Bcg trueluxury

True-Luxury Global Consumer Insight

Antonio Achille, Partner & Managing Director

Milan, January 22nd, 2015

P-Altagamma-317971-01-22Jan15-AAc-mil_Published_short.pptx 1

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This volume contains copies of slides presented by Antonio Achille, Partner and Managing Director

of the BCG Milan office, and Armando Branchini, Deputy Chairman of Fondazione Altagamma,

during the "Consumer and Retail Insight" event held in Milan on January 22nd 2015.

The presentation is based on a research that BCG developed during the month of November 2014,

interviewing 10'000 Top Luxury consumers from 10 countries (Italy, France, UK, Germany, US,

Japan, China, Brazil, South Korea and Russia).

During the presentation, the slides served as the focus for discussion; they are incomplete without

the accompanying oral commentary

This document will be most meaningful, therefore, to those who attended the meeting

Disclaimer


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True-Luxury Global Consumer Insight:

6 "W" questions addressed today

Why now?

What makes our study unique?

What will it take to capture growth in key categories?

Where will growth come from?

Which segments will drive growth?

What are the consumer trends shaping the industry?


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Why now?


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60%

Organic growth: 2 / 3 of next decade growth

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

Last decade growth by component2 Upcoming decade growth by component2

Total

growth

100%

Volume

20%

20%

Emerging

markets

35%

Traditional

Markets1

25%

Price

- Mix

40%

Organic growth

(LFL)

Retail expansion

100%

Total

growth

Volume

30%

Price

- Mix

40%

Emerging

markets

10%

Traditional

markets1

20%

Organic growth

(LFL)

70%

Retail expansion

.

30%


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The CONSUMER era

'80s '90s '00s 2015 next decade

• Style & Design for

elites

• Temple of Desire

• The rise of

Global Brands

• Retail as part of

Brand experience

• "Real estate rush"

• Consumer: engine

of top line and

margin growth

+Consumer Design +Brand +Retail


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What makes our study unique?


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2015 Edition: What's new?

10.000+Top Luxury Consumers analyzed

10 luxury markets deep dived

All luxury categories in scope

Doubled sample yearly average spending: 10K€ 20K€

• 2K€ 5K€ yearly spend as entry point

• 3.000+ luxury consumers spending yearly on avg. 44K€ in P&E luxury

Consumer Segments as

key lens to read market dynamics Category breakdowns


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All luxury categories in scope

5472154

350

354

624941121

6167

1,385

0

500

1,000

1,500

Hotel &

Exclusive

vacations

Food

& Wine

Furnit-

ures

Perfumes

&

Cosmetics

Watches

&

Jewelry

Apparel Acces-

sories

Arts Other2 Techno-

logy

Cars &

Yachts

Total

Personal luxury

(290 €B)

Experiential luxury

(465 €B)

Cars &

Yachts

(350€B)

Luxury market (€B,2014 retail value)

1.Personal and Experiential luxury 2. Including Private Jets, Art de la table, etc Note: Some numbers are rounded. Source: BCG 2014 specific survey, BCG-IPSOS market research

Covered by True-Luxury Global Consumer Insight

P&E 1 Market:

755 €B

Others

(280 €B)


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Sounding board of WW leading Brands to ensure

robustness and actionability of the insight

2015 additions

http://www.google.com/url?sa=i&source=images&cd=&cad=rja&docid=zLcf_AmohrVdVM&tbnid=IVklNVUGtMnkoM:&ved=0CAgQjRwwAA&url=http://it.wikipedia.org/wiki/File:Logo-Rinascente.JPG&ei=YXUwUou-BJCLhQeBlIEg&psig=AFQjCNH_OT85zXJT6CPL0fXtCsK0KfjrcQ&ust=1378993889160535

http://www.google.com/url?sa=i&rct=j&q=roccoforte logo&source=images&cd=&cad=rja&docid=FhCy18oR4IaPUM&tbnid=TLkvm7ovEWPJbM:&ved=0CAUQjRw&url=http://www.eyefortravel.com/social-media-and-marketing/sales-europe-emotional-and-expanding-business&ei=pnMwUtDZFa2p0AX5_IDQBw&bvm=bv.51773540,d.ZG4&psig=AFQjCNE57tyK77v6_CQC_t10_JlnKmBE-A&ust=1378993366127156


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Where will growth come from?


