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1、LUXURYFAST FORWARD20232024LUXURY FAST FORWARD 2023 2024 THE CHALLENGE FOR THE RETAIL POPULATION2LUXURY FAST FORWARD 2023 2024AuthorsDelphine Vitry,Founding Partnerdelphine.vitrymadnetwork.frJean Rvis,Founding Partnerjean.revismadnetwork.frVronique Le Bansais,Partnerveronique.lebansaismadnetwork.frTh

2、omas Mesmin,Partnerthomas.mesminmadnetwork.frLUXURY FAST FORWARD 2023 2024 INTRODUCTIONThe Brand We hear a lot about brand elevation from CEOs of luxury houses.It is important to understand why it is a real subject for the luxury houses,and what are the business challenges behind this term.We have c

3、hosen to address 4 essential dimensions of the strategy of luxury brands today.These dimensions are the Brand,the Customers,the Distribution,and the People.The Customers We concentrate on two client segments that are particularly key in the industry at the moment:/The ultra-luxury customer/The Ameri

4、can customer The reasons that make these topics two major challenges in the industry are quite different:/The ultra-luxury client is a rare commodity,highly coveted by the Maisons as it represents both a strong business potential and a strong image potential in order to nourish the brand elevation./

5、The US client,on the other hand,raises both concerns and hopes.After the hyper-growth phase between 2019 and 2022,the market is currently experiencing a slight downturn.In this context,two scenarios oppose each other regarding the future of the US client:Was the recent growth phase a bubble whose bu

6、rsting has begun?Was the recent growth phase structural with solid fundamentals that will lead to a continuation of sustained growth after the current market“breathing”phase?The DistributionIn our previous studies,we had analyzed extensively what an omnichannel world means for the luxury industry.We

7、 talked about No Channel,because for the client,it must be totally transparent,coherent and fluid.At a time when many groups and houses have really embarked on their digital transformation,what does this change mean in terms of the distribution model?Are there notable differences among sectors,fashi

8、on,watchmaking,cosmetics,etc.?And above all,how will it evolve?The PeopleIt is not very new or pioneering to say that employees are the most important thing in a company.But if there is one industry where this is true,it is the luxury industry.We already knew that the craft industry was suffering a

9、bit from a lack of interest or rather a lack of knowledge on the candidates side.However,since Covid,it is the population of the sales advisors and in general the people who are in direct relationship with the customers that could start to be cruelly running short.And all over the world.How is the l

10、uxury industry managing this talent war?In a business model based on human relations?And what if tomorrow the growth of this industry,which is incredibly resilient in the face of crises,is jeopardized by the lack of people to sell these products that make people dream?Introduction4LUXURY FAST FORWAR

11、D 2023 2024 AGENDAAGENDABRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIESI BRAND DESIRABILITY VS.BRAND ELEVATIONII BRAND EXTENSION THE CONVERGENCE OF THE 2 LUXURIES?THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANS:2 KEY CLIENTS TOPICS FOR THE INDUSTRYI THE ULTRA HIGH NET WORTH INDIVIDUALSII TH

12、E AMERICAN CUSTOMER BOOM:MIRAGE OR ELDORADO?DISTRIBUTION:ONE OBJECTIVE,MANY ROADSI THE UNDISPUTED TRIUMPH OF BOUTIQUE-LED DIRECT-TO-CONSUMER(DTC)FOR FASHION&JEWELRY BRANDSII FOR OTHER LUXURY PLAYERS,DTC AS WELL,BUT DIFFERENTLYIII NIKE AS AN INSPIRATION TO ALL LUXURY PLAYERSTHE CHALLENGE FOR THE RETA

13、IL POPULATIONI A GLOBAL OR RATHER MULTI-POLAR WARII INSPIRING INITIATIVES IN THE LUXURY SECTOR THAT ARE COMMITTED TO A TEST-AND-LEARN APPROACHIII OUR CONVICTION:EMPLOYEE VALUE PROPOSITION IS THE NEW BLACKPage 4Page 4Page 12Page 17Page 17Page 24Page 30Page 30Page 35Page 43Page 43Page 47Page 52Page 41

14、LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES5 4In the post-covid era,the brand power has definitely played a key role when it came to reshaping the luxury landscape.The market has been more polarized than ever:fast fashion delivers good designs at low prices,while

15、luxury brands offer dreams at full prices.Anything in the middle has been significantly challenged due to the lack of meaningful content,revealing how fragile brands can be when they have little to no depth.When luxury brands came across challenges on a particular market,the reason to fail that was

16、presented by the local management was most of the time linked to local brand perception and the events in 2022 demonstrated that more than any operational weakness,incidents affecting the brand itself were the most damageable.On the other side,sky has been the limit for Louis Vuitton,Dior,Chanel,Her

