true-luxury global consumer insights · source: bcg knowledge & analysis 1 the 7th true-luxury...

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TRUE-LUXURY GLOBAL

CONSUMER INSIGHTS7 TH EDI T ION

1Source: BCG Knowledge & Analysis

THE 7TH TRUE-LUXURY GLOBAL CONSUMER INSIGHT EDITION CONDUCTED IN TWO

FIELD MOMENTS: PRE-COVID (JANUARY 2020) AND POST-COVID (JUNE 2020)

€37K+ Average spend2

12,000+Respondents

10Markets1Fifth Ed. 2018

Sixth Ed. 2019€39K+

Average spend

12,000+

• 2,000 in China

• 2,000 in US

Seventh Ed. 2020

1. Begun monitoring UAE /KSA market (300 respondents) 2. Includes personal and experiential luxury, excluding cars, yachts, smartphones and smartwatches

+1Arabs market1

(UAE & KSA)Pre Covid-19 (Jan 2020)

Post Covid-19 (June 2020)

Powered by

Research Partner for

the all 7 editions of

the BCG Altagamma

True-Luxury Global

Consumer Insights

2000

~19M True-Luxury Consumers (out of ~435M total consumers) generating 31% of global luxury market

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WE BRING ALTAGAMMA PARTNERS AND MEMBERS OF BCG LUXURY ECOSYSTEM

TO THE TABLE TO GENERATE THE BEST CONSUMERS INSIGHTS

True-

luxury

Consumer

Insight

2020

BCG

partners

Altagamma

partners

Note: List of brands not exhaustive


BCG EXPERT NETWORK READY TO DISCUSS IN EVERY LARGE MARKET THE

OUTCOMES OF TRUE-LUXURY GLOBAL CONSUMER INSIGHT 2020

SarahWillersdorf

HemantKalbag

Bharat Khandelwal

RobbinMitchell

StefanRasch

JavierSeara

StefanRohrhofer

StephaneCairole

NicolaPianon

AndreasMalby

ThierryChassaing

PierreDupreelle

NicholasGoad

NicolasDe Bellefonds

PatrickDucasse

JoëlHazan

FrancescoLeone

DrakeWatten

MarioSimon

JeffreyShaddix

DiederikVismans

ChristineBarton

JimBrennan

KunalBhatia

JavierAnta

FilippoBianchi

Sebastian Boger

JessicaDistler

OlofDarpo

Crystal Hao

VincentLui

AMERICAS EUROPE ASIA

MikiTsusaka

VeroniqueYang

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1 . C O V I D - 1 9 I M P A C T

2 . T R U E - L U X U R Y C O N S U M E R I N S I G H T S

3 . N E W R E A L I T Y & I M P L I C A T I O N S F O R

B U S I N E S S E S

5

Note: Numbers rounded. Personal includes leather accessories, apparel, watches and jewelry (branded and unbranded) and perfumes and cosmetics; Experiential includes furniture, food and wine, fine dining & hotel and exclusive vacationsSource: BCG & Altagamma Market Model, BCG Analysis

Global Luxury Market (Personal & Experiential), % of total

SEVERE IMPACT OF COVID-19 ON LUXURY MARKET,

WITH EXPERIENTIAL LUXURY FACING THE BIGGEST DROP

39 %

2019

36 %

61 %

2013

64 %

42 %

58 %

2020

37 %

63 %

2022

+3.4%

+5.6%

CAGR

‘13-‘19

-25

to -45%

-40

to -60%

YOY

‘19-‘20

+21.2%

+32.7%

CAGR

‘20-‘22

Pre Covid-19 Projections

Personal Luxury

Experiential Luxury


Q1 Q2 Q3 Q4 Q1 Q2 Q3Q4 Q1

Source: BCG & Altagamma Market Model, BCG AnalysisNote: all percentages are compared to 2019

LUXURY SCENARIOS: LUXURY BRANDS’ RECOVERY COULD TAKE UP TO TWO

YEARS, WITH LOW SCENARIO MOST PROBABLE

Scenario

High

Probability

Scenario

Low

Virus controlled,

medium to fast

recovery

Successful and

timely development

of vaccine

Economic plans and

aids kick-in to

support GDP growth

Sociality goes back

to pre-crisis level

Domestic travel and

recovering fast, and

int'l travel catches up

Virus not controlled,

slow long-term

recovery

Vaccine research

and development

not successful

Economic and financial

programs not enough to

support economy

Social distancing

and preventive

measures persist

Int'l travel still in crisis,

domestic travel possible

in areas less affected

-100%

-50%

0%

50%

Q1 Q2 Q3 Q4 Q1 Q2 Q3

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Scenario High

Scenario Low-100%

-50%

0%

50%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Personal Luxury Market Experiential Luxury Market

Legend: 100% 50% 0%

Scenario High

Scenario Low


THE CRISIS IMPACTED EVEN TRUE-LUXURY CONSUMERS, WITH 57% REFRAINING

FROM MAKING PURCHASES AND INVESTMENTS THEY HAD PLANNED

Note: % represents share of respondentsSource: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

57% 61%53%

47% 45% 51%65% 64%

56% 60%67%

22% 15% 26%

20% 27%27%

21% 20% 32% 18%16%

20% 24% 20%33% 28% 22%

14% 15% 12%22% 17%

All

Countries

Surveyed

Strongly Agree & Agree

Strongly Disagree & Agree

Neither agree nor disagree

I will continue making the purchases and investments I had planned before

% of respondents


SENTIMENT TOWARDS THE RECOVERY IS MITIGATED, WITH ONLY CHINESE

EMERGING AS THE MOST CONFIDENT, AS THEY ARE AHEAD IN THE VIRUS CYCLE

Note: % represents share of respondentsSource: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

43% 46% 43% 37%50% 50%

62%

41%

62%50%

20%28% 27%

27%19% 18%

15%

18%

28%

15%

12%

36%26% 30% 36% 31% 32%

77%

20%31%

23%38%

All

Countries

Surveyed

8%


Strongly Disagree & Disagree


I believe that the recovery after the crisis will be fast

% of respondents

Europe & US extensively affected by Covid-19, especially in key areas for economic development.

Strict lockdown imposed to all citizens.

Chinese express optimistic sentiment towards recovery,

as the country is now ahead in the virus cycle.


WITHIN PERSONAL LUXURY, CASUALWEAR & COSMETICS EXPECTED TO REBOU ND

IN 2 YEARS, WHILE OTHER CATEGORIES IMPACTED BY CRISIS ON THE LON G TERM

-20%

-10%

0%

10%

20%

-40% -30% -20% -10% 0%

Formal coats

Perfumes

Watches

Cosmetics

Jeans

Sportswear

True-Luxury Consumers Net appetite1 (next 6 months)

Tru

e-L

uxu

ry C

on

sum

ers

Ne

t a

pp

eti

te1

(2-3

ye

ars

fro

m n

ow

)

Sneakers

Jewelry

Pants/SkirtsShirts/Topwear

Hoodies

T-shirts

Backpacks

Knitwear/sweaters

Dress/suits

Down jackets

Silk goods

Small leather goods Sunglasses

Formal Shoes

Handbags

Question text : "How does your luxury spending over the next 6 months will compare to your luxury spending in the 6 months prior to the coronavirus outbreak (i.e. 2nd half of 2019) and in 2-3 years from now? Note: 1. Net appetite: (% of a lot more + % of a bit more) – (% of a bit less + % of a lot less)Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

LOSERS

WINNERS

Hard luxury

Accessories

Beauty

Casualwear

Formalwear


IN EXPERIENTIAL, TRUE-LUXURY CONSUMERS ARE STILL RELUCTANT TOWARDS HOTELS,

RESORT AND CRUISE VACATIONS, PREFERRING MORE INTIMATE EXPERIENCE S

Question text : "How does your luxury spending over the next 6 months will compare to your luxury spending in the 6 months prior to the coronavirus outbreak (i.e. 2nd half of 2019) and in 2-3 years from now? Note: 1. Net appetite: (% of a lot more + % of a bit more) – (% of a bit less + % of a lot less)Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

-30%

-20%

-10%

0%

10%

-50% -40% -30% -20% -10% 0%

True-Luxury Consumers Net appetite1 (next 6 months)

Exclusive Fine Dining

Exclusive Resort Vacations

Tru

e-L

uxu

ry C

on

sum

ers

Ne

t a

pp

eti

te1

(2-3

ye

ars

fro

m n

ow

)

