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April7,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
1) Wearewitnessingtheproliferationofonlinemultibrandretailersandaspirationalfashionplatforms.ThesecompaniesprovideglobalinfrastructureanddistributionforluxurybrandssuchasYooxNet-A-Porter,Matchesfashion.com,FarfetchandMytheresa.com.
2) Thestronggrowthofonlinepure-playluxuryretailershasdemonstratedthatshoppersarekeentopurchaseluxurygoodsonline.
3) Thegrowthinonlineluxuryshoppingispoisedtocontinue.Forachallengedandsluggishluxurygoodssector,e-commercehasemergedasanimportantgrowthengine.
4) MultibrandonlineretailersaretakingsharefromUSdepartmentstoressuchasNeimanMarcus,SaksFifthAvenue,Bloomingdale’sandNordstrom.
5) Theluxurygoodssectorwasslowtoexpandintoe-commerce,butnowplayersarevyingforashareofthefast-growingonlineluxurymarket.E-commerceisthefastest-growingdistributionchannelgloballyforluxurygoods.McKinsey&Companyforecaststhate-commercewillaccountfor18%oftotalluxurysalesin2025,upfrom8%in2016.
Deep Dive: Luxury
E-Commerce Evolution
Deborah Weinswig
Managing Director
Fung Global Retail & Technology
US: 917.655.6790
HK: 852.6119.1779
CN: 86.186.1420.3016
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April7,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
ContentsExecutiveSummary..........................................................................................................................3
Introduction.....................................................................................................................................4
TheRiseofLuxuryMultibrandOnlinePurePlays..............................................................................4
MultibrandOnlineRetailerModel....................................................................................................5
OnlineBoutique/MarketplaceModel...............................................................................................6
LuxuryOnlinePurePlays’SalesAreOnFire......................................................................................6
WhyAreMultibrandOnlineLuxuryRetailersGrowingSoFast?........................................................81. EndlessProductChoice....................................................................................................................................82. Ever-ImprovingLogisticsandDeliveryServices...............................................................................................83. LuxurySectorWasSlowtoExpandintoE-Commerce.....................................................................................94. LuxuryGoodsDemocracy.................................................................................................................................95. ImmunetoAmazon…SoFar.............................................................................................................................96. DigitalServiceandMarketing........................................................................................................................107. LuxuryConsumersAreEmbracingDigital......................................................................................................118. Brick-and-MortarLuxurySectorIsStruggling................................................................................................139. BrandsTurntoMultibrandE-CommercetoTapOnlineGrowth...................................................................1410.USDepartmentStoreWoes...........................................................................................................................15
WhatDoestheFutureHold?..........................................................................................................16
CompetitionforSliceofDigitalPie.................................................................................................16
CompetitionHeatingUpwithLVMHPortalLaunch.........................................................................16
KeyTakeaways...............................................................................................................................17
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April7,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
ExecutiveSummaryInthisreport,weexaminetheriseofluxurygoodsretailerssuchasYooxNet-A-Porter,Matchesfashion.comandFarfetchthatoperateasmultibrandonlinepureplays.Milan-basedYooxNet-A-Porter,inparticular,hasbeenatrailblazerinthespace.Thecompanyoperatesmultibrandin-seasonandoff-priceoutletstoresthroughfourwebsitesaswellasmonobrandstorewebsitesfor41luxurygoodsbrands.
Salesandotherkeyperformanceindicatorsforonlinepure-playluxurygoodsretailershavebeengrowingrobustly.YooxNet-A-Porterreportedthatitsfiscalyear2016organicsalesincreasedby18%yearoveryear,to€1.9billion.Thecompanyexpectsitsfiscal2017revenuestoincreaseby17%–20%yearoveryear.London-basedMatchesfashion.comreportedthatitssalesincreasedby61%yearoveryearinitslatestfiscalyear.