17、ms,Cartier,Rolex Their positions have been reinforced with an underlying phenomenon:purchasing from them has moved from frivolity to investment,securing their power to increase the prices and grow with value rather more than with volume.This ultimate validation of the brands powers has originated on

18、e of 2023s buzzwords:brand elevation.Empowered by this aura,prominent brands have maintained their confidence in expanding into traditional categories(for example,Louis Vuittons recent foray into kidswear).However,they have also shown a keen interest in exploring new territories.Among these,experien

19、tial luxury,especially in the realm of hospitality,stands out as the indisputable winner.Following ventures into restaurants,the focus has now shifted toward hotels as the new frontier.What adds to the intrigue is that several leading luxury hotel brands appear to be tempted to enter the luxury good

20、s industrya potential new battleground on the horizon?Brand Elevation was probably the most quoted expression in 2023,during the presentation of 2022 annual results,with the promise that it would help the brands reach new heights.I.A BUT WHAT ARE WE TALKING ABOUT?Bernard Arnault was explaining in LV

21、MH last results presentations that Nous avons lambition de rendre ces Louis Vuitton,Dior,Cline,Loewe marques de plus en plus dsirables.Leur dsirabilit,quand on la compare celle de concurrents,samliore rgulirement.Cest le secret,les chiffres sont seulement une consquence.Lets take a quick step back.B

22、rand&business:New challenges and new territoriesI BRAND DESIRABILITY VS.BRAND ELEVATION The market has been more polarized than ever.This ultimate validation of the brands powers has originated one of 2023s buzzwords:brand elevation.Brand Elevation was probably the most quoted expression in 2023.Leu

23、r dsirabilit,quand on la compare celle de concurrents,samliore rgulirement.Cest le secret,les chiffres sont seulement une consquence.LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES6 5I.B WHAT IS AT STAKE?Both are of course necessary to boost a brand.Brands continuousl

24、y need to recruit new clients.But growing the average basket of existing clients is increasingly important.Maisons like Herms,Chanel,Dior,Louis Vuitton,or Cartier seemed to be in a stronger position than most of their competitors in the last years,raising the question on why they had been so strong.

25、On one hand,they secured their desirability by investing massive amounts of money in communication-be it media,pop-ups,events,exhibitions,collaborationsOn the other hand,they managed to constantly increase their prices,stick to their non-rebate strategy,limit the production of their icons and create

26、 strong bases of VICs(Very Important Customers)that can represent up to 35%of their business.Recruitment slow down?The VICs create a comfortable mattress to limit the damages.It is a very inspiring model.Most other brands have a much weaker VIC base,representing around 5 to 10%of the business,and mo

27、stly identified by the quantity of products they buy from a collection.How can these brands progressively grow their average baskets?How can they protect themselves,for instance,against the risk of creative fatigue?At MAD,we like to differentiate Brand Desirability and Brand Elevation:Brand Desirabi

28、lity is all about attractiveness:Brand Elevation on the other hand is more about the brands image:from the buzz of a collab to a century long reputation of excellence,the desire for a given brand is multifaceted.Brand Desirability is what attracts clients to the brand-if we talk about KPIs,its bigge

29、st impact is on traffic.Brand Desirability is mostly driven by communication,creation,but also sometimes by exclusivity.Brand Desirability is therefore a key driver of any brands growth:continuously recruiting new clients is necessary to enrich the client base.It powers volume.from a careful managem

30、ent of scarcity to the creation of sky-is-the-limit products,Brand Elevation is what makes clients spend more if we discuss KPIs,its most significant impact is on the average basket.Brand Elevation is therefore also a key driver of the growth,complementary to Desirability and that focusses more on t

31、he ability of a brand to developing clients than on gaining new ones.It powers value.Brands continuously need to recruit new clients.But growing the average basket of existing clients is increasingly important.LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES7 6The chal

32、lenge is therefore horizontal(expand a client from 1 to 2,3 categories or more),and vertical(grow the average basket through value with more expensive products).The combination of these 2 factors are a very strong growth booster since it becomes exponential.Growing the average basket by 25%in volume

33、 and 25%in value allows a 56%growth,an increase of 50%in volume and 50%in value allows a 125%growth.The leverage is tremendous.This is why Brand Elevation has turned into such an important issue,as it allows a sustainable growth mostly based on existing clients.I.C IS THERE A RECEIPE FOR BRAND ELEVA

34、TION?CREATE A DREAM THAT FEEDS A BUSINESS THAT FEEDS THE DREAMIts actually a full set of topics that need to be addressed simultaneously.I.C.1 Put client knowledge at the heartThere cannot be a precise brand elevation strategy without a clear client knowledge.Quick zoom on the VICs:/All brands follo

35、w the clients buying more than 10 K per year./Another limit one can consider 50,100 or 200 K depending on the brand and the category(200 for jewelry brands)in this segment,you start finding“fans”of the brand buying a lot of regular products,in many if not all the brands categories,and mixing them wi

