business of luxury emeric delalandre

THE BUSINESS OF LUXURY

EMERIC DELALANDRE [email protected]

09/25/2015

GLOBAL LUXURY MANAGEMENT BUS 590-002

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LUXURY is SOMETHING MEMORABLE which represents FOR SOMEONE THE BEST from its PERSONAL PERSPECTIVE and in its PARTICULAR SITUATION.

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PERSONAL Apparel, Jewelry & Watches,

Accessories, Cosmetics & Fragrances, Footwear & Leather Goods

TRANSPORTATION Automobiles, Marine Aircraft,

Recreational Vehicles, Professionnal Services

EXPERIENTIAL Hospitality, Home & Interiors, Travel Activities,

Sports, Collectibles, Real Estate, Charitable Giving & Involvement, Personal Health Management

I would say that

8 CHARACTERISTICS OF LUXURY PRODUCTS RARITY EXCELLENCE EXPENSIVENESS TIMELESSNESS HONESTY TAILORED PLEASURABLE EXPERIENCE

Luxury Daily

€850 billion An healthy growth of 7% driven by Cars, Jets & Hospitality

5% online 41% of Accessories and 28% of Apparel are purchased online

Market share 34% Europe – 32% Americas – 29% Asia

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LUXURY MARKET 2014 Bain & Company Study

€875 billion Between 2 and 4 % real growth driven by Western Europe (3-5%), Americas (1-3%) and Japan (7%)

30% retail The retail channel will continue to grow.

350 million The overall number of luxury consumers will be 3x more than in 2000

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LUXURY MARKET 2015 Bain & Company Study Estimations

LUXURY SECTORS SIZE

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PERSONAL 22%

EXPERIENTIAL 50%

TRANSPORT.

28%

$390 billion Future :



Luxury is a $1.8 trillion Industry !

Shock of the new chic 2014, BCG

Future of the Global Luxury Market

The buying behaviours of tomorrow’s luxury consumers - who are increasingly sophisticated, discerning and global – are changing.

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“Luxury companies are highly expansion-oriented, focusing on internationalization and horizontal integration. Luxury groups will seek further opportunities for partnerships and acquisitions to accelerate their global expansion and portfolio innovation.”

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THE LUXURY COMPANIES Luxury Groups 2015, Xerfi

They should be careful and not miss to :

▸  SIMPLIFY THEIR BRANDS ARCHITECTURE because consumers don’t want to deal with complications of multiple brand identities under a corporate brand

▸  BUILD NEW ECOSYSTEMS OF PARTNERSHIPS to control their brand while being more open with retailers and suppliers

Large luxury groups represent more than the half of the market.

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THE LUXURY COMPANIES Luxury Groups 2015, Xerfi

WHICH COUNTRIES ARE DRIVING THE LUXURY MARKET ?

9 Rank - Country Type of country Size (billion euros) 1 - United States Developed 62,5

2 - Japan Developed 17,3 3 - Italy Developed 16

4 - China Emerging 15,3 5 - France Developed 15,1

6 – United Kingdom Developed 12,1 7 - Germany Developed 9,9

8 – South Korea Developed 8,3 9 – Hong Kong Developed 7,7

10 - Russia Emerging 5,8

Region Size (billion euros) Market share (%) Europe 74 34 %

Americas 69 32 % Asia 63 29 %

Rest of the world 11 5 %

The developed countries are still largely dominating the luxury market.

Luxury Groups 2015, Xerfi

SALES OF LUXURY ARE CONCENTRATED IN THE LARGEST CITIES WHERE MOST WEALTHY CONSUMERS LIVE

Leading players in the luxury industry concentrate their sales in large cities, as consumers with a higher purchasing power live there. Asia is the world’s most populated region with an economic dynamism and an increasing consumption which makes it the main priorities for luxury brands.

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WHERE ARE THE FUTURE KEY MARKETS ?

United States

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Brazil

Russia

China

Western Europe

Japan

Emerging countries

Developed countries

India

Asia will lead luxury market growth in the coming years Together with Latin America, Asia’s High Net Worth Individuals population will grow 6.5% over the next decade.

Luxury companies will slowly adapt to a local production To meet customer needs while controlling an exclusive image. These customers use to buy luxury overseas while traveling.

Sales of luxury products are concentrated in the largest cities Because the wealthy consumers live in these cities like Tokyo, Shanghai, Deli, Mumbai, Jakarta or Sao Paulo

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THE ROLE OF EMERGING MARKETS Luxury Groups 2015, Xerfi

57.5% are male 52% are single, luxury is not always a present ! 42% are graduaded, luxury is not only for the most educated !

Income $125,000 $350,000: home market value $100,000: liquid ressources

98% use Internet 70% use Social Media, what an opportunity ! Women are more likely to engage with brands.

