luxury forecasts: optimism reigns plus strategies for global growth
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Global Luxury CEO Survey by DEPARTURES (American Express Publishing) and Ledbury Research. Inaugural Edition, 4th Quarter 2013TRANSCRIPT
DEPARTURES GLOBAL LUXURY CEO SURVEY INAUGURAL EDITION, 4TH QUARTER 2013
LUXURY FORECAST OPTIMISM REIGNS PLUS STRATEGIES FOR GLOBAL GROWTH
CONDUCTED WITH LEDBURY RESEARCH
WELCOME TO THE INAUGURAL DEPARTURES GLOBAL LUXURY CEO SURVEY This first in a series of quarterly reports assesses the state of the global luxury industry from the perspective of its business leaders. Conducted with renowned London agency Ledbury Research, the DEPARTURES Luxury Forecast examines how global luxury business leaders feel about the health of our industry and the drivers for growth as we look to the next quarter. I hope you will find these results as enlightening as we have.
— STEVEN DELUCA Senior Vice President / Publisher
SURVEY RESPONDENTS
Nearly 70 Luxury CEOs responded to our survey Position of respondent within company:
14%
14%
57%
35% OWNER/FOUNDER
CHAIRMAN
GLOBAL CEO/PRESIDENT/MANAGING DIRECTOR
REGIONAL CEO/PRESIDENT/MANAGING DIRECTOR
29%
14%
21%
14%
21%
< USD 50 MILLION
USD 50M-99 MILLION
USD 100M - 249 MILLION
USD 250M - 999 MILLION
USD 1 BILLION+
SURVEY RESPONDENTS
Nearly 70 Luxury CEOs responded to our survey Companies’ annual sales:
29%
29%
29%
21%
21%
18%
18%
7%
4%
7%
TRAVEL/HOSPITALITY
APPAREL/CLOTHING
HOME/DESIGN
JEWELRY
WATCHES
FOOTWEAR
LEATHER GOODS/ACCESSORIES
FRAGRANCE/BEAUTY
ELECTRONICS
OTHER
SURVEY RESPONDENTS
Industry breakdown:
OPTIMISM REIGNS Luxury CEOs are overwhelmingly positive about the state of the industry
TRUE LUXURY HAS EITHER TREMENDOUSLY RECESSION-PROOF, OR TREMENDOUSLY RECESSION- RESILIENT, CLIENTELE.
— SURVEY RESPONDENT
CEO FORECAST: THE NEXT 12 MONTHS
For the coming 12 months:
89% of CEOs are optimistic about the luxury industry
• Proven history of outperforming the wider economy • Recent rapid luxury recovery trend • No signs of slowdown
89%
7% 4%
LUXURY INDUSTRY
65%
14%
18%
LOCAL ECONOMY
40%
46%
14%
GLOBAL ECONOMY
40% are optimistic about the global economy
65% are optimistic about the local economy
OPTIMISTIC
NEUTRAL
PESSIMISTIC
CEO FORECAST: THE NEXT 12 MONTHS
CEOs expect sales to rise by an average of 9%
Double digit growth 40% 0 - 10% growth 57%
Single digit decrease 4%
96%
4%
YOUR COMPANY
89%
7% 4%
YOUR GROUP
OPTIMISTIC
NEUTRAL
PESSIMISTIC
ECONOMIC GROWTH and online commerce are making a real di!erence to the industry What external factors are impacting luxury businesses and to what extent?
POSITIVE FACTORS
ONLINE COMMERCE +66%
US GROWTH RATE +58%
CHINESE GROWTH RATE +45%
MOBILE COMMERCE +35%
• Online ranks #1 (more on why later)
• 58% of respondents are confident of the US’ recovery. 45% also think the Chinese growth rate is an advantage
ECONOMIC GROWTH and online commerce are making a real di!erence to the industry What external factors are impacting luxury businesses and to what extent?
