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The luxury marketFacts, figures, trends
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1
Luxury-goods market
Segments of the luxury-goods market 2008*by sales worldwide (in %)
* Estimate** E.g. watches, jewelleryFigures in brackets: Change compared to previous yearSource: Bain & Company/Altagamma
Tableware (-2%)
Garments (+/-0%)
Perfumes & cosmetics (+3%)
28
4
23
21
‘Hard luxury goods’** (+7%)
22
Accessories (+5%)
Total sales: EUR 175 billion
Core segments of the market hold their own
Generally speaking, garments, accessories, jew-ellery, watches, fragrances and cosmetics are considered to be constituent parts of the luxury market. This viewpoint was also adopted in a study conducted by Bain & Company on behalf of Altagamma, the Italian Association of Luxury Goods Manufacturers. According to this survey, garments account for around 28 percent of the market while accessories, fragrances, cosmetics and ‘hard luxury goods’ (especially luxury watch-es and jewellery) account for 21 to 23 percent. The market researchers also counted high-grade tableware as a small segment of the luxury-goods market. In a study entitled ‘Global Luxury Retail-ing 2007’, Verdict defined the market along similar lines. In this case, however, fashion / gar-ments, fragrances, cosmetics, watches and jewellery and accessories are joined by furniture and other product groups.
Luxury-goods market up in 2008 but decline expected in 2009
In 2008, the volume of sales in the worldwide luxury-goods markets rose by three percent to EUR 175 billion. The development of the luxury market was hampered, in particular, by the finan-cial crisis, the stock-market collapse and severe exchange-rate fluctuations. For 2009, however, the experts from Bain & Company anticipate a decline – the first since 2003. At constant ex-change rates, they expect a turnover of between EUR 163 and 170 billion (172 to 178 billion at current rates). The largest share of the luxury market by volume is held by Europe. However, growth in Europe is currently being fired by the upcoming countries of East Europe and the Asian-Pacific region. Tomorrow’s leading markets for luxury products will include not only China and India but also Russia and Brazil. According to the experts from Bain & Company, these
Development of the luxury-goods marketSales worldwide (in EUR billion)
* EstimateSource: Bain & Company/Altagamma
76
2008*2007200620052004200320022001200019991998199719961995
8493 98
134
111
159170
130 134128
134
146
175
Luxury-goods market by regions 2008*Sales worldwide (in %)
* EstimateFigures in brackets: Change compared to previous yearSource: Bain & Company/Altagamma
Rest of the world (+9%)
Europe (+5%)
America (+/-0%)
38
5
33
12
Asia/Pacific (+15%)
12Japan (-7%)
Total sales: EUR 175 billion
2
HNWI population by countries 2008Top 10 (in thousands)
Source: Capgemini Lorenz curve analysis (‘World Wealth Report 2009’)
Japan
Germany
China
France
Canada
Switzerland
Italy
Brazil
2,4603,019
1,3661,517
810833
364413
362491
346396
213281
185212
164207
131143
2008
2007
UnitedStates
UnitedKingdomWealth in Germany unchanged
In terms of the number of wealthy individuals, Germany holds third place in the world ranking. In 2008, 54 percent of all wealthy people lived in Germany, the USA and Japan. Moreover, per-sonal wealth and the number of HNWIs in Ger-many fell less because many rich Germans pursue a conservative investment policy and there was no property bubble.
Tourists from threshold countries purchase more in Germany
Besides the domestic consumption of high-in-come Germans, the expenditures of foreign tour-ists in Germany are also important for the luxury market. In particular, Russians and Chinese spend large sums of money during the vacation period – and, despite the crisis, actually increased their expenditures in 2008 compared to 2007. By contrast, travellers from other western industrial nations, such as Switzerland, the USA and Japan, spent more carefully in 2008.
Luxury orientation is multi-faceted
The significance of luxury differs greatly in the various segments of the population. For around 50 percent of people, luxury also means the pos-sibility of treating oneself. Fine dining is also popular among half the population. Many Ger-mans spend freely, especially on fashions, and then they are inclined to spend more. Around ten percent are very keen on ‘hard luxury goods’ – exclusive brands, watches and jewellery.
Attitudes towards luxury (in %)
* Agree completely/on the whole** Applies completely/on the wholeBasis: Inhabitants aged 20 to 69 Source: Communication Networks 13.0 / potential: 49.55 million
I buy primarily exclusive brands*
I like to shop in exclusive/up-market boutiques*
When I go shopping, it sometimes happensthat I spend more money than I intended*
At present, I mainly wear ‘in’ clothing brands**
I enjoy buying clothes*
Watches are an important aspect of my outfit*
Jewellery is an important aspect of my outfit*
The brand is important even if other less well-knowncompanies offer the same quality at a lower price*
I am happy to spend somewhat moreon a meal in elegant surroundings**
For me, luxury means having time for myselfand to do something for myself**
38.1
49.7
13.4
14.8
12.3
36.8
10.8
8.4
7.8
49.8
Tax-free shopping in Germany 2008Share of total sales by countries (in %)
Source: German National Tourist Board (DZT/Global Refund 2009)
Russia
China
Switzerland
Korea
Japan
Brazil
UnitedArab
Emirates
26.6
12.8
8.0
4.1
2.9
2.8
+37.4%
+7.8%
-2.0%
+22.2%
-23.9%
-30.4%
-19.2%
+12.1%2.0
2.3
UnitedStates
Luxury-goods market
countries are likely to grow at rates of between 20 and 35 percent over the next five years. In the future, long-term growth in the wealth of people in emerging nations and the increasing number of High Net Worth Individuals (HNWI) will gener-ate new impulses for the luxury market.
