PRODUCT BY AGE-GROUP
14
9
8
3
2
18-24 25-34 35-44 45-54 55-64
Source: Bain & Co; Bryan, Garnier & Co
24 | LUXURY GOODS 25FIG. 21: PLACE OF PURCHASE DEPENDING ON THE GENERATION
16 13
18
22
31
33
65
55
48
MILLENIALS GEN X BABY BOOMERS
Source: Bain & Co; Bryan, Garnier & Co
Local consumption Abroad Travel retail
FIG. 22: P
RESENCE OF MAIN LUXURY BRANDS INSTAGRAM (MILLIONS OF FOLLOWERS)
30
25
20
15
10
5
0
N
CI
R
I
R
O
NE
S
EL
A
TA
A
RY
ÈS
ND
D'
TO
O
IE
G
EG
AM
UC
AN
NE
LI
RM
ER
DI
IA
TO
RT
FE
IT
M
CE
AG
G
NC
CH
VE
RB
VU
CA
HE
O
RR
LE
BU
A
S
EG
BA
UI
FE
LO
TT
BO
Source: Instagram; Bryan, Garnier & Co
And very mobile INCREASED PRESENCE is the second most followed brand which has been more active
ON SOCIAL NETWORKS on Instagram (22m followers). in this area.
While almost 48% of millennials’ Among the top 15 most followed
luxury goods purchases are made Luxury brands have also built their brands on Instagram, there are Analyzing search trends by luxury
in their home countries, this is social presences in recent years, three Kering brands (Gucci, Bottega brand name on Google is also
also the most mobile age group, in particular on Instagram and Veneta and Balenciaga) and four a good indicator of the reputation
with the highest percentage of Facebook. The chart above is very LVMH brands (Louis Vuitton, of each brand and its ability
purchases made abroad. Millennials revealing, showing for example that Christian Dior, Fendi and Céline). to grow sales.
also purchase the most in travel Chanel, with 26 million followers, Note also that the Tod’s brand
retail. See Fig. 21. is the most-followed luxury brand (0.95m followers) is less followed The compilation of Google Trends
on Instagram despite being absent than Salvatore Ferragamo (3 million) results in Fig. 25 is based on
from all websites. despite almost similar revenues. user searches for luxury brands
This could be explained by Tod’s over several years. It records the
And Louis Vuitton, present only on reticence to fully engage in a social peak viewing score using an index
Louisvuitton.com and 24sevres.com, media strategy unlike Ferragamo, of 1 (lowest) to 100 (highest).
26 | LUXURY GOODS 27The charts in Fig. 23 prompt several
observations:
from luxury goods fans. There is
a general upward trend for all three
companies, culminating in a surge
the recent nomination of
Riccardo Tisci (ex Givenchy)
to replace Christopher Bailey
5. Conclusion: back to the future?
For each of the brands shown, in Google searches throughout 2017. as creative director.
the Christmas period generates
the highest search rates on Google Internet users do not seem In contrast, it is interesting to note We forecast that in 5-10 years, digital 85% in 2017 from a total of 529 group’s ambition to control digital
for information on luxury brands, interested in either Tod’s or that searches for Hermès made distribution of luxury products is set directly operated stores vs. 111 in distribution of its brands by offering
with trends returning to normal Salvatore Ferragamo at the by internet users are far more to undergo the same transformation 2007. For the entire luxury division a premium purchase experience
in January regardless of brand. moment, thereby reflecting regular throughout the year, which as physical distribution during the at Kering, the share of retail rose even if the offer is limited at this
The exception is Balenciaga, whose Ferragamo’s relative failure reflects the brand’s strategy and 2000s, switching from a wholesale from 53% of sales to more than 75% stage. 24sèvres can be seen as
current brand collection renewal to shake up its brand. positioning focusing on modernity to a far more retail business model. between 2007 and 2017 from a total the digital continuation of the Paris
is generating enormous interest. The same could be said of whilst maintaining its heritage. That switch saw transformation of 1,388 stores. At Hermès, sales department store Le Bon Marché.