Exclusive Hotels

Exclusive Cruise Vacations

Exclusive Luxury Bars & Clubs

Fine Wine & Spirits

Wellness & SPA

Design Furniture

Home Tech

Lightning

Art Goods

Private Villas

Super Yacht

Social Experiences

Private Experiences

Experiential Products

WINNERS

LOSERS

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1 . C O V I D - 1 9 I M P A C T



B U S I N E S S E S

12

8 CONSUMER TRENDS SHAPING THE NEW LUXURY REALITY, WITH 5 ACCELERATED

BY THE COVID-19 CRISIS THAT ARE HERE TO STAY

Accelerating trends, here to stay

Purpose at the heart of

Sustainability 360°

Luxury values polarizing between West and China

A new shopping equation:online acceleration & in-store brand experience

New business models reshaping ownership: rise of 2nd hand and rental

Next generation relationship driven by Clienteling 2.0

Temporary trends, here today

Chinese: from global spenders to

local consumers

Millennials take a hit, but are most

hopeful for the future

Experiential luxury & tourism: more

secluded and short-hauled

13

3 CONSUMER TRENDS ARE VERY RELEVANT TODAY, WHOSE DURATION IS

UNPREDICTABLE

43% of respondents say that they will be more likely to spend more on luxury experiences and less on products compared to before (even after Covid-19 crisis) • Preference for more exclusive and secluded categories such as home design, wellness & fine

dining as opposed to luxury cruise vacations and luxury bars, at least in the short run

• Experiential luxury becomes more short-hauled in the short term, with 54% of consumers not

expecting to resume international travel before 6 months from now

• Italy is on top of consumers' aboard destinations, except for Chinese, that now ranks France as first

choice (+24 pp vs Italy)

73% of Chinese say that they expect to re-patriate at least half of their luxury spending from abroad to their country of residence in the next 12 months• China market is expected to boom, growing at a faster rate than pre-Covid estimates

• Consumers say they will wait on average ca. 8 months before traveling abroad specifically to buy

luxury products, with faster recovery in domestic market

• Need for brands to relocate marketing efforts to be closer to where clients are; review distribution

strategy; rethink pricing and offer tailored to local markets

50% of Millennials & Gen Z say that their income has been reduced due to the Covid-19 crisis• However, they remain hopeful towards the future, with ca. 50% states that recovery will be fast (as

opposed to 20% for older generations)

• With or without a crisis, these generational cohorts are of special interest, given their increasing

spending power in the coming years and their ability to influence older generations, as they are

forerunners of accelerating luxury trends


Chinese: from global

spenders to local

consumers


secluded and short-

hauled

Millennials take a hit, but are most hopeful

for the future

14

5 CONSUMER TRENDS ARE HERE TO STAY, STRUCTURALLY SHAPING THE NEW

LUXURY REALITY (1/2)

Purpose at the heart

of Sustainability 360°

Luxury values polarizing between

West and China

Preference for luxury extro values increased by ~14% for Chinese, while it has lost ~9% for Westerns• Before Covid-19 hit, we witnessed a shift in values with a recent wave of extravagance and fun

identity statements as opposed to more traditional values (craftsmanship, timelessness…)

• With the arrival of Covid-19, the luxury world is now polarizing between "Sobriety is the way" in the

West and "Extra is cool" in China, as Chinese increase their preference for luxury extro values as

opposed to Westerns

• A potential dilemma for brands: would they follow extro values to appeal Chinese consumers (who

make 35% of the luxury market) or would they sober-up for westerns?

> 50% of respondents say that sustainability is more likely to impact their purchases than before• Now more than ever, consumers are paying a lot of attention on luxury brands' purpose and

contribution to society; they still support environmental causes such as climate change and see

favorably those brands who act beyond words

• The traditional meaning of sustainability – focused on the environment and animal welfare – has

evolved towards a holistic view (Sustainability 360°), with purpose and responsibility at its heart

• The luxury industry has made progress on sustainability, however at a slower rate in 2019, and many

brands are missing out on the benefits of sustainable practices – now is the time to act in order to

become a successful 360° Sustainability player


15

5 CONSUMER TRENDS ARE HERE TO STAY, STRUCTURALLY SHAPING THE NEW

LUXURY REALITY (2/2)

50% of respondents say that they will be more appreciative of personalized clienteling efforts• 46% will appreciate more digital personalized clienteling in the future compared to before,

especially Chinese (76%) and Italians (57%)

• Rising expectations for personalized relationship (especially online), not limited to moment of

purchase between brand and customer but along all consumer journey

• Time for brands to invest in customer-facing applications of advanced analytics

48% of respondents say that they will be more likely to spend online than before• Online channels to gain share during and post-lockdown, becoming an increasingly important

source of inspiration: 50% of consumers say they will spend more time gathering inspiration online

• Polarized choices: 36% of consumers say they expect to buy more online than offline going

forward, but 23% will still prefer offline purchases: the rise of online channels is not the death of

mono-brand stores, but an opportunity to embrace the new role of experience providers

• The shopping equation between online and offline is made possible by a solid omnichannel

strategy & advanced technologies

Before Covid-19, 2/3 of respondents said they expected buy significantly more second hand products vs before• 16% of True-Luxury consumers have rented a luxury item in the last 12 months, 25% have purchased

a 2nd hand luxury item and 33% have sold a 2nd hand luxury item

• Rather than feel threatened, brands should recognize 2nd hand luxury as a valuable customer

acquisition channel, which is linked to sustainability


A new shopping equation: online

acceleration &

in-store brand

experience

New business models

reshaping ownership: rise of 2nd hand and

rental

Next generation relationship driven by

Clienteling 2.0

16


E X P E R I E N T I A L L U X U R Y & T O U R I S M :

M O R E S E C L U D E D A N D S H O R T - H A U L E D


BUSINESS TRAVEL LEISURE TRAVEL & TOURISM

BUSINESS TRAVEL MOST AFFECTED AS COMPANIES EMBRACE NEW WAYS OF

WORKING, WHILE LEISURE CONSUMERS ARE LOOKING FORWARD TO TRAVELING

• Business travelers—especially premium and high-frequency

“road warriors" – say they miss

traveling

• However, companies they work for will have a significant say in

determining when they will resume

travel-dependent meetings

• Moreover, companies are

embracing alternative working

models such as work-from-home that might have a long-term

negative impact on business travel

• Leisure expected to recover

faster than business travel, as consumers show eagerness to

travel and experience

• When consumers identify the

activities they miss most while

waiting out the pandemic, they

consistently rank leisure travel

number one, across countries, age groups, and income levels,

with over 60% agreeing that they

can’t wait to start traveling again

This study focuses on experiential

luxury within leisure travel and

tourism

54%of True-Luxury consumers say

they plan to travel less for

work compared to before

60%of True-Luxury consumers say

they can't wait to travel again for

leisure

Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)


43% OF CONSUMERS WERE SHIFTING THEIR SPENDING TOWARDS EXPERIENTI AL

LUXURY BEFORE PANDEMIC HIT, AND TREND IS RESISTING

43%

43%

14%

Yes

Unchanged

No

% of respondents


~43% HAVE SHIFTED THEIR SPENDING TO EXPERIENTIAL BEFORE COVID-19

AND 40% STILL CONFIRM THEY ARE MORE LIKELY TO DO SO AFTER COVID-19

Compared to 2/3 years ago do you feel that you are buying fewer personal products

and more leisure experiences? (Pre-Covid Survey)

34% 34% 37% 38% 39% 41% 43% 44%53% 57%

46% 50% 44%49% 48% 50% 42% 43%

34% 32%

20% 16% 18% 13% 13% 9%15% 13% 12% 11%


Note: 1. Respondents who are switching because of at least 1 negative reason 2. respondents who are switching because of at least 1 positive reason 3. multiple choice question; Sample sizes are China = 876, Top 4 EU = 1294, US = 1194; multiple choice question Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

% of respondents % of respondents3

Compared to 2/3 years ago why do you feel that you are buying fewer personal products

and more experiences? (Pre-Covid Survey)

43

9

49

35

34

Bored of personal

goods

Full wardrobe

Experiences bring

more satisfaction

Experiences are

more exclusive

Spend time with

friends and family

47%

88%

Negatives of

personal goods1

Positives of

experiences2

33

6

56

37

40

40

8

49

33

33

52

10

53

36

35

All

AMONG THOSE WHO ARE SWITCHING, ~88% ARE SHIFTING SINCE EXPERIENCES

PROVIDE GREATER SATISFACTION AND EXCLUSIVITY


1. (% of a lot more + % of a bit more) – (% of a bit less + % of a lot less)Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

Home Tech -8% 4%

Lightning -16% -5%

Design Furniture -30% -10%

Art Goods -32% -17%

Wine & Spirits -4% 2%

Private Villas -25% 5%

Super Yacht -27% 2%

Exclusive Fine Dining -31% -5%

Wellness & SPA -33% -7%

Luxury Hotels -35% -5%

Luxury Resort Vacations -37% -7%

Luxury Bars & Clubs -41% -15%

Luxury Cruise Vacations -44% -21%

more secluded

How does your luxury spend in the future will compare to prior to the Covid-19 outbreak for the following categories?