Wehaveidentified10keyfactorsbehindtheriseandcontinuedrobustgrowthofluxurygoodsretailersthatoperateasmultibrandonlinepureplays:
1. EndlessProductChoice
2. Ever-ImprovingLogisticsandDeliveryServices
3. LuxurySectorWasSlowtoExpandintoE-Commerce
4. LuxuryGoodsDemocracy
5. ImmunetoAmazon…SoFar
6. DigitalServiceandMarketing
7. LuxuryConsumersAreEmbracingDigital
8. Brick-and-MortarLuxurySectorIsStruggling
9. BrandsTurntoMultibrandE-CommercetoTapOnlineGrowth
10. USDepartmentStoreWoes
Webelievethatonlineluxuryretailerswillcontinuetoseestronggrowth.McKinsey&Companyforecaststhatonlinesaleswillconstitute18%oftotalluxurysalesin2025,upfrom8%in2016.However,futurecompetitionandconsolidationactivityintheonlineluxurysectorwillonlyincrease.Scalewillbeimportant,sotherewillberoomforonlyseveralmajorplayersinthemarket.Economiesofscaleincustomeracquisitionandretention,aswellasbrandrelationshipsandlogisticsandmarketingefficiency,willbecomeincreasinglyimportant.Salesgrowthintheoverallluxurygoodssectorwillmainlybeachievedthroughmarketsharegainsandonlinesales.Pastrevenuedrivers—suchasstoreexpansion,priceincreasesandnewdeveloping-marketpenetration—willpresentonlylimitedopportunities.
Theluxurysectorwasslowtoexpandintoe-commerce,butnowplayersarevyingforashareofthefast-growingonlinemarket.GloballuxurygoodscompanyLVMHrecentlyannouncedthatitwilllaunchitsownmultibrande-commerceportal,whichwillfeatureall70ofitsbrandsononesite,inMay.TheportalwillalsoofferlabelsthatarenotownedbyLVMH.Ifmoreluxuryretailersfollowthispath,andfocusontheirownplatforms,itwillcomeattheexpenseoflong-standingmultibrandpureplays.
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April7,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
IntroductionInthisreport,weexaminetheriseofmultibrand,onlinepure-playluxurygoodsretailers.Weidentifykeyplayersinthespaceanddiscusstheirperformanceandbusinessmodels.Wealsoidentify10factorsthatsupportthegrowthoftheseretailersandanalyzetheimpactofgrowingcompetitionintheonlineluxurygoodsspace.Finally,weanalyzeLVMH’smovetolaunchitsownmultibrande-commerceportal.
Source:lvmh.com
TheRiseofLuxuryMultibrandOnlinePurePlaysWehavewitnessedtremendousgrowthamongonlinemultibrandretailersandfashionplatformssuchasYooxNet-A-Porter,Mytheresa.com,Matchesfashion.com,Farfetch,GarmentoryandLyst.Thesecompaniesshipgoodstomostcountriesaroundtheglobe.Weintroducetheseretailersinthetablebelow.
Figure1.SelectedLuxuryMultibrandOnlinePurePlays
Name HeadquartersYearFounded
ShippingCountries Boutiques
Designers/Brands AnnualSales Valuation
YooxNet-A-Porter Milan 2000 180 N/A N/A €1.9Bil. €2.9Bil.
Matchesfashion.com London 2000 190 N/A 450 £204Mil. £300Mil.
Mytheresa.com Munich 2006 120+ N/A 180 €129Mil.* N/A
Farfetch London 2008 190+ 500 1,600+ £302Mil.** $1.5Bil.