36、th a few exceptional products that propel the average basket to new levels a VIC buying only exceptional products is actually a myth./Last but not least,you have the clients of Haute Couture or high-end Jewelry unique jewelry pieces starting from 350 K.These VICs are rare:for 0,5%to 2%of the clients

37、 representing up to 35%of the sales.Of course,these clients and their segmentation should be carefully monitored in the brands dashboards.For the new clients,it is key to have a perfect vision of a few key questions:Who are my new clients?How do they behave?Which categories does the brand recruit wi

38、th?How can I segment these new clients in terms of potential according to their average basket or the categories they first bought?The challenge is therefore horizontal and vertical.The combination of these 2 factors are a very strong growth booster since it becomes exponential.This is why Brand Ele

39、vation has turned into such an important issue,as it allows a sustainable growth mostly based on existing clients.There cannot be a precise brand elevation strategy without a clear client knowledge.LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES8 7All this is necessar

40、y to support the staff in order to get a forewarning on the clients potential and start putting the energy on the right profiles.Nevertheless,this is not enough if other important elements are not present to create a constant attraction in regard to the brand.I.C.2 Nourish the image(with culture)It

41、seems that megabrands have communicated more than ever over the last years.Every week,one comes across a pop-up,an event,a fashion show in an unexpected space,an influencer partnership,or a new campaign.But how can one trigger value?How to build something solid,rooted,and sustainable?Brands have mul

42、tiplied their attempts to turn into a cultural media as culture is key to gain nobility.World-class architects have been collaborating with brands since mid-2000s,art has landed in stores in the 2010s,just before great foundations were opened by Prada,LVMH or Kering not mentioning Cartier,who launch

43、ed La Fondation Cartier in 1984.Identifying patterns seems evidence,but it is a sophisticated task to identify the relevant segments for a brand and the right correlation that shall maximize the ability to understand who are the new clients with most potential,then structure development strategies a

44、ccordingly.For the existing clients,the questions are of course different:Which are the relevant thresholds spent to properly segment these?How to detect the ones which are more likely to move from 1 to 2 or 3 categories?Which categories possess the most“adjacencies”?How to build the path to secure

45、a regular increase of the average basket:is it linked to a frequency of buying?To the category?Is there a category that actually allows to predict the ability to one day becoming a VIC?Becoming a cultural mediaCollaborations with artists and ambassadorsEventPop-upsExhibitions It seems that m e g a b

46、 r a n d s h a v e communicated more than ever over the last years.LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES9 8But it was mostly the leading Maisons,the most inspiring ones the ones who have already started their elevation.Considering Louis Vuitton as a cultural

47、 media after the tsunami of Yayoi Kusama dots over the planet simply leaves no room for doubt.Collaborations with artists,as currently Fendi with Arnaldo Pomodoro,or even brands becoming producers,as Saint Laurent with Pedro Almodvar,Abel Ferrara,Jim Jarmusch or David Cronenberg demonstrate the will

48、ingness to connect the brand with an artistic world that speaks deeper,wider,and longer than the mere shopping interactions.It does not prevent brands from bringing artistry in exhibitions,events and pop-ups focusing on brands stories and know-hows.Gucci Cosmos in Shanghai,showcasing the 102 years b

49、rand heritage,is a demonstration on how to reconnect with your roots in a cultural manner.And securing legitimacy on a know-how is always a good reason to justify high prices.On the other side,brands whose only connection to culture is through pop culture collaborations and ambassadors undoubtedly h

50、ave a less profound and more fragile ability to significantly and enduringly elevate their image.It can add some coolness but doesnt allow for a deep enrichment of the brand,potentially exposing it to backlash if things dont go well.I.C.3 Attract your offer with exclusivityA few months ago,a Maison

51、contacted MAD with the following pitch:“we want to secure our 10 K clients strategy”.But the challenge was unrealistic for one simple reason:the products were not there to elevate the average basket.A 10 K client is not a 10 x1K client.And when it comes to the leading brands,we are not talking about

52、 10 K clients but 50 K clients,200 K clients when it comes to jewelry.The offer needs to present products at significantly higher price points,enabling the wealthiest clients to aspire to acquire THE item that will set their sights on the stars.This is the role of Haute Couture,of High Jewelry.Brand

53、 elevation therefore requires a more exclusive,expensive,sophisticated offer,carried by an increased perceived value as the client has to understand why he is paying more.It can be done with icons.Louis Vuitton has managed to increase the sales of Keepall and at the same time increasing the average

54、value by multiplying limited editions that have secured the bags appeal while allowing to spend a lot!1Mid-May 2023,on the French website of Louis Vuitton,in the mens section,there were 69 Keepall presented.2The“standard”Keepall 50 Bandoulire was priced at 2 150.3The 3 most expensive references of a