Net appetite1Next

6 months

Next

2-3 years

Less impacted by crisis as consumers enjoy more time at

home

Impacted in the short term but will recover faster as experiences

become more secluded; super yacht and private villas positively affected

More impacted both in the short and long term as consumers are

structurally shifting their preferences towards intimate moments

Impact

AMONG EXPERIENTIAL, SOCIAL EXPERIENCES MORE NEGATIVELY IMPACTED BY

COVID-19 CRISIS, WITH CONSUMER SHIFTING TOWARDS MORE INTIMATE ACTIVITIES

EXPERIENTIAL

PRODUCTS

PRIVATE

EXPERIENCES

SOCIAL

EXPERIENCES


65%57% 55% 54% 50% 48% 46%

34% 31% 28%

27%

23%

23% 28% 24% 30% 29% 28%

30% 33%

22%

24% 17% 16%17% 18% 21% 25%

29% 34%

46%

Germany

100%

46%

5%3%

All

nationalities

RussiaFrance

3%11%

2% 1%

Italy

2%

UK

1%

China

1% 7%

Brazil US

2%

South

Korea

4%

Japan

I don’t think I will travel internationally again

After more than 1 year

From Immediately after to 6 months

After 6 months - 1 year

From the moment you will be allowed to travel for leisure internationally again,

when do you think you will actually start doing so?

Average

timeframe

(in months)

6 7 7 7 8 9 10 11 12 149

On average, Europeans & Russians

expected to resume international travel in

6-8 months, preferring neighboring

countries and short-hauled trips

Non-Europeans will take a bit more time

before they travel internationally again,

with higher share of consumers waiting

1 year


54% OF TRUE-LUXURY CONSUMERS DO NOT EXPECT TO RESUME INTERNATIONAL

LEISURE TRAVEL BEFORE 6 MONTHS

54%


Na

tio

na

lity

Italy

France

UK

Germany

Russia

US

Brazil

China

Japan

South Korea

Top Abroad Destinations

for luxury experiences, Pre-Covid

1 2

US

US

US

France

France

France

Italy

France

Italy

US

3

France

Italy

Italy

Italy

Italy

Italy

US

Italy

US

Italy

Spain

Spain

Spain

US

Spain

Spain

France

US

France

France

Note: Pre-Covid: question asked was 'How many trips of each type have you done to each destination in the last 12 months"; Post-Covid: Question was "Once the Covid-19 will be under control, which will be your 3 top international destinations (outside of your country of residence) for luxury experiences (e.g. luxury resorts, cruises, wellness)?"Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

Top Abroad Destinations

for luxury experiences, Post-Covid Era(x%) – Sum of share of respondents who ranked the country 1st, 2nd or 3rd

1 2 3

= (54%)

= (61%)

= (57%)

= (51%)

= (64%)

= (62%)

= (51%)

France (63%)

= (62%)

US (51%)

=

=

=

=

=

=

France

Japan

=

France

(51%)

(41%)

(48%)

(49%)

(56%)

(57%)

(51%)

(52%)

(60%)

(49%)

UK

UK

=

=

=

UK

Italy

Italy

=

Italy

(42%)

(35%)

(45%)

(36%)

(52%)

(44%)

(43%)

(39%)

(60%)

(44%)

ONCE THE COVID-19 WILL BE UNDER CONTROL, ITALY WILL BE THE PREFERRED

LOCATION FOR EUROPEAN NEIGHBORS AND AMERICAN, BUT NOT FOR CHINESE

23Source: BCG Knowledge & AnalysisSource: BCG Analysis

FOCUS ON VIRUS SAFETY MEASURES

EXPERIMENTING WITH INCENTIVES

THINK HYPER LOCAL

Fight Phase Future Phase

ENHANCE BRAND REPUTATION

DEEP KNOWLEDGE OF (NEW) CUSTOMERS

IDENTIFY NEW GROWTH VECTORS

FOCUS ON ITALIAN CLIENTELE FIRST, PROMOTING WHAT MATTER MOST TO THEM (CLEANLINESS, FLEXIBILITY)

REINFORCE NATIONAL BRANDING: AS ONE OF THE MOST AFFECTED COUNTRY, COLLECTIVELY PROMOTE ITALY AS A

WHOLE EVEN ACROSS BORDERS TO REASSURE

INTERNATIONAL CLIENTELE

F O C U S I T A L Y

EXPAND HORIZONS BUT KEEP YOUR LOCALS,

WORK YOUR WAY TO RE-WIN CHINESE INTEREST

PROMOTE YOUR UNIQUENESS: FOCUS ON PERSONALIZATION, INTIMACY, RARENESS

STABILIZE AND STRENGTHEN NATIONAL BRANDING WITH FOCUSED INITIATIVES

F O C U S I T A L Y

WHICH IMPLICATIONS FOR EXPERIENTIAL LUXURY & TOURISM?

23Source: BCG Analysis & Knowledge

24


C H I N E S E : F R O M G L O B A L S P E N D E R S T O

L O C A L C O N S U M E R S


RE-LOCALIZATION OF CHINESE CONSUMERS IS EXPECTED, WITH 73% CONVERTING

AT LEAST HALF OF THEIR YEARLY ABROAD LUXURY SPEND BACK TO CHINA

43 43 44 44

57 57 56 56

2016 2017

Share of purchase

Abroad

2018 2019

Share of purchase

In China

100%

Before Covid-19 hit, 56% of the yearly luxury

purchases of Chinese consumers were done

abroad…

… now, 73% of Chinese to convert at least half of

their yearly abroad luxury spend back to China in

the next 12 months

In the 12 months after the crisis, how much of your

yearly luxury spend you used to do abroad do you

expect to convert to your country of residence?

(Share of total Chinese respondents)

18% 55% 21%

All of it More than half Less than half

73%

6%

None


From half to all of it


THIS NEW DYNAMIC DRIVEN BY RE-PATRIATION OF DEMAND IS EXPECTED TO GROW

LUXURY MARKET PROJECTIONS FOR CHINA FASTER THAN PRE-COVID ESTIMATES

Note: all % variations vs 2019Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

0%

20%

40%

60%

2019 2020 2021 2022

~10%

~5%

~31%

~21%

~39%

~32%

Market Projections for China, Luxury

Yearly evolution, % var. vs 2019

Post Covid-19 Projections

Pre-Covid-19 Projections

China market hit by crisis in the first half of the year, progressively

catching up thanks to repatriated Chinese spend. Still, lower growth

than Pre-Covid forecasts

Ca. +7 pp. versus pre-Covidgrowth estimates, as consumption

by Chinese locals & repatriated keeps growing at GDP rate and

brands keep investing in the market

Rapid grow as a result of higher spend by Chinese who traditionally

bought in China & continued repatriation of Chinese who used to spend abroad (following GDP

growth)

GDP projections

(vs 2019)+1% +9% +15%

27Source: BCG Knowledge & AnalysisSource: Extract from BCG Virtual Press Conference – Insights on Fashion & Luxury Industry in China after Covid-19 (June 11th 2020)

Waves of brands opening online

stores since Jan 2020

Brands seek for strategic partnerships and joint commercial push

Example: 20+ fashion & luxury brands launched Super Brand

Day on Tmall since Jan. 2020 – 50%+ focused on new

product launch

A luxury jewelry brand:

16mn RMB sales,

0.3bn impression

A skincare brand:

>100mn RMBsales

PRADA

Cartier BVLGARI PIAGETGIORGIO

ARMANI

MIU MIU Acne Studios

Alexandre

Wang

Maison

Margiela

MONT

BLANC

DELVAUX GOOSSENS BARRIE SMYTHSON

Pringle of

ScotlandMSGM

PROENZA

SCHOULER

A sportswear brand:

