SSelected key 2016 and beyond business trends in the luxury industry
January 2016
4 key trends in the Luxury industry4 key trends in the Luxury industry
A changing world:A changing world: new growth drivers
in the Luxury industry
1
• Strong reduction in retail expansion: 2/3 of the next decade's growth will be organic
• Opportunities in countries where luxury buying is long-established, with US consumers expected to be the main contributor of future growthy
Intro values still roaring & customers i i l l ki2
• Intro luxury values (quality, exclus., craftsmanship) still stronger than extro• Accelerating shift from “having” to “being”
consumers expected to be the main contributor of future growth
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ight
s re
serv
ed.
increasingly looking for experience
'W d f M th' k
• How to (i) diversify and (ii) deliver individual outstanding experiences along the purchase pathway ?
• Word of mouth/advocacy now the #1 influencer of luxury purchases
onsu
lting
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nc. A'Word of Mouth' key
influencer for purchases
3
Word of mouth/advocacy now the #1 influencer of luxury purchases• And magazines are not dead (yet)
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The rise of the digital world4
• Luxury sales are accelerating online• Beyond e-commerce, digital as a key lever to influence purchasing
behaviors of Luxury customers
Luxury Overview - 17Jan16- FINAL.pptx 1
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2
world behaviors of Luxury customers• Multichannel is a Must – What role for the stores in the future ?
4 key trends in the Luxury industry4 key trends in the Luxury industry
A changing world:A changing world: new growth drivers
in the Luxury industry
1
• Strong reduction in retail expansion: 2 / 3 of the next decade's growth will be organic
• Opportunities in countries where luxury buying is long-established, with US consumers expected to be the main contributor of future growthy
Intro values still roaring & customers i i l l ki2
• Intro luxury values (quality, exclus., craftsmanship) still stronger than extro• Accelerating shift from “having” to “being”
consumers expected to be the main contributor of future growth
All r
ight
s re
serv
ed.
increasingly looking for experience
'W d f M th' k
• How to (i) diversify and (ii) deliver individual outstanding experiences along the purchase pathway ?
• Word of mouth/advocacy now the #1 influencer of luxury purchases
onsu
lting
Gro
up, I
nc. A'Word of Mouth' key
influencer for purchases
3
Word of mouth/advocacy now the #1 influencer of luxury purchases• And magazines are not dead (yet)
015
by T
he B
osto
n C
o
The rise of the digital world4
• Luxury sales are accelerating online• Beyond e-commerce, digital as a key lever to influence purchasing
behaviors of Luxury customers
Luxury Overview - 17Jan16- FINAL.pptx 2
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2
world behaviors of Luxury customers• Multichannel is a Must – What role for the stores in the future ?
New growth drivers (1/3) : Recent switch from Retail expansion to Organic growth
1expansion to Organic growth
Last decade growth by component2 Upcoming decade growth by component2
10%
40%
100%
30%
100%
40%
20%
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25%
20%
10%
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Total growth
VolumeEmerging markets
Traditional Markets1
25%
Price - Mix Total growth
VolumePrice - MixEmerging markets
Traditional markets1
20%
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60% 40%
Organic growth (LFL)
Retail expansion
30% 70%
Organic growth (LFL)
Retail expansion .
