True-Luxury Global Consumer Insight. Antonio Achille, Partner & Managing Director

Transcription

1 True-Luxury Global Consumer Insight Antonio Achille, Partner & Managing Director

2 True-Luxury Global Consumer Insight we will address 5 "W" questions Why now? What makes our study unique? g What will it take to win luxury Consumer? d.where will growth come from? Inc. All rights reserved Which luxury segments will drive growth? What's in for you? ton Consulting Group, Copyrigh ht 2014 by The Bost 1

3 Organic growth: 2 / 3 of next decade growth Last decade growth components 2 Upcoming decade growth components 2 20% 20% 40% 25% 35% Traditional Emerging Markets 1 markets Retail expansion. Price Organic growth (LFL) 100% 20% 15% 25% 100% Volume Total Traditional Emerging Price Volume Total growth markets 1 markets growth Retail expansion. Organic growth (LFL) 60% 40% 35% 65% 1. Europe (Italy, France, UK, Germany, Spain, Nordics), US and Japan; 2. Referred to personal luxury (apparel, accessories, hard luxury, Perfume & Cosmetics) Source: Bernstein / BCG analysis 2

4 Consumer discontinuities to impact 100 Bn industry investments per year Intensity of discontinuity Example of discontinuity Industry investments (2014, Bn) For 80% of Consumers Made-In Production "Made In" is key Advocacy Store experience Digital interactions ti Friends' opinions impact on 50% of purchases 70% of Consumer are advocate Fom monolithic Mono-brand store to diversified concepts 50+% sales influenced by digital Digital in-store immersion ~100 Bn Source: BCG 2013 specific survey 1. Made-In calculated as 30% of COGS (with COGS industry avg. at 35-40% of revenues) 2. Advocacy calculated on marketing investments (industry avg. 6-8% of revenues), 3. Calculated sum of yearly rent for all stores (industry avg. 20% of retail revenues), plus refurbishment and key money where applicable for new stores 4.Calculated as digital strategy and platform investments (industry avg. 5% of revenues) 3

5 The CONSUMER era Design +Brand +Retail +Consumer '80s '90s '00s 2014 next decade Style & Design for elites Temple of desire The emerging of global brands Retail as part of brand experience "Real estate rush" Consumer: engine of top line and margin growth ton Consulting Group, Copyrigh ht 2014 by The Bost Source: BCG 2013 specific survey 4

6 True-Luxury Global Consumer Insight we will address 5 "W" questions Why now? What makes our study unique? g What will it take to win luxury Consumer? d.where will growth come from? Inc. All rights reserved Which luxury segments will drive growth? What's in for you? ton Consulting Group, Copyrigh ht 2014 by The Bost 5

7 True-Luxury Consumers talk to you today Cluster Avg. yearly spend including cars 1 (K ) Sample (#) Core Beyond money 130 K Ultra 60 K luxury Very high 10 K High 3 K Avg. 30K ~10K Aspirational <2K ~5 K Prospects - ~25 K ~30K ton Consulting Group, 1.Cars & Yacht Source: BCG Analysis Rest of the world Focus of analysis Copyrigh ht 2014 by The Bost 6

8 One of a kind study: our approach ~10 K Consumers Core luxury Consumers population base for: Core luxury Identification of general trends Definition of global segments Aspirational Aspirational luxury Consumers population for: ~30 K Consumers Understand how many of them can be turned into core luxury Consumers Estimate Core luxury market future growth Source: BCG ad hoc luxury survey 7

9 All luxury categories in scope: our actual sample spent ~230 M in luxury goods last year Luxury market ( B) ,500 1, Furnitures Accessories Personal luxury (285 B) P&E 1 Market: 730 B 40 Apparel 2 Watch & Cosmetic jewellery Experiential luxury (445 B) 50 Technology 60 Food & Wine 335 Hotel & Exclusive vacations Covered in the Global Luxury Consumer Insight 1.Personal and Experiential luxury Note: Some numbers are rounded. Source: BCG 2013 specific survey, BCG-IPSOS market research Cars & Yacht (320 B) 320 Cars & Yacht 150 Others (270 B) 70 Arts 50 Other 1,320 Total 8