6K pairs of shoessold in the first 10 mins

Tmall

JD.com

MANY LUXURY BRANDS ARE ALREADY ACCELERATING THEIR PRESENCE IN CH INA,

ESPECIALLY ON E-COMMERCE


FOR LUXURY CATEGORIES, RECOVERY WILL BE FASTER IN DOMESTIC MARKE T

VS INTERNATIONAL, PARTICULARLY FOR APPAREL, SHOES AND LEATHER GO ODS

Immediately 1-3 months 3-6 months 6 months -1 year 1 year 2 years

Apparel

Perfumes & Cosmetics

Jewelry

Leather Goods

Shoes

Watches

Luxury Wellness & Spa

Luxury Hotels & Resorts

Luxury Home Items

Luxury Yachts & Cruises

Note: 1. from the moment you can buy locally/you will be allowed to travel internationallySource: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

Apparel, perfumes

and shoes first to

recover in domestic

market, with bigger

gap between home

& international

recovery as they are

easily available

Shorter gap

between domestic

and international

recovery for

experiential luxury,

as experience

cannot be

replicated locally

When do you think your spending habits in your country of residence/abroad would return to “normal” (i.e., similar to before the outbreak) for the following luxury categories (both online and offline)?1

Country of Residence – Weighted average recovery timeframe Abroad – Weighted average recovery timeframe


~50% OF CHINESE CONSUMERS SAY THAT THEY WILL WAIT AT LEAST 6 MONT HS

BEFORE TRAVELING INTERNATIONALLY


95%99%

0%

20%

40%

60%

80%

100%

2%

Immediately

after

20%

78%

After 6

months

- 1 year

After 3 -

6 months

After 1 -

3 months

50%

After more

than 1 year

After more

than 2 years

From the moment you will be allowed to travel

internationally again (outside of your country of

residence), when do you think you will actually start

doing so?

TOP INTERNATIONAL DESTINATIONSFOR CHINESE CONSUMERS

For luxury

goodsFor luxury

experiences

Share of respondents who ranked the country in the top 3

Cumulated share of responses

Japan (62%)1

2 France (57%)

3 Italy (39%)

1 France (63%)

2 Japan (52%)

3 Italy (39%)

4 South Korea (33%)4 South Korea (36%)

5 Germany (31%)

6 UK (28%)

5 UK (30%)

6 US (24%)


KEY IMPLICATIONS FOR LUXURY BRANDS DERIVING FROM RE-PATRIATION OF

CHINESE CONSUMERS

• Rethink marketing and communication to be

closer to where clients are, adapt local engagement style and media

• Give more freedom to local PR and events to

nurture local initiatives

• With less international travel and with the rise of

online shopping in China, it is of upmost

importance for global luxury brands to partner

with a local e-commerce company

• Review retail footprint to seize opportunities

• Review your pricing strategy and product

offering to avoid missed opportunities to boost local sales

&Half of Chinese

will wait at least 6 months

before traveling abroad

China market expected

to boom with re-

patriation of demand

Relocate marketing

and communication

efforts

Review strategically

your distribution

Rethink pricing and

offer to local market

Source: BCG Analysis & Knowledge

31


M I L L E N N I A L S T A K E A H I T , B U T A R E

M O S T H O P E F U L A B O U T T H E F U T U R E


MILLENNIALS & GEN Z MOST IMPACTED BY COVID-19

COMPARED TO OTHER GENERATIONS…

My income has been reduced due to the coronavirus

35%

55% 50%37%

29% 22%

21%

20%15%

21%22%

27%

44%

25%35% 41% 48% 50%

Generation

X

Total Silver Baby

Boomers

Generation

Z

Millenials

64% say they are very careful

on how they spend their

money


Strongly Agree & Agree Neither agree nor disagree Strongly Disagree & Disagree

32


…YET ARE THE MOST HOPEFUL ABOUT THE FUTURE: 53% THINKING RECOVER Y WILL

BE FAST COMPARED TO ~20% ON AVERAGE FOR OLDER GENERATIONS

I believe that the recovery after the crisis will be fast

43% 50%61%

53%

35%23%

20%

30%18%

19%

22%

24%

36%20% 21%

28%44%

53%

SilverTotal Baby

Boomers

Generation

X

Millenials Generation

Z



Strongly Disagree & Disagree

• Millennials & GenZ are more positive than average (+5 pp in net score1) on

almost all categories, especially on

casual apparel (+10 pp) and

sportswear (+7 pp)

• Less negative than other generations, especially on jewelry and watches (+8

pp in net score)

• Their negative feeling towards hotels, luxury bars and cruises is also

moderated compared to older generations

Focus on future luxury spend

Next 6 months

Next 2-3 years

1, Share of respondents who indicated "will buy a lot more" & "will buy a bit more" MINUS share of respondents who indicated "will buy a lot less" & "will buy a bit less"Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)


MILLENNIALS AND GEN Z ARE FORERUNNERS OF EXISTING TRENDS, SOME O F

WHICH ACCELERATED BY COVID-19

More likely to appreciate

personalized relationship

(Clienteling)

58% agree

(+ 9 pp. vs average)

More likely to follow

influencers and social

media on developing

opinions

44% agree


More likely to spend

more time finding

inspiration for purchase

50% agree


More interested in buying

online, especially on

multi-brand online stores

49% agree


More likely to buy/sell

second hand products in

the future

36% agree


Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries) 34


GEN Z AND MILLENNIAL MARKETING MATTERS MORE THAN EVER: SOME BRAN DS

HAVE CLEARLY REALIZED IT

Among Gen-Z and Millennials,

60% say that an advertisement on

social media has influenced their

purchase decision during COVID-19,

compared to 25% of older generations

Smart brands will develop a deep

understanding of Gen Z and Millennial

consumers, anticipate their shifts, and

adjust their marketing strategies in order

to catch the wave early

Source: BCG Analysis & Desk research

Bold brands engaged with these generations

disruptively during Covid-19

Gen Z customers make

81% of the platform’s user base

It was the most-

downloaded app on the App Store in 2018 and 2019

In May, Dior created a video with

virtual KOL Xuefei Nova exhibiting Dior styles

For Chinese Valentine's day,

Gucci promoted on Bilibili

Fendi advertised a customized

Pekaboo bag (picture on the left)


The priority for the short term is finding the right balance between engaging

with young generations and nurturing older generations, who are more solid

in terms of spending power and are currently core luxury consumers

WHICH IMPLICATIONS FOR LUXURY BRANDS?

With or without a crisis, these generational cohorts are of special interest,

given their increasing spending power in the coming years and their ability to

influence older generations

Millennials & GenZ are now suffering the effects of Covid-19, however they

are expected to represent 55% of total luxury consumption by 2025

There is an opportunity for brands to pivot their marketing to engage with

young generations from now: following this generation means anticipating

future trends and winning the race before others

37


L U X U R Y V A L U E S P O L A R I Z I N G B E T W E E N

W E S T A N D C H I N A


LUXURY ALWAYS CHARACTERIZED BY ALTERNATION OF GLOBAL STYLE ERAS

70's 90's80's 00's Future60's 10's 20's

Emancipation Woodstock Eccentricity Eclectic Minimalism OutrageousNew

EleganceExtravagance

Source: desk research


THE GROWTH TRAJECTORY OF EXTRO VALUES PROGRESSES FAST IN CHINA

BUT HALTS IN THE WESTERN WORLD: TWO DIVERGING DIRECTIONS

15%21%

28%23%

2017 20192014 2020

-18%

19% 22%28% 26%

2014 2017 2019 2020

-9%

22%29% 31%

35%

2017 20192014 2020

+14%

Note: 1. % of new luxury values indicated as a response to the question "Luxury to me is…"Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

Preference for

New luxury values

Extro Values1

Extravagant & funIdentity statement

Brand visibility & patternsAdorned aesthetics

Cool & Sexy…

Timelessness

Craftsmanship

Adorned aesthetics

Exclusivity

Craftsmanship

Heritage

Brand iconic patterns

Brand visibility

Brand iconic patterns

An identity statement

Exclusivity

Craftsmanship

More significant values

compared to global average

Less significant values

compared to global average


LUXURY WORLDS TRAVELS NOT ONLY AT TWO SPEEDS BUT ALSO TOWARDS

TWO DIFFERENT DIRECTIONS


70's 90's80's 00's60's 10's 20's

Emancipation Woodstock Eccentricity Eclectic Minimalism Outrageous New

Elegance

Extravagance

SIGNALS FROM THE WEST

"Sobriety is

the way"

SIGNALS FROM CHINA

"Extra is

cool"

41Source: BCG Knowledge & AnalysisSource: BCG Knowledge & Analysis

WHICH IMPLICATIONS FOR LUXURY BRANDS? A DILEMMA ARISES

41

Towards the Sober Era: • Preference for temperance and "slow fashion"

• This preference is also linked to a general

appreciation for sustainability 360°: consumers in

mature fashion countries increasingly thoughtful in

their consumption habits

Would they sober-up

to appeal Westerns?

