fast forward your route to consumers · unlimited choices are less effective than a curated...
TRANSCRIPT
FAST FORWARD YOUR ROUTE TO CONSUMERS
April 8th, 2017
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'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '16E
CAGR +4%
+4%-1%+3%
CAGR -9% CAGR +4%
+9%
HIGH-QUALITY DESIGN ON A STEADY GROWTH PATH SURPASSING PRE-CRISIS LEVEL
'15
YoY Growth:
YoY Growth @ constant exchange: +4%
Finalizzaresembraconfermarsiil
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ALL SEGMENTS WITH POSITIVE PERFORMANCE IN 2015, LIVING AND BEDROOM THE WINNING CATEGORY
'15 '16 '15 '16 '15 '16
CATEGORIES GEOGRAPHIES CHANNELS
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YET, DESIGN STILL REPRESENTING A SMALL PORTION OF THE GLOBAL LUXURY CONSUMPTIONS
Personal Luxury Goods
Luxury Cars
LuxuryHôtellerie
LuxuryWines &Spirits
LuxuryFood
Fine Art
High-QualityDesign
LuxuryPrivate
Jets
LuxuryYachts
LuxuryCruises
TOTAL2016E
4OF TOTAL LUXURY
%
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HIGH-QUALITY DESIGN HAS A STRONG LONG-TERM POTENTIAL
'16E
X3LONG TERM POTENTIAL
• Enlarging luxury customer base with rising middle class of emerging market
• Shifting consumption from unbranded to branded high-end furniture
• Conquering of further away high potential underpenetrated geographies
•Taking ownership of contract business
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+
BR
AN
DS
IN
DIR
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T C
ON
TR
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• The industry is made up predominantly by small and independent pure design players (average size ~60M€),
often very specialized (almost 80% are mono-category) and stuck in a "manufacturing mind-set"
• Most players are European, struggling to serve a global consumer outside of their domestic market, because of the difficult route to market
• Limited profitability, compared to other luxury segments, limitsnecessary investment to overcome route-to-customer complexities
BUT TO DO SO IT MUST MOVE INTO ITS NEXT STAGE OF DEVELOPMNET
High-quality design & interior design markets vs luxury consumers spending by geography (2015|€B)
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TODAY DESIGN RETAIL PRESENCE IS STILL MARGINALWHEN COMPARED TO PERSONAL LUXURY
Mono-brand network of pure design brands
Pure design brands
Personal luxury goods
~20.000 stores
Mono-brand coverage of design brand vs personal luxury brands
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RETAIL SALES
BUT EVEN IN PERSONAL LUXURY, THE RETAIL EQUATION IS UNDER STRESS
OPEX
EBITDA
-
=
• Traffic in store declining across the board
- Reduced tourist flows due to price harmonization
- At global level off-price stores are the only ones to strongly attract consumers
- The e-commerce channel is booming on two key drivers: bargainand convenience, aka the opportunity not to visit a physical store
• Conversion rate flat on the surface but strong polarization with players fighting to engage with more opinionated and demanding local customers
• Full price sales decreasing due to the higher incidence of in season mark down
• Rent costs increasing in top locations as brands fight for the top spot to intercept the dwindling traffic
• Marketing costs increasing in order to support new customer engagement strategies
• Channel profitability suffering with polarization between brands that have managed to adapt to the new environment (experience and omni-channel) and those that haven't
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IN THIS PIVOTAL MOMENT FOR RETAIL, DESIGN BRANDS SHOULD THINK OUTSIDE OF THE BOX TO DEFINE A FORWARD-LOOKING
HOLISTIC ROUTE-TO-CUSTOMER
YET PERSONAL LUXURY BRANDS ARE REASSESSING THEIR ROUTE TO MARKET
Real terms trend
+13%
+23%
+26%
Global Personal Luxury Goods Market by channel & format (2016E|€B)
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TO UNLOCK THE POTENTIAL, DESIGN BRANDS MUST LOOK AT WHO WILL BE THE FUTURE CONSUMER….
'16 '25
GEN Z
GEN X
MILLENNIALS58%
35%
Luxury consumers share by generation(2016F-25F|#)
TODAY MILLENNIALS ALREDY REPRESENTING
35% OF LUXURY CONSUMERS
OLDER GENERATIONS
IN THE NEXT 10 YEARS MILLENIALS AND
GENERATION Z WILL REPRESENT 65% OF
CONSUMER
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… AND AT HOW TODAY'S CONSUMERS ARE ALREADY EVOLVING
MILLENNIAL IS A STATE OF MIND
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WHAT DESIGN BRANDS SHOULD BE LOOKING OUT TO AND START PREPARING FOR:
1. SEAMLESS expectation
2. EDITED for ME
4. I must EXPERIENCE IT
3. COMMUNITY: need for belonging
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CONSUMERS THINK BRAND-FIRST: A SEAMLESS & CONSISTENT SHOPPING EXPERIENCE
IS MORE IMPORTANT THAN WHO IS ACTUALLY INVOICING YOU
ONLINE AGGREGATORS OF PHYSICAL MULTIBRAND STORES ARE ABLE TO DELIVER A UNIQUE EXPERIENCE TO CUSTOMERS, MOST OF WHOM THINK THEY ARE BUYING FROM A SINGLE STORE
1.SEAMLESS expectation
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UNLIMITED CHOICES ARE LESS EFFECTIVE THAN A CURATED SELECTION, ESPECIALLY WHEN LEVERAGING THE SAME EFFICIENCY
ONLINE STARTUPS ARE USING AMAZON AS A LOGISTICAL PARTNER WHILE CRAFTING A RADICALLY DIFFERENT CUSTOMER EXPERIENCE ON THEIR OWN PLATFORM, EDITING PRODUCTS IN ORDER TO INSTANTLY
APPEAL TO CUSTOMER NICHES
EDITED for ME2.