Garmentory Seattle 2014 N/A 300+ 2,000+ N/A N/A
Lyst London 2011 150+ 11,500 11,500 $150Mil. N/A
*AttimeofacquisitionbyNeimanMarcusinSeptember2014**Grossmerchandisevalueforfiscalyear2015,endedDecember31,2015Source:S&PCapitalIQ/companyreports/CompaniesHouse/FinancialTimes/TechCrunch.com
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
MultibrandOnlineRetailerModelMultibrandonlineretailersoperateastraditionalretailersinthesensethattheypurchaseselectedpiecesfrombrandsanddesignercollectionsandresellthemontheirwebsites.AlthoughYooxNet-A-Porteroperatesvirtualmonobrandstoresfor41luxurybrands,thecompanygenerates90%ofitsrevenuesviaitsmultibrandonlinestores,which,inessence,arevirtualdepartmentstores.YooxNet-A-Porteroperatesfourproprietaryregularpriceandoff-pricemultibrandsites:Net-A-Porter,MrPorter,YooxandTheOutnet.
Figure2.YooxNet-A-Porter:FY16RevenuesbyBusinessSegment(%)
Source:Companyreports
Matchesfashion.comandMytheresa.comoperatebusinessplatformmodelsthataresimilartoYooxNet-A-Porter’s.
Source:mytheresa.com
52%37%
11%
MulnbrandIn-Season MulnbrandOff-Season OnlineFlagshipStores
YooxNet-A-Portergenerates90%ofitsrevenuesfromitsonlinemultibrandstores;theremaindercomesfromtheonlinemonobrandstoresitoperatesfor41luxurybrands.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
OnlineBoutique/MarketplaceModelOnlineboutiquesandmarketplacesactasaggregatingplatforms,whichallowshopperstobrowsehundredsofstylesfromthird-partystoresanddesigners.Theplatformoperatordoesnotpurchaseinventoryand,so,incursnoinventoryrisk.Themodelallowssmallerboutiquesanddesignerstoscale,therebyreachingamuchwidercustomerbaseandincreasingsales.
• TheFarfetchplatformenablesindependentlyownedboutiquesthathavesmallteamsandlimitedtechnologyresourcestoleveragee-commerceanddistributetheirproductsglobally.
• Seattle-basedGarmentoryworkswithboutiquesandsmalldesignerstohelpthemclearexcessinventorywithouttakingbigmarkdownsbysellingthatinventoryonlinetoaglobalaudience.
• Evenmediacontentprovidersaremovingintomerchandisee-commerce,inordertooffsetdwindlingsubscribernumbersandadvertisingrevenues.Forexample,VoguepublisherCondéNasthasrelauncheditsformerrunwayreviewsiteintheformofacuratedluxurymarketplacecalledStyle.com.
LuxuryOnlinePurePlays’SalesAreOnFire• YooxNet-A-Porterisatrailblazerinonlineluxury.Thecompany
operatesthreee-commercebusinesssegments:multibrandin-seasonstores(Net-A-PorterandMrPorter),multibrandoff-seasonstoresthatselloutletitems(YooxandTheOutnet)andflagshipstores.Thelatterdivisiondesignsandmanages41monobrandwebsitesforpartnerluxurygoodsbrands;theseincludeMoncler.com,Armani.com,Valentino.comandChloe.com.ThedivisionisalsoinajointventuretopowerKeringsites,includingBottegaVeneta.comandStellaMcCartney.com.YooxNet-A-Portercontinuestoaddbrandstoitsfull-priceon-andoff-seasonoffering.Thecompanyisalsoplanningtolaunchaprivate-labelbusinessinthefourthquarterof2017.
Figure3.YooxNet-A-Porter:FY16RevenuesbyBusinessSegment(EURMil.)
Source:Companyreports
969
697
205
MulnbrandIn-Season MulnbrandOff-Season OnlineFlagshipStores
Farfetchenablesindependentlyownedboutiquestoleveragee-commerceanddistributetheirproductsglobally.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
YooxNet-A-Porterreportedan18%year-over-yearorganicsalesincrease,to€1.9billion,foritsfiscalyear2016,endedDecember31.Thecompanyincreaseditsmonthlyclientbaseby8%,to28.8million,andordersincreasedby18%yearoveryear,to8.4million.Thecompanyguidedfor17%–20%year-over-yearrevenuegrowthinfiscal2017.Analystshaveasimilarlybullishsalesoutlookforthecompanyforthenextfewyears.