55、 Keepall 50 Bandoulire were on sale 20,5 K,20,6 K and 39 K.4To push the limits The Millionaire”1M was launched during Pharrell Williams first show.Of course,they will never be best sellers.But they feed a dream that feed a business that nourishes the dream.Brand elevation therefore requires a more e

56、xclusive,expensive,sophisticated offer,carried by an increased perceived value.LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES10 9One of the most interesting examples of brand elevation strategy comes from the Wines and Spirit industry.Its The Macallan whiskies./In 20

57、04,Macallan launched a first Pillar:very small quantities(450 units),a very high price for the whisky market at the time(7,5 K$),and a high perceived value thanks to an exceptional liquid and a Lalique bottle./From 2004 to 2016,5 other Pillars were launched,each new one was more expensive than the f

58、ormer,to reach 35 K$in 2016.This new niche offer was amplified with PR(Public Relations)to establish the Pillars as ultimate collectible./A collection of the 6 Pillars,whose RSP(Retail Sale Price)value would have been around 115 K$went for close to a million in an auction in 2017./What is interestin

59、g is how this strategy impacted Macallans ability to increase its base product,the 18-year-old,where the volume is concerned.Benefiting from the halo effect of the Pillar strategy,the prices of The Macallan 18-year-old have more than doubled between 2017 and today.I.C.4 Create sky-is-the-limit exper

60、iencesLook at the latest flagships of Dior and Cartier in Paris or Tiffany in New York.Be it the 30 Montaigne,the 13 Paix or the Fifth Avenue Landmark,entering these temples is an overwhelming experience of brand immersion.It is the pinnacle of brands to sharing their know-how,display their treasure

61、s,spread their history and heritage.More than stores,they turn into lifestyle platforms,flirting with culture:cafs,restaurants,exhibitions all of the latter focusing on one topic:nourish the magic.The birthplaces are not the only reasons to create flagships.In China for instance,where most brands cu

62、rrently have issues in regard to seducing new clients,a flagship is at the same time a shopping destination,a touristic attraction,a mark of respect to the local shoppers and to their country and a place to learn and discover since the value of luxury knowledge is still a cultural marker.Its no surp

63、rise to see brands in Sanlitun,Beijing,offering homes of 3,000 square meters or more But for the ones who are afraid of big crowds and look for more discreet moments,the Chinese market also shows an interesting direction:private fairs for top clients,on invitation only.What do they have in common?Ve

64、ry discreet entrance on a higher floor of the mall,no queuing required,20 clients per day.They have opened the 2 leading luxury Chinese malls in SKP and in Plaza 66 in Shanghai,and more are announced.The level of refinement in architecture is impressive,with details borrowed from the iconic flagship

65、s.The assortment is of course extremely exclusive:exotic skins,evening wear,runway pieces,fur,personalization only the best.With this approach,leaders are solidifying their positions by permanently widening the gap with their challengers.They are setting a standard that has already prompted an incre

66、ase in the average size of luxury fashion brand stores,from 200 to 300 square meters.It can be anticipated that the latter will need to raise their CAPEX per square meter to enhance the quality of their customer experience.More than stores,flagships turn into lifestyle platforms,flirting with cultur

67、e.In China,a flagship is at the same time a shopping destination,a touristic attraction,a mark of respect to the local shoppers and to their country and a place to learn and discover.With private suites,leaders are solidifying their positions by permanently widening the gap with their challengers.LU

68、XURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES1110I.C.5 Push the limits of client treatmentThe first level of client treatment begins with monitoring and highlighting a very important KPI:the%of sales carried out through“appointments”.Appointments do lead to many advan

69、tages:/Setting an appointment shows a higher motivation to buy,with a direct consequence on the conversion rate that can jump up to 60%./An appointment also requires preparation,which includes understanding the client,establishing a connection with a sales associate,and paving the way for quicker ac

70、cess to a VIP status.But this is just the beginning.At MAD,we were privileged to support some leading high-end Jewelry brands in structuring their“Grands Vendeurs”strategy since the mid of the 2010s.This elite of sales associates,a mix of businessmen,concierges,socialites and sometimes shrinks,were

71、limited to a few tenths and found exclusively in a few high-end Jewelry flagships.Recently,there have been significant changes,with many leading luxury Maisons establishing dedicated teams for VICs care.These teams provide exceptional attention to their most valued clients.The strength of the relati

72、onships they cultivate transcends geographical boundaries and price differentials.For example,in China,most top-tier brands believe that with effective VIC management,they can retain clients in domestic stores even with a price gap of 20-25%compared to Europe.Of course,it takes specific talents that

73、 are rare and coveted.It also takes new metrics for the VICs,its important to think in terms of Customer Lifetime Value.VICs dont just buy the most exclusive pieces,but also regular pieces of the collections.Therefore,their turnover can vary from a year to year basis,and it is important to shift fro