10 Copyrigh ht 2014 by The Bostton Consulting Group, Inc. All rights reserved d. Mapped pp Consumers opinion p on 100+ luxury y brands Source: BCG 2013 specific survey Note: Including: cars, hotel, furniture & design, sunglasses (not exhaustive) 9

11 Sounding board of WW leading brands to ensure robustness and actionability of the insight Copyrigh ht 2014 by The Bost d. ton Consulting Group, Inc. All rights reserved Source: BCG 2013 specific survey 10

12 True-Luxury Global Consumer Insight we will address 5 "W" questions Why now? What makes our study unique? g What will it take to win luxury Consumer? d.where will growth come from? Inc. All rights reserved Which luxury segments will drive growth? What's in for you? ton Consulting Group, Copyrigh ht 2014 by The Bost 11

13 380M Luxury Consumers to become 440M by 2020 with P&E market growing from today 730 to 880 Bn Cluster #(M) Bn( ) 1 #(M) Bn( ) 1 Core luxury Beyond Ultra Very high High Aspirational Total Core lux Aspirational Total Luxury Consumers 1 ~380 ~730 ~440 ~ Including experiential and personal luxury, excluding cars Source: BCG Analysis 12

14 Core Luxury Consumers growth at value led by US, China and Europe P&E 1 Luxury market growth by country ( Bn) Core luxury Bn Aspirational #of Consumers 2013 Core New core 65% US China Europe Middle Others East ,8 1,1 0,6 0,2 6, Personal & Experiential Luxury market; 2. Including Japan, S. Korea, Russia, Brazil and RoW Source: BCG Analysis 13

15 Aspirational Consumers growth at value led by China, US and Europe P&E 1 Luxury market growth by country ( Bn) Core luxury Bn Aspirational #of Consumers Aspirational New Aspirational China 1. Personal & Experiential Luxury market; 2. Including Japan, S. Korea, Russia, Brazil and RoW Source: BCG Analysis US 80% Europe Middle East Others

16 Disaffection ~1M core luxury consumers impacted with 4Bn luxury spend at risk Disaffected Passport: Key demos 7% 6% Top countries A Age 6% # of consumers1 1.0 M Current value1 8 Bn Copyrigh ht 2014 by The Bostton Consulting Group, Inc. All rights reserved d. 8% Shopping relevance 1.0M Value at risk 4 Bn (50%+) % Woman 49% Current avg. lux. spend1 % with bachelor or higher degree 88% Most trusted source of info % with HH income in top 20% 100% 8K In store advice value Note that disaffected are current luxury consumers expected to decrease their spend on luxury Source: BCG ad hoc luxury study 15

17 True-Luxury Global Consumer Insight we will address 5 "W" questions Why now? What makes our study unique? g What will it take to win luxury Consumer? d.where will growth come from? Inc. All rights reserved Which luxury segments will drive growth? What's in for you? ton Consulting Group, Copyrigh ht 2014 by The Bost 16

18 What it will take to win Luxury Consumers 1 2 "Made In" still rocks 3 The Advocacy era Intrinsic values rebound Man: what a surprise Global Consumer: catch me if you can DOS is dead, long life to DOS Digital it "physicalization" " 17

19 1 Luxury: the art of balancing Intro and Extro values Intro values Quality Exclusivity Craftsmanship Timeless Extro values Adorned aesthetics Brand visibility Customization Being Cool/Sexy Copyrigh ht 2014 by The Bost ton Consulting Group, 18

20 1 Intro values roaring, also in China and S. Korea % of respondents 1 17% "What is luxury to you?" Extro values 17% Adorned 25% 27% 27% 28% 31% 31% aesthetics 32% 39% Brand visibility Intrinsic Avg. 73% Customization Being Cool/Sexy 83% UK 83% US 75% China 73% 73% 72% Japan 69% Italy Intro values 69% 69% Quality 61% Exclusivity Craftsmanship Timeless Russia 1. Respondents where asked to rank the top three values: the graph represent the value ranked as the most important Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) France Brazil 19