3
Major luxury groups 2008/2009*(in EUR billion)
* Different business-year periods in some cases Source: Corporate information, own research
17.19LVMH
Richemont
Swatch Group
Polo Ralph Lauren
Gucci Group
Hermès
Phillips-Van Heusen
Armani Group
Burberry
5.42
2.21
3.77
1.76
3.38
3.39
1.75
1.62
1.07
Valentino Fahion Group (Hugo Boss)
Luxury holdings top the market
Today, many of the most valuable luxury brands belong to major luxury-goods groups, e.g., Louis Vuitton belongs to LVMH, Gucci to PPR and Cartier to Richemont. Others have been quoted independently on the stock market for many years, e.g., Hermès, Tiffany & Co. and Bulgari. Additionally, many luxury brands are still managed by the founding families or owners, e.g. Chanel and Rolex, and they provide virtually no informa-tion about the development of their business.
Some owner-managed labels, including Prada, Versace and Salvatore Ferragamo, are consider-ing going public. In view of the current situation on the financial markets, however, these plans have been postponed for the time being.
Luxury brands
The world’s most valuable luxury brands 2008Top 15 by brand value (in EUR billion)
Source: Interbrand (‘The Leading Luxury Brands 2008’)
Louis Vuitton (F)
Gucci (I)
Chanel (F)
Rolex (CH)
Hermès (F)
Cartier (F)
Tiffany & Co. (USA)
Prada (I)
Ferrari (I)
Bulgari (I)
Burberry (GB)
Dior (F)
Patek Philippe (CH)
Ermenegildo Zegna (I)
Salvatore Ferragamo (I)
3.278
16.718
3.836
3.541
4.918
6.388
3.257
2.775
2.730
2.577
2.542
1.578
0.855
0.633
0.559
Brands are particularly valuable in the luxury market
The brand is the most important asset for manu-facturers of luxury products. Hence, it is not surprising that many luxury brands rank among the most valuable in the world. The biggest lux-ury brand, Louis Vuitton, also holds 16th place in the ranking of all international brands. Gucci, Chanel, Rolex and Hermès are also brands that have an excellent reputation in this market and generate appropriate levels of sales with their good names.
Europe is the most important region of origin for international luxury brands. Italy and France are particularly prominent, as is Switzerland when it comes to watch brands. Thus, the Swiss Rolex and Patek Philippe brands also made it into the ranking. Other leading names include Omega, Chopard, Longines and TAG Heuer. Of the US brands, only one brand, Tiffany & Co., managed to get into the top 15.
4
Fashion
Luxury garments worldwideMarket volume (in EUR billion)
* EstimateSource: Bain & Company/Altagamma
Women Men
23.522.0
2008*20072006 2008*20072006
22.023.5 23.523.6
* In constant pricesIndex: 2003=100Source: German Statistical Office (Statistisches Bundesamt)
Development of garment salesin the retail trade* by quarters (index)
92.2
89.0
80
90
100
110
120
130
2009200820072006200520042003200220012000
Luxury fashion market stagnating worldwide
The worldwide market for luxury fashions has grown continuously over recent years. On behalf of Altagamma, the Italian Association of Luxury Goods Manufacturers, the Bain & Company market research institute calculated an average annual rate of growth of 4.5 percent for women’s fashions and six percent for men’s between 1998 and 2008. In 2008, the rate of growth declined significantly – to a certain extent as a result of economic uncertainties but also due to currency fluctuations.
Garment trade in Germany holding its own
In Germany, the garment trade rang up sales worth just over EUR 60 billion in 2007. According to estimates, there was no continuation of this trend in 2008 and, in view of the crisis, it is un-likely to resume in 2009. A more positive estimate comes from the BTE trade association and its estimates show stable results for the first four months of 2009. However, this does not apply to the luxury-article segment, which has been suffering from a fall in demand from foreign cus-tomers in Germany.
The most important segment for the German garment trade continues to be women’s fashions. In 2007, sales in this segment climbed by around seven percent according to BTE, so that it ac-counted for almost half of the entire garment market. In the men’s wear segment, too, sales jumped by almost five percent in 2007 so that boys’ and men’s clothing represented approxi-mately 25 percent of the total. The HML Index for Sales in the Specialist Trade shows the develop-ment of sales in the first four months of 2009.