74、m product-driven KPIs to customer centric KPIs,over an extended period,most of the time over 18 months.I.D IDENTIFY A CHANGE IN INTERNAL CULTURE AS A KEY SUCCESS FACTORIn order to create a strategy to carry the Brand Elevation,of course one requires to properly establish a vision and then coordinate

75、 the above-mentioned levers but thats not it.I.D.1 Claim(and assume)luxuryA precise and profound understanding of the brand is essential,starting from its deepest roots within the brand platform.Anticipating the brands evolution for the next 10 years is crucial to ensure that the brands elevation re

76、mains aligned with its core values.For instance,its very interesting to see how many brands have been willing to become“inclusive”./Is this compatible with brand elevation?/Can a brand be at the same time exclusive and inclusive?/If being inclusive means to challenge the traditional codes of luxury,

77、there might be a risk of cutting off the branch youre sitting on?The first level of client treatment begins with monitoring and highlighting a very important KPI:the%of sales carried out through“appointments”.Anticipating the brands evolution for the next 10 years is crucial to ensure that the brand

78、s elevation remains aligned with its core values.New metrics for the VICs:its important to think in terms of Customer Lifetime Value.LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES1211Luxury is by essence exclusive.But it is also understood that luxury brands need to

79、reach out to a broader audience,who are younger,more diverse,creative,independent,liberated from conventions.They need to welcome all these people even if only a few can really afford the products and therefore we prefer to lead our clients to be universal rather than inclusive.This allows the cultu

80、re of exclusivity to continue leading the brand ambition:without the willingness of exclusivity,no brand elevation and a risk of schizophrenia.I.D.2 Break glass ceilingsAnother topic is essential:how far can the brand go in expressing this exclusivity?Is there a risk of going too far,stretching the

81、brand,and being perceived as arrogant or losing its purpose?There can be no Brand Elevation without boldness.Once it has been settled that the products driving the Brand Elevation are of the highest quality while being fully“on brand”,there needs to be boldness in the projection.For instance,could a

82、 watch brand willing to position itself in fine watchmaking come to the market with“the most affordable tourbillon”?Would it make anyone dream?The products driving the Brand Elevation have to demonstrate the best of the brands know how,displaying the brands ultimate mastery,in a potentially unexpect

83、ed manner.Most of the time,the product(s)that impersonate the brand elevation might not be profitable in the very short run.Its a process that takes time,and a brand going into the process must see these inspiring products as investments but for the benefit of the rest of the range:when Balenciaga g

84、oes back to Haute Couture,it is highly likely that profitability isnt triggered immediately.The challenge is to produce very few highly desirable items while considering the impact of the halo effect on the entire offering.Its about shifting the paradigm from volume to value.I.D.3 And be ready for a

85、 long struggleBrand Elevation is the new ambition of most brands,the reasons are clear,but the challenges are real.Do all brands have enough depth,history,boldness,know-how to engage successfully in this process?Will all of them be able to trigger the required sparks?Its going to be a tough struggle

86、 and not all brands will be eligible for this.It is a long process that requires high investment in products,stores,staff and data.A new battle is starting in the luxury landscape.Luxury is by essence exclusive.But it is also understood that luxury brands need to reach out to a broader audience,who

87、are younger,more diverse,creative,independent,liberated from conventions.There can be no Brand Elevation without boldness.The challenge is to produce very few highly desirable items while considering the impact of the halo effect on the entire offering.Its about shifting the paradigm from volume to

88、value.A new battle is starting in the luxury landscape.LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES1312II BRAND EXTENSION THE CONVERGENCE OF THE 2 LUXURIES?Dior Prestige La Suite,Louis Vuitton Hotel,but also Ritz x Frame collab,exclusive Orient Express collections,

89、Aman entering Harrods with their beauty line.Not to mention the already existing Armani Hotels,Bulgari Hotels After Belmonds acquisition by LVMH,the path seems to be paved for luxury goods and luxury hospitality to get closer and closer,after years of mutual observation.Are we sure that each of them

90、 is measuring the challenge of perfectly developing the others expertise?II.A FROM HOSPITALITY TO LUXURY GOODSWe have seen in the past few years different strategies being implemented.One of the pioneers has certainly been Soho House,with 2 different approaches on 2 different categories:/Beauty,with

91、 Cowshed/Home&Furniture,with Soho HomeII.A.1 Cowshed:using the hotels as a springboardThe founder of Soho House started by launching its own beauty brand,Cowshed,25 years ago.Cowshed offers a full range of 80 products,from body and skin care,massage oils to candles,with a natural positioning.The bra

92、nd is very closely linked to Soho House:/A wide range of products with a cool packaging./Available in Sohos“Houses”rooms and in the spas./With products displayed for the guests to choose from,then purchase if they like them.Years after years,Cowshed started to be distributed outside of the propertie

93、s,for instance at Liberty,John Lewis,Harrods,Nordstrom,Boots,Waitrose etc.And then online,with their own website but also ASOS and other multibrand distributors.Nevertheless,it seems difficult to see it as a success./Even if the branding is different from Soho House,the 2 brands are strongly intrica

