bain luxury market survey
TRANSCRIPT
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.
Luxury Market Update2012 Outlook
June 10, 2009
20092007200620052004
EMBARGOEDFor more information and approved use, contact:
Christopher FoxMedia RelationsBain & CompanyPh: 646-290-6103Email: [email protected]
2This 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.
0
40
80
120
160
€200B
1995
76
1996
84
1997
93
1998
98
1999
111
2000
130
2001
134
2002
134
2003
128
2004
134
2005
146
2006
159
2007
170
2008E
170
Worldwide Luxury Goods Market trend (1995-2008 E)
CAGR 95-0014%
CAGR 00-040,8%
11% 10% 5% 14% 17% 3% 0% -5%
+6,5%
CAGR:6,5%
5% 9%
In 2008 the luxury goods market was flat
+0%
CAGR 04-08 E6%
9%
3This 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.
In 2009 we expect the market to shrink by 10%
Bain Forecast April 2009
0
50
100
150
€200B
2008
170
2009FK
154
-10%
Source: Bain analysis
Main Assumptions
• First semester average market trend as the worst actual one: -15%-20%
• Slower decrease in the second half of the year: -5% - 0%
By semester
By channel
• Retail Like-for-Likedecreasing as the current trend (-5%, -10%)
• Compensation effect to the decrease of already committed new openings and full potential of 2008 numerous new openings
• Wholesale crisis as for actual order campaign (-20%) with aggressive mark-down campaigns (-30% on 50% of products)
ESTIMATES
At constant exchange rates – assuming no
change in the forex for 2009
4This 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.
We developed long-term forecasts for luxury market following a twofold approach
Top-downapproach
Bottom-upapproach
• Regression based on correlation of Luxury market and real GDP between 1995-2008
• Market forecast based on GDP projections by geographical area
• Market estimates based on benchmarking of competitors’current trading and sell-in/sell-out projections for the next seasons
*wholesale calculated through average mark-ups
• Bain Luxury Study
• Analyst reports
• Worldwide trade associations
• International Monetary Fund (World Economic Database)
• Bloomberg research
• Interviews to-players’ top management
-industry experts-luxury retailers
• Analyst reports
Methodology Sources
Luxury goods marketForecasts
5This 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.
We found strong historical correlation between Luxury market and key macroeconomic facts
0
100
200
300
Real GDP
WW Luxuymarket
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Indexed (1995)
Luxury market and GDP development (current exchange rate)
0.0
0.2
0.4
0.6
0.8
1.0
Rea
lG
DP
0.96
Tourist
arr
ival
s
0.96
Housi
ng
price
s
0.90
Wealth
(liq
uid
ass
ets
)
0.72
Dis
p.
inco
me
0.72
Sto
ckprice
0.20
Consu
mer
confidence
0.01
Pearson correlation (-1 to +1);Example Europe Luxury market
1.3 0.9 0.32.01.8 0.70.2Growthmultiple
Correlation of Luxury market with macro-indicators (EU
example)
Luxury market outperformed economic development
Luxury market development closely related macro-indicators
Luxury market can be forecasted using GDP projections
6This 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.
Order taking will be negative until FW10
Order taking 2009 Order taking 2010
Also order taking forecasts can be a proxy of market trend for next 12-24 months
7This 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.
Luxury market will not recover before 2012
• Dramatic decline of -10% in 2009
• 2007 market value recovered by 2012
• GDP trend:-strong contraction in 2009-flat in 2010-recovery beginning 2011
• Luxury reaction with a multiple of 1.8 on a global basis to GDP trend
• 2009 and 2010: GDP forecast adjusted based on current trading and order taking
0
50
100
150
€200B
207
170
2008
170
2009
154
2010
156
2011
162
2012
174
Bain Forecast(Constant exchange rates)
Main Assumptions
-10%
+1%
+4%
+7,5%0%
8This 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.
The current crisis is changing consumer trends
Reduce & Reuse
Polarize
Valuefor
Money
Under-statement
• Delay high-ticket and classic/basic purchases
• Booming season-end sales and discount channels
• Willing to spend only for items and brands who pass the worth-it-test
• Aspirational consumers trading down
• Austerity is fashionable even for wealthiest consumers
• Extravagant spending considered irresponsible or disrespectful
• Luxury shame, impacting negatively logo and showy products
• Consumers “shop their closets”, reusing purchases from past years
• Shoppers are trying to update their wardrobes inexpensively
• ... refreshing their looks with few key items and accessories
• Down-trading on fashion items, investing in evergreen items
• Accelerating Cheap & Chic
• Fast Fashion players winning the game
9This 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.
Women are trading down on fashion items
ABSOLUTE
ASPIRATIONAL
ACCESSIBLE
CLASSIC / CONTEMPORARY
FASHION
Main trends in Female Luxury Consumption
-
-- =
---
Drastic decrease in ostentation
Value proof brands and long lasting products revamp
“Cheapest and chic” “Fashion for money”
Main consumption shifts
Impact on market trend
10This 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.
ABSOLUTE
ASPIRATIONAL
ACCESSIBLE
FORMAL CASUAL/FASHION
Main trends in Male Luxury Consumption
--
--- -
=
Niche loyal fashion freak
Delaying purchase
Trading down “Casual for money”
Men are delaying classic and formal purchases
Main consumption shifts
Impact on market trend
11This 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.
Some trends will fade away slowly, but others are here to stay
Trends that stay relevant
Accel-erated, lasting trends
Accelerated & upcoming trends that will fade out
„Reduce, reuse, recycle“
„Inconspiciousconsumption“
„Redefine true luxury“
Consumer conscience
Technology dependence
Sensory/ indulgence
Feminisation Brand fatigue Tribalism
Individu-alism
Consumer experience
“Real value” for money
Spend polarization
Luxury shame
Consumption caps
„Polarization“
2007 2008 2009 2010 …
Core trends Emerging trends
“I don’t think it’s only the financial problem...it’s also that there was kind of indigestion. Fashion became just too much…”
Dries Van Noten
“I believe the cautious approach of customers everywhere towards spending on luxury goods is something that will stay…”Patrizio di Marco, President and Ceo,
Gucci
“Nice to have has vanished. But for compelling pieces, there’s no price resistance…”
Michael Burke, CEO, Fendi“Some prices are just too expensive for what you are getting. Hermès is doing very well. Why? I can still use my mother’s handbags…”
Diane Von Fustemberg
“I think there was too much of everything…the whole industry had to take a laxative”
Diane Von Fustenberg
12This 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.
Despite the crisis, long-term prospects for the luxury market remain strong
• Despite current negative trends, market fundamentals remain strong in the long-run
• Growth of personal wealth and HNWI forecasted to recover from the second half of 2010
• Global GDP forecasted to grow in 2010
• “New luxury segments” are emerging: working women, men, new generations, emerging markets
• Continuing growth of aspirational consumerbase (especially in Asian and emerging markets)
• New opportunities may come from changing values and consumption habits
Growing customer base