luxury sentiment survey report - … filefor the final quarter of 2014. ¥ for 56% of respondents,...

LUXURY SENTIMENT SURVEY REPORT

WEALTH-X INSTITUTE SPECIAL REPORT

VOL. 4: LOOKING AHEAD TO Q4 2014

W W W. W E A L T H X . C O M

We at Wealth-X are proud to present the fourth edition of the Wealth-X Luxury Sentiment Survey Report. This report is essential reading for those who want to gauge

the level of optimism in the luxury industry with regards to the future of its relationship with ultra high net worth (UHNW) individuals, and understand the reasons behind this

sentiment. The level of optimism at the end of Q3 2014 recovered from its slump over the last half-year. The Luxury Industry Sentiment Index (LISI) rose to 108, registering an 8%

improvement in sentiment since the start of 2014. More than 60% of all respondents to our Luxury Sentiment Survey expect that their total revenue and their engagement with

UHNW individuals will grow faster than 10% over the coming quarter, and no respondents expect a decrease in these indicators.

Responses to Wealth-X’s previous Luxury Sentiment Surveys showed that bespoke marketing, which is able to demonstrates a clear understanding of UHNW clients as

individuals, is the preferred marketing strategy and has the largest return on investment when it comes to generating revenue from UHNW clients. In order for this marketing

strategy to be successful, information on current and prospective clients is required, and although companies across industries are now able to compile massive quantities of data,

many do not have effective strategies and systems to organise, analyse and use the data they collect. In this survey, we asked respondents specific questions regarding their data

use: how they collect it, what they use it for, what value they associate with it and what the biggest barriers to efficient data collection and use can be. 82% of respondents agreed that

“data is instrumental in engaging and retaining UHNW clients”.

Mykolas D. RambusChief Executive Officer

David S. FriedmanPresident

WEALTH-X : LUXURY SENTIMENT SURVEY REPORT VOL. 4 / 2

A NOTE TO THE READER

KEY FINDINGS

• The luxury industry showed a boost of optimism in its outlook for the final quarter of 2014, with the Luxury Industry Sentiment Index (LISI) rising to 108, an 8% improvement since the beginning of the year.

• None of the respondents expect to see a decline in their market share and almost 60% expect to see their revenue increase by more than 10% in Q4 2014.

• In Q3 2014, lack of inventory was the biggest challenge for 37% of the respondents. Previously, macro-economic circumstances were considered the most significant challenge that they faced.

• Although few respondents expect to open new stores in Q4 2014, new product launches are expected, while only 36% of respondents do not expect their businesses to expand in any significant way.

• All of the respondents collect data on their clients, with the most common data collected, besides names, being email and personal preferences.

• 82% of respondents said that “data is instrumental in engaging and retaining UHNW clients”.

• 70% of respondents used the data they collect to improve the quality of their services — thereby hoping to build customer loyalty and stimulate demand.

The luxury industry shows a boost of optimism in its outlook

for the final quarter of 2014.

• For 56% of respondents, the biggest difficulty in collecting and using data was lack of resources.

• 75% of respondents said they relied on their internal research team to collect data, and only 40% used in-store information cards.

• Only 50% of respondents said they used the data they collect to rate their customers.

• Less than 50% of respondents use the data they collect for other purposes than improving individual contact with clients.

• 73% of respondents plan on improving their techniques for using data in the coming quarter — by collecting more or better data, or even by improving their current capacity to analyse data.

• Only 40% of respondents use CRM integration to optimise the use of their data — however, even within the 60% that do not use CRM integration, its value was recognised, particularly with regards to its use in assessing the value of individual clients.

• The respondents felt that the most significant benefit of CRM was its use in tracking individual clients.


60%expect to see their revenue increase by more than 10%

82%feel that data is instrumental

in engaging and retaining UHNW clients

70%use the data they collect to improve the quality of

their services

THE LUXURY INDUSTRY & UHNW INDIVIDUALS

Only 18% of respondents said they did not specifically define UHNW individuals, in line with our previous surveys — although all respondents consider themselves providers of goods to UHNW clients. For many providers of luxury goods and/or services, while there may not be a specific definition for a type of individual based on his or her net worth, classifications do remain important.