Luxury Overview - 17Jan16- FINAL.pptx 3
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260%
1. Europe (Italy, France, UK, Germany, Spain, Nordics), US and Japan; 2. Referrers to personal luxury (apparel, accessories, hard luxury, Perfume & Cosmetics)Note: Last decade Personal Luxury market CAGR growth ~5%; upcoming decade Personal Luxury market CAGR growth ~4%Source: Bernstein / BCG analysis
40% 30% 70%
New growth drivers (2/3) : Top Luxury consumers are back and are to make 40% of growth
1
Cluster 2014
# (M) $Bn1
2021
# (M) $Bn1
and are to make 40% of growth
# (M) $Bn # (M) $Bn
73122
4284
25
24Ultra
Beyond money$10 k
$20 k
135
330
94
220
11
18
9
15 220
Very high
Total Top Luxury
$5 k
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Top Aspirational 7654 2519
+110$2 k
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609481 422356Aspirational
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Total LuxuryConsumers1 ~1015~755 ~465~390
Luxury Overview - 17Jan16- FINAL.pptx 4
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2+2601. Including Experiential and Personal luxury, excluding cars and YachtsNote: rounded numbersSource: BCG Analysis
New growth drivers (3/3) : US consumers expected to be the main contributor to future growth
1main contributor to future growth
P&E1 Luxury market growth by Nationality ($Bn)y g y y ($ )
Top Luxury
330496
450+$110B
y
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672029220
150
300
~55%
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150
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o02021Others3Middle
EasternEuropean2ChineseAmericans2014
Luxury Overview - 17Jan16- FINAL.pptx 5
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1. Personal & Experiential Luxury market; 2. Italian, French, German, English 3. Including Japanese, S. Korean, Russian, Brazilian and RoWSource: BCG 2014 ad hoc study (10'000 respondents in 10 countries)
4 key trends in the Luxury industry4 key trends in the Luxury industry
A changing world:A changing world: new growth drivers
in the Luxury industry
1
• Strong reduction in retail expansion: 2 / 3 of the next decade's growth will be organic
• Opportunities in countries where luxury buying is long-established, with US consumers expected to be the main contributor of future growthy
Intro values still roaring & customers i i l l ki2
• Intro luxury values (quality, exclus., craftsmanship) still stronger than extro• Accelerating shift from “having” to “being”
consumers expected to be the main contributor of future growth
All r
ight
s re
serv
ed.
increasingly looking for experience
'W d f M th' k
• How to (i) diversify and (ii) deliver individual outstanding experiences along the purchase pathway ?
• Word of mouth/advocacy now the #1 influencer of luxury purchases
onsu
lting
Gro
up, I
nc. A'Word of Mouth' key
influencer for purchases
3
Word of mouth/advocacy now the #1 influencer of luxury purchases• And magazines are not dead (yet)
015
by T
he B
osto
n C
o
The rise of the digital world4
• Luxury sales are accelerating online• Beyond e-commerce, digital as a key lever to influence purchasing
behaviors of Luxury customers
Luxury Overview - 17Jan16- FINAL.pptx 6
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2
world behaviors of Luxury customers• Multichannel is a Must – What role for the stores in the future ?
Intro values still roaring2
Intro values still roaring
"What is luxury to you?"
• Adorned
Extrovalues% of respondents1
24% 24% 29% 30% 34% 38% 39% 40% 41% 44%
aesthetics• Brand visibility• Customization• Being Cool/Sexy
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Introl
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76% 76% 71% 70% 66% 62% 61% 60% 59% 56%• Quality• Exclusivity• Craftsmanship
values
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oCraftsmanship• Timeless
Luxury Overview - 17Jan16- FINAL.pptx 7
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1. Respondents were asked to rank the top 3 values: the graph represent the value ranked as the most importantSource: BCG 2014 ad hoc study (10'000 respondents in 10 countries)
Experiential Luxury market accounts for the largest part of the Luxury market
2the Luxury market
Luxury market ($B,2014 retail value)
541 500
Personal luxury ($290B)
Experiential luxury($465B)
Cars & Yachts($350B)
Others($280B)
5472154
350
1 500
1 000
1 385
P&E1 Market: $755B
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624941121500
$755B
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61670
TotalOther2Perfume &
Watches&
ApparelAcces- ArtTechno-Cars & Hotel & Food & Furniture
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o& Cosmetics
&Jewelry
sories logyYachtsExclusive vacations
Wine
Covered by True-Luxury Global Consumer Insight
Luxury Overview - 17Jan16- FINAL.pptx 8
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2
1.Personal and Experiential luxury 2. Including Private Jets, Art de la table, etcNote: Some numbers are rounded.Source: BCG 2014 specific survey, BCG-IPSOS market research
Fundamental differences between personal Luxury goods and Luxury experiences
2and Luxury experiences
E i ti l lP l L d H b id Experiential luxuryPersonal Luxury goods
Having Being
Hybrid
For self only
Usually visible to
Often with others
Not always visibleCharacte-
-ristics
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For the mid-long term
Instant pleasure
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Examples
• iPad• High-end kitchen• High end furniture• ....