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THE LUXURY SHOPPER The new face of luxury 2014, Epsilon

Omnigifter All they want is to take care of their relatives

Absolute luxurer Luxury is their commodity

Mega citier World is their city. City is their world

For them luxury is about making their loved ones happy and gifting is their natural approach to the luxury world. They are mainly men aged between 45 and 55 years old with a strong presence in mature markets. They buy jewelry, vacations and food. When buying gifts, superior quality and customer experiences are essential to them.

They grew up in luxury. For them, compromising is not an option and exclusivity is fundamental. This is the European elite and a happy few in emerging markets aged between 35 and 45. They buy both Personal and Experiential luxury mainly leather goods, clothing, jewelry and watches and exclusive vacations with a special emphasis on everything that is unique and customized.

Whether they live in New York, London, Paris, Rio, Moscow or Shanghai, they only enjoy the same tastes and holiday destinations. They transform local trends in global phenomenons. They are concentrated in Brazil and China, New York or in the European capitals, aged between 30 and 35 years old. They concentrate their luxury spend on lether goods, closing, hotels and exclusive vacations.

WHO ARE THE NEW TYPES OF CUSTOMERS ?

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Experiencer Luxury is real only when shared

Fashionista In fashion, they trust

Little Prince Luxury is their fun


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They share luxury moment. This consumer has risen from the ashes of luxury in Japan, Europe and the US, is aged between 45 and 50. They invest more on holidays, food and hotels spending abroad in Personal luxury.

She always knows what's going on. She loves design and shopping is her passport to the magical kingdom of luxury. They are mostly women aged between 35 and 40 well-represented in China, Russia and the US. She knows everything from the most famous brands to the latest star discovery. She buys mainly Personal luxury items : leather goods, clothing, perfumes and cosmetics.

This is a generation whose parents were wealthy. They connected and hungry for the new and colorful. They are aged between 18 and 25 and come mostly from emerging markets. They mainly buy leather goods clothes, perfumes and cosmetics for which brand and design are essential elements.

Social Wearer Luxury should drive a better world

Status seeker Theu show then they exist

Classpirational They saw it on their boss


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They believe that luxury is the green carpet to a better world. They are aged between 35 and 40 mainly from France, Germany and Brazil. The mainly shop for leather goods, travels and furniture. For them quality, sustainability and made in are essential.

They live under the spotlight with logos in full view. They always wear a known watch or accessory. They don't like experimenting and follow trends and well-known brands in this world. They are aged between 35 and 40, mainly Asian but also American. They love to shop for leather goods, clothing usually in large flagship stores with an immersive digital experience. Celebrities and ads on TV can strongly influence them.

Their greatest fear is looking bad in front of their boss. For them affordable luxury is the best way to be accepted by their community especially at work. They are men and women aged between 30 and 35 years old with a strong presence in South Korea, Germany, France and Russia. They prefer classic clothes, perfumes, cosmetics and bags that offer and good value for money. They compare prices online.

Timeless Proper Fashion passes, style remains

Luxe Immune They can afford it but do they want

Rich upstarter Luxury, they are coming


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Coco Chanel is their myth. These ladies are classic, proper, mostly Americans, English and Japanese between 40 and 45 years. They usually purchase handbags, shoes, food and wine. These women usually shop in a few trusted stores located in exclusive areas with limited digital presence.

They belong to the richest part of the population but seemed to be immune or disillusioned to the temptation of the luxury world. They are only present in Japan, US and Europe, aged between 50 and 55 years old, are usually not price-sensitive and they buy leather goods and clothing. They choose what to buy based on advice received in stores or from their friends.

The newcomers have luxury from emerging markets. After years of hard work they finally won a place in the luxury world. They are aged between 35 and 40 years old. They are unsophisticated customers who buy leather goods, perfumes and cosmetics from well-known brands. Social media have a strong influence in driving their choices.

INNOVATION: A CHALLENGE FOR LUXURY

Being innovative creates demand, drive store traffic and exclusivity while sustaining the distance between a luxury brand and a mass brand. The challenges consist in production line extension and renewal, local adaptation of products and services.

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Co-Creation with the community to engage with product design Creating a customer-centric offer in-store or online is the best way to serve and reward a community of cnsumers.

Management by Design is required to stay competitive Brand loyalty, equity and values are the result of the consumer behaviors and the market. Business Design thinking pays off !

Remain inspirational for the customers and other industries A lot of global trends are starting with luxury products which need to remain innovative. Sustainability is the future.

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INNOVATION: A CHALLENGE FOR LUXURY

DEVELOPMENT OF NEW SALES CHANNELS: A CHALLENGE FOR LUXURY

A luxury brand strategy that encompasses the omnichannel holistically has more chance to be successful generating interest, brand affiliation, and more sales.