Sales by segments Jan. - April 2009Change over the same period last year (in %)
Basis: Merchandising systems with annual sales of approx EUR 6 billion Source: HML Modemarketing
+8.8
Women’s wear Men’s wear
+4.9
+4.3
+1.6
-0.5
-1.7
-5.2
-5.6
-6.6
-21.5
Dresses
Coordinates
Knitwear
Trousers
Blouses
Blazers
Coats
Skirts
Outdoorjackets
Costumes/trouser suits
Totalwomen’s wear
Totalmen’s wear+1.2
Suits
Coats
Knitwear
Trousers
Sports jackets
Shirts
+4.1
Outdoorjackets
+3.6
+2.2
+0.4
-0.6
-1.1
-2.0
+0.7
5
Fashion
Sales of the German fashion industry(in EUR billion)
Basis: Companies with 20+ employees; from 2007 with 50+ employeesSource: textil+mode trade association
2008200720062005
8.939.239.279.23
German fashion industry in a difficult situation
As expected, 2008 was somewhat disappointing for the German fashion industry. According to the ‘textil+mode’ and ‘GermanFashion’ trade asso-ciations, there was a decline in the sales of the country’s garment manufacturers. Although based on slightly different figures, both associ-ations registered a decrease of 3.5 percent whereby the biggest falls took place in the major segments of outerwear, knitwear and underwear. To date, this negative trend has continued into the current year, 2009.
One of the main reasons for the sales difficulties of the German fashion industry is the decline in exports, which have been affected by the eco-nomic crisis since the autumn of 2008. Overall, exports of garments only remained stable in 2008 with an increase of one percent – a below-aver-age rate of growth in comparison to the German economy as a whole. In particular, exports to the EU 15 – especially to important countries such as Austria, The Netherlands and France – suffered from the crisis and sank significantly. On the other hand, there was an increase in exports to expanding regions such as the eastward expan-sion of the EU, the Asia / Pacific region and the Middle East, including the Arabian Gulf States.
Export development by countries* 2008Change over the previous year (in %)
* From an export volume of EUR 10 million Source: GermanFashion/German Statistical Office (Statistisches Bundesamt)
+76.3
+60.6
+26.8
+26.3
+24.7
-14.5
-14.3
-13.0
-12.9
-10.8
Top 5 winners
Slovakia
Poland
Saudi Arabia
PR China
Serbia
Top 5 losers
Estonia
United Kingdom
Spain
Italy
Finland
Garment suppliers in Europe 2007Sales (in EUR million)
* 2007/2008 business year ** Wholesale sales *** EstimatedSource: Textilwirtschaft
4,400
3,250*
2,147
1,956
1,504
1,456*
1,443
1,347
1,340
1,320
1,244**
1,200***
1,126***
878
850***
Adidas Group
Esprit
Valentino Fashion Group
Benetton Gruppe
Triumph Int. Holding
Burberry Group
Multiline
PPR/Gucci Group
Tommy Hilfiger
Only the Brave
Bestseller Gruppe
Max Mara Fashion Group
LVMH-Gruppe
Giorgio Armani
Dim Branded Apparel
Luxury groups are leaders in the fashion market
In Europe, some luxury brands and corporate groups rank among the biggest garment suppli-ers with international groups being particularly well represented. In Germany, however, the mar-ket tends to be dominated by domestic manu-facturers, such as Hugo Boss, Escada, Gerry Weber, the Ahlers Group (Baldessarini, Pierre Cardin, etc.) and F.W. Brinkmann (Bugatti, etc.).
6
Accessories
Luxury accessories successful
Over recent years, leather goods and shoes have ranked among the most successful segments in the luxury-goods market. According to calcula-tions by Bain & Company on behalf of Alta-gamma, average annual growth in the shoe segment amounted to around seven percent between 1998 and 2008. For 2007, the market researchers noted a dominant trend in the seg-ment – growth was primarily driven by the top luxury brands. The demand for cheaper and upcoming brands was significantly lower.
Leather-goods trade satisfied
According to BBE Retail Experts, there is a clear upwards trend in the German leather-goods market with sales having risen by ten percent from 2004 to 2008. And further growth in the small segment is predicted for the future. For 2008, the Federation of the German Leather Goods Retail Trade (Bundesverband des Deutschen Leder-waren-Einzelhandels – BLE) estimates a market volume of EUR 2.1 billion. In recent years, the market trend has been towards fashion articles and leisure accessories. According to the German Leather Goods and Plastic Products Association (Bundesverband Lederwaren and Kunststoff-erzeugnisse – BVLK), sales in the German leather-goods industry were driven by domestic demand and rose by about one percent in 2008.