Would they follow extro values

to appeal Chinese consumers?

Extra is still cool: • Chinese consumers still appreciate bold and

extravagant values

• Luxury items represent a way to express fun

identity statements


P U R P O S E A T T H E H E A R T O F

S U S T A I N A B I L I T Y 3 6 0 °


MANY SUSTAINABILITY TRENDS HAVE BEEN ACCELERATED BY COVID -19 CRISIS &

RECENT EVENTS, WITH THE URGE OF EMBRACING SUSTAINABILITY 360 °

= Strong dynamics in past years = Comparably moderate dynamics in past years

BRANDS' TRUE COMMITMENT TO SOCIETY IS EXPECTED, WITH NO SPACE FOR GREENWASHINGConsumers expect brands to become more human, to redefine their role in society with a need to act beyond words, and to avoiding the use of greenwashing (using language of sustainability to drive sales, without true commitment) Call to action: Brands need to truly contribute and support society, committing to meaningful change

Before

Covid-19

After

Covid-19 & recent events

CONSUMERS ARE MORE THOUGHTFUL OF DIVERSITY & INCLUSIONConsumers expect to see diversity and inclusion in brands' communications and in stores, to reflect reality Call to action: Brands need to truly commit to diversity & inclusion programs both in HQ, stores and communication

INCREASING CONSUMER AND EMPLOYEE AWARENESS & EXPECTATIONS, NO SINGULAR VIEWConsumers significantly increased their sustainability concerns, especially on social media; in China awareness rises in particular among younger generations; no singular view of what sustainability means to consumersCall to action: Brands must understand what sustainability really means to their consumers

CLIMATE CHANGE AND NATURAL DISASTERS ARE THE MOST IMPORTANT TOPICS IN SUSTAINABILITYFashion and luxury industry has a significant environmental impact—that’s why consumers consider climate change as one of the most important topics in sustainabilityCall to action: Climate change should remain on top of priorities for both companies and authorities

THE FASHION AND LUXURY BUSINESS MODEL IS AT RISK Due to its extensive negative social and environmental impact, the industry faces financial, business and reputational risksCall to action: Brands should rethink their fashion calendar and collection management


SUSTAINABILITY IS INFLUENCING CONSUMERS NOW MORE THAN EVER…


12%21%

33%

35%

33%

28%

15%10%

7% 6%Completely

disagree

Disagree

2013 2019

Completely

agree

Indifferent

Agree 59% 61%

41% 39%

20192018

No

Yes45% 56%

I try to get informed

whether the brand I buy is

socially responsible

Does sustainability impact

your purchasing behavior?

Before Covid-19 Before Covid-19

"I will be much more

attentive to the services offered by luxury brands. I will

also be attentive to the

aspects related to

packaging (less packaging in general, recyclable

packaging, etc.)"

"I will check where the

items/products are coming

from, giving priority to locally

sourced products"

After Covid-19

More than halfSay that sustainability is more

likely to have an impact on their

purchasing behavior than before

45

…BUT MANY LUXURY BRANDS ARE NOT PERCEIVED AS

SUSTAINABLE FOR CONSUMERS

Index of votes for best and worst sustainability brands for each

Sustainability criteria (e.g. animal welfare)

1.0

Top 100 most frequently responded brands

Leading brands are

strong in all

sustainability

categories

The most at risk brands

are those viewed as

worst for respecting

animal welfare

72% are at risk of

losing consumers as

sustainability

increasingly

influences behavior

28% are likely

benefitting from

consumers shifting

towards more

sustainable brands

Note: each data point corresponds to a different luxury brandSource: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)


…donated money for research 62% 59% 54% 81% 62% 64%

…donated money for medical

supplies and facilities60% 57% 54% 81% 58% 61%

…took early steps in protecting their

workers and consumers60% 66% 53% 75% 60% 59%

…re-purposed their production

facilities to produce hand sanitizers,

masks & other vital products

59% 58% 52% 77% 59% 57%

…took a political stance and urged

governments to take action52% 45% 46% 76% 45% 53%

…sent personalized communication

about Covid-19 impact on the brand48% 40% 43% 71% 42% 48%

Note: 1. Actions with >20% of respondents saying they are now more likely to purchase that brand 2. Brazil, Russia, South KoreaQuestion text: “Please tell us how the following actions undertaken by luxury brands during the Coronavirus pandemic impacted your perception of those luxury brands"Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in 10 countries)

During the coronavirus crisis, consumers found particularly attractive brands that… (% of respondents, positive impact)

Three actions1 increased consumers' willingness to buy from that brand…

Protected their workers and customers from the very beginning

Repurposedproduction facilities

Donated to the community

All

countriesEmerging

markets2

….highlighting the purpose of brands in society

& the importance of acting beyond words

CONSUMERS ARE ESPECIALLY PAYING A LOT OF ATTENTION ON LUXURY BRANDS'

PURPOSE AND CONTRIBUTION TO SOCIETY IN THE LIGHT OF RECENT EVENTS

47

DIVERSITY AND INCLUSION ALSO EXPECTED TO BE FULLY INTEGRATED

WITHIN SUSTAINABILITY STRATEGY



A HOLISTIC MEANING FOR SUSTAINABILITY: INCREASED EMPHASIS ON SUP PORT

TO COMMUNITY, BUT ENVIRONMENT STILL REMAIN VERY RELEVANT

40%

32%

6%

40%

Natural /

organic

materials

22%

6%

33%

39%

36%

Air and water

pollution

25%

Reason why I

would prefer

a brand

46%

20%

Recycling

Minimum

criteria

20%

29%

Carbon

footprint and

gas emissions

30%

20%20%

5%Indifferent

49%

37%

Sustainable

innovation

5%

32%

40%

19%

Fair labour

practices

13%

Animal

welfare

Happy with it

6%

16%

6%

29%

Use of

chemicals

40%

30%

42%41%

7%

32%

21%

7%

Waste

37%

Educate

21%

9%7%

Support

community

causes

41%

20%

6% 8%

18%

39%

Transparency

34%

% of respondents that are influenced by sustainability

Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10

countries) & Post-Covid (June 2020; ~2000 in 10 countries)

Which Sustainability criteria are most important to you?

Animals Labour EnvironmentEducation &

innovation

After Covid-19,

consumers most concerned about…

Climate change remains a strong focus both for consumers and for the industry

49

Purpose

Locally made

Waste

reduction

Support

employees

Support society &

communityTransparency

Diversity &

Inclusion

Working

conditions

Innovation

Carbon footprint &

gas emissions

Animal Welfare

& Biodiversity

Thoughtful evolution

of processes

Thoughtful use &

sourcing of materials

SUSTAINABILITY 360°

A NEW HOLISTIC DEFINITION,

DRIVEN BY THE UNDERLYING

PURPOSE OF THE BRAND

49

50

4751

2017 2018

52-541

2019

1. Small luxury player with a Pulse score of 52 and large luxury player with a Pulse score of 54 in 2019Source: Pulse of the Fashion Industry 2019; BCG analysis

Pulse Score (max. 100)

LUXURY INDUSTRY HAS MADE PROGRESS

HOWEVER AT SLOWER RATE IN 2019

Target

100

+4pp

+1-3pp

50


EFFICIENCY MEASURES CAN FURTHER IMPROVE SUSTAINABILITY PERFORMANCE,

BUT FOR A REAL CHANGE DISRUPTIVE NEW TECHNOLOGY IS NEEDED

How to unlock the Next Level:

• Overcome challenges in

innovating transformative

technologies

• Build collaboration

between Industry and

government e.g. for clear

certification and protocols

PRE–PHASE PHASE ONE PHASE TWO PHASE THREE PHASE FOUR

Building the

Foundation

Implementing the

Core

Expanding to

Scale

Unlocking the Next

Level

Taking

Uncoordinated

Actions

Luxury

industry

Now

Weak Strong

>7060–6950–5940–4930–3920–29<20

Opportunistic actions to selectively showcase

engagement / react to latest trends / news

Comprehensive program

including set of actions

targeting high-impact areas

Holistic program embedding

sustainability into business practices

and brand promise

Source: Pulse of the Fashion Industry 2019; BCG analysis


FOR TECHNOLOGY DISRUPTION, RAW MATERIALS & END-OF-USE HAVE HIGHEST

IMPACT POTENTIAL AND REQUIRE 45% OF THE TOTAL INVESTMENT

X Axis

Source: BCG and Fashion for Good analysis.1 Includes logistics and transportation innovations, overarching water management solutions, and worker empowerment