45% of respondents said that 75-100% of their revenue was derived from UHNW clients. These respondents were mainly involved in the big luxury items industry, while those who reported that 0-50% of their revenue was derived from UHNW clients were predominantly in the traditional luxury category.

N/B: This breakdown varies per survey, but the LISI is weighed so as to provide comparable results.


Proportion of Total Revenue Derived from UHNW Clients1

1 This graph is representative of the respondents in the

survey and may not apply to the entire luxury industry.

75%–100%

25%–50%

50%–75%

0%–25%

No Differentiation

9%

9%

27%

10%

45%


LUXURY INDUSTRY SENTIMENT INDEX

The Luxury Industry Sentiment Index

(LISI) stands at 108.2 for Q3 2014, an

8% increase since the beginning of 2014.

2014 seems to have been a year of uncertainty for the luxury industry, with feelings of optimism waning as the year progressed and then recovering sharply ahead of the final quarter. The decline in the level of respondents’ optimism in the first half of 2014 was most likely due to the continued economic difficulties experienced across the luxury industry, but the approach of the holiday season has made most respondents far more optimistic as to their expected results for Q4 2014, with no respondents expecting a decline in their revenue — in total or specifically from UHNW individuals. Much of the optimism in Q1 2014 was linked to strong expansion plans, with 92% of respondents expecting to expand their market presence. By the end of Q3 2014, many companies having

Q1 2014 Q2 2014 Q4 2014

100

97.6

83.6

Q3 2014

108.2

suffered from a lack of inventory rather than demand-side problems, are confident that their existing infrastructure will be sufficient to maximise returns in the coming quarter.

Once again, the role of North America — as the region that is home to largest number of UHNW individuals in the world, and the most valuable market for the luxury industry — has continued, with almost half of all respondents stating that the majority of their clients came from North America. Europe and Asia were the next two most significant markets for the luxury industry, with just over 20% of respondents stating that the majority of their clients came from these two regions.


Challenges in Q3 2014

For 37% of respondents, the biggest challenges in Q3 2014 were supply driven, with lack of inventory as the most significant obstacle to performance. In this quarter, personnel issues and demand constraints were the least significant obstacles to performance, although competition, particularly in the sales of big ticket items in Europe, was a limiting factor. For the first time this year, issues relating to macro-economic conditions were not mentioned by any of the respondents to our survey.

18%

18%37%

27%

Competition

Decreased Demand

Lack of Inventory

Personnel


TRADITIONAL LUXURY*

Respondents from the traditional luxury sector, compared to other sectors, saw UHNW individuals as having the least significant impact on their total revenue, suggesting that UHNW customers were generally responsible for less than 25% of total revenue. Although the majority of respondents saw North America as the region from which the bulk of their customers come from, Europe and Asia also accounted for a significant portion of their customer base. In the traditional luxury sector, competition and personnel issues were the main problems. Nonetheless, this sector appears quite optimistic with more than three quarters of respondents

expecting to see revenue increase by more than 10%, largely due to projected new product launches.

This sector was the most likely to collect data on customers through in-store customer cards, but the current use of data of this sector has been more limited than in other luxury industry sectors, and is used mostly to improve marketing strategies. One of the main reasons given for this limited collection of data is that the industry considers client reluctance as the main obstacle to such collection.

* Traditional Luxury include Apparel, Shoes & Leather Goods, Jewellery & Timepieces.


BIG LUXURY ITEMS*

In this sector of the luxury industry, we find that respondents typically have much greater exposure to UHNW individuals, who reportedly account for over three quarters of these respondents’ total revenue. This industry was most adversely affected by issues relating to decreased demand, unlike the rest of the luxury industry, which seemed more affected by problems to do with lack of inventory. Yet, the respondents from this sector remained optimistic with the majority expecting to see revenue grow by more than 10% in the coming quarter and three quarters of respondents in this sector planning to launch new products or at least increase their digital presence in order to help stimulate this revenue growth.