21 1 Quality and Exclusivity leading "What is luxury to you?" Intro values Extro Values Total EU 4 1 US Japan S. Korea China Brazil Russia % of respondents Quality Exclusivity 35 Craftsmanship 30 Timeless 29 Adorned aesthetics Brand 19 Customization Being Cool/Sexy Note: Multiple answer possible; 1. IT, FR, DE, UK Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 20

22 1 From values to purchase drivers: key for brands to place their bets in time Declared relevance 1 Purchase driver 2 Upcoming High relevance as value, low impact as purchase driver Actual Expected Established Same relevance as value and as purchase driver Fading Low relevance as value, still high impact as purchase driver Note: 1. "What is luxury to you?"; 2. "Which are the key elements that you value the most when you purchase luxury products?" Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) Actual Expected Actual Expected 21

23 1 Brand visibility still strong as purchase driver but expected to decrease, strong impact on China? Total Emerging Markets China % of respondents 19% 32% 13 P.P. P 21% 37% 16 P.P. 32 P.P. 43% 11% ton Consulting Group, Declared Value 1 Actual purchase driver 2 Declared Value 1 Actual purchase driver 2 Declared Value 1 Actual purchase driver 2 Copyrigh ht 2014 by The Bost Note: 1. "What is luxury to you?"; 2. "Which are the key elements that you value the most when you purchase luxury products?" Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 22

24 1 Simplicity is the new sexy Total Emerging Markets South Korea % of respondents 31% 42% 11 P.P. 11 P.P. 30% 41% 17% 46% 29 P.P. ton Consulting Group, Declared Value 1 Actual purchase driver 2 Declared Value 1 Actual purchase driver 2 Declared Value 1 Actual purchase driver 2 Copyrigh ht 2014 by The Bost Note: 1. "What is luxury to you?"; 2. "Which are the key elements that you value the most when you purchase luxury products?" Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 23

25 1 Exclusivity strong as a value and expected to grow as a purchase driver, with great relevance for Russia Total Emerging Markets Russia % of respondents 35% 24% 11 P.P. 40% 28% 12 P.P. 46% 30% 16 P.P. ton Consulting Group, Declared Value 1 Actual purchase driver 2 Declared Value 1 Actual purchase driver 2 Declared Value 1 Actual purchase driver 2 Copyrigh ht 2014 by The Bost Note: 1. "What is luxury to you?"; 2. "Which are the key elements that you value the most when you purchase luxury products?" Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 24

26 1 ~25% of luxury brands at risk of losing exclusivity "Which are the brands you think are losing exclusivity?" % of top brands analyzed 15% 25% 10% 100% 75% Total brand 1 Brands already losing exclusivity 2 Brands risking to lose exclusivity 3 Brands not at risk 1. Analysis on top brands included in the survey with at least 200 respondents purchasing their products 2.Brands losing exclusivity: brands with at least 100 respondents declaring that the brand is losing exclusivity 3. Brands with 50 to 100 respondents declaring that the brand is losing exclusivity Note: for the entire analysis considered only brands with at least 200 respondents purchasing their products: ~100 brands Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 25 ton Consulting Group, ht 2014 by The Bost Copyrigh

27 What it will take to win Luxury Consumers 1 2 "Made In" still rocks 3 The Advocacy era 4 Intrinsic values rebound Man: what a surprise Global Consumer: catch me if you can DOS is dead, long life to DOS Digital it "physicalization" " 26

28 "Made In" rocks in all geographies with emerging markets the most sensitive "Do you check where luxury products you buy are made in?" % of respondents No Avg. 78% Yes Copyrigh ht 2014 by The Bostton Consulting Group, Inc. All rights reserved d. 2 87% 71% Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 27