Market for luxury accessories worldwideMarket volume (in EUR billion)
* EstimateSource: Bain & Company/Altagamma
Leather goods Shoes
19
17
2008*20072006 2008*20072006
7.0 7.6 8.2
20
Sales in the leather-goods retail trade 2008*By segment (in %)
* EstimatesSource: Federation of the German Leather Goods Retail Trade (Bundesverband des Deutschen Lederwaren-Einzelhandels – BLE)
10
10
3025
25
Total sales in 2008: EUR 2.1 billion
Baggage
Women’s handbagsBusiness/school
Small leathergoods
Miscellaneous
Sales development in the German shoe retail tradeBy quarter years in constant prices (index)
Index: 2005 = 100Source: German Statistical Office (Statistisches Bundesamt)
I2009
IVIIIIII2008
IVIIIIII2007
IVIIIIII2006
IVIIIIII2005
80
111
99
111
106
79
108
83
120
115
83
117
109
117
112 113
83
Shoe trade stable
The German shoe retail trade achieved a positive result in 2008 according to figures published by the German Statistical Office (Statistisches Bun-desamt). However, the Federation of the German Shoe Industry (Hauptverband der Deutschen Schuhindustrie – HDS) reports a 3.6 percent decline in sales revenues for 2008, caused pri-marily by a low level of demand in the domestic market. By contrast, foreign sales rose slightly.
7
Watch-export nations 2008 (Top 5)
Source: Association of the Swiss Watch Industry (Verband der Schweizerischen Uhrenindustrie FH)
Switzerland
Hong Kong
China
France
Germany
15.8
7.1
2.7
1.5
1.5
Exports of watch productsby value (in USD billion)
Exports of wristwatches by quantity (in million)
China
Hong Kong
Switzerland
Germany
USA
550.3
425.8
26.1
12.9
6.4
Swiss watches lead the luxury-watch market
The most important export nations for watches are Switzerland, Hong Kong and China. Charac-teristic of the Asian manufacturers is the bulk business in quartz watches. In 2008, China ex-ported around 550 million watches, the average price of which, however, was just two dollars. The price of watches from Hong Kong rose slightly to an average of eleven dollars. The quantity ex-ported was also high at around 426 million. By contrast, Swiss watches are positioned in a com-pletely different segment and are an institution in the international luxury market. Switzerland’s watchmakers have a long tradition. They use the finest, top-grade materials and are characterised by great precision and craftsmanship, especially in the case of mechanical watches. And this is reflected in the average price per Swiss watch exported, which was EUR 563 in 2008 when Swiss watches continued their triumphal world-wide advance with an increase in both the value and quantity of watches exported, especially high-quality mechanical wristwatches. However, sales declined in the first months of 2009. As well, no export increases could be achieved in the upcoming regions of Asia.
Source: Association of the Swiss Watch Industry (Verband der Schweizerischen Uhrenindustrie FH)
Exports of Swiss wristwatchesby value and quantity
Value (in CHF billion)Quantity (in million)
200820072006200520042003
9.310.1
12.7
15.9
14.8
11.4
6.2
4.7
24.4 24.9
Jan.-May 2008
Jan.-May2009
24.4 24.9
26.125.9
10.27.7
Watches and jewellery
German watch industry feeling the pinch
The German watch industry was unable to gener-ate an increase in sales over recent years and, in 2008, they fell to just over EUR 500 million. Ac-cording to the Association of the Jewellery and Watch Industry (BV Schmuck + Uhren) on the occasion of the Inhorgenta fair, developments were generally positive in the first three quarters of the year before the impact of the crisis was felt in terms of a decline in the number of orders received, as well as postponements and cancel-lations, especially on the export side.
Sales* of the German watch industry(in EUR million)
* Estimated on the basis of companies with 20 or more employees (50 or more from 2007)Source: Association of the Jewellery and Watch Industry (BV Schmuck + Uhren)/ German Statistical Office (Statistisches Bundesamt)
2008200720062005
501.6541.2
581.0
627.5
8
2008 was a good year for the German jewellery industry
Despite the influence of the financial and eco-nomic crisis, Germany’s jewellery manufacturers were once again able to boost their sales, which rose to around EUR 807 million in 2008, an in-crease of approximately five percent. The Christ-mas business was also satisfactory in 2008. In view of the current crisis, however, the jewellery sector is taking a somewhat pessimistic view of the immediate future. Exports of jewellery from Germany were also good in 2008 and rose by eight percent to EUR 884 million. The most im-portant importers of German jewellery were EU countries and members of EFTA (Iceland, Liech-tenstein, Norway and Switzerland). The situation is different in the case of imports into Germany – the bulk in terms of value is imported from outside Europe with China being a particularly important producer of costume jewellery.
Precious materials generate the greatest sales
According to an analysis by BBE Retail Experts, there is also a trend towards polarisation in this market with the most successful brands being those in the uppermost segment, e.g., belonging to LVMH and Richemont. Also successful at the other end of the spectrum are suppliers of inex-pensive costume jewellery, such as Bijou Brigitte and beeline. However, this only reflects the de-velopment of the individual segments of the jewellery to a certain extent because the high price of gold and platinum means that jewellery made of these materials accounts for the biggest share in terms of sales. The demand for jewellery made of precious materials remained high at the beginning of 2009 with less but more expensive jewellery being purchased. In times of crises, investors and buyers bank on goods of lasting value and the high price of gold continues to support this trend. Silver jewellery holds a stable ten percent of sales.