25%

13%

20%

12%

20%

100%5%

5%

Raw materials ProcessingCut-make-

trim

Retail and

useEnd of use

Total

opportunity

Transparency

and

traceability

Other cross-

supply-chain

innovations1

$20-30bn p.a. required in financing to achieve

opportunities from disruptive technologies

52


OUR VIEW ON HOW TO BE A SUCCESSFUL 360° SUSTAINABILITY PLAYER

Source: BCG analysis

Meaningfully and responsibly

commit to society, both

internally (diversity &

inclusion) and externally

(community & environment)

Integrate sustainability in the

overall business strategy and

in day-to-day operations

(Internal, supply chain), as

well as part of digitalization

Master the table stakes

demanded by consumers

(e.g. fair labor, transparency,

environment…)

Develop sustainability

strategies that are driven

by impact that goes

beyond boundaries and

obvious initiatives

Have Targets, Traceability

and Transparency… requiring

clear standards set by

government and regulators

Make credible, tangible and

stakeholder-focused

sustainability promises,

accelerating transparency


N E X T - G E N E R A T I O N R E L A T I O N S H I P

D R I V E N B Y C L I E N T E L I N G 2 . 0


A NEXT-GENERATION TYPE OF RELATIONSHIP: CLIENTELING 2.0

…2.0

…ensuring that the relationship is seamlessly

nurtured both in store & online, combining

capabilities of people and data using advanced

tools (e.g. machine learning)

Establish long-term relationships with consumers

leveraging data about what they like, what they

purchase, how they behave…

CLIENTELING…

55Source: BCG Knowledge


IN THE NEW REALITY CONSUMERS WILL HIGHLY VALUE DIGITAL CLIENTELING,

WITH HIGH EXPECTATIONS ON LEVEL OF SERVICE

46% SAY THEY WILL BE MORE

APPRECIATIVE OF DIGITAL PERSONALIZED CLIENTELING

COMPARED TO BEFORE

76% 57%

EVEN MORE SIGNIFICANT FOR

TO THE POINT THEY WILL EXPECT TO

RECEIVE THE SAME LEVEL OF SERVICE

IN BOTH ONLINE AND OFFLINE

CHANNELS




50% of True-Luxury

consumer starts

their journeys

online, searching

for inspiration

Online penetration

will increase

strongly up to 20%

of luxury sales in

2022

(+8 pp vs 19)

Digital clienteling

will become as

relevant as

physical

(46% preference

vs. 49% for

physical)

THE OLD MODEL DOES NOT WORK ANYMORE, AS CLIENTS WISH TO REPLICAT E

ONLINE THE OFFLINE RELATIONSHIP THEY HAVE WITH BRANDS

PAST FUTURE

PHYSICAL

CHANNELS

Inspiration Purchase Clienteling

80% of True-Luxury

consumers

conclude their

purchase in store

(of which 39%

ROPO1)

Inspiration Purchase Clienteling

Personalized

in-store treatment,

selling ceremony,

with 1to1

knowledge of taste

and preferences

DIGITAL

CHANNELSNote: 1. ROPO: Research Online, Purchase OfflineSource: BCG Analysis & Knowledge


SOME BRANDS HAVE STARTED EXPERIMENTING NEW AND PERSONALIZED WAYS

OF ENGAGING WITH CONSUMERS DURING LOCKDOWNS

During lockdowns, consumers and brands engage on a personalized level via digital…

..with brands imagining the

next-generation of relationship

Gucci Live, a video service that

enables staff to communicate with

shoppers on their mobiles or laptops,

offers a seamless, always accessible,

personalized experience

Source: desk search, brands' websites

Galeries Lafayette has been

trialing ‘Exclusive Live Shopping,’ a

video service that links up

individual customers at their

homes with consultants and

personal shoppers

Luxury brands in High Jewelry

shifting from events to deeper

personalization and intimate events

(digital & offline) in the long-term


HOW TO BUILD A STRONG CLIENTELING 2.0 BACKBONE, THROUGH ALL

CHANNELS?

FROM DATA TO PEOPLE• Enable sales associates to use customer targeting

and recommendation

• Move from blast campaigns to personalization

– Impact on content design, creation and

validation process

ADVANCED TOOLS AND METHOD• From data to action: advanced methods and tools

such as machine learning to gather insights

• Customer-centric mindset

LEVERAGE DATA TO GET TO KNOW YOUR CLIENTS• Gathering of client data (socio-demo; recent

purchases; browsing data; third-party)

• Build an end-to-end automated flow from customer

data capture to activation

Data

Capabilities

AI/AA

People

60


A N E W S H O P P I N G E Q U A T I O N :

O N L I N E A C C E L E R A T I O N & I N - S T O R E

B R A N D E X P E R I E N C E


INTRODUCING A NEW SHOPPING EQUATION WHERE ONLINE ACCELERATES AND

STORES EVOLVE

ONLINE

ACCELERATIONIN STORE BRAND

EXPERIENCE

SEAMLESS

JOURNEY

"WHERE I LOOK FOR INSPIRATION"

"WHERE I BUY MY PRODUCTS"

"WHERE I LIVE THE EXPERIENCE"

"WHERE I CONNECT CLOSELY TO PEOPLE"

"WHERE I ENJOY A SMOOTH SHOPPING

EXPERIENCE"

"WHERE I FEEL SPECIAL"

CLIENTELING 2.0



STORES EVOLVE






EXPERIENCE"


CLIENTELING 2.0

ONLINE


EXPERIENCE

SEAMLESS

JOURNEY


SHIFT TO ONLINE CHANNELS WAS ALREADY ON ITS WAY, BUT HAS BEEN FU RTHER

ACCELERATED BY COVID-19


countries) & Post-Covid (June 2020; ~2000 in 10 countries); BCG-Altagamma Market Model & BCG Post-Covid-19 Market Projections

2016 2017 2018 2019

100105

111

124

Share of number of purchases made

onl ine ( indexed to 100 in 2016)

PAST PRESENT FUTURE

Mix of onl ine channels (brand.com &

e-tai lers) on total sales, vs 2019

48% of consumers say they will be more likely to shop online for

luxury products

From 2016, online channels have

considerably grown(CAGR: +7%)

13%

31%

36%

12%

8%

By 2022, online channels are

expected to contribute to 20% of total luxury sales

10%

10%

88%80%

2022…

6%6%

2019

Offline Channels

Brand.com

E-tailers 20%10%

Strongly Agree

Agree

Neither agree

nor disagree

Disagree

Strongly Disagree

% of respondents

" I wi l l be more l ikely to buy onl ine in

the future compared to before"


METAMORPHOSIS OF ONLINE: FROM DISTRIBUTION CHANNEL TO INSPIRATIO N

MACHINE & MORE

Source: BCG knowledge & analysis

Past

Future

Limited share of

sales compared to

offline channels

Used mostly as a

distribution

channel

Not a main source

of inspiration for

consumers

One size fits all

communication

style

Share of online

sales on total +8

pp. by 2022

From distribution

channel to 360°

role

An increasingly

important source

of inspiration

Personalized

communication & targeting

Focus of next slides


% Of time spent on each component of the shopping journey

27

29

29

28

27

24

26

26

26

26

25

24

29

24

25

26

33

44

17

21

20

19

15

9

OlderMillennial

Gen Z

Overall

Generation X

YougerMillennial

Baby Boomers+ Silver

I N SP I R A T I O N R ESEA R C H PU R C H A SEP O S T -

P U R C H A S E

For your most recent purchase, how much time did you spend on each of the

following actions?

INSPIRATION IS AS RELEVANT AS PURCHASE PHASE

ESPECIALLY FOR MILLENNIALS AND GEN Z

Inspiration is the first

moment

of influence along the

customer journey

It is the conversion of

passive

consumption into active

engagement

What is inspiration?

44% of True-Luxury consumers say will spend more time

gathering information than before Covid-19

Source: Proprietary BCG-Altagamma True-Luxury Global Consumer Insight Survey & Analysis in two field

moments: Pre-Covid (Dec-Jan 2020; 12K+ respondents in 10 countries) & Post-Covid (June 2020; ~2000 in

10 countries)


CONSUMERS SEEK INSPIRATION FROM MULTIPLE SOURCES: ONLINE AND OFFLINE

CHANNELS BOTH PLAY AN IMPORTANT ROLE

51%

49%

Note: Other offline: physical mail, events presenting the product (e.g. fashion shows) and personal shopper or stylist. Other online: online mag, newspapers and blogs



Where did you first find inspiration for this purchase?