29 2 "Made In Italy" outperforms "Made In France" and is first for all categories except watches & cars "Which country of manufacturing do you consider the best for Luxury?" %over"made In" respondents ~3x ~3x ~5x Ranking "Made in" "Made in" Italy France Clothing #1 #2 Accessories 1 #1 #2 Jewelry #1 #2 Watches #2 #4 Cars #2 #5 14 "Made in" Switzerland #8 #7 #3 #1 #8 9 "Made in" Germany #4 #4 #4 #3 #1 Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) Note: 1. Accessories include handbags, shoes and sunglasses 28

30 2 "Made In Italy" outperforms "Made In France" from US to Far East; China and Brazil where closer "Which country of manufacturing do you consider the best for Personal Luxury 1?" % of respondents 1 "Made In Italy" "Made In France" +5.9x +4.8x +7.7x +2.6x 68% 12% US Citizen 63% 13% Russian 61% 8% British 60% 24% South Korean +2.4x 51% "Made in Italy" clear winner 21% Japanese +4.2x 49% 11% German x 47% 38% Chinese 1.4x 34% 24% Brazilian Close competition 1. % over "Made In" respondents with focus on Personal Luxury including handbags, shoes and clothing Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 29

31 What it will take to win Luxury Consumers 1 2 "Made In" still rocks 3 The Advocacy era 4 Intrinsic values rebound Man: what a surprise Global Consumer: catch me if you can DOS is dead, long life to DOS Digital it "physicalization" " 30

32 3 Word of Mouth is a key influence lever "Which of the following has an impact on your purchase decision?" % of respondents Different WoM influence across markets Magazines 1 50% 61% Social media WoM (physical) WoM &Social M. 2 32% 11% 44% 14% 48% Store windows 39% 46% 45% 44% 43% Average 44% 9% Brands websites 34% 8% 40% 9% 38% 38% 17% 11% 12% TV & Movies 24% 12% 15% 26% Invitations 22% 48% 9% 39% 37% Events 20% 35% 32% 29% 28% 26% 22% Celebrities 20% 17% Seen wore 13% ton Consulting Group, Copyrigh ht 2014 by The Bost 1 Including fashion, lifestyle and other magazines and newspapers 2. Respondent influenced by Social media and other Websites but not by physical Word of Mouth Note: multiple choices possible; Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 31

33 3 2 out of 3 luxury Consumers are active advocates. Quality and design key to activate them " Have you recommended a brand in the last 12 months?" " Please indicate the reason why you have recommended this brand" % of Advocates respondents Non advocates 28% Superior quality 1 38% Superior style/design 31% Advocates when prompted Advocates spontaneously 41% 31% Luxury consumers 72% Admired when wearing it 21% Superior value for money 19% Identification with this brand 16% Wide assortment of products 15% Excellent service 15% Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 32

34 3 Omni-media key to stay closer to a Consumer who has multiple points of influence "Which of the following usually has an impact on your purchase decision?" Magazines 50 of Mouth & 44 d.word Social Media Store Browsing 39 Brands websites 34 TV & Movies 24 Invitations 22 Total EU 4 1 US Japan Russia China S. Korea Brazil % over respondents Events Celebrities Seen wore Inc. All rights reserved Note: multiple answer possible; 1. IT, FR, DE, UK Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 33

35 What it will take to win Luxury Consumers 1 2 "Made In" still rocks 3 The Advocacy era 4 Intrinsic values rebound Man: what a surprise Global Consumer: catch me if you can DOS is dead, long life to DOS Digital it "physicalization" " 34

36 4 Men over-proportionally contributing to future growth also expanding into woman categories "Which was your last purchase for yourself 1? " Total Mature markets Emerging markets % of man respondents 1 10 Years ago Today Total Jewelry 2, Handbags, P&C % +13 P.P % 20% 33% 31% 28% 20% 1. Excluding gifts and purchases explicitly required by others; 2. Total of Jewelry, handbags and P&C 3. Watches excluded Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 80 Other Jewelry 3 Handbags P&C 35

