FAST FORWARD YOUR ROUTE TO CONSUMERS · unlimited choices are less effective than a curated...

FAST FORWARD YOUR ROUTE TO CONSUMERS

April 8th, 2017

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 2

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '16E

CAGR +4%

+4%-1%+3%

CAGR -9% CAGR +4%

+9%

HIGH-QUALITY DESIGN ON A STEADY GROWTH PATH SURPASSING PRE-CRISIS LEVEL

'15

YoY Growth:

YoY Growth @ constant exchange: +4%

Finalizzaresembraconfermarsiil


ALL SEGMENTS WITH POSITIVE PERFORMANCE IN 2015, LIVING AND BEDROOM THE WINNING CATEGORY

'15 '16 '15 '16 '15 '16

CATEGORIES GEOGRAPHIES CHANNELS


YET, DESIGN STILL REPRESENTING A SMALL PORTION OF THE GLOBAL LUXURY CONSUMPTIONS

Personal Luxury Goods

Luxury Cars

LuxuryHôtellerie

LuxuryWines &Spirits

LuxuryFood

Fine Art

High-QualityDesign

LuxuryPrivate

Jets

LuxuryYachts

LuxuryCruises

TOTAL2016E

4OF TOTAL LUXURY

%


HIGH-QUALITY DESIGN HAS A STRONG LONG-TERM POTENTIAL

'16E

X3LONG TERM POTENTIAL

• Enlarging luxury customer base with rising middle class of emerging market

• Shifting consumption from unbranded to branded high-end furniture

• Conquering of further away high potential underpenetrated geographies

•Taking ownership of contract business

-

+

BR

AN

DS

IN

DIR

EC

T C

ON

TR

OL


• The industry is made up predominantly by small and independent pure design players (average size ~60M€),

often very specialized (almost 80% are mono-category) and stuck in a "manufacturing mind-set"

• Most players are European, struggling to serve a global consumer outside of their domestic market, because of the difficult route to market

• Limited profitability, compared to other luxury segments, limitsnecessary investment to overcome route-to-customer complexities

BUT TO DO SO IT MUST MOVE INTO ITS NEXT STAGE OF DEVELOPMNET

High-quality design & interior design markets vs luxury consumers spending by geography (2015|€B)


TODAY DESIGN RETAIL PRESENCE IS STILL MARGINALWHEN COMPARED TO PERSONAL LUXURY

Mono-brand network of pure design brands

Pure design brands

Personal luxury goods

~20.000 stores

Mono-brand coverage of design brand vs personal luxury brands


RETAIL SALES

BUT EVEN IN PERSONAL LUXURY, THE RETAIL EQUATION IS UNDER STRESS

OPEX

EBITDA

-

=

• Traffic in store declining across the board

- Reduced tourist flows due to price harmonization

- At global level off-price stores are the only ones to strongly attract consumers

- The e-commerce channel is booming on two key drivers: bargainand convenience, aka the opportunity not to visit a physical store

• Conversion rate flat on the surface but strong polarization with players fighting to engage with more opinionated and demanding local customers

• Full price sales decreasing due to the higher incidence of in season mark down

• Rent costs increasing in top locations as brands fight for the top spot to intercept the dwindling traffic

• Marketing costs increasing in order to support new customer engagement strategies

• Channel profitability suffering with polarization between brands that have managed to adapt to the new environment (experience and omni-channel) and those that haven't


IN THIS PIVOTAL MOMENT FOR RETAIL, DESIGN BRANDS SHOULD THINK OUTSIDE OF THE BOX TO DEFINE A FORWARD-LOOKING

HOLISTIC ROUTE-TO-CUSTOMER

YET PERSONAL LUXURY BRANDS ARE REASSESSING THEIR ROUTE TO MARKET

Real terms trend

+13%

+23%

+26%

Global Personal Luxury Goods Market by channel & format (2016E|€B)


TO UNLOCK THE POTENTIAL, DESIGN BRANDS MUST LOOK AT WHO WILL BE THE FUTURE CONSUMER….

'16 '25

GEN Z

GEN X

MILLENNIALS58%

35%

Luxury consumers share by generation(2016F-25F|#)

TODAY MILLENNIALS ALREDY REPRESENTING

35% OF LUXURY CONSUMERS

OLDER GENERATIONS

IN THE NEXT 10 YEARS MILLENIALS AND

GENERATION Z WILL REPRESENT 65% OF

CONSUMER


… AND AT HOW TODAY'S CONSUMERS ARE ALREADY EVOLVING

MILLENNIAL IS A STATE OF MIND


WHAT DESIGN BRANDS SHOULD BE LOOKING OUT TO AND START PREPARING FOR:

1. SEAMLESS expectation

2. EDITED for ME

4. I must EXPERIENCE IT

3. COMMUNITY: need for belonging


CONSUMERS THINK BRAND-FIRST: A SEAMLESS & CONSISTENT SHOPPING EXPERIENCE

IS MORE IMPORTANT THAN WHO IS ACTUALLY INVOICING YOU

ONLINE AGGREGATORS OF PHYSICAL MULTIBRAND STORES ARE ABLE TO DELIVER A UNIQUE EXPERIENCE TO CUSTOMERS, MOST OF WHOM THINK THEY ARE BUYING FROM A SINGLE STORE

1.SEAMLESS expectation


UNLIMITED CHOICES ARE LESS EFFECTIVE THAN A CURATED SELECTION, ESPECIALLY WHEN LEVERAGING THE SAME EFFICIENCY

ONLINE STARTUPS ARE USING AMAZON AS A LOGISTICAL PARTNER WHILE CRAFTING A RADICALLY DIFFERENT CUSTOMER EXPERIENCE ON THEIR OWN PLATFORM, EDITING PRODUCTS IN ORDER TO INSTANTLY

APPEAL TO CUSTOMER NICHES

EDITED for ME2.