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Short term: Luxury Barometer® indicates

rebound of confidence in 2015 vs. 2014

24% 29% 24%

43%48%

39%

33%23%

37%

Less

(-20%)

Same

More

(+20%)

2015 2014 2013

1. Index calculated as percentage of customers who see growth in spend less the percentage who foresee a decrease in spend (Positive – Negative) . The index represents a proxy of the expected growth of spend in Luxury by Top Luxury consumers

Source: BCG 2014 ad hoc study (10'000 respondents in 10 countries)

% of respondents

Luxury

Barometer®1

9pp 13pp -5pp

"Do you expect to spend more or less on luxury products in the next 12 months?"

Short

term


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390M consumers to become 465M by 2021

with P&E market growing from 755 to 1015 Bn€ Cluster

Total Luxury

Consumers1

2014

# (M) Bn(€)1

2021

Top Aspirational

# (M) Bn(€)1

73

122

135

~1015

609

330

76

~755

481

54

42

84

94

220

2

5

11

~465

422

25

18

~390

356

19

2

4

9

15 220

Ultra

Beyond money

Very high

1. Including Experiential and Personal luxury, excluding cars and Yachts Note: rounded numbers Source: BCG Analysis

Total Top Luxury

Aspirational

2 k€

5 k€

10 k€

20 k€

Mid

term


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US consumers confirmed as the

main contributor to future growth

33049

672029

220

0

150

300

450

2021 Others3 Middle

Eastern

European2 Chinese Americans 2014

+110€B

P&E1 Luxury market growth by Nationality (€Bn)

~55%

1. Personal & Experiential Luxury market; 2. Italian, French, German, English 3. Including Japanese, S. Korean, Russian, Brazilian and RoW Source: BCG 2014 ad hoc study (10'000 respondents in 10 countries)

Top

Luxury

Mid

term

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What are the consumer trends

shaping the industry?


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Global trends confirming their importance

Confirmations Changes in Trajectory New Trends

Advocacy era continuing: 80% of consumers willing to become brand ambassador

"Made in Italy" still rules: 1st preferred manufacturing country

– Leadership in all categories but cars (1st Germany) and watches (1st Switzerland)

53% of Luxury consumers spend made out of the home country

– Drivers: convenience key for Emerging Markets; part of the journey experience

for Mature Markets

Exclusivity key for long term creation and not granted: 25% of luxury brands at risk of

loosing exclusivity based on consumer declarations

"Made in" still rocks: 80% of consumers actively check where products are "Made-In"


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Changes in trajectory


Intro values still roaring with selective extro values rebound (from 27% to 34%)

Word of Mouth becoming 1st influence lever and increasingly digitally enhanced

Digital growing importance with online influencing 62% vs. 53% of total luxury purchases

Store windows losing relevance vs. online (from 39% to 32%): is store role changing?

Brands website preferred e-commerce channel: websites quality and customer care

more important than price

Omnichannel getting momentum, 75% of consumers asking for it


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Intro values still roaring

Selective rebound of Extro values?

76% 76% 71% 70% 66% 62% 61% 60% 59% 56%

24% 24% 29% 30% 34% 38% 39% 40% 41% 44%

• Quality

• Exclusivity

• Craftsmanship

• Timeless

Intro

values

• Adorned

aesthetics

• Brand visibility

• Customization

• Being Cool/Sexy

Extro

values

"What is luxury to you?"