• Luxury hotel or resorts
• High-end restaurants
• Watches with diamonds
• Jewelry• Bags, apparel
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oExamples• Spas...
g , pp• ...
Luxury Overview - 17Jan16- FINAL.pptx 9
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2
Source: Internet research
4 key trends in the Luxury industry4 key trends in the Luxury industry
A changing world:A changing world: new growth drivers
in the Luxury industry
1
• Strong reduction in retail expansion: 2 / 3 of the next decade's growth will be organic
• Opportunities in countries where luxury buying is long-established, with US consumers expected to be the main contributor of future growthy
Intro values still roaring & customers i i l l ki2
• Intro luxury values (quality, exclus., craftsmanship) still stronger than extro• Accelerating shift from “having” to “being”
consumers expected to be the main contributor of future growth
All r
ight
s re
serv
ed.
increasingly looking for experience
'W d f M th' k
• How to (i) diversify and (ii) deliver individual outstanding experiences along the purchase pathway ?
• Word of mouth/advocacy now the #1 influencer of luxury purchases
onsu
lting
Gro
up, I
nc. A'Word of Mouth' key
influencer for purchases
3
Word of mouth/advocacy now the #1 influencer of luxury purchases• And magazines are not dead (yet)
015
by T
he B
osto
n C
o
The rise of the digital world4
• Luxury sales are accelerating online• Beyond e-commerce, digital as a key lever to influence purchasing
behaviors of Luxury customers
Luxury Overview - 17Jan16- FINAL.pptx 10
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2
world behaviors of Luxury customers• Multichannel is a Must – What role for the stores in the future ?
Word of Mouth: 1st influence lever, overcoming magazines3
Word of Mouth: 1 influence lever, overcoming magazines
"Which of the following has an impact on your purchase decision?"
% of respondents2013 Different WoM influence across nationalities
Social Media & Blogs Physical
2014
39%
32%Events
Magazines2
WoM 49%29% 20%
Store 39%
WoM1 43%32%11%
Magazines 50%
46%47%49%52%52%53%55%
58%
17% Avg. 49%
Social Media & Blogs Physical
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31%
32%
32%
Tailoredoffers
Storewindows
Events
TV &Movies 24%
Brandwebsites 34%
windows 39%
34%
10%
41%
19%
17%14%24%
21%26%18%
33%
49%
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TV &Movies
Brandwebsites
26%
30%
offers
Events 20%
Tailoredoffers 22%
Movies
23%
10%
22%30%33%
25%30%26%
35%
22%
41%
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SeenWore
Celebrities
19%
23%
SeenWorn 13%
Celebrities 20%23%22%22%
Luxury Overview - 17Jan16- FINAL.pptx 11
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2
1 Includes WoM, Social Media and Other Social blogs 2. Editorials and Commercial in MagazinesNote: multiple choices possible, out of top 3 ranksSource: BCG 2014 ad hoc study (10'000 respondents in 10 countries)
Social media and blogs the real engine of WoM growth3
Social media and blogs the real engine of WoM growth
"Which of the following has an impact on your purchase decision?"
