True Luxury - 2014/2015 - BCG

True-Luxury Global Consumer Insight
Antonio Achille, Partner & Managing Director
Milan, January 22nd, 2015

P-Altagamma-317971-01-22Jan15-AAc-mil_Published_short.pptx 1
Copyright©2015byTheBostonConsultingGroup,Inc.Allrightsreserved.
This volume contains copies of slides presented by Antonio Achille, Partner and Managing Director
of the BCG Milan office, and Armando Branchini, Deputy Chairman of Fondazione Altagamma,
during the "Consumer and Retail Insight" event held in Milan on January 22nd 2015.
The presentation is based on a research that BCG developed during the month of November 2014,
interviewing 10'000 Top Luxury consumers from 10 countries (Italy, France, UK, Germany, US,
Japan, China, Brazil, South Korea and Russia).
During the presentation, the slides served as the focus for discussion; they are incomplete without
the accompanying oral commentary
This document will be most meaningful, therefore, to those who attended the meeting
Disclaimer

True-Luxury Global Consumer Insight:
6 "W" questions addressed today
Why now?
What makes our study unique?
What will it take to capture growth in key categories?
Where will growth come from?
Which segments will drive growth?
What are the consumer trends shaping the industry?

Why now?

60%
Organic growth: 2 / 3 of next decade growth
1. Europe (Italy, France, UK, Germany, Spain, Nordics), US and Japan; 2. Referrers to personal luxury (apparel, accessories, hard luxury, Perfume & Cosmetics)
Note: Last decade Personal Luxury market CAGR growth ~5%; upcoming decade Personal Luxury market CAGR growth ~4%
Source: Bernstein / BCG analysis
Last decade growth by component2 Upcoming decade growth by component2
Total
growth
100%
Volume
20%
20%
Emerging
markets
35%
Traditional
Markets1
25%
Price
- Mix
40%
Organic growth
(LFL)
Retail expansion
100%
Total
growth
Volume
30%
Price
- Mix
40%
Emerging
markets
10%
Traditional
markets1
20%
Organic growth
(LFL)
70%
Retail expansion
.
30%

The CONSUMER era
'80s '90s '00s 2015 next decade
• Style & Design for
elites
• Temple of Desire
• The rise of
Global Brands
• Retail as part of
Brand experience
• "Real estate rush"
• Consumer: engine
of top line and
margin growth
+ConsumerDesign +Brand +Retail

What makes our study unique?

2015 Edition: What's new?
10.000+Top Luxury Consumers analyzed
10 luxury markets deep dived
All luxury categories in scope
Doubled sample yearly average spending: 10K€  20K€
• 2K€  5K€ yearly spend as entry point
• 3.000+ luxury consumers spending yearly on avg. 44K€ in P&E luxury
Consumer Segments as
key lens to read market dynamics
Category breakdowns

All luxury categories in scope
5472
154
350
354
62
4941121
61
67
1,385
0
500
1,000
1,500
Hotel &
Exclusive
vacations
Food
& Wine
Furnit-
ures
Perfumes
&
Cosmetics
Watches
&
Jewelry
ApparelAcces-
sories
Arts Other2Techno-
logy
Cars &
Yachts
Total
Personal luxury
(290 €B)
Experiential luxury
(465 €B)
Cars &
Yachts
(350€B)
Luxury market (€B,2014 retail value)
1.Personal and Experiential luxury 2. Including Private Jets, Art de la table, etc
Note: Some numbers are rounded.
Source: BCG 2014 specific survey, BCG-IPSOS market research
Covered by True-Luxury Global Consumer Insight
P&E 1 Market:
755 €B
Others
(280 €B)

Sounding board of WW leading Brands to ensure
robustness and actionability of the insight
2015 additions

Where will growth come from?