37 4 Gift represents ~30% of core luxury spend: 7 gifts out of 10 made by men "Who was the recipient e of your last purchase?" % of total respondents on last purchase Last purchase Gift by type Gift by gender of giver Business 19% Women 31% Self Purchase 72% Gift 28% Personal 81% Men 69% Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 36

38 4 Best gentleman are in S. Korea, Russia and UK % men's gifts over last purchase % Men's gift by country 1 Business gift sudden shrink in China due to anti-corruption policies i Business Leisure % 6% 34% 2% 37% 8% 29% 2% 33% 9% 26% 3% 32% 3% 29% 4% 24% Avg. 36% 4% 19% ton Consulting Group, 0 Russia UK Italy US Brazil France China Japan Copyrigh ht 2014 by The Bost 1 Includes gift for personal and for business reasons Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 37

39 What it will take to win Luxury Consumers 1 2 "Made In" still rocks 3 The Advocacy era 4 Intrinsic values rebound Man: what a surprise Global Consumer: catch me if you can DOS is dead, long life to DOS Digital it "physicalization" " 38

40 5 50% of luxury spending made out of the home country "How much have you spent out of your home country in last 12 months?" % of total luxury expenditure 54% 52% 51% 43% 39% Avg. 45% 43% 41% 2 32% Average spend abroad (K /Year 1 ) (cars excluded) Brazil China Russia Japan Avg. EU country Average spend abroad of a single Consumer per year. Includes all respondents ; 2. Mainly within Europe Note: EU includes Italy, France, UK and Germany Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) US Spend in home country Spend abroad 39 ton Consulting Group, Copyrigh ht 2014 by The Bost

41 5 Opportunity driving spend abroad for emerging countries. EU & US citizen looking for experience "What is your main reason for buying outside your home country?" Emerging countries Japan US Avg. EU country 1 Lower prices than home country Broader selection (items & brands) Prefer to buy in the country of origin of the brand Tax refunds advantage 21% % of respondents spending abroad 50% or more of total luxury expenditure 25% 42% 41% It s part of travelling experience 37% More free time when travelling 25% 26% 32% 44% Enjoy superior customer experience 23% Opportunity driven reasons Note: 1. IT, FR, DE, UK Source:BCG 2013 specific survey ( core luxury Consumers in 10 countries) 26% 20% 15% 24% 32% 45% Experience driven reasons 27% 24% 21% 22% 19% 55% 15% 23% 20% 16% 32% 43% 40 ton Consulting Group, Copyrigh ht 2014 by The Bost

42 5 Brands need to be known before to get on the shopping list of luxury globetrotters " When you are abroad, how do you select the brands to purchase? " Brazil China Russia South Korea Japan % of respondents spending abroad 50% or more of total luxury expenditure Brands popular/ visible in my country Brands I buy in my country Global Brands seen in medias Brands got to know on-line Brands with attractive stores in visited countries Brands popular in visited countries 1. Europe and US not included as significant part of their purchases abroad are on a regional base Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) Brand selected before traveling Brand selected during travel 41

43 5 Traditional hubs capture 70+% of luxury travelers but top European destinations losing share "In which city have you bought in the past 12 months?" Excluding Consumers in their home country 1 "In which city do you plan to buy in the next 12 months?" Excluding Consumers in their home country 1 Paris 26% 72% Singapore Milan London New-York Hong-Kong 24% 22% 21% 17% Milan still strong but losing share Moscow Macau Paris, London & NY Milan Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 42

44 What it will take to win Luxury Consumers 1 2 "Made In" still rocks 3 The Advocacy era 4 Intrinsic values rebound Man: what a surprise Global Consumer: catch me if you can DOS is dead, long life to DOS Digital it "physicalization" " 43

45 6 DOS and Department Stores confirmed as key shopping destinations. Online already relevant "Where have you mainly purchased your luxury goods in the past 12 months?" Total EU 4 1 US Japan Russia China S. Korea Brazil % over respondents Dep. store / Malls DOS 22 Duty free 15 Multi-brand 14 Online 15 Off-price outlet Note: 1. IT, FR, DE, UK Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 44