NEGATIVE FACTORS
POLITICAL UNREST -60%
EXCHANGE RATE -30%
COMPETITOR ACTIVITY -30%
WORK VISA POLICIES -28%
§ 60% believe political unrest is impacting them negatively, though with mixed results.
“Travel is very emotional, so when you don’t have to take a chance, you won’t. [Travellers] will absolutely stay away from unrest.”
but…
“They are not only used to bad news; they expect it. So they design a lifestyle that accommodates a certain amount of bad news.”
§ Exchange Rate, Competitor Activity, and Work Visa Policies tied for second place
FOCUS SHIFTS BACK TO NORTH AMERICA Less emphasis on emerging markets
THE US ECONOMIC RECOVERY IS IN FULL STRENGTH, AND EUROPE IS EMERGING FROM SEVERAL YEARS OF SLUMP.
— SURVEY RESPONDENT
WHERE WILL GROWTH come from over the next 5 years?
1. 89% expect North America to be the most important
contributor of growth
2. East Asia, comprising Greater China and South Korea, is second
§ Inside and outside of China
§ The Chinese are now the world’s biggest travel spenders (UNWTO) on international tourism
§ Europe benefits: 5 of the top 10 countries Chinese luxury consumers visit
North America
East Asia
Western Europe
Eastern Europe
Central/South
America
WHERE WILL GROWTH come from over the next 5 years?
1. 50% do not anticipate that Middle East political
unrest will significantly impact on their businesses
2. Japan continues to decline in importance for growth
§ But is still the world’s third largest luxury market
3. Africa ranks as least important for the next 5 years
§ Though one respondent says, “it will probably be an important region in 10 to 20 years’ time”
Middle East
Southeast Asia
Japan
Oceania
South Asia
Africa
95%
70%
96%
83%
33%
96%
63%
TOURISTS
LOCALS
VIP
FULL-PRICE
DISCOUNT
SELF-PURCHASERS
GIFT PURCHASERS
VIPS, SELF PURCHASERS AND TOURISTS ARE FUELLING GROWTH
What customer types are fuelling this growth?
LEADING GROWTH:
THE FASTEST GROWING CONSUMER TYPE IS THE TRAVEL RETAIL CONSUMER, WHICH IS LED BY THE CHINESE TODAY.
THE RICH ARE GETTING RICHER. [THE MARKET IS INCREASINDLY DEPENDENT ON KNOWING AND SATISFYING THEM.]
— SURVEY RESPONDENT — SURVEY RESPONDENT
FUTURE STRATEGIES: Moving upmarket & Investing in digital
WHEN YOU’RE DEALING WITH LUXURY, YOU MUST NOT AT ANY POINT, DEPRECIATE THE QUALITY AND THE VALUE.
— SURVEY RESPONDENT
LUXURY IS ABOUT QUALITY AND SERVICE, but also Exclusivity and Uniqueness What does luxury mean to leaders of luxury companies today?
1. Quality
2. Service
3. Exclusivity
4. Unique
High prices is not a mentioned as a top term
Being expensive is not enough to be luxury
WHAT CEOS NEED TO BE CAREFUL ABOUT IS, IS IT APPROPRIATE FOR MY BRAND IMAGE TO BE UBIQUITOUS?
— SURVEY RESPONDENT
Source: Xxxxx xxxxx xxxxx ?
PRIORITIES: Technology Spend How do CEOs plan to evolve their businesses over the next 12 months?
Digital initiatives are the number one priority
• Not necessarily because it always translates to direct sales
The internet has made information more accessible, and
pricing more transparent. This is good for the consumer. I
can see it contributing to growth as it has allowed us to
interact with our (existing) target audience and increase
their buying likelihood, but I don’t know if we’ve reached
people who are actual new customers.]
— SURVEY RESPONDENT
Similarly, another respondent
said digital is crucial but
lamented that there is
no luxurious element in social
media. It is high tech instead of high touch.