+6pp
ǻpp '13-'14
5%8% Blogs
S
49%
43% +3pp
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ed.6% Social
Media12% +6pp
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Physical29%32% (3pp)
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20142013
WoMdigitalization 0.3 0.7
Luxury Overview - 17Jan16- FINAL.pptx 12
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1. WoM Digitalization index: calculated as Social Media & Blogs influence vs. WoM physical influenceNote: multiple choices possible, out of top 3 ranksSource: BCG 2014 ad hoc study (10'000 respondents in 10 countries)
gindex1
Impact of blogger collaboration in luxury3
Impact of blogger collaboration in luxury
Enlisted nine bloggers to help drive online and brick• Enlisted nine bloggers to help drive online and brick-and-mortar sales
• Hosted a series of in-store events across the U.S., resulting in 147 000 social interactionsresulting in 147,000 social interactions
• Blogger Christine Andrew of Hello Fashion fueled a 107% uptick in “likes” and 465% increase in comments to Neiman Marcus’ Instagram page after
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comments to Neiman Marcus Instagram page after a Fall Trend event
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• Rach Parcell of Pink Peonies reportedly drove $1 million in sales to nordstrom.com during the 2014
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ogholiday season
Luxury Overview - 17Jan16- FINAL.pptx 13
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Source: WWD 'The Blogosphere Pays Off More Than Ever'. January 11, 2016
Vignette: Chanel targeting social media withimmersive pop-up perfume exhibit in NY
3immersive pop up perfume exhibit in NY
Immersive experience Social media promotion
Exhibit highlights key elements of Chanel No5 eau premiere from 'creation' to 'revelation'
Selfie walls• Visitors encouraged to post about their
experience online
Sensory experience• Coco Chanel whispers No5 anecdotes
directly to you
Twitter hashtag on perfume samples• Magically appears when sample paper is
spritzed with perfume to promote tweeting
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ed.• Interactive video tables for each key
ingredient• 'Revelation' room scented with eau premiere
Virtual tickets
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• Stamp-customizable eau premiere bottle cards mailed anywhere in the world for free
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Luxury Overview - 17Jan16- FINAL.pptx 14
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Note: Chanel No5 eau premiere 'In a New Light' exhibit May 7-May17/15 in NYC
4 key trends in the Luxury industry4 key trends in the Luxury industry
A changing world:A changing world: new growth drivers
in the Luxury industry
1
• Strong reduction in retail expansion: 2 / 3 of the next decade's growth will be organic
• Opportunities in countries where luxury buying is long-established, with US consumers expected to be the main contributor of future growthy
Intro values still roaring & customers i i l l ki2
• Intro luxury values (quality, exclus., craftsmanship) still stronger than extro• Accelerating shift from “having” to “being”
consumers expected to be the main contributor of future growth
All r
ight
s re
serv
ed.
increasingly looking for experience
'W d f M th' k
• How to (i) diversify and (ii) deliver individual outstanding experiences along the purchase pathway ?
• Word of mouth/advocacy now the #1 influencer of luxury purchases
onsu
lting
Gro
up, I
nc. A'Word of Mouth' key
influencer for purchases
3
Word of mouth/advocacy now the #1 influencer of luxury purchases• And magazines are not dead (yet)
015
by T
he B
osto
n C
o
The rise of the digital world4
• Luxury sales are accelerating online• Beyond e-commerce, digital as a key lever to influence purchasing
behaviors of Luxury customers
Luxury Overview - 17Jan16- FINAL.pptx 15
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world behaviors of Luxury customers• Multichannel is a Must – What role for the stores in the future ?
The rise of online luxury continues : >25% growth every year since 2007
4year since 2007
Online luxury global market (personal luxury goods) (2007-2015, $B)(2007 2015, $B)
15.015.0
Online sales expected to
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5.6
expected to represent:
• ~10-15% of Luxury sales in 2020 ?
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3.62.5
5 6 in 2020 ?• ~40-50% of
the growth 2015-2020 ?
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2015F2011 201320092007
% on total l
5%+1.2%
Luxury Overview - 17Jan16- FINAL.pptx 16
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Note: Personal luxury includes apparel, leather and accessories, watch and jeweler, cosmetic sSource: Forrester research, BCG analysis
luxury
Digital: what's in beyond ecommerce?4
Digital: what s in beyond ecommerce?