This sector was the most enthusiastic with regards to the use of data with 100% of respondents agreeing that

“data is instrumental in engaging and retaining UHNW clients”. Respondents reported that they collected data for two main purposes: to improve service and to proactively stimulate demand. This sector was also the most likely to hire external research services to collect more and better data on their UHNW clients. More than 50% of respondents said that their biggest difficulty in collecting data was their lack of experience in deriving useful insights, but 71% expect to increase their relationship with data, both by improving their data collection methodology and by hiring external research firms to improve the depth and breadth of their database.

* Big Luxury Items include planes, helicopters, yachts and motor vehicles.


HOSPITALITY & SERVICES

Respondents from the hospitality and services sector, as has been the case in the past few quarters, remained particularly optimistic — perhaps due to the fact that one of their major obstacles in Q3 2014 was lack of inventory, rather than demand-based problems. These respondents continue to expect to increase their share of the market and to see growth in revenue — not only in total, but with regards to their UHNW business.

Although respondents in this sector collected some of the most extensive datasets on their clients, many of them do not view data as a key instrument to engage and retain clients — almost 40% stated they neither agreed nor disagreed that data has this role. Many also pointed out that although they had data, the problem was in knowing how to best leverage actionable insights.


ALTERNATIVE LUXURY*

Respondents from the alternative luxury sector reported that between 25-50% of their total revenue comes from UHNW individuals and their biggest obstacle in Q3 2014 was lack of inventory. Compared to other sectors, respondents from this sector of the luxury industry expect the least significant changes for Q4 2013 in terms of market share although, on average, they expect to see an increase in their revenue of up to 10%. They typically do not anticipate expanding although they plan on increasing the share of their marketing budget that goes toward targeting UHNW individuals.

This sector was the most enthusiastic when it came to assessing data’s various functions — from improving their

products and service to increasing client loyalty. Although only a few respondents collect information through in-store customer information cards, these respondents did report that they collected data generated automatically at the time of payment. They also typically have an internal research team that also compiles data on individual clients. This allows them to rank their clients. They use this data not only to engage with individual clients, but also to better understand trends over time and across clusters of customers. Despite this, few respondents from the alternative luxury sector currently use CRM integration to optimise their use of data. Although some respondents noted that the benefits of such an approach could be seen, the primary constraint was cost.

* Alternative luxury includes spirits & wines, art & collectibles.


ENGAGING WITH UHNW INDIVIDUALS: DATA

Luxury companies rely heavily on customer retention and referrals to increase their wallet share. In a world where huge amounts of data are collected on a daily basis, the role of data for the luxury industry when engaging with UHNW clients remains relatively unknown, and its potential remains largely untapped.

82% of respondents agreed or strongly agreed with the statement that “data was instrumental in engaging and retaining UHNW clients”.

To improve our service

However, these questions remain: Why is data so instrumental? What kind of data is instrumental? How can you utilise data to boost your business? In this survey, the world’s leading luxury companies shed light on these issues. One of the most interesting findings from this survey is that the main use of data is to improve service. Typically, companies will collect data for a number of different reasons, but the predominant reason was improving service, as well as building customer loyalty — two related concepts.

Why do you collect data?

To build customer loyalty

To assess prospective clients

70%

50%45%

30%

5%To proactively stimulate their

demand

To improveour products


Internal research team

How do you collect data?

In-store customer information card

75%

50%40%

25%

Strangely, luxury companies do not seem to make as much use as one would expect from the data that they constantly collect on their customers through in-store customer information cards and automatically collected data based on payment (such as name, item purchased, value of item, etc). In fact, although the latter type of information is automatically collected, it is often neglected when it comes to analysis. With regards to

in-store customer information cards, the difficulty seems to be client reluctance when it comes to filling these out, and filling them out with correct information. 50% of respondents make use of external research services to improve their data collection, but it seems clear that the preference across the luxury industry is to employ an internal research team that collects, classifies and analyses data.