94、ted for at least Soho House 225 000 members.But is it enough to build a brand?/A limited commercial success:with a turnover estimated about 10M and roughly breaking even,it has not become a cash cow.Raising one interesting challenges for Hospitality grounded brands:the distribution.LUXURY FAST FORWA

95、RD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES1413II.A.2 Soho Home:From Hotel to Home!It is therefore also very interesting to take a look at another of Soho Houses initiative in luxury goods:Soho Home.The simple concept is that all Houses have a very strong common design theme.Why n

96、ot make the Soho House atmosphere available to a wider audience?This is how Soho Home saw the light of the day,selling furniture and home accessories displayed in the Houses or inspired by them.However,the approach is totally different from Cowshed:/They launched the business online in the UK in 201

97、6./Then on Anthropologies website in 2017./Before launching the US website in 2019./Finally opening the first brick and mortar stores in 2021 and now they possess a network of 7 directly operated stores./They also work in B2B with interior designers,handpicked stockists,and with Selfridges,Net-a-por

98、ter,and Liberty,for a turnover estimated to be 30M in 2022.The approach to bring the atmosphere of the hotel back to your home is actually very pragmatic:more than 40 locations turn into a showroom.Could this be the way for the hospitality players?Big caveat here:it is only possible because Soho Hou

99、se has a very strong style,harmonized between the properties,which is not always the case in most luxury hotel brands.II.A.3 Aman Essentials:celebrating the brandOne of the players in this category is known for its consistency:its Aman.With the long-lasting collaboration with Japanese Pritzker price

100、 Kengo Kuma,Aman has managed to create 34“retreats”around the world that offer an atmosphere,a touch that is unique and instantly recognizable./Among the 34 retreats,18 host a store with a selection of carefully sources products celebrating the wellness culture of Aman./The“Aman Essentials”is mainly

101、 based on perfumes and cosmetics,loungewear and apparel echoing the Aman lifestyle./The distribution is done through the 18 boutiques,increasing clients on-site spending,and online,to help them retain a link with the brand between their stays or seduce clients who cant afford a stay in the propertie

102、s,but are seduced by the storytelling.In 2022,Aman started to be distributed by Harrods,online,but also offline with a concession in ground floors Beauty Hall.A selection of skincare,fragrance and candles designed in collaboration with Kengo Kuma.An interesting intrusion of a luxury hotel brand in t

103、he temple of luxury goods.II.A.4 Orient Express:teasing the return of a legendThe final example of luxury hotel brands eyeing to luxury goods comes from LOrient Express,who actually uses luxury goods to tease the relaunch of this mythical brand.The concept here is different:collaborating with high-p

104、rofile brands,from Maison Bonnet eyewear to Au Dpart trunks or Bernardaud tableware,and create a collection of products reflecting“Artisans of Travel”.The products are of course distributed online on the LOrient Express website but The final example of luxury hotel brands eyeing to luxury goods come

105、s from LOrient Express,who actually uses luxury goods to tease the relaunch of this mythical brand.In 2022,Aman started to be distributed by Harrods,online,but also offline with a concession in ground floors Beauty Hall.A selection of skincare,fragrance and candles designed in collaboration with Ken

106、go Kuma.An interesting intrusion of a luxury hotel brand in the temple of luxury goods.LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES1514were also the opportunity of 3 physical immersive pop-up in prime luxury shopping destinations:Gardens by the Bay in Singapore,La

107、Samaritaine in Paris,and IFC in Shanghai.Among these 4 examples,it is clear that only Soho House is aiming at a certain scalability./Yet,the benefits for hotel brands that start developing their own retail could be numerous.From an image standpoint,it is about finding a material expression(the produ

108、ct)of something which is most of the time immaterial(the hotel experience).Finding the creative sweet spot that best represents the brands image,then developing a range of products will help expressing the underlying lifestyle.The brand is then impersonated in“real”products where overall characteris

109、tics(design,quality,materials,finishes,colors,but also price-point,etc.)are very concrete markers of the brands positioning./From a business standpoint,its about growing the revenue in hotels by offering opportunities to the guests and increase their spending during their stay.But thats not.Four Sea

110、sons,for instance,who has always put the in-room comfort as a key argument,started to sell it online in the US,from mattresses to bedding,spa and bath products,and more recently lifestyle.A significant additional source of revenues(estimated to several tenths of millions of USD,in the US only for th

111、e moment),but also a source of loyalty outside the properties,and possibly a source of recruitment for new clients.The strengths of luxury hospitality brands in this move?They have loyal,wealthy,and sometimes very visible clients.These are strong brands,with sometimes legendary names and heritage-ev

112、en if their own branding can be improved.And they master more than anybody else what luxury good brands are permanently running after:impeccable service.But then come 3 key questions:What distribution?Can relevant business be carried out only in hotels?What style?Not every luxury hospitality leader