Need to reorient Marketing Spend to Online (Social media, blogs etc)
Drive awareness with audiences through
Build deep consumer engagement and
A B
audiences through new platforms exploit advocacy
marketing
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Enhance customer driven innovation:
• productsBuild a multichannel customer experience
D C
Luxury Overview - 17Jan16- FINAL.pptx 17
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2• retail,....customer experience
3 out of 4 consumers asking for omnichannel4
3 out of 4 consumers asking for omnichannel
"How important is for you that a brand can be reached through different channels?"
Omnichannel importance across nationalities
% f d t25%Not
Important
78% 78%81%85% 81%%
90%
A
% of respondents
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38%Somehowimportant
78% 78%
43% 57%
45%
71%
33%
75%41%
44% 27%42%34%
48%
Avg. 75%
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31%
33%49%38% 36%43% 49%
41% 37%
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37%Not negotiable/Very Important
33%38% 36%
11%
41%26%
37%
Luxury Overview - 17Jan16- FINAL.pptx 18
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Source: BCG 2014 ad hoc study (10'000 respondents in 10 countries)
Total
"Pure store" no longer the first channel in terms of sales origination
4origination
"Where have you bought the last item purchased? Where have you researched it?"
53 Æ 62%% of last purchase for each respondent
1007 Æ8
8Æ 9
10060
80
38 Æ 45
8 Æ 9
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100
20
40
47 Æ38
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TotalShowrooming(viewed in store,
Pure OnlineResearched OnlinePurchased Offline
Pure in Store
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purchased on line)Purchased Offline
Luxury Overview - 17Jan16- FINAL.pptx 19
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Source: BCG 2013 and 2014 ad hoc study (10'000 respondents in 10 countries)
2013 Æ 2014Omnichannel
Multi-channel Consumers spend more4
Multi channel Consumers spend more
Brand X: average consumer spend by channels (index=100)
267
156
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100122
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Multichannel (on-line+store)
Store onlyOn-line only
Luxury Overview - 17Jan16- FINAL.pptx 20
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Source: BCG analysis, mix of Maisons (Europe, US)
As a consequence: - traffic in physical stores & + rent = decreasing store return
4decreasing store return
2008 2014
Traffic (#) ~ 70 K ~60 K
~ 9.1 K ~7.7 K
~ 13% ~ 12.8%Conversion rate (%)
Clients (#)
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~$1.000 ~$1.300
9.1 K 7.7 K
Average yearly purchase ($)
Clients (#)
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~$6 K / sqm ~$9 K / sqm
$30 K / sqm $33 K / sqm
Rent / sqm
Sales / sqmx 5 x 3.7
Luxury Overview - 17Jan16- FINAL.pptx 21
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Note: Analysis performed on a subset of Personal Luxury BrandsSource: Public data, Interviews with experts, Cushman & Wakefield Valuation report, BCG analysis
Emerging Trends: New business modelsLuxury on-demandLuxury on demand
UberLUX• Tested in select markets on
Audi• Tested in SFO with plans to
Glamsquad• On-demand beauty app
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Tested in select markets on New Year's and Valentine's Day 2015
• Car models: Mercedes Benz
Tested in SFO with plans to expand to more cities
• Vehicles available: A4 sedan & R8 supercar
y ppproviding hair, makeup or nail services from beauty professionals on-demand
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S-Classes & BMW 7-Series
• Pickups from highest-rated drivers
sedan & R8 supercar
• Can use car for up to 28 days
• Currently in New York, LA, Miami and the Hamptons
• Founded by Gilt Groupe co-
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odrivers• Also offers 'Audi at Home'
where residents in select condo complexes can share a fleet of Audi
y pfounder
Luxury Overview - 17Jan16- FINAL.pptx 22
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2share a fleet of Audi vehicles
Source: Company websites, Luxury Daily
Emerging Trends: New business modelsEmerging Trends: New business models
Luxury Travel Retail Wearable TechnologyLuxury Travel Retail Wearable Technology
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Luxury Overview - 17Jan16- FINAL.pptx 23
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2
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