Development of sales of the Germanjewellery industry* (in EUR million)
* Estimated on the basis of companies with 20 or more employees (50 or more from 2007)Source: Association of the Jewellery and Watch Industry (BV Schmuck + Uhren)/ German Statistical Office (Statistisches Bundesamt)
20082007200620052004
807.0769.1762.5
792.4757.6
Imports/exports of jewellery 2008Share by region (in %)
Source: Association of the Jewellery and Watch Industry (BV Schmuck + Uhren)/ German Statistical Office (Statistisches Bundesamt)
Total imports:EUR 774.4 million (+3.1 %)
Total exports:EUR 884.3 million (+8.5 %)
EU
6
61
30
44
6
9
24
EFTA
EFTA
Rest ofEurope Rest of
Europe20
Othercountries EU
Othercountries
Product groups of the German jewelleryindustry 2008* Share (in %)
* Estimated on the basis of nine months and companies with 50 or more employeesSource: Association of the Jewellery and Watch Industry (BV Schmuck + Uhren)/ German Statistical Office (Statistisches Bundesamt)
Silverware
Gold and platinumjewellery
Silver jewellery
76
56
3Fancy jewellery
10
Costume jewellery
Watches and jewellery
9
Perfumes & Cosmetics
Growth in the world market for luxury fragrances and cosmetics
Bain & Company market researchers calculated that the worldwide markets for luxury fragrances and luxury cosmetics were worth EUR 18.4 billion and EUR 22.4 billion respectively in 2008. Thus, these segments achieved a good average rate of growth of five and seven percent over the years from 1998 to 2008. In this connection, perfumes and fragrances were driven, in particular, by suc-cessful product launches combined with fierce competition and massive advertising.
Perfumeries are optimistic
The trade with fragrances and cosmetics in Ger-many announced a slight decline of less than one percent for 2008. Although the previous year started strongly, this was followed by several poor months and, in particular, a disappointing Christmas season. Nevertheless, the Perfumery Association (Parfümerieverband) is taking a cau-tiously optimistic view of 2009 because crises have been good for Make-up & Co in the past.
Market for luxury fragrances/cosmetics worldwideMarket volume (in EUR billion)
* EstimateSource: Bain & Company/Altagamma
Luxury cosmeticsLuxury fragrances
18.0
2008*20072006
17.018.4
21.0
2008*20072006
22.421.8
Development of perfumery sales 2008
Source: German Perfumery Association (Bundesverband Parfümerien e.V.)
Total
Face care
Body care
+0.7
+2.7
+0.2
+1.0
+0.6
-0.3
-1.2
13.8%
13.4%
21.8%
6.1%
29.3%
15.8%
Decorativecosmetics
Women’sfragrances
EUR 2.67billion
Share Change compared to previous year (in %)
Men’scosmetics
Miscella-neous
German market for body-care products 2008by segments (in %)
* At consumer pricesSource: IKW Working Group market estimate
Other body-care productsSoaps / syndets
Hair-care products
Skin-care products
24.1
3.1
23.210.5
7.7
Bath/shower products
Deodorants
10.6
7.0
6.7
5.41.7
Decorative cosmetics
Dental/oral-careproducts
Women’sperfumes/fragrances
Men’scosmetics
Market for body-care growing
By and large, the beauty and care industry was satisfied with business in 2008. Expenditures on body-care products rose to EUR 12.6 billion. The most growth was achieved in the fields of dec-orative cosmetics and deodorants. According to calculations by the Association of the Body Care and Detergent Industry (Industrieverband Körper-pflege- and Waschmittel – IKW), Germans spent EUR 153 each on body-care products, an in-crease of three euros over 2007. Luxury cosmet-ics grew equally in 2008. According to figures published by the VKE cosmetics association, which represents around 50 German manufactur-ers and distributors of selective cosmetics, sales of companies with medium to high-priced cos-metics rose by 1.9 percent to EUR 1.7 billion.
10
The future of luxury goods
The evolution of luxury
Luxury is closely connected with shortage on the one hand and desirability on the other. People are prepared to spend a lot of money on anything that fulfils both criteria, is difficult to achieve and coveted. In view of the fact that both the avail-ability and desirability of goods and social tastes change in the course of time, the notion of lux - ury is subject to a constant process of change. Through developments, such as the constant growth in affluence, the collapse of traditional family structures and lifestyle diversification, luxury became an extremely heterogeneous and individual phenomenon in the second half of the 20th century. For the future, it can safely be as-sumed that the homogenous luxury market is a thing of the past and that the sector will be dominated by a variety of market segments, all very different in character.
Luxury trendsby the size of the individual target groups
Source: Z_punkt
Democratisation of luxury
Climber luxury
Niche luxury
Immaterial luxury
Artificialshortage
Connoisseurluxury
Superluxury
Siz
e of
the
con
sum
er g
roup
Localisation of trends by availability
and material/immaterial aspects of luxury goods
Super luxury
Extremeshortage
Artificialshortage
Immaterialluxury
Moderateshortage
Source: Z_punkt
Purelymaterial
Purelyimmaterial
Climber luxury
Connoisseur luxury
Niche luxury
Democratisationof luxury
Z_punkt The Foresight Company
Z_punkt The Foresight Company is a firm of consultants for strategic questions re-lating to the future, which has been sup-porting companies and public authorities
in the fields of strategy, innovation and leadership since 1997. The Z_punkt consultants combine a strategic approach with the results of research into trends and the future, and help decision-makers to cope with present-day problems without forgetting to make preparations for the future. Z_punkt works for companies in the service, high-tech and consumer-goods sectors and has great expertise and experience in various markets.