UK brand Burberry. However, accompanied by an aggressive policy generated by the directly-operated
Search trends for Gucci and developments in the coming Google search trends use a base 100 to open directly operated stores. stores have gained more than 10 The operation by Richemont to
Balenciaga (Kering) and Fendi months should nevertheless index with the top 100 representing It meant high initial investments, far points over the past 10 years to reach buy the YNAP shares that it did not
(LVMH) reflect rising interest be watched closely following a peak in searches. stricter control of price policy and almost 83% of total sales in 2018. already own for EUR2.7bn testifies to
brand image, and better knowledge chairman Johann Rupert’s interest
of end-customers (roll-out of CRM) with Three recently announced operations in this distribution niche following
an optimized customer experience point to future in-house management the acquisition of Net-a-Porter
and stock management, to the of digital distribution: in 2010, despite the low weight
FIG. 23: SEARCH TRENDS FOR BRAND NAMES ON GOOGLE TRENDS
detriment of the wholesale network. of e-commerce at hard luxury
The creation of the multi-brand groups. The move was probably
GUCCI AND LOUIS VUITTON FENDI AND BALENCIAGA This strategy resulted in better e-commerce site 24Sevres.com also somewhat defensive and
100
profitability levels for groups and by LVMH in June 2017 presenting illustrates the group’s aim to be less
100
brands, thanks to the higher margins almost 160 brands including dependent on multi-brand retailers
80 80
from bringing distribution in-house. Christian Dior, Louis Vuitton, or wholesale networks further out.
60 60 We expect the business models of Salvatore Ferragamo, Gucci,
40 40
certain e-commerce platforms based Tod’s, Céline and a collection Chanel’s acquisition of a stake
on a wholesale model to evolve and of 77 exclusive products. However, in Farfetch, albeit a minority one,
20 20
allow better control by the brands. this project, which seems to have despite the group’s reluctance to
0 0 had difficulty taking off, is set to market Chanel products on the
3
3
13
15
5
5
15
14
4
4
14
16
6
6
16
18
17
7
7
17
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
3
3
13
14
4
4
14
15
5
5
15
16
6
6
16
17
7
7
17
18
V-
B-
V-
B-
V-
B-
V-
B-
B-
V-
Often dominant weight of retail
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
AY
G
AY
G
AY
G
AY
G
AY
G
generate losses (that we estimate internet. The operation should
V-
B-
V-
B-
V-
B-
V-
B-
V-
B-
NO
NO
NO
NO
NO
FE
FE
FE
FE
FE
AY
G
AY
G
AY
G
AY
G
AY
G
AU
AU
AU
AU
AU
M
M
M
M
M
NO
NO
NO
NO
NO
FE
FE
FE
FE
FE
AU
AU
AU
AU
AU
M
M
M
M
M
Fendi Balenciaga
Gucci Louis Vuitton at EUR30-50m) for some years yet, enable the French brand to improve
At Gucci, the retail network generated according to LVMH’s management. the efficiency of its digital tools
FERRAGAMO AND TOD’S BURBERRY AND HERMÈS 68% of sales in 2007 vs. more than The policy demonstrates the and its relations with consumers.
100
100
80
80
60 60
FIG. 24: WEIGHT OF RETAIL IN SALES AT MAIN LUXURY BRANDS
40 40
20 20
Louis Hermès Gucci Bottega Saint Fendi Céline Cartier
0 0 Vuitton Veneta Laurent
3
3
13
15
5
5
15
18
14
14
16
6
6
16
4
4
17
7
7
17
3
3
13
15
5
5
15
14
18
4
4
14
16
6
6
16
17
7
7
17
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
-1
V-
B-
V-
B-
B-
V-
B-
V-
B-
V-
V-
B-
V-
B-
B-
V-
B-
V-
B-
V-
AY
G
AY
G
AY
G
AY
G
AY
G
AY
G
AY
G
AY
G
AY
G
AY
G
NO
NO
NO
NO
NO
FE
FE
FE
FE
FE
AU
AU
AU
AU
AU
NO
NO
NO
NO
NO
FE
FE
FE
FE
FE
AU
AU
AU
AU
AU
M
M
M
M
M
M
M
M
M
M
Burberry Hermès
100 85 85 83 69 75 75 70
Ferragamo Tod's
Source: Google; Bryan, Garnier & Co Source: Company Data; Bryan, Garnier & Co
28 | LUXURY GOODS 29You can also read