% of respondents1

1. Respondents were asked to rank the top 3 values: the graph represent the value ranked as the most important Source: BCG 2013 and 2014 ad hoc study (10'000 respondents in 10 countries)

2013 Intro

Value Avg. 73% 73% 83% 83% 72% 69% 69% 61% 75% 69%

2014: 66%

Values


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http://upload.wikimedia.org/wikipedia/commons/0/03/Flag_of_Italy.svg

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http://upload.wikimedia.org/wikipedia/commons/b/ba/Flag_of_Germany.svg

http://upload.wikimedia.org/wikipedia/commons/f/f3/Flag_of_Russia.svg

http://upload.wikimedia.org/wikipedia/commons/0/09/Flag_of_South_Korea.svg

//upload.wikimedia.org/wikipedia/commons/9/9e/Flag_of_Japan.svg


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Word of Mouth: 1st influence lever,

overcoming magazines

% of respondents

TV &

Movies

Seen

Wore

Celebrities

Brand

websites

26%

31%

39%

32%

32%

19%

30%

23%

Tailored

offers

Store

windows

Events

Magazines2

WoM 49% 29% 20%

Seen

Worn 13%

Celebrities 20%

Events 20%

Tailored

offers 22%

TV &

Movies 24%

Brand

websites 34%

Store

windows 39%

WoM1 43% 32% 11%

Magazines 50%

1 Includes WoM, Social Media and Other Social blogs 2. Editorials and Commercial in Magazines Note: multiple choices possible, out of top 3 ranks Source: BCG 2014 ad hoc study (10'000 respondents in 10 countries)

"Which of the following has an impact on your purchase decision?"

2013 Different WoM influence across nationalities

34%

23%

10%

41%

22%

19%

46%

30%

17%

47%

33%

14%

49%

25%

24%

52%

30%

21%

52%

26%

26%

53%

35%

18%

55%

22%

33%

58%

41%

17% Avg.

49%

Social Media & Blogs Physical

2014

WoM



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http://upload.wikimedia.org/wikipedia/commons/9/9e/Flag_of_Japan.svg







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Social media and blogs the real engine

of Word of Mouth growth

"Which of the following has an impact on your purchase decision?"

32% 29%

5%

6% 12%

8%

2014

49%

2013

43% Blogs

Physical

Social

Media

+6pp

1. WoM Digitalization index: calculated as Social Media & Blogs influence vs. WoM physical influence Note: multiple choices possible, out of top 3 ranks Source: BCG 2014 ad hoc study (10'000 respondents in 10 countries)

Δpp '13-'14

(3pp)

+6pp

+3pp

WoM

digitalization

index1

0.3 0.7

WoM


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>50% sales digital influenced

already in past year edition...

53% % of last purchase

for each respondent

"Where have you bought the last item purchased? Where have you researched it?"

47

100

8

38

0

20

40

60

80

100

Total Pure in Store Pure Online

7

Showrooming (viewed in store,

purchased on line)

Researched Online

Purchased Offline


Omnichannel

Digital


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...channels are further blurring:

62% of sales digitally influenced in 2014

% of last purchase

for each respondent


45

98

100

38

0

20

40

60

80

100

Total Pure Online Showrooming (viewed in store,

purchased on line)

Researched Online

Purchased Offline

Pure in Store


Omnichannel

53% 62%

Digital


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"Pure store" no longer the first channel for sales

62% % of last purchase

for each respondent


100

0

20

40

60

80

100

Total Showrooming (viewed in store,

purchased on line)

7 8

38 45

8 9

47 38

Pure Online Researched Online

Purchased Offline

Pure in Store

Source: BCG 2013 and 2014 ad hoc study (10'000 respondents in 10 countries)

2013 2014 Omnichannel

Digital


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3 out of 4 consumers asking for omnichannel


37%

38%

25%

Not negotiable/

Very Important

Somehow

important

Not

Important

Total

"How important is for you that a brand can be reached through different channels?"

75%

Omnichannel importance across nationalities

78% 78% 81% 85%

43% 57%

45%

71%

31%

33%

81% 75%

90%

33%

41%

49%

44% 27% 42%

34% 48%

33% 38% 36%

11%

43% 49%

41%

26% 37%

Avg.

75%

% of respondents

Digital




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For online shoppers brands website

1st option; experience more important than price

"Which kind of online store

did you buy the product from?"