— SURVEY RESPONDENT
PRIORITIES: The next highest priority is improving retail distribution § Includes shifting balance of retail vs. wholesale to directly owned retail
distribution plus expanding stores
DEPARTURES!GLOBAL!LUXURY!CEO!SURVEY | !"
INVEST IN DIGITALIMPROVE RETAIL
BUILD ASIAINCREASE ADVERTISING
BRAND COLLABORATIONS
IMPROVE SERVICES
SHIFT FOCUS BACK TO ESTABLISHED MARKETS
BRAND AND PRODUCT EXTENSIONS
LUXURY COMPANIES
are mixed on widening their ranges
57% want to increase brand extensions
Enable brands to “touch di!erent people with di!erent interests at di!erent stages of their lives”.
• Bentley’s limited edition handbags
• Bugatti’s launch of a collection of men’s clothing and accessories.
43% want to decrease brand extensions
Brand extensions can go wrong. Poor execution, moving into a completely unrelated or non-relevant product category, increased visibility, can impact the brand negatively
*Mentioned mainly by those in Home/Design
OPERATE AN INCREASING NUMBER OF PRODUCTS/
SERVICES THROUGH BRAND EXTENSIONS
DECREASE BRAND EXTENSIONS & FOCUS MORE ON CORE CATEGORY EXPERTISE
57%* 43%
— SURVEY RESPONDENT
While price alone does not define
luxury (see slide 9), price a!ects
the perception of the product.
LUXURY COMPANIES
are focusing on going up the wealth ladder
Universally, respondents agreed their strategy is to raise prices and focus on high-end
INCREASE FOCUS ON LOWER PRICED PRODUCTS/
SERVICES TO ATTRACT A WIDER CUSTOMER BASE
RAISE PRICES AND/OR INCREASE FOCUS ON HIGH-END PRODUCTS/SERVICES TO TARGET THE WEALTHIEST CUSTOMER SEGMENT
14% 86%
LUXURY COMPANIES
are mixed on global consistency
61% of our survey’s respondents believe it is vital to have a consistent o!ering globally for brand image consistency
39% are taking a localized approach, tailoring products and services to the tastes of emerging markets
TAILOR PRODUCTS/SERVICES TO THE TASTES
OF CONSUMERS IN EMERGING MARKETS
VITAL TO HAVE GLOBALLY CONSISTENT OFFERING 39% 61%*
Emerging market customers currently make up almost 50% of global luxury sales. Should luxury brands should tailor their products and services to individual local markets, or to o!er the same experience worldwide?
*Mentioned mainly by those in Apparel/Clothing
LUXURY CEOS
overwhelmingly believe country of origin counts
How important is country of origin in the luxury business?
93% of respondents believe “Made in” is important today, with virtually no change in the next decade.
§ Provenance represents knowledge that is passed on through generations
§ Being “Made in” a brand’s home country therefore conveys a sense of authenticity which cannot be replicated
% IMPORTANT
NOW IN 10 YEARS
93% 89%
CONCLUSIONS & IMPLICATIONS
VIP customers are fuelling growth
• Focus on: 1. Service: quality & speed 2. Unique, higher-end pieces 3. Premium price points / raising prices
Emerging markets are less important for their home market than they are for the tourists they create in Western markets
• Make your Western stores not only speak the language of the tourists, make sure the o!erings speak to tourists’ tastes and other tourist-friendly services are in place
Digital continues to grow
• Though its primary importance continues to be as a branding vehicle and information source rather than a strong sales channel (online sales will continue to grow in importance, however)
Global consistency in o!ering still seen as important, but regional customization is also a force
• Maintain and monitor a ratio between the two
Authenticity remains key
• Retain focus on original production standards and country of origin
• Enter brand extensions with thought to e!ect on brand dilution to core, a"uent market
DEPARTURES GLOBAL LUXURY CEO SURVEY INAUGURAL EDITION, 4TH QUARTER 2013
LUXURY FORECAST OPTIMISM REIGNS PLUS STRATEGIES FOR GLOBAL GROWTH
CONDUCTED WITH LEDBURY RESEARCH