Figure4.YooxNet-A-Porter:2016RevenueGrowthandConsensusRevenueGrowthEstimates(%)
Source:S&PCapitalIQ/companyreports
• PrivatelyownedMatchesfashion.com,whichisbasedinLondon,reportedthatitsonlinesalesincreasedby61%yearoveryear,to£204million,inthefiscalyearendedJanuary31,2017.Matchesfashiongenerates95%ofitssalesonlineand80%ofsalesaremadeoutsideoftheUKmarket.Clientaveragetransactionspendincreased14%to£511inFY16.
• TheFarfetchwebsitereceivesmorethan10millionvisitorseachmonth,andthecompanygrewgrossmerchandisevalueby70%yearoveryearinthefiscalyearendedDecember31,2015.
Webelievethattheseandotheronlineluxuryretailerswillcontinuetoseestronggrowth.
12%
17%18%
17%
8%
2016 2017E 2018E 2019E 2020E
TheFarfetchwebsitereceivesmorethan10millionvisitorseachmonth.
YooxNet-A-Porterreportedan18%year-over-yearorganicsalesincrease,to€1.9billion,forfiscal2016andguidedfor17%–20%revenuegrowthinfiscal2017.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
WhyAreMultibrandOnlineLuxuryRetailersGrowingSoFast?Wehaveidentified10keyfactorsthataresupportingtheriseandcontinuedgrowthofluxurymultibrandpureplays:
1.EndlessProductChoiceE-commerceoffersunparalleledproductchoicefromestablisheddesignernames,emergingbrandsandindependentboutiques.Somedesignersandboutiquesdistributeexclusivelythroughparticularplatformsorcreateexclusivecapsulecollectionsforcertainsites.E-commerceretailandmarketplacesitesoffer:
• Curatedandeditedproductcontent,withthebestpiecesfrombrandcollections.
• Handpickedselectionsofthebestbrandsandlooksintheworld,regardlessofplaceoforigin.
• Newnessandchoice.Forinstance,Matchesfashion.comfeatures1,400newitemsonitssiteeachweekaswellaslimited-runcapsulecollections.
Source:matchesfashion.com
2.Ever-ImprovingLogisticsandDeliveryServicesGlobalshippinganddeliveryoptionsarecontinuouslyimprovingandmultipleplayersnowprovidesame-daydeliveryinlargecities.Luxuryonlinepureplaysprovidefast,simpleandfreereturnsandexchangesforthemostpart.Luxurycustomershavehighexpectationswithregardtoe-commercedelivery;fastshipping,packagingandtrackingareconsideredparamount.
• Mytheresa.comdeliverswithin72hourstomorethan120countriesworldwide.
• Matchesfashion.comdeliverswithin90minutesinLondon.
• Farfetchofferssame-daydeliveryin10majorcitiesacrosstheglobe.
• YooxNet-A-Porterhasrolledoutpickupanddrop-offpointsinseveralEuropeancitiesandcontinuestorolloutomnichannelfunctionalitiestoitsclients’onlineflagshipstores.Theseservices
Mytheresa.comdeliverswithin72hourstomorethan120countriesandMatchesfashion.comdeliverswithin90minutesinLondon.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
includeclick-from-store,in-storepickupandreturn,andtheabilitytocheckin-storeavailabilityonline.
3.LuxurySectorWasSlowtoExpandintoE-CommerceLuxurybrandstraditionallyhavebeenwaryofe-commerceduetothelackofcontrolbrandshaveoverthesellingenvironment,pricingandqualityonthird-partyplatforms.Consequently,anumberofluxurybrandswereslowtoembracee-commerce,initiallydippingtheirtoeinthewatersbypartneringwithYooxNet-A-Porter.Thismeansthecurrent,rapidgrowthweareseeingisfromasmallbase,asluxuryretailisplayingcatch-upwithmass-marketretailine-commerce.