Short term: Luxury Barometer® indicates
rebound of confidence in 2015 vs. 2014
24% 29% 24%
43%
48%
39%
33%
23%
37%
Less
(-20%)
Same
More
(+20%)
201520142013
1. Index calculated as percentage of customers who see growth in spend less the percentage who foresee a decrease in spend (Positive – Negative) .
The index represents a proxy of the expected growth of spend in Luxury by Top Luxury consumers
Source: BCG 2014 ad hoc study (10'000 respondents in 10 countries)
% of respondents
Luxury
Barometer®1 9pp 13pp-5pp
"Do you expect to spend more or less on luxury products in the next 12 months?"
Short
term

390M consumers to become 465M by 2021
with P&E market growing from 755 to 1015 Bn€
Cluster
Total Luxury
Consumers1
2014
# (M) Bn(€)1
2021
Top Aspirational
# (M) Bn(€)1
73
122
135
~1015
609
330
76
~755
481
54
42
84
94
220
2
5
11
~465
422
25
18
~390
356
19
2
4
9
15 220
Ultra
Beyond money
Very high
1. Including Experiential and Personal luxury, excluding cars and Yachts
Note: rounded numbers
Source: BCG Analysis
Total Top Luxury
Aspirational
2 k€
5 k€
10 k€
20 k€
Mid
term

US consumers confirmed as the
main contributor to future growth
33049
6720
29
220
0
150
300
450
2021Others3Middle
Eastern
European2ChineseAmericans2014
+110€B
P&E1 Luxury market growth by Nationality (€Bn)
~55%
1. Personal & Experiential Luxury market; 2. Italian, French, German, English 3. Including Japanese, S. Korean, Russian, Brazilian and RoW
Top
Luxury
Mid
term

What are the consumer trends
shaping the industry?

Global trends confirming their importance
Confirmations Changes in Trajectory New Trends
Advocacy era continuing: 80% of consumers willing to become brand ambassador
"Made in Italy" still rules: 1st preferred manufacturing country
– Leadership in all categories but cars (1st Germany) and watches (1st Switzerland)
53% of Luxury consumers spend made out of the home country
– Drivers: convenience key for Emerging Markets; part of the journey experience
for Mature Markets
Exclusivity key for long term creation and not granted: 25% of luxury brands at risk of
loosing exclusivity based on consumer declarations
"Made in" still rocks: 80% of consumers actively check where products are "Made-In"

Changes in trajectory
Intro values still roaring with selective extro values rebound (from 27% to 34%)
Word of Mouth becoming 1st influence lever and increasingly digitally enhanced
Digital growing importance with online influencing 62% vs. 53% of total luxury purchases
Store windows losing relevance vs. online (from 39% to 32%): is store role changing?
Brands website preferred e-commerce channel: websites quality and customer care
more important than price
Omnichannel getting momentum, 75% of consumers asking for it

Intro values still roaring
Selective rebound of Extro values?
76% 76% 71% 70% 66% 62% 61% 60% 59% 56%
24% 24% 29% 30% 34% 38% 39% 40% 41% 44%
• Quality
• Exclusivity
• Craftsmanship
• Timeless
Intro
values
• Adorned
aesthetics
• Brand visibility
• Customization
• Being Cool/Sexy
Extro
values
"What is luxury to you?"
% of respondents1
1. Respondents were asked to rank the top 3 values: the graph represent the value ranked as the most important
Source: BCG 2013 and 2014 ad hoc study (10'000 respondents in 10 countries)
2013 Intro
Value Avg.
73% 73% 83% 83% 72% 69% 69% 61% 75% 69%
2014: 66%
Values

Word of Mouth: 1st influence lever,
overcoming magazines
% of respondents
TV &
Movies
Seen
Wore
Celebrities
Brand
websites
26%
31%
39%
32%
32%
19%
30%
23%
Tailored
offers
Store
windows
Events
Magazines2
WoM 49%29% 20%
Seen
Worn
13%
Celebrities 20%
Events 20%
Tailored
offers
22%
TV &
Movies
24%
Brand
websites
34%
Store
windows
39%
WoM1
43%32%
11%
Magazines 50%
1 Includes WoM, Social Media and Other Social blogs 2. Editorials and Commercial in Magazines
Note: multiple choices possible, out of top 3 ranks
"Which of the following has an impact on your purchase decision?"
2013 Different WoM influence across nationalities
34%
23%
10%
41%
22%
19%
46%
30%
17%
47%
33%
14%
49%
25%
24%
52%
30%
21%
52%
26%
26%
53%
35%
18%
55%
22%
33%
58%
41%
17% Avg.
49%
Social Media & Blogs Physical
2014
WoM