Offline

Online

Older

Millennial

Baby Boomers

+ Silver

Gen. XAll Gen. Z Younger

Millennial

29% 28% 30% 29% 29% 29%

23% 22% 26% 24% 23% 18%

19% 21%18% 20% 17% 19%

9% 10% 12%

9%9%

8%

6%6%6%7%

8%

7%8% 7%

6%7%5%

6%7%

8%

7%

5%

7%6%

26% 31% 31% 26% 22%12%

18%17% 19%

20%17%

13%

18% 18% 16%17%

20%

25%

10% 10% 10% 10% 11%

9%

10%11% 9% 10% 10%

11%

11% 10% 10% 13%26%7%

8%

6% 7%2% 7%

6%

Multi-brand website

Mono-brand website

Social media & influencers

Generalist marketplace

Digital comms incl. app

TV commercial

Other

Mono-brand store

High-end department

store

Multi-brand storeWord of mouth

Store windowsOther

Magazines & newspapers

27% 28% 28%

30%18% 19%

19%

20% 21%

13%

10%10%

6%

6%

8%

8%4%

7%

6%5%

8%

26% 28% 28%

19% 19% 19%

18% 16% 16%

10% 10% 10%

10% 11% 11%

11% 11% 11%5%6% 5%

50% of True-Luxury consumers say will

spend more time gathering information

online than before Covid-19



STORES EVOLVE






EXPERIENCE"


CLIENTELING 2.0

ONLINE


EXPERIENCE

SEAMLESS

JOURNEY


POLARIZED CHOICES: 36% OF CONSUMERS SAY THEY EXPECT TO BUY MORE ONLINE

THAN OFFLINE GOING FORWARD, BUT 23% WILL STILL PREFER OFFLINE PU RCHASES

Question text: " After lockdown is over, i.e. brick-and-mortar clothing stores reopened, how much do you expect your spend at luxury physical stores vs online stores for the

following luxury products compared to before?"



9% 8%14% 13%

8% 10% 10%

13% 13%

14% 12%13% 12% 13%

41% 41%

40% 41%42% 41% 41%

29% 30%25% 25% 29% 30% 28%

8% 8% 7% 8% 8% 8% 8%

Leather

goods

Shoes Apparel Jewellery Perfumes &

CosmeticsWatches Overall

More online

More offline

Will buy only online

Will buy more online than offline

compared to before

Unchanged

Will buy more offline than online

compared to before

Will buy only offline

Especially for:

Chinese consumers (+13 pp, excl. watches &

jewelry)

Millennials & GenZ (+5 pp)

36%

Especially for:

Watches and Jewelry purchases (+5 pp)

Older generations (+8 pp)

23%


THE RISE OF ONLINE CHANNELS IS NOT THE DEATH OF RETAIL, BUT AN

OPPORTUNITY FOR STORES TO EVOLVE

Focus on experience

and service

"Hyper-localized"

assortment

Upgraded digital

experience

Consumers hope stores can

provide brand experiences and

offer additional services e.g.

experience flagship store,

showrooms and community events

to build strong relationships with

the brand

~60% of retail executives believe

that the main mission of stores is to

offer themed experiences and

fulfillment

As consumers increasingly shop

close to home and expect

personalized and local

experiences, a hyper-localized

assortment has become key for

retailers

Hyper-localized stores offer

consumers a personalized product

assortment and increased

convenience

Increase in digital touch points

increases consumer expectations for

retailers to provide better E2E

customer journeys, including in-store

innovations

Use digital tools to innovate in-store

consumer journeys, eg. store

displays, unlimited shelves, new

shopping assistance services and

CRM etc

Source: Extract from BCG Virtual Press Conference – Insights on Fashion & Luxury Industry in China after Covid-19 (June 11th 2020)


GOING FORWARD, STORE WILL LOOK VERY DIFFERENT: SOME BRANDS ALREA DY

ANTICIPATING THE SHIFT

Off-White, Bistrot Amèlie - Le Bon Marché, Paris Cartier - New Bond Street Boutique, London Farfetch – Store of the Future, New York

A NEW ROLE FOR RETAIL

EVOLVE TOWARDS FEWER STORES

MORE IMMERSIVE & EXPERIENTIAL

A PLACE FOR CONNECTION AND SOCIALITY

Source: Desk research, BCG knowledge



STORES EVOLVE






EXPERIENCE"


CLIENTELING 2.0

ONLINE


EXPERIENCE

SEAMLESS

JOURNEY


Inspire

Cultivate an image that’s both aspirational and

accessible; use social

channels to show how

they participate in social,

civic, and other causes;

collaborate with third-

parties and create

communities

Boost your online

Create an online

connection that feel exclusive and beyond

what non-luxury retailers

offer, incl. fashion shows,

private showings,

personal shoppers, blue-

ribbon delivery, and

other customized services

Shift from store to

experience, trying new concepts such as store in

store, test & try, brand

storytelling & brand-

related services, within

the omnichannel

strategy

Evolve your stores

Nurture Relationships

Make your consumers have

what they want: emotional

connection, personalizationand uniqueness, both online

and offline (omnichannel

relationship)

Leverage data and

technology to make all this possible; invest in tech

Advanced Analytics and

Artificial Intelligence to create

E2E consumer journeys

Leverage AA & AI

Inspire

Evolve

your stores

Nurture

relationships

Leverage

AA & AI

Boost your

online

Omnichannel

strategy

Source: BCG knowledge

OMNICHANNEL IN LUXURY IS STILL THE WAY TO GO: WHICH IMPLICATION FOR

BRANDS?

73


N E W B U S I N E S S M O D E L S R E S H A P I N G

O W N E R S H I P : R I S E O F 2 N D H A N D A N D

R E N T A L


CONSUMERS ARE LIKELY TO INCREASINGLY EMBRACE THESE NEW MODELS FOR

ACCESSING AND OWNING LUXURY ITEMS

25%

33%

16%

Expected Trend & observations

% Consumers have rented 2nd hand in

last 12 months

Ownership models

Hard luxury (e.g. watches) will drive growth for

rental market, however the fundamental

difference in the consumer experience

renting, versus owning luxury items will hinder

growth (i.e. renting is not same feeling as

buying)

Renting



I want to try new products and brands without a significant investment

Ne

w &

em

erg

ing

Co

nso

lida

tin

g

% Consumers have purchased 2nd

hand in last 12 months

% Consumers have sold 2nd hand in last

12 months

Buying

SellingScarcity and limited editions will drive the

buy-and-sell market

Sustainability to increase consumers

willingness to sell their old luxury items

Many consumers are open to purchasing 2nd

hand but are not yet participating in the

market. The rise in number of 2nd hand

platforms, models and innovation will open

up avenues for such consumers

It is not sustainable to hold onto unworn luxury items that

someone else might wear

If I can get authentic luxury items in pristine condition –why not buy pre-owned?


60% 62%

40% 38%

Interested

2018 2019

Not interestedMORE CONSUMERS ARE INTERESTED IN THE PREOWNED MARKET

Source: BCG-Altagamma True-Luxury Global Consumer Insight Survey Dec

19/Jan 20 (12K+ respondents in 10 countries); press search

Are you interested in the pre-owned

market?