113、has the signature of Aman.How to develop a proper offer?Luxury goods definitely requires a very specific expertise,from design to merchandising.It will be interesting to see if the introduced experiences mentioned above will last in time,or if they will appear to be too big an investment for them to

114、 be economically sustainable.II.B FROM LUXURY GOODS TO HOSPITALITYII.B.1 The Vuitton temptationThe news of an upcoming Louis Vuitton hotel was in all the press earlier this year.A natural move for the undisputable luxury leader,already covering a very large number of categories,cities,market segment

115、s when more growth is to be achieved,it could become natural to explore new territories,especially when you are the“spirit of travel”.The connection to experiential luxury has already begun with restaurants and cafs The news of an upcoming Louis Vuitton hotel was in all the press earlier this year.T

116、he strengths of luxury hospitality brands in this move?They have loyal,wealthy,and sometimes very visible clients.These are strong brands,with sometimes legendary names and heritage-even if their own branding can be improved.And they master more than anybody else what luxury good brands are permanen

117、tly running after:impeccable service.LUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES1615in Osaka(2020),Tokyo(2021),Saint-Tropez(2022),and Paris(2022),allowing the brand to dip its toe in the water.But what can Louis Vuitton expect from this move?Beyond just revenues,w

118、e are at a moment when luxury megabrands are all eager to captivate their clients with immersive experiences.After the flagships,the next level would naturally include a place where customers can enjoy shopping,storytelling,experiences,culture,and even dining and accommodation.II.B.2 Obvious benefit

119、s in the Client AgeThink of the extra client knowledge you could build on the most coveted part of your clients:the fans and the VICs we can guess that the price of both meals and rooms would exclude the most basic clients.Think of the extra coverage you can get on social media we can trust Louis Vu

120、itton for creating amazing places,highly instagramable.Think of the potential of building more loyalty and probably doing some recruitment we can trust Louis Vuitton for creating localized spaces that turns into touristic attractions,and references in their category.Think of the branding and consist

121、ency you can bring,in the hospitality business where very few players have a clear signature among their often poorly branded,heterogenous properties.II.B.3 Nothing new under the sun?The past experiences of Bulgari hotels,for instance,have proven a success in building an extra-platform to promote th

122、e brand and its products,allowing presentations of jewelry to hotel clients,jumping on the special occasion linked to their stay,and increasing the client base with clients that were initially attracted by the hotel experience,then took the chance to discover the products.Armani has been able to pro

123、mote its esthetics and brand identity in the same way,pushing it Armani Casa touch to a wider audience,while defending its vision of a timeless,elevated yet discreet Italian lifestyle.When luxury stores have limited space to fully showcase their home and furniture offerings,hotels could become the p

124、erfect showrooms to display,allow customers to try,and potentially sell a category that all luxury brands are either eyeing or already developing.More recently,different brands have felt the interest of proposing hospitality options to their top clients:several flagships offer a suite for top VICs,f

125、rom Boucheron to Van Cleef,and of course Dior.The value proposition is unique:you can spend a night at the heart of the brands birthplace,access the most personalized services,and even shop 24/7 in certain cases,and the service is 5*,since the Suites are operated by parisien palaces.Is it sufficient

126、 to test a concept?To move to the next step?Bulgari Hotels:extra-platform to promote the brand and its products Examples of brands from luxury goods to hospitality:Armani Casa:hotels could become the perfect showrooms to display,allow customers to try,and potentially sell a category that all luxury

127、brands are either eyeing or already developingBoucheron,Van Cleef,Dior:offer a suite for top VICsLUXURY FAST FORWARD 2023 2024 BRAND&BUSINESS:NEW CHALLENGES AND NEW TERRITORIES1716What is striking in these 3 cases is that the brands have understood that hospitality is a very different business,with

128、its own know-how,expertise,codes and there these brands,who usually internalize their expertise,are in this case subcontracting it.Undoubtedly,the luxury good brands possess a power of attraction that is higher than most luxury hospitality brands but will they be legitimate?They have fans and a subs

129、tantial base of VICs,but might there not be a risk of commercial overkill for those who are not?Are these two target groups large enough to establish a viable business line?They have sophisticated CRM approaches yet not matching the intimate links hotels have created with their clients.II.C THE ELEP

130、HANT IN THE ROOMOne topic still remains to be solved,and it is a big one:business models.On one side,very few luxury hotel brands have a fully integrated model:there are many parties involved,especially the owner who pays for the CAPEX and has strong ROI constraints,limiting the brands power to full

131、y structure a consistent roll-out.And being in full command has been the discipline of luxury goods leaders in the last 20 years.There are,of course,other questions:/How to secure a traffic or an average basket in a store located in a hotel,that can reach the 20 K/sqm required to properly operate a