Social media and blogs the real engine
of Word of Mouth growth
"Which of the following has an impact on your purchase decision?"
32% 29%
5%
6% 12%
8%
2014
49%
2013
43% Blogs
Physical
Social
Media
+6pp
1. WoM Digitalization index: calculated as Social Media & Blogs influence vs. WoM physical influence
Note: multiple choices possible, out of top 3 ranks
Δpp '13-'14
(3pp)
+6pp
+3pp
WoM
digitalization
index1
0.3 0.7
WoM

>50% sales digital influenced
already in past year edition...
53%% of last purchase
for each respondent
"Where have you bought the last item purchased? Where have you researched it?"
47
100
8
38
0
20
40
60
80
100
TotalPure in Store Pure Online
7
Showrooming
(viewed in store,
purchased on line)
Researched Online
Purchased Offline
Omnichannel
Digital

...channels are further blurring:
62% of sales digitally influenced in 2014
% of last purchase
for each respondent
45
9
8
100
38
0
20
40
60
80
100
TotalPure OnlineShowrooming
(viewed in store,
purchased on line)
Researched Online
Purchased Offline
Pure in Store
Omnichannel
53%  62%
Digital

"Pure store" no longer the first channel for sales
62%% of last purchase
for each respondent
100
0
20
40
60
80
100
TotalShowrooming
(viewed in store,
purchased on line)
7 8
38  45
8  9
47 38
Pure OnlineResearched Online
Purchased Offline
Pure in Store
2013  2014Omnichannel
Digital

3 out of 4 consumers asking for omnichannel
37%
38%
25%
Not negotiable/
Very Important
Somehow
important
Not
Important
Total
"How important is for you that a brand can be reached through different channels?"
75%
Omnichannel importance across nationalities
78% 78%81%
85%
43% 57%
45%
71%
31%
33%
81%
75%
90%
33%
41%
49%
44% 27%
42%
34%
48%
33%38% 36%
11%
43%
49%
41%
26%
37%
Avg.
75%
% of respondents
Digital

For online shoppers brands website
1st option; experience more important than price
"Which kind of online store
did you buy the product from?"
1.9x
Flash sales sites 2%
Others kind of websites
(travels, restaurant, ...)
8%
Luxury-specialized
etailers
16%
Dept. store website 18%
Online marketplace 20%
Brand website 37%
% of respondent % of respondent
"Which factors are more important
when buying on line?"
Free return
Exclusive
collections
21%
22%
Payments
accepted
24%
Brand
carried
25%
Online customer
care quality
29%
Website
navigability
31%
20%Price discount
Digital

New trends
Are US and UK self legitimating as "Made" in countries for Luxury?
Sustainability is happening, 13% importance as value
– +5 pp vs. 2013 led by Europeans and Americans
Dynamism in fashion hubs: New York City growing, Milan fading
– Dubai, Singapore and Los Angels legitimating as fashion hubs?

Sustainability is happening: will declared
values impact behaviors?
9%
10%
Brazil USEurope
% over respondents
8%
China
18%
+5pp
15%
RussiaTotal
13%
15%
8%
13%
10%
4%
5%
6%
13%
"What is luxury to you?"
20142013
Multiple answer possible
Δ 2013-2014
(pp)
+13pp - +7pp +4pp +6pp -2pp
Sustainability

Are US and UK self legitimating
as "Made in" countries?
+3pp
2014
10%
2013
7%
% of respondents selecting US
+3pp
2014
7%
2013
4%
"Which country of manufacturing do you
consider the best for Luxury?"
% of respondents selecting UK
Who is
saying that?
Apparel
Jewelry
Handbags
~25%
~17%
~13%
On which
categories?
Apparel
Handbags
Jewelry
~22%
~18%
~16%
~33%
~17%
~10%
~25%
~12%
~12%
Made in

Dynamism in fashion hubs with New York
rising and Milan fading
1. The calculations excludes consumers in their home country
2013 20152014
"In which cities have you bought luxury products in the past 12 months?
In which ones do you plan to buy in the next 12 months1?"
Spend
Abroad
Paris
London
Hong-Kong
2
3
4
5
2
4
5
New-York
Milan
Paris
London
Hong-Kong
New-York
Milan
Paris
London
Hong-Kong
New-York
Milan
5
2
3
4
1 1 1
3

Among the group of followers Dubai,
Singapore and Los Angels gaining momentum...
2013 20152014
"In which cities have you bought luxury products in the past 12 months?
In which ones do you plan to buy in the next 12 months1?"
1. The calculations excludes consumers in their home country
6
7
8
Singapore
Rome
Los
Angeles
Dubai
MiamiSingapore
Rome
Los
Angeles
Dubai
Miami
Singapore
Rome
Los
Angeles
Dubai
Miami
6
7
6
7
8
10
9 9
10
8
9
10
Spend
Abroad

Which Segments will drive growth?