1.9x

Flash sales sites 2%

Others kind of websites

(travels, restaurant, ...) 8%

Luxury-specialized

etailers 16%

Dept. store website 18%

Online marketplace 20%

Brand website 37%


% of respondent % of respondent

"Which factors are more important

when buying on line?"

Free return

Exclusive

collections 21%

22%

Payments

accepted 24%

Brand

carried 25%

Online customer

care quality 29%

Website

navigability 31%

20% Price discount

Digital


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New trends


Are US and UK self legitimating as "Made" in countries for Luxury?

Sustainability is happening, 13% importance as value

– +5 pp vs. 2013 led by Europeans and Americans

Dynamism in fashion hubs: New York City growing, Milan fading

– Dubai, Singapore and Los Angels legitimating as fashion hubs?


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Sustainability is happening: will declared

values impact behaviors?

9% 10%

Brazil US Europe

% over respondents

8%

China

18% +5pp

15%

Russia Total

13%

15%

8%

13%

10%

4% 5%

6%

13%

"What is luxury to you?"

2014 2013

Multiple answer possible Source: BCG 2014 ad hoc study (10'000 respondents in 10 countries)

Δ 2013-2014

(pp) +13pp - +7pp +4pp +6pp -2pp

Sustainability






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Are US and UK self legitimating

as "Made in" countries?


+3pp

2014

10%

2013

7%

% of respondents selecting US

+3pp

2014

7%

2013

4%

"Which country of manufacturing do you

consider the best for Luxury?"

% of respondents selecting UK

Who is

saying that?

Apparel

Jewelry

Handbags

~25%

~17%

~13%

On which

categories?

Apparel

Handbags

Jewelry

~22%

~18%

~16%

~33%

~17%

~10%

~25%

~12%

~12%

Made in









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Dynamism in fashion hubs with New York

rising and Milan fading

1. The calculations excludes consumers in their home country Source: BCG 2013 and 2014 ad hoc study (10'000 respondents in 10 countries)

2013 2015 2014

"In which cities have you bought luxury products in the past 12 months?

In which ones do you plan to buy in the next 12 months1?"

Spend

Abroad

Paris

London

Hong-Kong

2

3

4

5

2

4

5

New-York

Milan

Paris

London

Hong-Kong

New-York

Milan

Paris

London

Hong-Kong

New-York

Milan

5

2

3

4

1 1 1

3


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Among the group of followers Dubai,

Singapore and Los Angels gaining momentum...

2013 2015 2014

"In which cities have you bought luxury products in the past 12 months?

In which ones do you plan to buy in the next 12 months1?"

1. The calculations excludes consumers in their home country Source: BCG 2013 and 2014 ad hoc study (10'000 respondents in 10 countries)

6

7

8

Singapore

Rome

Los

Angeles

Dubai

Miami Singapore

Rome

Los

Angeles

Dubai

Miami

Singapore

Rome

Los

Angeles

Dubai

Miami

6

7

6

7

8

10

9 9

10

8

9

10

Spend

Abroad


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Which Segments will drive growth?


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8 Global segments, 3 of them counting for ~50%

Country

specific

2.2 2.8 1.6 1.8 2.1 3.0 2.3 2.2 1.5 1.2

9% 11% 6% 7% 8% 11% 9% 8% 6% 5%

30 8 10 10 7 3 9 10 4 4

67 22 17 17 14 8 21 21 6 5

24%

2.5

10%

17

41

15%

2.8

11%

13

35

13% 8% 6% 6% 5% 3% 8% 8% 2% 2%

(M)

(%)

(K€)

(Bn€)

(%)

Se

gm

en

t

siz

e

Cu

rre

nt

va

lue

Avg

.