46 6 DOS: one size does not fit all "Which characteristics should your ideal store have?" Mature markets Emerging markets Small / Intimate Large Specialized per category Multiple categories Located in most excl. areas Up-coming trendy locations Sales assistant Limited digital in store Full support From my country Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) VIP Room Brand temple Immersive digital exp. Light support International Sales assistant 45

47 6 Mature markets recipe: intimate experience for senior, large flagship for younger generations "Which characteristics should your ideal store have?" Small / Intimate Silver & Baby Boomers Gen. X Gen Y & Gen. Z Large Specialized per category Multiple categories Sales assistant Located in most excl. areas Limited digital in store Full support From my country Up-coming trendy locations Immersive digital exp. Light support International Sales assistant Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 46

48 6 Emerging markets recipe: high consistency on store preferences, but on sales staff support "Which characteristics should your ideal store have?" Small / Intimate Silver & Baby Boomers Gen. X Gen Y & Gen. Z Large Specialized per category Multiple categories Sales assistant Located in most excl. areas Limited digital in store Full support From my country Up-coming trendy locations Immersive digital exp. Light support International Sales assistant Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 47

49 What it will take to win Luxury Consumers 1 2 "Made In" still rocks 3 The Advocacy era 4 Intrinsic values rebound Man: what a surprise Global Consumer: catch me if you can DOS is dead, long life to DOS Digital it "physicalization" " 48

50 7 Use of digital as an information source different across generations Why do you use digital beyond purchasing? % of respondents 2 Senior generations 67% 11% 5% 9% 6% 2% Silver (67+ years) 60% 9% 12% 8% 7% 5% Baby boomer (51-67 years) 42% 14% 17% 35% 34% 15% 14% 19% 20% 9% 11% 11% 9% 11% 12% 8% Generation X (36-50 years) 9% Generation Y (21-35 years) 9% Generation Z (18-20 years) Price and products comparison Follow / influence trends Price & Products Access to brand content Brand Interaction with brand &Trends (support, dialogue, recognition) Opinion sharing Feedback sharing Social Media Younger generations ton Consulting Group, Copyrigh ht 2014 by The Bost Note: Respondents purchasing Online or Researching Online and Purchasing Offline 2. Up to 2 answers possible, index value represented Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 49

51 7 E-commerce key in US and Brazil with mobile commerce gaining share "Which device did you use to purchase online?" % of respondents pure online buyers (purchasing online and researching online) % 11% % 9% US 9% 5% 2% 8% 1% 7% 7% 6% Brazil UK 7% 3% 5% South Korea 5% 5% 5% 1% 2% 1% 4% 3% 4% Japan Italy France 4% 1% 3% Russia 3% 1% 2% China Average 7% Smartphone & Tablet Laptop 1. Does not include respondents purchasing online that went in a store to see the product before purchasing it Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 50

52 7 Channels are blurring with online influencing over 50% of total luxury purchases "Where have you bought the last item purchased? Where have you researched it?" % of last purchase for each respondent % Pure in Store 7 Pure Online 8 Researched in Store Purchased Online ROPO Researched Online Purchased Offline 100 Total Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 51

53 7 Emerging markets the most into immersive digital experience, mature markets less interested in "Should your ideal store have limited or immersive in-store digital experience?" % over respondents Limited digital in store China Russia Brazil South Italy Korea US France UK Japan Augmented reality Digital sales supp. Indifferent Immersive digital in store Digital self navigation Pick-up Share Archive... ton Consulting Group, Copyrigh ht 2014 by The Bost Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 52

54 True-Luxury Global Consumer Insight we will address 5 "W" questions Why now? What makes our study unique? g What will it take to win luxury Consumer? d.where will growth come from? Inc. All rights reserved Which luxury segments will drive growth? What's in for you? ton Consulting Group, Copyrigh ht 2014 by The Bost 53