8 Global segments, 3 of them counting for ~50%
Country
specific
2.2 2.8 1.6 1.8 2.1 3.0 2.3 2.2 1.5 1.2
9% 11% 6% 7% 8% 11% 9% 8% 6% 5%
30 8 10 10 7 3 9 10 4 4
67 22 17 17 14 8 21 21 6 5
24%
2.5
10%
17
41
15%
2.8
11%
13
35
13% 8% 6% 6% 5% 3% 8% 8% 2% 2%
(M)
(%)
(K€)
(Bn€)
(%)
Segment
size
Current
value
Avg.
Spend1
Gender
specific
Global segments (gender / geography balanced)
counting for ~50%
of lux. market
Note: This table represent Luxury Consumer of Beyond Money, Very High, High and a projection proxy of Top Aspirational consumers 1. Not including Cars & Yachts
Absolute
Luxurer
Experien
cer
Mega
citier
Fashioni
sta
Social
Wearer
#Little
Prince
Status
Seeker
Classpira
tional
Timeless
Proper
Omni
Gifter
Luxe
Immune
Rich
Upstarter

What will it take to capture growth
in key categories?

Product category insight through the eyes
of most relevant consumer segment
Absolute
Luxurer
• 22% of 2014
Leather Goods
market
• First contributor
to long term
growth (+3B€)
Megacitier
Omni Gifter &
Timeless Proper #Little Prince Experiencer
• 16% of 2014
Apparel market
to long term
growth (+1.2B€)
• 15% of 2014
Hard Luxury
market
• First contributors
to long term
growth (+2.2B€)
• 11% of 2014
P&C Luxury
Market
• Fast growing
segment
(CAGR +6.1%)
• 17% of 2014
Experiential
Luxury Market
• 46% share of
wallet (1st
category)

Leather Goods  Absolute Luxurer
Absolute
Luxurer
• 22% of 2014
Leather Goods
market
to long term
growth (+3B€)
Megacitier
Omni Gifter &
Timeless Proper #Little Prince Experiencer
• 16% of 2014
Apparel market
to long term
growth (+1.2B€)
• 15% of 2014
Hard Luxury
market
• First contributors
to long term
growth (+2.2B€)
• 11% of 2014
P&C Luxury
Market
• Fast growing
segment
(CAGR +6.1%)
• 17% of 2014
Experiential
Luxury Market
• 46% share of
wallet (1st
category)

Leather Goods: Absolute Luxurer
1st contributor to long term growth
Leather Goods Top luxury market growth by Segment
293
112
3
20
0
20
40
€B
+9B€
2021Others1#Little
Prince
Fashioni
sta
Mega
citier
Absolute
luxurer
2014
14-21 CAGR
(%)
7.4% 5.9%7.7% 8.1% 3.5%
2014 Market
(%)
22% 9%15% 5% 49%
Rounded numbers
Source: BCG 2014 specific survey (10.000 Top luxury Consumers in 10 countries)
Absolute Luxurer
Total size #: 2.2M
Spend/head: 30K€
Total spend: 67B€
Life stage: 35-45 yr.
Gender: 55% W

Quality and exclusivity not negotiable,
off price and low entry price disaffection triggers
Purchase Enablers Disaffection triggers
18
20
21
21
22
23
23
26Craftsmanship/quality
Adorned aesthetics
Customer care
Brand visibility (logo)
Value for money
Shopping experience
Customization
Exclusivity
17
18
18
19
22
25
27
Stores too Large
Production outside
home country
Too many categories
Owned by
majority of friends
Poor distribution
Fake copies
Low entry price
Too much off-price 30