Sp

en

d1

Gender

specific Global segments (gender / geography balanced)

counting for ~50%

of lux. market Note: This table represent Luxury Consumer of Beyond Money, Very High, High and a projection proxy of Top Aspirational consumers 1. Not including Cars & Yachts


Absolute

Luxurer

Experien

cer

Mega

citier

Fashioni

sta

Social

Wearer

#Little

Prince

Status

Seeker

Classpira

tional

Timeless

Proper

Omni

Gifter

Luxe

Immune

Rich

Upstarter


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Product category insight through the eyes

of most relevant consumer segment

Absolute

Luxurer

• 22% of 2014

Leather Goods

market

• First contributor

to long term

growth (+3B€)

Megacitier

Omni Gifter &

Timeless Proper #Little Prince Experiencer

• 16% of 2014

Apparel market


to long term

growth (+1.2B€)

• 15% of 2014

Hard Luxury

market

• First contributors

to long term

growth (+2.2B€)

• 11% of 2014

P&C Luxury

Market

• Fast growing

segment

(CAGR +6.1%)

• 17% of 2014

Experiential

Luxury Market

• 46% share of

wallet (1st

category)


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Leather Goods Absolute Luxurer

Absolute

Luxurer

• 22% of 2014

Leather Goods

market


to long term

growth (+3B€)

Megacitier

Omni Gifter &

Timeless Proper #Little Prince Experiencer

• 16% of 2014

Apparel market


to long term

growth (+1.2B€)

• 15% of 2014

Hard Luxury

market

• First contributors

to long term

growth (+2.2B€)

• 11% of 2014

P&C Luxury

Market

• Fast growing

segment

(CAGR +6.1%)

• 17% of 2014

Experiential

Luxury Market

• 46% share of

wallet (1st

category)


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Leather Goods: Absolute Luxurer

1st contributor to long term growth

Leather Goods Top luxury market growth by Segment

293112

320

0

20

40

€B

+9B€

2021 Others1 #Little

Prince

Fashioni

sta

Mega

citier

Absolute

luxurer

2014

14-21 CAGR

(%) 7.4% 5.9% 7.7% 8.1% 3.5%

2014 Market

(%) 22% 9% 15% 5% 49%

Rounded numbers Source: BCG 2014 specific survey (10.000 Top luxury Consumers in 10 countries)

Absolute Luxurer

Total size #: 2.2M

Spend/head: 30K€

Total spend: 67B€

Life stage: 35-45 yr.

Gender: 55% W


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Quality and exclusivity not negotiable,

off price and low entry price disaffection triggers

Source: BCG 2014 specific survey (10.000 Top luxury Consumers in 10 countries)

Purchase Enablers Disaffection triggers

18

20

21

21

22

23

23

26Craftsmanship/quality

Adorned aesthetics

Customer care

Brand visibility (logo)

Value for money

Shopping experience

Customization

Exclusivity

17

18

18

19

22

25

27

Stores too Large

Production outside

home country

Too many categories

Owned by

majority of friends

Poor distribution

Fake copies

Low entry price

Too much off-price 30


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Handbags: 67% of Absolute Luxurer

researching online

"Where did you buy handbags?

Where did you researched them?" "Why did you researched online for handbags?"

Follow/influence trends 14%

Price and product comparison 17%

Access to

brand content 23%

Opinion & Feedback Sharing 27%

Interaction with brand

32%

Gathering information

on product 42%

% of respondents

2%

Pure online Show

rooming1

7%

Researched

Online

Purchased

Offline

67%

Pure in

store

23%

Total

100%

Overall

Avg. 38% 45% 8% 9%

1. viewed in store, purchased on line Source: BCG 2014 specific survey (10.000 Top luxury Consumers in 10 countries)


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Brand polarization: 70-80% of Absolute

Luxurer prefers specialist brands

Total

Handgabs

Lifestyle

brands

Core Leather

Goods

brands

100%

22%

80%

% of respondents % of respondents

Total

Shoes

Lifestyle

brands

71%

100%

Core Leather

Goods

brands

25%

Source: BCG 2014 specific survey (10.000 Top luxury Consumers in 10 countries)

"Which type of brand do you prefer?"