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Online luxury sales – which still account share of total luxury market – a growing at a faster peace. Customers are demanding to buy luxury online so the companies should go for it !

5.4% of the luxury sales are online Technological innovations, shorten delivery times and online customer habits are increasing the digital competitiveness versus brick and mortars.

The customers from developed countries are the most active online shoppers E-Commerce has became for the luxury industry a complementary distribution channel to offer more than juste the face-to-face customer experiences.

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To stay competitive, brands must focus on 360° omnichannel strategies and integrate e-commerce and offline retail. Why? Omnichannel consumers are more engaged spend 2x more.

Technology in-store provides a better experience Physical and digital experiences can no longer be seperate because the mobility is part of the luxury journey, big data provides a personalized interaction that will drive to higher frequency and basket size. An innovative retail experience is a must for an innovative brand, augmented reality is the future !

Luxury ecommerce is also a content and a community ! It is important to have a greate site to see the products and that offers an exclusive experience. Moreover, it is necessary to provide a unique and rich content on it. Finally, it is critical to build a strong customer social community which will master the brand image and increase the profitability.

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Worldwide IDC Retail Insights 2015 Predictions, IDC

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SOCIAL MEDIA MARKETING: A CHALLENGE FOR LUXURY Consumers have a new voice, increasing their individual and collective power, and communities of both brand advocates and critics sprang up. While this erodes message control for luxury brands, social media, along with mobility and e-commerce, is one of the most effective means to introduce new products globally and provide instant gratification to shoppers in any part of the world. Moreover, social media can be used effectively as a vibrant and cheap storytelling medium for luxury brands, communicating brand heritage and iconography to a new audience of potential clients. Social media Marketing has to generate a positive « word of mouth » by leveraging close relationships with key influencers.

« From communication to conversion »

A CLEAR TOURIST AND TRAVEL STRATEGY: A CHALLENGE FOR LUXURY

With the exception of Japan, China an South America, all markets are maily driven by touristic spending. The local marketing has to adapt its organization for a tourist-and-travel retail distribution, promote significantly the brand in tourists’ home countries and customized retail experiences in the holiday destinations.

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Luxury Groups 2015, Xerfi

TALENT The luxury industry is changing, the human ressources have to adapt. The new leaders need some new specific skills.

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11% of luxury CEOs are female While the average for other industries is 1.3%

10% of luxury CEOs have MBAs While the average for other industries is 23%.

The average age of luxury CEOs is 51 While the average for other industries is 55 years old.

Leadership in the Luxury Industry 2014, Spencer Stuart

Ability to understand the brand DNA

Sensitive to the creative elements

Respect the company culture

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WHICH SKILLS NEED THE NEW LUXURY MANAGER ?

Global view of the business

An ambassador for the brand

Diversivied experience

Adaptable in new environments

Intellectually mature

Strong culture of the luxury industry

Flexible, humble and team player

Dedicated to build a strong business

THE NEW LUXURY MANAGER IS AN

ENTREPRENEUR !

THE LUXURY I AM INTERESTED IN

SECTOR : PERSONNAL LUXURY INDUSTRY: WATCHES & JEWELRY

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Past Store Assistant Intern for a Luxury Multibrand Jewelry in France (Cartier, Omega, Officine Panerai, Chopard, Boucheron) E-Marketing Coordinator for the France Tourism Development Agency in America (Production, Tracking, Development of online communications campaigns)

RELATED EXPERIENCES

Present Entrepreneur creating an innovative Luxury Watch brand with my former manager from the Luxury Multibrand Jewelry

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CAREER GOALS

ACTIVITY: CREATING AND MANAGING MY OWN BUSINESS WORK & LIFE: AN EXCITING CAREER FOR AN EXCITING LIFE MONEY: BEING FINANCIALLY PROSPER

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CREDITS

Consulting Reports: ▸  Spencer Stuart (2014). Leadership in the Luxury Industry ▸  Xerfi (2015). Luxury Groups ▸  Deloitte (2014). Global Powers of Luxury Goods ▸  Bain & Company (2014). Luxury Goods Worldwide Market Study ▸  IDC (2015), Worldwide IDC Retail Insights Predictions Related Articles: ▸  Knight Franck (2015). Wealth Report ▸  Epsilon (2014). The new face of luxury ▸  BCG (2014). Shock of the new chic Global Luxury Management Program: ▸  GLM 2015 Summer Readings ▸  Rohde Powerpoint ▸  GLM NCSU classes ▸  GLM website: poole.ncsu.edu/glm/ Additional Ressources: ▸  Luxury Daily: www.luxurydaily.com ▸  JustLuxe: www.justluxe.com

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business of luxury emeric delalandre

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