Handbags: 67% of Absolute Luxurer
researching online
"Where did you buy handbags?
Where did you researched them?"
"Why did you researched online for handbags?"
Follow/influence trends 14%
Price and product comparison 17%
Access to
brand content
23%
Opinion & Feedback Sharing 27%
Interaction with brand
32%
Gathering information
on product
42%
% of respondents
2%
Pure onlineShow
rooming1
7%
Researched
Online
Purchased
Offline
67%
Pure in
store
23%
Total
100%
Overall
Avg.
38% 45% 8%9%
1. viewed in store, purchased on line

Brand polarization: 70-80% of Absolute
Luxurer prefers specialist brands
Total
Handgabs
Lifestyle
brands
Core Leather
Goods
brands
100%
22%
80%
% of respondents % of respondents
Total
Shoes
Lifestyle
brands
71%
100%
Core Leather
Goods
brands
25%
"Which type of brand do you prefer?"

The CONSUMER era: key takeaways (I)
2 / 3 of the next decade's growth will be organic
Growth to continue...:
– Short term (2015): rebound in luxury confidence already in 2015
– Mid term (2021): 390M consumers to become 465; market to increase by 260€Bn
....but at multiple speeds:
– Consumers: Top Luxury (4% of total) making 40% of growth alone
– Geographies: US, China, EU and ME accounting for 55% of total growth
– Sectors: Experiential luxury growing faster than Personal luxury
– Categories: Jewelry & Watches and Leather 1st contributors to growth in Personal

The CONSUMER era: key takeaways (II)
Consumer: Confirmations and new realities
– Made in still rules, but not granted
– Digital influence reaching new heights
– Omnichannel from buzzword to reality
– Sustainability is happening
12 unique segments entering your stores with different expectations
– Absolute Luxurer, Megacitier and Experiencer representing 65% of future growth
Consumer lens the only way to capture future growth
– Leather: Absolute Luxurer looking for craftsmanship and brand specialization...
– Apparel: Casualization led by Megacitier,..
– Jewelry: Omni Gifter picking pure jewelry brands only,...
– ...
Consumer Insight next competitive
advantage: there will be winners and losers

Antonio Achille
Partner and Managing Director - Milan
Antonio Achille is a Partner and Managing Director in the Milan office. He is a senior leader of the
Consumer & Retail team and he co-leads globally the Luxury practice for the firm.
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, eyewear, accessories,
selective fragrances, jewelry/hard luxury and experiential luxury. The geographical scope of his work
includes most of the developed and emerging luxury markets (EU, North America, China, Turkey,
Korea, Middle East ….).
He has developed an extensive knowledge on the Global Luxury Consumer and he is responsible for
the database that includes a comprehensive view on over 40.000 consumers from 20 countries,
developed in cooperation with Altagamma, the trade association for the Italian luxury industry.
The actionable insights of the study are presented at the yearly event “True-Luxury Global Consumer
Insight”.
In addition he contributes to 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.
He is author and co-author of most of the recent BCG publication on Luxury such as "Luxury
ecosystem advantage", "Shock of the New chic", ... Antonio is extensively quoted, as Luxury and
Consumer expert, in Italian and International media, such as FT, WWD, Bloomberg, CNBC,
FashionIllustrated, Il sole 24 ore, Il Corriere della Sera,...
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.

About BCG and its Luxury practice
The Boston Consulting Group (BCG) is a global management consulting firm and the world’s
leading advisor on business strategy. We partner with clients from the private, public, and
not-for-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 insight 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 practice, with more than 200 experts worldwide, advises Brands
and Retail companies bringing together the experience of its centers of competence located in
all key must-be geographies for the sector: Milan, New York, Paris, Shanghai, Hong Kong and
Tokyo.
BCG Luxury 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.

BCG contacts
For a copy of BCG "True-Luxury Global Consumer Insight" or to schedule an interview with Antonio
Achille, please contact:
INTERNATIONAL PRESS:
• Lisa Trunfio email: Trunfio.Lisa@bcg.com or +39.02.65599242
ITALIAN PRESS:
• Francesco Guidara email: Guidara.Francesco@bcg.com or +39.02.65599704
• Francesca Prosperi email: Prosperi.Francesca@bcg.com or +39.02.65599328

Thank you
bcg.com | bcgperspectives.com

True Luxury - 2014/2015 - BCG

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