Source:ynap.com
4.LuxuryGoodsDemocracyMultibrandpureplaysareagreatdistributionchannelforemergingbrandsanddesigners.E-commercelevelsthecompetitiveplayingfieldbetweenindustryplayersofdifferentsizes,asitenablessmallerluxurygoodsbrandstoreachawideaudienceandenjoytheeconomiesofscalethatlargerbrandsenjoy.
5.ImmunetoAmazon…SoFarUnlikethemajorityofdiscountandmidpriceretailersandbrandsaroundtheworld,luxurymultibrandonlinepureplayshavesofarbeenlargelyinsulatedfromAmazon’sthreatinfashionretailing,whichhasallowedthemtoflourish.
• LuxurygoodsretailershavebeenquicktodismissAmazonasawholesalepartnerduetodiscountingandcounterfeitingconcerns,insteadpreferringtodistributeproductsthroughdedicatedluxurymultibrandpureplayssuchasYooxNet-A-Porter.
• LuxurygoodscompaniesalsoclaimthatAmazonisnottheappropriatedistributionchannelforexpensiveandaspirationalgoods,asluxurycompaniesmustpreservetheirproducts’scarcity
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
andexclusivityinordertomaintainapricepremium;inappropriatepresentationanduncontrolleddiscountingwouldkilltheallureofluxuryitems.
• LuxurypowerhouseLVMHhasstatedthatitdoesnotbelievethebusinessofAmazonfitswithluxuryorwithLVMHbrands.Thecompanyveryrecentlyunveiledplanstolaunchitsownmultibrande-commerceplatform.
• Intime,however,Amazonmayfigureouthowtomakeitsofferingworkwiththeluxurybusiness.
6.DigitalServiceandMarketingE-commerceisbenefitingfromstrongerprecisionmarketingandpersonalizationcapabilities.Examplesofincreasedonlinepersonalizationincludethefollowing:
• Matchesfashion.comoffers24/7advicethroughMyStylist,thecompany’sdedicatedfashionconciergeteam.
• MrPorterislaunchinganAppleTVappdevotedtoitsvideocontent.Thefirst-of-its-kindshoppableappenablesuserstoshopthelookstheyseeon-screenastheywatchontheirmobiledevice.
• YooxNet-A-Porterisdevelopingamessagingtechnologytoallowcertainhigh-spendingcustomerstopurchaseproductsdirectlythroughWhatsApp.YooxNet-A-Porter’spersonalshoppersalreadycommunicatewithtopclientsviathetext-messagingservice,andthecompanywillbecomeoneofthefirstWesternretailerstouseWhatsApptoselldirectlytocustomers.Net-A-Porter’smobilecustomersplacemorethandoublethenumberofordersasitsdesktopcustomers,andthosemobilepurchases,onaverage,areabouttwiceasvaluable.
• Lystusesalgorithmstopersonalizevisitorexperiences,suggestingnewitemsforcustomersbasedontheirpriorpurchasesandshowinginventoryavailability.
Source:lyst.com
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
7.LuxuryConsumersareEmbracingDigitalInitially,luxuryretailersharboredconcernsthattheirtypicalcustomerwouldnotbewillingtopurchasehigh-valuegoodsonline.However,anecdotalevidence,surveysandresearchhaverepeatedlydemonstratedthatluxurygoodsshoppers,especiallymillennials,aredigitallyinfluencedandthattheyembracee-commerce,includingmobilepurchasing.Themultibrandonlineluxuryretailershavecapitalizedonthisshiftinpurchasingbehavior,asevidencedbytheirstellarsalesgrowth.