Z_punkt is responsible for the chapter on the future of this market analysis. The chapter was written by Klaus Burmeister and Björn Theis.
Facets of luxury
The trend analyses in the market concentrate on the most important of these market segments and attempt to do justice to the various facets of luxury. Characteristic of modern luxury is that it is, on the one hand, accessible to an increas-ingly broad range of socio-economic groups (“democratisation of luxury”) and, on the other hand, increasingly dependent on belonging to a specific group (“niche luxury”). Besides the as-sertive demonstration of status by those who want to document their ascent in the material world (“climber luxury”), there is the boundless luxury of the super-rich (“super luxury”). More sensitive souls, for whom this showing off is re-pugnant, withdraw into private worlds of luxury where intimate connoisseurship counts (“con-noisseur luxury”). New mechanisms are being tried to create exclusiveness (“artificial shortage”). And, finally, there is a trend towards luxuries that are fully decoupled from goods and can only be satisfied by services (“immaterial luxury”).
11
Advertising market
Watches & jewellery marketDevelopment of advertising expenditures (in EUR million)
* Jewellery shops, range advertising, wristwatches, internet: watches & jewellery, miscellaneousSource: Nielsen Media Research (gross advertising expenditures)
20082007200620052004
Miscellaneous*JewelleryWatches
78 77
89
106
113
44
32
1st half of 2008
1st half of 2009
Fashion & accessories market Development of advertising expenditures (in EUR million)
Source: Nielsen Media Research (gross advertising expenditures)
20082007200620052004
Mail-order trade, textiles/shoes Textile stores/department storesRange advertising, textiles/garmentsCorporate image advertisingLeather goods & accessoriesShoesUnderwear & stockingsClothing
507
579 580605
567
276294
1st half of 2008
1st half of 2009
Advertising expenditures of the clothing sector increasing
According to Nielsen Media Research, the gross amount spent on advertising in above-the-line media in 2008 amounted to around EUR 567 million for the fashion & accessories market as defined here. This represents a drop of six percent compared to 2007. In the first half of 2009, the market grew, also by six percent. This growth is due almost solely to the clothing segment and, in particular, clothing stores, which significantly increased their advertising to a total of EUR 197 million, an increase of almost 30 percent over the same period the previous year. Most of this growth can be traced back to the Peek & Clop-penburg fashion chain, which now is close on the heels of competitor C&A. However, despite cuts of six percent, C&A remains the top advertiser in this segment with expenditures of EUR 47 million. While clothing stores spend more than half of their budgets on newspaper advertising and a quarter on television commercials, the rest of the fashion and accessories sector prefers to invest in consumer publications.
Fashion & accessories media mix1st half of 2009 by segments (in %)
Source: Nielsen Media Research (gross advertising expenditures)
144.42
21.38
6.60
12.85
47.06
15.64
6.14
3.99
4.61
16.34
5 8Clothing stores
Women’s wear
Men’s wear
Sport/leisure wear
Shoes
Leather goods
Underwear
Budget inEUR million
2556 3
Daily newspapers Trade magazinesConsumer magazines PostersRadio
Cinema Internet
TV
Range advertising: textiles/garments
Mail-order trade, textiles/shoes
Textile stores/department stores
3
75 914 1
1
57 20 220
11 51 14 149 1
20 1932 3 8127
814 51 7 1
7816 4 2
69 31116
1 2462 112
7 261255
Hope pinned on advertising for the Christmas season?