What data do you collect?

Preferences

Email

Data on significant relationship (spouse, partner, children)

Home address

Birthday

Location

Purchases

Net worth

100%

100%

86%

86%

86%

86%

57%

29%

Externalresearch services

Data collected automatically based

on payments


What are the biggest difficulties in collecting and using data?

Lack of resources

Client reluctance

Lack of experience in deriving useful insights

Time

Uncertainty over “how” to use data

56%

44%

44%

33%

11%

Only 50% of respondents said they

used this data to rate their customers

Data can be particularly useful when it comes to correctly assessing customers, and rating them in terms of their loyalty or value, based on their purchasing patterns. Data also significantly enhances a company’s ability to engage with a client — from knowing what type of product is most likely to appeal to a specific individual to understanding which marketing approach would the most effective for that specific individual. Certainly such individual data is useful, but the large amount of data

collected by the luxury industry suggests there are many other uses that could be encouraged — from deeper analysis to better understand how different groups of consumers engage with one’s brand to understanding trends over time. Generally, data seems to be underused in the luxury industry, with less than half of the survey’s respondents using these deeper analytics when it comes to determining strategy.

On an individual basis to better engage with

specific clients

How do you use your data?

100%

44%33%

It appears that luxury companies are recognising that their use of data is perhaps not as extensive as they would hope, or indeed that the collected data itself is perhaps not as good as it could be.

On a group basis to better

understand differences

amongst customer segments

On a time series basis to better

understand trends affecting our

business and clients

WEALTH-X : LUXURY SENTIMENT SURVEY REPORT VOL. 4 / 14WEALTH-X : LUXURY SENTIMENT SURVEY REPORT VOL. 4 / 14

73% of respondents plan on improving

their relationship with data

%

45%

36%

27%

27%

9%

0%

WHAT IS YOUR FIRM’S EXPECTED FUTURE RELATIONSHIP WITH DATA?

We plan to collect more information on our customers

We plan to collect better information on our customers

We plan to improve our internal team’s capacity in analysing data

We plan to use external research firms to improve the depth and breadth of our database

We plan to create an internal team to better analyse our data

We plan to use external research services to better analyse our data

Only 40% of respondents use CRM integration

Within the 60% of respondents who do not use CRM integration, they still recognise the various benefits of CRM integration — especially its use in assessing the value of individual clients to the firm.

RANK

1

2

3

4

5

6

7

8

9

BENEFIT OF CRM

Tracking of individual clients

Improve communication

Improves understanding of client

Improvement of marketing strategies’ results

Value of individual client to the firm

Identification of key strengths/weeknesses

Identification of future clients

Data protection

Cost reduction (in training, approach)


THE SURVEY: METHODOLOGY

Respondents to our survey come from various sectors within the luxury industry including Clothing, Shoes & Leather; Watches & Jewellery; Household Furnishings; Electronics; Spirits & Wines; Antique, Art & Collectibles; Hospitality & Services; Planes &

Helicopters; Yachting & Boating and Motor Vehicles. The survey was conducted between September 15th 2014 and October 3rd 2014. The survey was sent to over a thousand different brands across all sectors of the luxury industry as listed above.

Asia

Proportion of RespondentsResponsible for Specific Regions*

Europe

45%

* Respondents could choose more than one region, hence the percentages add up to more than 100%.

37%

82%

30% 27% 25%

10%

NorthAmerica

MiddleEast

Latin America

Oceania Africa

These respondents, in their positions at their respective firms, are typically responsible for numerous regions. On average, each respondent’s role was responsible for almost three regions, a constant throughout this year’s survey. The resulting diversity in our results enables us to draw unique, global insights into where revenue in the luxury industry was generated in Q3 2014, where growth is more likely to come from in the future and what the luxury industry expects during Q4 2014, as well as how the industry collects and uses data on its UHNW clients.