• AccordingtotheBostonConsultingGroup(BCG),60%ofluxurysalesaredigitallyinfluenced,andin-storepurchasesoftenfollowonlineresearch.Approximately41%ofluxurycustomersresearchproductsandservicesonlineandbuyinbrick-and-mortarstores,while9%researchproductsin-storeandpurchaseonline,accordingtotheconsultancy.
Figure5.PercentageofDigitallyInfluencedLuxuryGoodsPurchases
Base:10,000respondentsin10countriesSource:BCG
TheUSandtheUKarethemostdigitallymatureluxurymarkets:morethantwo-thirdsofluxurycustomersinthetwocountrieseitherpurchasedtheirlastproductonlineorresearcheditonlinefirstbeforepurchasingitin-store,accordingtoBCG.ItalyandFrancearetheleastdigitallymatureoftheestablishedluxurymarkets.
Source:bcg.com
42% 41%
9% 8%
StoreOnly ResearchOnline,PurchasedOffline
CheckedatStore,PurchasedOnline
OnlineOnly
Approximately41%ofluxurycustomersresearchproductsonlineandbuyinbrick-and-mortarstores,while9%researchproductsin-storeandpurchaseonline.
TheUSandtheUKarethemostdigitallymatureluxurymarkets,whileItalyandFrancearetheleastdigitallymature.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Figure6.PercentageofSurveyRespondentsWhoResearchedTheirLastLuxuryPurchaseOnlineandThenPurchasedIn-Store
Base:10,000respondentsin10countriesSource:BCG
Itisnotjustdigitally-savvymillennialswhoareattractedtoe-commerce,though.Babyboomersarealsointerestedinomnichannelinteractionswithluxurybrands.
Figure7.PercentageofLuxuryGoodsPurchasersReadyforOmnichannelInteractionsSuchasE-Commerce,SocialSharingandDigitalIn-StoreExperiences
Base:10,000respondentsin10countriesSource:BCG
47% 47% 46%
31%
US Brazil Japan France
85%
75%
Millennials BabyBoomers
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
8.Brick-and-MortarLuxurySectorIsStrugglingBrick-and-mortarluxurygoodssaleshavebeenchallengedforseveralyears,and2016markedtheworstyearforthesectorsince2009,withmarketgrowthessentiallyflat,accordingtotheAltagammaFoundation,anorganizationcommittedtoincreasingthecompetitivenessofItalianluxurygoodscompanies.Severalfactorshavecontributedtosluggishsalesinluxurybrands’directlyoperatedbrick-and-mortarstoresand,consequently,havemadeonlineluxuryshoppingamoreattractiveoption:
Source:altagamma.it
• TourismspendinginEuropehasfallenfollowingterroristattacksandthestrongUSdollarhasimpactedtouristsalesintheUS.Approximately40%ofluxurygoodssalesarederivedfromtourism.Onlineplatformshavebenefitedversustouristsales.
• PersistentlylowcommoditypriceshaveaffectedcurrenciesanddemandfromBrazilianandRussiantourists.
• Overexpansionandstoreopeningsaturation,especiallyinAsiancities,andrisingfixedcostsduetoescalatingrealestatecostshaveaffectedthesector.Companieshavebeenclosingsomestoresandopeningsmallerones.
Severalprominentbellwetherluxurygoodscompaniesreturnedtogrowthinthefourthquarterof2016.Sectorsalesgrowthinthefuturewilllikelybemuchmoresubduedthanthedouble-digitannualincreasesseeninthe2000s.BCGforecaststhatgloballuxurygoodssaleswillgrowatjust2%–3%annuallythrough2020.