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STORES CAN BECOME YOUR COMMUNITY CENTRE
YOGA SPECIALIST RETAILER ENGAGES DIRECTLY WITH ITS LOYAL COMMUNITY THAT SHARES THE SAME VALUES AND PASSIONS:
• SHOP ASSISTANTS ARE MEMBERS OF THE SAME COMMUNITY AND ARE TRUSTED IN THEIR ADVICE
• STORE BECOMES GATHERING PLACES TO SERVICE OF THE COMMUNITY ORGANIZING YOGA SESSION AND OTHER RELEVANT INITIATIVES
• THE PRODUCTS SOLD IN STORES ARE TRUE TO THE VALUES OF THE COMMUNITY
COMMUNITY: need for belonging3.
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YOUR STORE IS WHERE THE CUSTOMER CAN FINALLY GET A CHANGE TO EXPERIENCE HIS OR HER OWN PASSIONS
APPLE'S NEW STORE CONCENPT IS CENTERED AROUND ENABLING PEOPLE TO DEVELOP THEIR OWN PASSIONS AND SKILLS THORUGH FREE CODING COURSES, PHOTOGRAPHY SEMINARS, CONCERTS AND MUSIC
CLASSES AND MUCH MORE STILL TO COME
I must EXPERIENCE IT4.
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TODAY DESIGN BRANDS HAVE YET TO RESPOND TO MOST EMERGING CONSUMER TRENDS
SEAMLESSexpectation
EDITED for ME
I must EXPERIENCE IT
COMMUNITY:need for belonging
Intermediated route to consumer
Widest choice to the peril of a brand POV
The interest is there, the cultivation of a community not fully
Transactional showroom for rare consumer need
DESIGN BRANDS TODAY
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IT IS PARAMOUNT TO RETHINK THE CUSTOMER JOURNEY AND THE ROLE OF RETAIL WITHIN IN
NEED
PARALLEL JOURNEY, LESS DEPENDENT FROM CONSUMERS AND WITH MARGINAL ROLE FOR RETAIL
B2C
CONTRACT
A specific and infrequent
purchasing need, not initiated by the brand or the store
itself
High level of intermediation
STORE
STARTAWARENESS AND CONSIDERATION CONVERSION
ARCHITECT
INTERIOR DESIGNER
DEALER
INFLUENCER/PRESS
Store marginal role, crossing only some customers and their journeys
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 19A VIRTUOUS CYRCLE CENTRED AROUND A STORE EPICENTRE
THE STORE MUST BE RE-THOUGHT TO BECOME THE EPICENTRE OF MULTIPLE & DIFFERENT JOURNEYS
SHOWROOMING "OUT OF STORE" CONVERSION
PRESIDIUM OF CONTRACT PRESCRIBERS DEALERS LIKE RETAIL
• Chance for the customer to directly experience the product
• Leverage on online to drive brand awareness and consideration
• May lead the customer to seek additional experiences in stores
• Small satellite spaces
- Leveraging on augmented reality to overcome the need for large retail surface
- These may also be within wholesale space
• Brands architects directly to the customer's home
• Shortening of customer journey, reduced level of intermediation
Further opportunities for showrooming through
contract
Drive traffic to dealers
Creates promoters among prescribers
Increases brand awareness & consideration
• Provide support to dealers and wholesalers:
- Tailored/ edited catalogue for the local customer and needs
- Trade marketing
- Advanced configurator
- Rapid catalogue access
- Direct communication tool with the brand
• Advance CRM of architects involved in contract prescription
• Direct support in the planningand prescription of brand product
• Tailored catalogues based on the specific industry/ sectors/ client type needs
EXPERIENTIAL NON-
TRANSACTIONAL INITIATIVES
IN STORE TRAFFIC
CONVERSION
PROJECT SPACE AND STAFF FOR PRESCRIBERS
TRAINING TO DEALERS
STORE EPICENTRE
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent 20A VIRTUOUS CYRCLE CENTRED AROUND A STORE EPICENTRE
SHOWROOMING "OUT OF STORE" CONVERSION
PRESIDIUM OF CONTRACT PRESCRIBERS DEALERS LIKE RETAIL
EXPERIENTIAL NON-
TRANSACTIONAL INITIATIVES
TRAFFIC CONVERSION
PROJECT SPACE AND STAFF FOR PRESCRIBERS
TRAINING TO DEALERS
STORE EPICENTRE
SEAMLESSexpectation
EDITED for ME
I must EXPERIENCE IT
I must EXPERIENCE IT
COMMUNITY: needfor belonging
SEAMLESSexpectation
EDITED for ME
…SO TO ADDRESS ONGOING CHANGES IN CONSUMERS
Further opportunities for showrooming through
contract
Drive traffic to dealers
Creates promoters among prescribers
Increases brand awareness & consideration