Companies in the clocks, watches and jewellery sector boosted their expenditures on advertising for the third year running in 2008. On this occa-sion, however, the increase of six percent was more moderate than in previous years. Although advertising for clocks and watches – especially by luxury watch makers – accounts for over 60 percent of total advertising expenditures in the sector, jewellery manufacturers are catching up. In the first half of 2009, the advertising market shrank by more than 25 percent compared with the first half of 2008. Given, however, that busi-nesses run around 40 percent of their advertising in November and December, it will not be pos-sible to assess advertising expenditures for the year until after Christmas 2009. Around 90 per-
12
Advertising market
Perfumes & cosmetics marketDevelopment of advertising expenditures (in EUR million)
Source: Nielsen Media Research (gross advertising expenditures)
20082007200620052004
620
Sun/tanning lotionsFace and body-care productsComplete series, care & cosmetics Corporate image advertising, body careDecorative cosmeticsBody careFace carePerfume & fragrance samples
626
695 713 733
354 346
1st half of 2008
1st half of 2009
Watches & jewellery Development of the media-mix structure (in %)
Source: Nielsen Media Research (gross advertising expenditures)
1st half of 2009advertising expenditures: EUR 32.40 million
2008advertising expenditures: EUR 113.24
Daily news-papersTrade
magazines
69
1442
15
202 2
2
68
21
Consumerpublications
PostersRadioTV
Daily news-papersTrade
magazines
Consumerpublications
PostersInternetRadio
TV
Perfumes & cosmetics media mix1st half of 2009 by segments (in %)
Source: Nielsen Media Research (gross advertising expenditures)
61.47
128.91
49.30
49.29
7.70
39.58
2.81
6.67
32 1
Face care
Body care
Face/body care
Budget inEUR million
613
Complete series, care and cosmetics
3
36 6111 2
34 6211 3
16730 1
3 2981 60
25 1111 59 12
53 222 32 9
27 6411 7
Corporate imageadvertising
Perfumes &fragrances
Decorativecosmetics
Sun/tanning lotions
Daily newspapers Trade magazinesConsumer magazines PostersRadio
Cinema Internet
TV
Cosmetics sector to invest in advertising against the trend
With an advertising budget of approximately EUR 733 million (gross), the perfumes & cosmetics market once again increased its expenditures by about three percent in 2008. Expenditures fell slightly in the first half of 2009. However, the individual segments developed differently with companies increasing their advertising expend-itures for face and body care – especially com-plete series – by almost 30 percent in 2008. Advertising for decorative cosmetics was also raised – by eleven percent in 2008 and nine per-cent in the first half of 2009. With an increase in spending of over EUR 15 million (up 63 percent) in the first half of the year, care products and cosmetics are most probably responsible for the fact that overall ex penditures fell only slightly. Perfumes and frag ran ces, the second biggest segment after face care in terms of advertising expenditures, declined in 2008 and the first half of 2009. Most companies attach great importance to advertising, especially in times of economic crisis. According to VKE cos metics association, almost 30 percent of companies in the luxury cosmetics sector want to maintain their advertis-ing expenditures in 2009 at the same level as in 2008. Another 17 percent plan to increase them. As in the past, the emphasis is on classic adver-tising in print media. However, the internet is catching up quickly and, in this connection, the sector currently faces a number of challenges in relation to advertising. Thus, following the frag-mentation of the media, consumers are not only more difficult to reach but are also characterised by new patterns of consumption via new sales channels. The result – a further increase in com-petitive pressure.
cent of all advertising appears in the print media with consumer publications holding a dominant position in the media mix. Television commercials play only a secondary role, a fact from which other media, such as posters and radio, profited in the first half of 2009.
13
Communication
High level of interest in luxury productsExtremely/very interested (share in %)
Basis: Population aged 20 to 69 (49.78 million)* Agree fully/on the whole with “I mainly purchase exclusive brands” and/or “I like to shop in exclusive/up-market boutiques”** Extremely/very important aspects for wristwatches: handmade and/or exclusive brand and/or well-known brandSource: Communication Networks 12.0
Luxury buyers*(5.78 million)
17.8
11.6
21.722.0
27.4 26.6
33.6
27.5 26.3
32.3
20.3
46.0Premium-watch buyers**(8.85 million)
Population,aged 20-69
Fashion Trendsand
lifestyle
Genuine jewellery(gold, diamonds,
platinum, etc.)
Cosmetics,perfumes,toilet water
Wrist-watches
Exclusive target groups for exclusive products
Exclusiveness is a decisive keyword in the luxury market. By no means can everyone afford these expensive, high-quality products – and that’s certainly not desirable because becoming an article for the mass market would harm the aura of such brands. Therefore, advertisers in the luxury market must ensure they accurately target consumers who are receptive to their brand and who fit with its image. For the luxury market de-fined here, these consumers could be luxury buyers who explicitly prefer selected brands or shops. For luxury-watch makers, the very special target group of premium-watch buyers is of paramount importance. In the case of wrist-watches, these buyers attach particular im-portance to luxury qualities – the watches must be handmade or come from exclusive and famous brands.
Attitudes to fashion (in %)
Basis: Population aged 20 to 69 (49.78 million)* Agree fully/on the whole with “I mainly purchase exclusive brands” and/or “I like to shop in exclusive/up-market boutiques”** Extremely/very important aspects for wristwatches: handmade and/or exclusive brand and/or well-known brandSource: Communication Networks 12.0
When it comes to fashion trends,I’m always up to the minute
17
3251
21
3345
1138
21
13
31
7031
46
19
20
3141
49
47
522
16
20
1030
23
279
37
I like to try new clothes
I always buy clothesfrom the latest collection
The brand is important even if other, less renowned suppliers
offer the same quality at a lower price
I prefer to buy one high-qualitygarment to two cheaper articles
A handbag and/or belt areimportant parts of my outfit
Watches and jewellery areimportant parts of my outfit
I change my watch to matchthe occasion and my outfit
I frequently buy accessories(belt, handbag, sunglasses) of
the same brand as my clothing
I frequently buy shoesof the same brand as my clothing
I frequently buycosmetics/fragrances of
the same brand as my clothing
Agree fully/on the whole with:
Populationaged 20 to 69(49.78 million)
Luxurybuyers*(5.78 million)
Premium-watch buyers**(8.85 million)
7
1926
Luxury buyers are keen on fashion
Buyers of luxury products are very keen on products from the fashion, lifestyle, jewellery, cosmetics and watches segments and, in the case of fashions, are particularly trend and brand conscious. No less than one in two of them keeps abreast of the latest developments. 70 percent prefer high-quality products. Moreover, they attach great importance to a smart appearance – and accessories, such as bag, watch and jewellery, which are often sold as matching the garments of a given fashion brand, are simply part of this. They also tend towards well-known brands when buying cosmetics and fragrances.