55 The genesis of segments: From the "crowded" world of luxury to 12 segments lobal seg gments G Absolute Luxurer "Luxury is my commodity" Status Seeker Megacitier "The world is my city" #LITTLEPRINCE Experiencer "Luxury is real only when shared" SocialWearer "I show then I exist" "I am to cool for school" "Green carpet" Fashionista "In fashion I trust" Classpirational "I saw it on my boss" Gender sp pecific Coun ntry spec cific TimelessProper Luxe Immune "Fashion passes, style remains" "Well Well, I can, but do I want?" OmniGifter Rich Upstarter t "Oh darling" "Luxury I am coming" ton Consulting Group, Copyrigh ht 2014 by The Bost 54

56 8 Global segments accounting for 80% of Core luxury market, 3 of them for 50%+ Global segments (gender / geography balanced) Gender specific Country specific Absolute luxurer Megacitier Experien cer Fashionista Status Seeker # Little Prince Social Wearer Classpira tional Timeless Proper Omni Gifter Luxe Immune Rich Upstarter Segmen nt size 1 (M) (%) % 9% 11% 11% 9% 6% 3% 13% 10% 8% 6% 6% Curren nt Avg. value Spend (K ) (Bn ) (%) % 15% 13% 8% 6% 6% 4% 4% 8% 8% 2% 2% counting for 50%+ of lux. market 1.Does not include cars Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 55 ton Consulting Group, Copyrigh ht 2014 by The Bost

57 Are you able to follow your Consumers across their lifecycle? Luxury Spend Megacitier Absolute Luxurer Luxury becomes like breathing, spend increase Exclusivity the key driver Average #LITTLE PRINCE Fashionista Experiencer LuxeImmune 20-30s 30-40s 40-50s Reduced materialism and interest in personal luxury Sharing becomes the priority Strong detachment and low interest into luxury Reduced spend Age Most likely Less likely ton Consulting Group, Copyrigh ht 2014 by The Bost Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 56

58 In the US, most relevant segments are the Experiencer and the Luxe-Immune Experiencer 16% Luxe-Immune 15% TimelessProper 13% OmniGifter 13% Fashionista 10% Classpirational 7% Status Seeker 7% Magazines TV & Movies How to reach them % of respondents Avg % 24% Celebs & Events 25 34% WoM & Social media Store % 39% Absolute luxurer 8% 22 Special events Megacitier 5% #LITTLEPRINCE 4% SocialWearer 2% Rich Upstarter 0% % of respondents Clothing Accessories P&C Hard luxury Food & Wine Vacations What they buy % Avg 68% 84% 54% 61% 45% 48% Source: BCG ad hoc luxury survey 57

59 In the EU, most relevant segments are the Absolute Luxurer and the Experiencer Absolute luxurer 16% Experiencer 15% Fashionista 12% OmniGifter 11% TimelessProper 11% Status Seeker 7% Megacitier 6% Magazines TV & Movies How to reach them % of respondents Avg % 24% Celebs & Events 38 34% WoM & 46 44% Social media Store 36 39% Classpirational 9% 30 Special events Luxe-Immune 6% #LITTLEPRINCE 5% SocialWearer 3% Rich Upstarter 0 % of respondents Clothing What they buy 22% Accessories 94 84% P&C Hard luxury Food & Wine Vacations Avg 68% 54% 61% 45% 48% Source: BCG ad hoc luxury survey 58

60 In China, most relevant segments are the Fashionista and the Rich Upstarter Fashionista 18% Rich Upstarter 17% Megacitier 15% Status Seeker 11% Classpirational 10% SocialWearer 5% #LITTLEPRINCE 4% Magazines TV & Movies How to reach them % of respondents Avg % 24% Celebs & Events 45 34% WoM & Social media 46 44% Store 38 39% TimelessProper 7% 22 Special events OmniGifter 4% Experiencer 4% Absolute luxurer 3% Luxe-Immune 0 % of respondents Clothing What they buy 22% 68% Accessories 85 84% P&C Hard luxury Food & Wine Vacations Avg 54% 61% 45% 48% Source: BCG ad hoc luxury survey 59