The fifth edition of Wealth-X Luxury Sentiment Survey will be conducted between January 6th and January 20th 2015. If you would like to take part in the next Luxury Sentiment Survey, please email [email protected]. Alternatively, an invitation link will be distributed through the Wealth-X newsletter on January 7th and January 14th 2015.


ABOUT WEALTH-X

Wealth-X is the world’s leading ultra high net worth (UHNW) intelligence and prospecting firm with the largest collection of curated research on UHNW

individuals, defined as those with net assets of US$30 million and above. The firm’s Wealth-X Professional solution is the standard for financial institutions, not-for-

profit organisations and luxury brands working with the ultra affluent.

Headquartered in Singapore, Wealth-X has 13 offices on five continents.

PARTNERSHIPS

For the last three years, Wealth-X has published an annual report: the World Ultra Wealth Report. Since 2013, this work has been published in partnership with UBS.In addition, 2013 saw the publication of the inaugural Billionaire Census Report, also in collaboration with UBS, The second edition of the report, Wealth-X and

UBS Billionaire Census 2014, was recently published.

In addition to these reports, Wealth-X institute publishes insights on UHNW individuals across the financial services, luxury and non-profit sectors.

.


WEALTH-X SOLUTIONS

Wealth-X is the first organisation to focus exclusively on UHNW intelligence, research and insights to support financial institutions, not-for-profit organisations

and luxury brands working with the ultra affluent.

Wealth-X’s team has a passion for partnering with our clients to develop successful strategies to connect with UHNW individuals.

PROFESSIONAL

Wealth-X Professional is an online collection of global UHNW individual dossiers, highlighting their financial profiles, passions and interests, known associates, affiliations, family members, biographies, news and much more.

Designed to help expand our client’s business, Wealth-X Pro enables private bankers, business development professionals, fundraisers and luxury brand marketers to spend less time researching prospects and more time developing business relationships.

INTEGRATION

The full integration of Wealth-X data within our clients’ CRM systems enables the big data automation of new UHNW client identification and business development.

Our intelligence is delivered directly into our clients’IT infrastructure through a bespoke API, Salesforce or Pythagoras interface. Customer and prospect data never leaves the local environment, providing clients with all the benefits and functionality of Wealth-X Professional to multiple users through a single access point.


DILIGENCE

Wealth-X Diligence provides in-depth intelligence on UHNW individuals, combining wealth intelligence and Know Your Customer (KYC) solutions for financial institutions and not-for-profit organisations to meet their regulatory requirements and mitigate reputational and commercial risk.

Wealth-X Diligence provides clients with enhanced dossiers on UHNW individuals, detailing their source of wealth, significant litigation or sanctions, political inclinations and connections, wealth breakdown and analysis, business activities and asset holdings.

SCREENING

Wealth screening unlocks the potential in your customer or prospect data using our unparalleled coverage on UHNW individuals and expertise in matching and identity resolution.

Wealth-X Screening complements your knowledge of the ultra-wealthy and their relationship networks and provides powerful client analytics for new UHNW client or donor initiatives.

Assess market and wallet share;Drive new business cases; Leverage market segmentation through UHNW characteristics; Perform statistical analyses on UHNW consumer spend or philanthropic giving.

ADVISORY

Wealth-X offers bespoke advisory services that provide intelligence on evolving global wealth creation trends and dynamics through advisory projects and reports for our clients, generated by our Institute. The Institute supports leaders in the banking, luxury, and non-profit sectors in making informed decisions.

Our advisory has produced dozens of high profile reports including the World Ultra Wealth Report and the Billionaire Census in partnership with UBS, Around the World in Dollars and Cents with Savills, the Wealth Report 2013 with Knight Frank and several others.


For more information, contact [email protected]

WEALTH-X AND UBS BILLIONAIRE CENSUS 2014http://www.billionairecensus.com

WEALTH-X AND UBS WORLD ULTRA WEALTH REPORT 2013http://www.wealthx.com/wealthxubswealthreport

W W W. W E A L T H X . C O M

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luxury sentiment survey report - … filefor the final quarter of 2014. ¥ for 56% of respondents,...

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