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The CONSUMER era: key takeaways (I)

2 / 3 of the next decade's growth will be organic

Growth to continue...:

–Short term (2015): rebound in luxury confidence already in 2015

–Mid term (2021): 390M consumers to become 465; market to increase by 260€Bn

....but at multiple speeds: –Consumers: Top Luxury (4% of total) making 40% of growth alone

–Geographies: US, China, EU and ME accounting for 55% of total growth

–Sectors: Experiential luxury growing faster than Personal luxury

–Categories: Jewelry & Watches and Leather 1st contributors to growth in Personal


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The CONSUMER era: key takeaways (II)

Consumer: Confirmations and new realities –Made in still rules, but not granted

–Digital influence reaching new heights

–Omnichannel from buzzword to reality

–Sustainability is happening

12 unique segments entering your stores with different expectations

–Absolute Luxurer, Megacitier and Experiencer representing 65% of future growth

Consumer lens the only way to capture future growth

– Leather: Absolute Luxurer looking for craftsmanship and brand specialization...

–Apparel: Casualization led by Megacitier,..

– Jewelry: Omni Gifter picking pure jewelry brands only,...

– ...

Consumer Insight next competitive

advantage: there will be winners and losers


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Antonio Achille Partner and Managing Director - Milan

Antonio Achille is a Partner and Managing Director in the Milan office. He is a senior leader of the Consumer & Retail team and he co-leads globally the Luxury practice for the firm.

For 20 years, he has been advising National and International Groups on issues that include corporate strategy, growth acceleration, clients strategic segmentation, organization redesign and Post Merger Integration. In the Luxury and Fashion sector his experience includes apparel, eyewear, accessories, selective fragrances, jewelry/hard luxury and experiential luxury. The geographical scope of his work includes most of the developed and emerging luxury markets (EU, North America, China, Turkey, Korea, Middle East ….).

He has developed an extensive knowledge on the Global Luxury Consumer and he is responsible for the database that includes a comprehensive view on over 40.000 consumers from 20 countries, developed in cooperation with Altagamma, the trade association for the Italian luxury industry. The actionable insights of the study are presented at the yearly event “True-Luxury Global Consumer Insight”.

In addition he contributes to the annual Luxury Summit, one of the most valued discussion forum for the sector. He is also member of the Scientific Committee of one the first Italian master on Luxury. He is author and co-author of most of the recent BCG publication on Luxury such as "Luxury ecosystem advantage", "Shock of the New chic", ... Antonio is extensively quoted, as Luxury and Consumer expert, in Italian and International media, such as FT, WWD, Bloomberg, CNBC, FashionIllustrated, Il sole 24 ore, Il Corriere della Sera,...

Prior to joining BCG he worked for Arthur D. Little. He graduated magna cum laude from the “Università L. Bocconi” of Milan where he holds a degree in Business Administration.


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About BCG and its Luxury practice

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s

leading advisor on business strategy. We partner with clients from the private, public, and

not-for-profit sectors in all regions to identify their highest-value opportunities, address their

most critical challenges, and transform their enterprises.

Our customized approach combines deep insight into the dynamics of companies and markets

with close collaboration at all levels of the client organization. This ensures that our clients

achieve sustainable competitive advantage, build more capable organizations, and secure

lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries.

Within the Firm, The Luxury practice, with more than 200 experts worldwide, advises Brands

and Retail companies bringing together the experience of its centers of competence located in

all key must-be geographies for the sector: Milan, New York, Paris, Shanghai, Hong Kong and

Tokyo.

BCG Luxury team has a deep and relevant experience driving profitable growth with leading

Brands and Retail companies, from strategy to marketing and operations, and a unique point of

view on consumer segmentation.


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BCG contacts

For a copy of BCG "True-Luxury Global Consumer Insight" or to schedule an interview with Antonio

Achille, please contact:

INTERNATIONAL PRESS:

• Lisa Trunfio email: [email protected] or +39.02.65599242

ITALIAN PRESS:

• Francesco Guidara email: [email protected] or +39.02.65599704

• Francesca Prosperi email: [email protected] or +39.02.65599328

mailto:[email protected]



Thank you

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