61 True-Luxury Global Consumer Insight we will address 5 "W" questions Why now? What makes our study unique? g What will it take to win luxury Consumer? d.where will growth come from? Inc. All rights reserved Which luxury segments will drive growth? What's in for you? ton Consulting Group, Copyrigh ht 2014 by The Bost 60

62 So what's in for you? Key take- aways 2 / 3 of the next decade growth will be organic (today markets, today stores) Consumer discontinuities will impact 100 Bn industry investments. 380 M luxury Consumers to become 440; total market to increase by 150 Bn of which 78 Bn made by additional 10 million core luxury Consumers Socio demos no longer predictive of core luxury Consumer behaviors: 12 unique segments entering your stores with different expectations Call for action Growth is there but there will be winners and losers. Actions required include a set of commercial lever Retail: country and generation customization Quality and Exclusivity as Brand life insurance Advocacy a key pillar of an effective Omni-media strategy Digital: from brick to digital and back again "Made In Italy" an asset to build on for the long term growth "Amazonization" of Brand assets: consumer knowledge will make the difference Source: BCG 2013 specific survey ( core luxury Consumers in 10 countries) 61

63 Antonio Achille Partner and Managing Director - Milan Antonio Achille is a Partner and Managing Director in the Milan office. He is a leader of the Consumer & Retail practice of the firm, with a particular focus on Luxury Good and Fashion. For 20 years, he has been advising National and International Groups on issues that include corporate strategy, growth acceleration, clients strategic segmentation, organization redesign and Post Merger Integration. In the Luxury and Fashion sector his experience includes apparel, accessories, selective fragrances, jewelry/hard luxury and experiential luxury. The geographical scope of his work includes most of the developed and emerging key luxury markets (Europe, North America, Greater China, Turkey, Korea, Middle East.). He has developed an extensive knowledge on the Global Luxury Consumer and he is responsible for the database that provides a comprehensive view on over consumers from 20 countries, developed in cooperation with Altagamma, the trade association for the Italian luxury industry. The actionable insights based on the depth analysis of this database are presented at the event True-Luxury Global Consumer Insight. In addition he chairs the annual Luxury Summit, one of the most valued discussion forum for the sector. He is also member of the Scientific Committee of one the first Italian master on Luxury. Antonio is extensively quoted, as Luxury and Consumer expert, in Italian and International media, such as "Il sole 24 ore", "La Repubblica", "Il Corriere della Sera", CNBC, FashionIllustrated, Prior to joining BCG he worked for Arthur D. Little. He graduated magna cum laude from the Università L. Bocconi of Milan where he holds a degree in Business Administration. Antonio Achille altagamma.pptx 62

64 About BCG and its Luxury Fashion & Beauty practice The Boston Consulting Group (BCG) is a global management consulting firm and the world s leading advisor on business strategy. t We partner with clients from the private, public, and notfor-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insighti into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. Within the Firm, The Luxury, Fashion and Beauty practice, with more that 200 experts worldwide, advises Brands and Retail bringing together the experience of its centres of competence located in all key must be geographies for the sector: Milan, Ney York, Paris, Shanghai, Hong Kong and Tokyo. BCG Luxury, Fashion and Beauty team has a deep and relevant experience driving profitable growth with leading Brands and Retail companies, from strategy to marketing and operations, and a unique point of view on consumer segmentation. ton Consulting Group, Copyrigh ht 2014 by The Bost Public Slides SENT.pptx 63

65 BCG contacts For a copy of BCG "True-Luxury Global Consumer Insight" or to schedule an interview with Antonio Achille, please contact: INTERNATIONAL PRESS: Marie Karlbom Karlbom.Marie@bcg.com or ITALIAN PRESS: Francesco Guidara Guidara.Francesco@bcg.com or Marco Micheli Micheli.Marco@bcg.com or Public Slides SENT.pptx 64