STORES CAN BECOME YOUR COMMUNITY CENTRE

YOGA SPECIALIST RETAILER ENGAGES DIRECTLY WITH ITS LOYAL COMMUNITY THAT SHARES THE SAME VALUES AND PASSIONS:

• SHOP ASSISTANTS ARE MEMBERS OF THE SAME COMMUNITY AND ARE TRUSTED IN THEIR ADVICE

• STORE BECOMES GATHERING PLACES TO SERVICE OF THE COMMUNITY ORGANIZING YOGA SESSION AND OTHER RELEVANT INITIATIVES

• THE PRODUCTS SOLD IN STORES ARE TRUE TO THE VALUES OF THE COMMUNITY

COMMUNITY: need for belonging3.


YOUR STORE IS WHERE THE CUSTOMER CAN FINALLY GET A CHANGE TO EXPERIENCE HIS OR HER OWN PASSIONS

APPLE'S NEW STORE CONCENPT IS CENTERED AROUND ENABLING PEOPLE TO DEVELOP THEIR OWN PASSIONS AND SKILLS THORUGH FREE CODING COURSES, PHOTOGRAPHY SEMINARS, CONCERTS AND MUSIC

CLASSES AND MUCH MORE STILL TO COME

I must EXPERIENCE IT4.


TODAY DESIGN BRANDS HAVE YET TO RESPOND TO MOST EMERGING CONSUMER TRENDS

SEAMLESSexpectation

EDITED for ME

I must EXPERIENCE IT

COMMUNITY:need for belonging

Intermediated route to consumer

Widest choice to the peril of a brand POV

The interest is there, the cultivation of a community not fully

Transactional showroom for rare consumer need

DESIGN BRANDS TODAY


IT IS PARAMOUNT TO RETHINK THE CUSTOMER JOURNEY AND THE ROLE OF RETAIL WITHIN IN

NEED

PARALLEL JOURNEY, LESS DEPENDENT FROM CONSUMERS AND WITH MARGINAL ROLE FOR RETAIL

B2C

CONTRACT

A specific and infrequent

purchasing need, not initiated by the brand or the store

itself

High level of intermediation

STORE

STARTAWARENESS AND CONSIDERATION CONVERSION

ARCHITECT

INTERIOR DESIGNER

DEALER

INFLUENCER/PRESS

Store marginal role, crossing only some customers and their journeys

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 19A VIRTUOUS CYRCLE CENTRED AROUND A STORE EPICENTRE

THE STORE MUST BE RE-THOUGHT TO BECOME THE EPICENTRE OF MULTIPLE & DIFFERENT JOURNEYS

SHOWROOMING "OUT OF STORE" CONVERSION

PRESIDIUM OF CONTRACT PRESCRIBERS DEALERS LIKE RETAIL

• Chance for the customer to directly experience the product

• Leverage on online to drive brand awareness and consideration

• May lead the customer to seek additional experiences in stores

• Small satellite spaces

- Leveraging on augmented reality to overcome the need for large retail surface

- These may also be within wholesale space

• Brands architects directly to the customer's home

• Shortening of customer journey, reduced level of intermediation

Further opportunities for showrooming through

contract

Drive traffic to dealers

Creates promoters among prescribers

Increases brand awareness & consideration

• Provide support to dealers and wholesalers:

- Tailored/ edited catalogue for the local customer and needs

- Trade marketing

- Advanced configurator

- Rapid catalogue access

- Direct communication tool with the brand

• Advance CRM of architects involved in contract prescription

• Direct support in the planningand prescription of brand product

• Tailored catalogues based on the specific industry/ sectors/ client type needs

EXPERIENTIAL NON-

TRANSACTIONAL INITIATIVES

IN STORE TRAFFIC

CONVERSION

PROJECT SPACE AND STAFF FOR PRESCRIBERS

TRAINING TO DEALERS

STORE EPICENTRE

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 20A VIRTUOUS CYRCLE CENTRED AROUND A STORE EPICENTRE

SHOWROOMING "OUT OF STORE" CONVERSION

PRESIDIUM OF CONTRACT PRESCRIBERS DEALERS LIKE RETAIL

EXPERIENTIAL NON-

TRANSACTIONAL INITIATIVES

TRAFFIC CONVERSION

PROJECT SPACE AND STAFF FOR PRESCRIBERS

TRAINING TO DEALERS

STORE EPICENTRE

SEAMLESSexpectation

EDITED for ME



COMMUNITY: needfor belonging

SEAMLESSexpectation

EDITED for ME

…SO TO ADDRESS ONGOING CHANGES IN CONSUMERS

Further opportunities for showrooming through

contract

Drive traffic to dealers

Creates promoters among prescribers

Increases brand awareness & consideration

FAST FORWARD YOUR ROUTE TO CONSUMERS · unlimited choices are less effective than a curated...

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