RATHER THAN FEEL THREATENED, BRANDS SHOULD RECOGNIZE 2 ND HAND LUXURY

AS A VALUABLE CUSTOMER ACQUISITION CHANNEL

1. Sum of answers 'strongly agree' and 'agree' minus answers 'disagree' and 'strongly disagree'



29% 26% 32% 31% 28%16%

44%42%

42%50%

39%

46%

19%19%

18%15%

24%29%

6% 10% 5% 6% 8%3%3%2%

Gen Z

2% 2%

All

1%

Neutral

Younger

Millennial

Baby

Boomers

+ Silver

Older

Millennial

3%

Gen X

Agree

Disagree

Strongly

disagree

Strongly

agree

I buy more expensive brands on 2nd hand that I could not afford otherwise

32% 29%37% 40%

23%

9%

33%31%

33%35%

33%

27%

21% 26%19%

17%

22%

31%

9% 9% 7% 6%

13%25%

5% 9% 7%

Gen XAll

5%

Younger

Millennial

Gen Z Older

Millennial

4% 2%

Baby

Boomers

+ Silver

I discovered a new brand through the 2nd

hand market

Preference

Index156% 64% 77% 58% 52% 46% 59% 67% 34% 4%51%65%


PREOWNED IS A USEFUL CUSTOMER ACQUISITION CHANNEL FOR BRANDSCONSUMERS WOULD APPRECIATE MORE DIRECT BRAND INVOLVEMENT

IN THE 2ND HAND PURCHASE MARKET

33%

37%Agree

30%

28%

40%

Neutral /

disagree

37%

37%

32% 26%

Strongly agree

74%68%70%

To what extent would you like…



To purchase 2nd hand

products directly through

brands

To find 2nd hand products in

mono-brand stores

Brands to certify 2nd hand

products sold on re-sellers


RETAILERS HAVE BEEN ENTERING THE 2ND HAND BUYING & SELLING MARKET,

WITH SOME LUXURY BRANDS ALSO GETTING INVOLVED

2020: Nordstrom announces own

physical reselling outlet, "See you

Tomorrow"

2018: Stella McCartney partnered with

TheRealReal, encouraging consumers

to consign Burberry

2019: Burberry partnered with

TheRealReal, encouraging consumers

to consign Burberry

2019: Reselling platform, Vestiaire

Collective opens concession store in

Selfridge's

2019: Neiman Marcus acquired

reselling platform, Fashionphile

2019: Macy's stocked Preowned

products from ThredUp in department

stores for Summer 2019


RENTING IS STILL BEHIND THE SECOND HAND MARKET, MAINLY DUE TO A DESIRE

TO OWN LUXURY ITEMS NOT JUST BORROW



62%

45%

38%

55%

2nd hand

purchasingRenting

Interested

Not interested

Have you rented a pre-owned luxury item in the last 12 months?

45% ARE INTERESTED IN RENTING

2ND HAND LUXURY ITEMS DRIVEN BY

Afraid to damage product & not

aware of consequences

I want to own luxury products

Would never use something owned

and used by someone else

44%

12%

12%

Can afford luxury items that I could

not first hand

To rent more unique or exclusive

items

18%To try a product a few times and

return it

17%

17%

Less relevant for younger

consumers – only 40% of Gen Z +

Younger millennials are

not interested in renting due to a

desire to own luxury products


45%

55%

Interested

Not

interested

RENTALS ARE STILL NASCENT WITH ONLY 15% OF CONSUMERS HAVING RENTED A

LUXURY ITEM IN THE LAST 12 MONTHS, HOWEVER 25% FOR GEN Z

16%

29%

55%

No but

I would

No and I

would never

Rented23% 20% 20%

9%4% 4%

32% 34% 31%

27%

16% 16%

45% 46% 49%

64%

80% 80%

Younger

Millennial

Older

Millennial

Gen Z Generation

X

Baby

Boomers

Silver

By Generat ion

1/3 o f those in teres ted have

actua l ly rented



Have you rented a pre-owned luxury item in the last 12 months?


HANDBAGS LEAD RENTALS, WITH CLOTHING POPULAR UNLIKE IN BUYING MARKET

16%

29%

55%

2019

No and I

would never

Rented

No but

I would



Which category do you mostly rent?

(# occasions)

% respondents

Renting

29%

18% 15% 13% 12%8% 6%

Sunglasses WatchesHandbags Clothing Leather

accessories

JewelryShoes

18%12%

17%12% 12% 11%

17%

Handbags WatchesClothing JewelryShoes Sunglasses Leather

accessories

Purchasing 2nd hand

Due to far higher price point, jewelry and watches

dominate total EUR-value for the rental and 2nd

hand purchasing market

~40% of Eur-value of

2nd hand market


OPPORTUNITIES AND RISKS POSED BY THE WARDROBE OF THE FUTURE

New and growing revenue stream: Profit from

providing rental services and resulting foot-traffic,

especially as trend is driven by Generation Z and

Millennials (primarily for retailers)

Enlarge customer base: Consumers who

discover a brand / product through renting or

become convinced to make a purchase; engage with

thoughtful consumers

Cannibalization of sales:Customers may be inclined to rent a luxury item where

they previously may have purchased, especially if for

a one-off event. Large offering of rentals by brands

may also tarnish the exclusivity of a product or brand

Opportunities to embrace wardrobe of the future

Risk to be mindful of

Operate circular economy: Partner with

second-hand or rental provider to provide a

controlled and sustainable circular economy of own

products

83

RECAP OF 8 CONSUMER TRENDS SHAPING THE NEW LUXURY REALITY AFTER

COVID-19


Purpose at the heart of

Sustainability 360°

Luxury values polarizing between West and China

A new shopping equation:online acceleration & in-store brand experience

New business models reshaping ownership: rise of 2nd hand and rental

Next generation relationship driven by Clienteling 2.0


Chinese: from global spenders to

local consumers

Millennials take a hit, but are most

hopeful for the future


secluded and short-hauled

Ju

ne

20 2

0

1 . C O V I D - 1 9 I M P A C T



B U S I N E S S E S


COVID

Evolution

& impact

# New cases per country

Flatten Fight Future

Immediately respondProtect people & protect cash/profit

Prepare for the re-boundPrepare 3-season plan head & conduct commercial SWAT

Total cases hit critical

threshold – gov. takes

monitoring

& containment measures

New daily cases are low enough for

government to lift containment

measures

New daily cases close to 0, lifting consumers

confidence and purchasing behavior to new

standard

Cases increase at alarming pace – gov.

imposes severe isolation measures

Drive advantage in 'New Luxury Reality'Accelerate M&A, build up digital & AI capabilities, be ready for changed consumer needs

GDP

PLAN FOR A NEW LUXURY REALITY ALREADY DURING HEIGHT OF PANDEMIC

1.

2.

3.


NEW LUXURY REALITY: THIS CRISIS WILL RESULT IN STRUCTURAL CHANGES IN

LUXURY CONSUMER BEHAVIOR AND PREFERENCES

Structural ChangesNew Reality

Consumers will buy less, more locally and more

selectively

• Shift in category mix towards more casual paired with

polarization across price points & styles

• Harder hit in Europe driven by repatriation of (mainly

Chinese luxury) consumption

• Focus on sustainability and purpose

Distribution resets towards digital & different channel economics

• Footprint 2.0: further DTC push, less WHS

• Online at the core

• Channel economics will change, e.g. higher cost to

serve WHS and online

New P&L shape emerging

• Revenue pressure and need for margin protection

• Strict cost management across COGS, rent and

personnel

• Digitized business requiring significant investment in traffic,

demand creation, platform, cost-to-serve and backbone

Industry will polarize and consolidate

• Scale as polarizing factor – smaller players challenged

without clear proposition and consumer equity

• Vertical & horizontal integration through M&A

• Sourcing & production economics change with initial

overcapacity followed by supplier consolidation

Digitization of business accelerates

• E2E digitization and personalization of consumer

pathways

• "Bionic organization" for AI augmented decision making


Reset distribution• Redefine footprint, including role of wholesale,

physical stores, platforms, digital and omni-channel

sales

Make supply chains less costly and more agile• Renegotiate supplier partnerships to increase

flexibility, risk-sharing, and decrease time to market

Adjust P&L• Reduce costs to reflect lower revenue

Rethink the fashion calendar• Produce fewer collections

• Match delivery to the seasons

• Cut back on collection shows

Implement a zero-based organizational redesign• Review org structure and break down silos

• Adopt “bionic” operating model to combine

human, technology capabilities

Address changing consumer demands• Amplify brand purpose, sustainability, and community

Invest in inspiration• Excel in content ideation, creation, amplification, and

nurture target communities

Embrace clienteling 2.0• Personalize client relationships

• Marry analytics with people to improve selling

Accelerate the digital ecosystem• Cover the entire customer journey, including

inspiration, purchase and post-purchase

Build an AI-driven technology backbone• Digitize core processes for product development, and

to accelerate e-commerce

Bring fresh skills to the workforce• Hire, retain and train people who know AI and AA

Reset and Streamline Invest

LUXURY BRANDS MUST RESET, STREAMLINE AND INVEST TO WIN IN THE NE W REALITY


ALTAGAMMA & BCG TEAM FOR THE 7TH EDITION OF THE STUDY

General Manager Altagamma

Stefania Lazzaroni

Managing Director & Senior Partner

JavierSeara

Principal

Filippo Bianchi

Managing Director & Partner

Guia Ricci

Managing Director & Partner

Managing Director & Senior Partner

Nicola Pianon

Sarah Willersdorf

Research Partner

THANK YOU

true-luxury global consumer insights · source: bcg knowledge & analysis 1 the 7th true-luxury...

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