Globalluxurygoodssalesareforecasttogrowatjust2%–3%annuallythrough2020.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
9.BrandsTurntoMultibrandE-CommercetoTapOnlineGrowth
E-commercestillrepresentsonlyasmallshareoftotalluxurygoodssales,butthechannelisakeygrowthopportunity.Furthermore,luxurygoodscompanieshaverecognizedthatmarket-sharegainsandonlinesaleswillbetheirmaingrowthdriversgoingforward,aspaststrategiesofemerging-marketpenetration,openingdirectlyoperatedstoresandhikingpricesarenolongerviable.Duetotheirlackofexperiencewithdigitalstrategies,manyluxurygoodsretailersturnedtomultibrandonlineretailerssuchasYooxNet-A-Portertogainane-commercefoothold.
• E-commerceisthefastest-growingdistributionchannelgloballyforluxurygoods.McKinsey&Companyforecaststhatonlineluxurysaleswilltotal€70billion(£60.7billion)by2025,constituting18%oftotalluxurysales,upfrom8%in2016.
• Theonlineoff-priceluxurygoodssegmentisalsooutperforming.In2016,approximately8%ofluxurygoodssalesweremadeatoutletstores,accordingtoglobalmarketingagencyPMXAgency.
• Luxurygoodssoldonlinearemoreprofitablethanthosesoldthroughanytraditionalsaleschannel,accordingtoBCG.
• Eventheluxurywatchindustryismovingonline.Swisswatchmakershavehistoricallybeenreluctanttosellonline,butarenowtargetingyoungerconsumersthroughe-commerce.AccordingtoaDeloittereport,Swisswatchmakersarepessimisticabouttheindustry’sprospects,andthishaspromptedthemtoshiftonlineinordertofindbuyers.HalfofthewatchexecutivessurveyedbyDeloitteconsiderspecialtye-commerceresellersasthemostimportantsaleschannelin2017.
• FrenchluxurygoodscompanyKeringsawitsonlinesalesgrowbymorethan20%yearoveryearinthefirsthalfofitsfiscalyear2017.Kering’slargestbrand,Gucci,sawonlinesalesjump19%yearoveryearduringtheperiod.
Source:gucci.com
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
10.USDepartmentStoreWoesHigh-endbrick-and-mortardepartmentstoresintheUScontinuetostruggle,partlybecauseonlinepureplayssuchasYooxNet-A-Porteraretakingshare.Also,intheoff-pricesegment,onlineplatformsthatselloff-priceluxurygoodsaretakingsharefromoff-pricedepartmentstoreconceptssuchasSaksOff5th.
TheUSisthelargestgloballuxurymarket,accountingfor32%ofluxurygoodsrevenuesin2016.Approximately31%ofYooxNet-A-Porter’srevenuesarederivedfromtheNorthAmericanmarket,makingitthecompany’slargestgeographicmarketintermsofrevenue.
Figure8.YooxNet-A-Porter:FY16RevenuesbyGeographicSegment
Source:Companyreports
Likewise,theUSisexpectedtoemergeasMatchesfashion’slargestmarketin2017.
• US-basedhigh-enddepartmentstorechainNeimanMarcus,whichistheparentcompanyofMytheresa.com,hassufferedfromdecliningsalesandlosses.NeimanMarcus’scomparablestoresalesdeclinedby7%yearoveryearinthefirsthalfofitsfiscalyear2017,endedJanuary28,2017.InMarch,thecompanyannouncedthatithadputitselfupforsale.
• SaksFifthAvenue’ssalesincreasedbyjust0.1%inthefourthquarterofitsfiscalyear2016,endedJanuary28,2017.Comparablesalesatoff-pricesegmentsSaksOff5thandGiltdecreasedby6%overtheperiod.
7%
14%
26%31%
16%
6%
Italy UK RestofEuropeNorthAmerica AsiaPacific RestoftheWorld
Approximately31%ofYooxNet-A-Porter’srevenuescomefromNorthAmerica,makingitthecompany’slargestgeographicmarketintermsofrevenue.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
WhatDoestheFutureHold?