Premium-watch buyers are also characterised by a very great affinity to luxury. However, they are significantly less interested in fashion than luxury buyers – precision timepieces are their passion. Premium-watch buyers are interested in watches for watches’ sake and not as part of their outfit.
14
Communication
“Advertising is credible generally speaking”Applies fully/on the whole (in %)
Basis: Population aged 20 to 69 (49.78 million)* Agree fully/on the whole with “I mainly purchase exclusive brands” and/or “I like to shop in exclusive/up-market boutiques”** Extremely/very important aspects for wristwatches: handmade and/or exclusive brand and/or well-known brandSource: Communication Networks 12.0
20
33
3940
33 32
23
2725
Populationaged 20-69
(49.78 million)
Luxury buyers*
(5.78 million)
Premium-watch buyers**(8.85 million)
109
16 1613 14
Advertising in magazinesAdvertising on televisionPoster advertisingAdvertising by e-mailAdvertising on the internet/online services
Magazine ranking
Premium-watch buyers*
* Population aged 20 to 69 and as purchasing criteria for a wristwatch: handmade and/or exclusive brand and/or well-known brandBasis: Top 12 by cost per thousand; affinity > 101; title selection (MA-adjusted): Current-affairs magazines, business press, lifestyle magazinesFormat: 1/1 p. 4c bleed (average prices 2009 gross)Source: Communication Networks 12.0 / potential: 8.85 million
FOCUS
SternDer SpiegelGuter RatWirtschaftswocheFOCUS-MONEY
CapitalManager MagazinFit for FunNeonPlayboyCinema
FOCUS-BlueChip-Kombi
Cost per thousand (in EUR)
Coveragein %
12.514.013.02.33.41.83.22.52.81.92.41.4
13.6
4443
4869
9297100103
109
117112
47
79
Magazine positioning
Luxury buyers*
* Population aged 20 to 69 and agree fully/on the whole with “I mainly purchase exclusive brands” and/or “I like to shop in exclusive/up-market boutiques” Basis: Top 15 by cost per thousand; affinity >101; title selection (MA-adjusted): Current-affairs magazines, business press, lifestyle magazinesFormat: 1/1 p. 4c bleed (average prices 2009 gross)Source: Communication Networks 12.0 / potential: 5.78 million
Der Spiegel
Cinema
Stern
FOCUS
FOCUS-BlueChip-Kombi
FOCUS-MONEY
Cost per thousand (EUR)
Coverage (%)
Capital
Wirtschaftswoche
Bunte
Men’s Health
Gala
FitforFun
Playboy
ManagerMagazin
50 60 70 80 90 100 110 120 130 140 150 160 170 1800
5
10
15
20
Print advertising appeals to luxury target groups
Luxury brands have to cultivate their image con-tinuously and an important aspect of this is the choice of appropriate advertising media. Al-though, the two luxury-oriented target groups see advertising as being more credible than the po-pulation as a whole, there are significant differ-ences between the individual media, parallel to the degree of receptiveness. For both luxury and for premium-watch buyers, magazine advertise-ments are the most persuasive with 40 percent of this target group according advertisements the highest level of credibility. Poster campaigns are also rated positively. Less well received is adver-tising in the electronic media, on television and, above all, in e-mails and on the internet.
Established media brands score in the luxury market
Of the various groups of magazines, news, current affairs and business magazines are advertising media of interest to advertisers in the luxury market. FOCUS and FOCUS-MONEY are popular with advertisers because they offer excellent value for money and a clear target-group orien-tation. For target groups of importance in mar-keting and strategic terms, they provide exten sive coverage and outstanding cost effectiveness. FOCUS is distinguished by broad coverage – al-most 13 percent – of both the exclusive luxury buyer and premium-watch buyer target groups. And, by booking FOCUS-MONEY, the modern business magazine, in the FOCUS BlueChip combination, this coverage can be expanded even more. FOCUS and FOCUS-MONEY offer advertisers in the luxury market outstanding planning effectiveness for communicating with top target groups.
15
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Representations abroad
AddressFOCUS Magazin Verlag GmbHPO Box 81 03 07; D-81903 MunichArabellastraße 23; D-81925 Munich
Managing DirectorsHelmut MarkwortFrank-Michael Müller
Advertising DirectorIngo Müller (+49) 89 92 50-23 43 Alexander Kirschner (Deputy) -20 60
Senior Advertising ManagerMichael Mergenthal -20 76 Fax -24 94 E-Mail [email protected]
AssistantAynur Civelek -24 39 Fax -20 61 E-Mail [email protected]
Burda Community Network GmbHService Manager JournalDesign & PlacementMarlene Gunesch (+49) 89 92 50-29 51 Fax -29 52 E-Mail [email protected]