CompetitionforaSliceoftheDigitalPieScalewillbeimportantinonlineluxuryretail,sotherewillonlyberoomforseveralmajorplayersinthemarket.Economiesofscaleincustomeracquisitionandretention,aswellasbrandrelationshipsandlogisticsandmarketingefficiency,willbecomeincreasinglyimportant.Salesgrowthintheluxurygoodssectorwillmainlybeachievedthroughmarketsharegains,aspastrevenuedrivers—suchasstoreexpansion,priceincreasesandnewdeveloping-marketpenetration—nowpresentonlylimitedopportunity.
• Consolidationactivityhasincreasedfollowingrisingcompetition.USchainNeimanMarcusacquiredMunich-basedMytheresa.cominSeptember2014,andMilan-basedYooxmergedwithLondon-basedNet-A-PorterinMarch2015.Itwouldnotbesurprisingtoseefurtherconsolidationinthesectorgoingforward.
• Competitionfromtraditionaldepartmentstores,andespeciallycompetitionfromluxurygoodsbrands’ownonlinestores,isalsoincreasing.
Luxuryretailerswereslowtoexpandintoe-commerce,butnowplayersarevyingforashareofthefast-growingonlinemarket.Theluxurysectorlagsotherconsumersectorsintermsofimplementingdigitaltechnologiesandstrategies,accordingtoBCG,butitissprintingtocatchup.Wearelikelytoseesomeluxurybrandsinternalizingtheire-commerceplatformsattheexpenseofmultibrandonlinepureplays.
CompetitionHeatingUpwithLVMHPortalLaunchInMay,LVMHwilllaunchitsownmultibrande-commerceportal,whichwillfeatureall70ofitsbrandsononesite.TheportalwillalsoofferlabelsthatarenotownedbyLVMH.Thecompanyistheworld’slargestluxurygoodsfirmbyrevenue;infiscal2016,endedDecember31,LVMH’sgroupsalesincreasedby5%,to€38billion.
• TheonlineplatformwillcompetedirectlywithNet-A-Porter,Matchesfashion.comandFarfetch,whichalreadywholesaleseveralLVMHbrands.ThemovefollowsLVMH’shiringofanAppleexecutivein2015tofillthenewlycreatedroleofChiefDigitalOfficerandleadthecompany’sonlineretailexpansion.
• Currently,LVMH’s70brandseachchoosetheirowndigitalstrategies,whichincludedistributingthroughYooxNet-A-Porterortheirownmonobrandwebsites.
• ThismarksLVMH’ssecondforayintomultibrandonlinefashionretail;thecompanyoperatedtheeLuxuryplatformbetween2000and2009.WhenLVMHshutteredthesite,itsbrandsintroducedstand-alonee-commerceoperations.
• SomeLVMHbrandsareworkingonone-daydelivery,andstoreassistantsareencouragingcustomerstoorderonlinewhilein-store.
Luxurygoodssalesgrowthwillmainlybeachievedthroughmarketsharegains,aspastrevenuedriversnowpresentonlylimitedopportunity.
InMay,LVMHwilllaunchitsownmultibrande-commerceportal,whichwillfeatureall70ofitsbrandsononesite.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
KeyTakeaways• Wearewitnessingtheproliferationofonlinemultibrandretailers
andaspirationalfashionplatforms—suchasYooxNet-A-porter,Matchesfashion.com,FarfetchandMytheresa.com—thatprovideglobalinfrastructureanddistributionforluxurybrands.
• Onlineluxurypenetrationispoisedtogrowfrom8%in2016to18%in2025,accordingtoMcKinsey&Company.
• Luxurybrandstraditionallyhavebeenwaryofe-commerceduetothelackofcontrolbrandshaveoverthesellingenvironment,pricingandqualityonthird-partyplatforms.However,luxurybrandsarenowfullyembracingdigitalsales.Asaconsequence,weexpectsomebrandstofocusontheirowne-commerceplatformsattheexpenseofmultibrandonlinepureplays.
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April7,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEvaKubickaSeniorResearchAssociate
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