132、luxury goods store?/How to create an offer that is attractive enough for clients in cities who are already saturated with luxury goods offers(the situation of resorts,with captive client,is yet very different)?/How can we persuade the owner to open a store when we havent yet demonstrated its sustain

133、able profitability?/How to control the retail identity and the quality of the operation when the model will probably end-up being closer to wholesales than to retail?/How to expand the distribution out of the hotels?/How to secure the necessary investments of launching a luxury goods brand if you st

134、ick to the model of not bearing the investments and minimizing your assets?Becoming a serious luxury good player might necessarily lead to reconsider some key convictions in the way of doing business,when the hotel brand is not fully in control(and only very few are).It will take time,cultural chang

135、es and require to scale up in expertise to be able to come a significant player in the luxury Goods arena.On the other side,very few hotel businesses can reach the level of profitability of the megabrands ok if its a side business,but what will be the impacts on the margin once it is significantly s

136、caled?A reflection on the model has to be undertaken ROI on CAPEX in a fully integrated model(the typical luxury one)would be in years,very different from the one of a store,which can take months.Only a different model(not owning the full real estate for instance)could secure similar margins,which w

137、ould be a change on the paradigm of what luxury good leaders have done in the past.For the rest,the luxury good brands can easily“buy”the hospitality knowledge,and enrich it with a layer of branding,experience,and exclusive shopping opportunities that could make a huge difference with luxury hospita

138、lity brands who are not all that well equipped in these areas.One topic still remains to be solved,and it is a big one:business models.Becoming a serious luxury good player might necessarily lead to reconsider some key convictions in the way of doing business,when the hotel brand is not fully in con

139、trol.Undoubtedly,the luxury good brands possess a power of attraction that is higher than most luxury hospitality brands but will they be legitimate?On the other side,very few hotel businesses can reach the level of profitability of the megabrands.18LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET W

140、ORTH INDIVIDUALS AND THE AMERICANS5At the pinnacle of the customer pyramid reside the Ultra High Net Worth Individuals.This demographic is highly coveted and subsequently indulged by luxury Maisons for two primary reasons:/The first,quite obvious,is business potential:for the best-in-class in this f

141、ield,the top 1%of their customer base represents 20%of sales.This represents a potential windfall of substantial sales(and profits)for players still new to the field./The second,more subtle but just as important,is the halo effect:developing an ultra-luxury clientele(and,through a capillary action,u

142、ltra-luxury products)draws the Maison upwards(the famous brand elevation)and makes it possible to gain in brand desirability-and therefore pricing power-across the entire product range,including the most accessible.I.A RICH,VERY RICH,ULTRA-RICH:CONSIDERABLE VOLUMETRY DIFFERENCESWhen we start to take

143、 an interest in this segment,it is important to understand the very significant differences in volume depending on the populations considered.If we gradually tighten the mesh to identify these gaps:/Luxury customers represent around 500-600M individuals,or around 7-8%of the world population./HNWI(Hi

144、gh net worth individual),that is to say those who have more than 1M euros in liquid assets,represent 34M people,or 6%of luxury customers./VHNWI(Very-high-net-worth individual),that is to say those who have more than 5M euros in liquid assets,represent 5M people,or 14%of the rich(HNWI)./UHNWI(Ultra-H

145、igh Net Worth Individuals),that is to say those who have more than 30M euros in liquid assets,represent 0.4M people,or 8%of the very rich(VHNWI).Note that in proportion there are 7 times more HNWI among luxury customers(7%)than UNWHI among HNWI(1%).It is therefore essential to define the targeted po

146、pulation before any desire to conquer.The Ultra High Net Worth Individuals and the Americans:2 key clients topics for the industryI THE ULTRA HIGH NET WORTH INDIVIDUALSLuxury customersHNWIVHNWIUHNWI5503450,4Number of individuals in millions500-600M34M5M0,4M Note that in proportion there are 7 times

147、more HNWI among luxury customers(7%)than UNWHI among HNWI(1%).The top 1%of their customer base represents 20%of sales.Developing an ultra-luxury clientele draws the Maison upwards and makes it possible to gain in brand desirability.19LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDIVIDUALS

148、 AND THE AMERICANS6According to us,THE population that luxury Maisons are chasing at the moment is the top 1%of luxury customers,that is to say the VHNWI and UHNWI,or around 5.5M people worldwide.This population of V/UHNWI presents many advantages(business):/They are growing quickly in number(CAGR 8

149、%over the last 10 years)./The retained mass of wealth is growing rapidly in value(CAGR 7%over the last 10 years)./They are more resilient than the luxury average in recent crises./In the current context,they are only slightly sensitive to inflation.I.B WHERE ARE THEY,WHO ARE THEY?From a macro point

150、of view the answer is quite simple and rather well documented:From a more micro point of view,a relevant-and more comforting-answer would be to say that they are in the customer base of most luxury Maisons.Be perfectly identified,treated as such,and therefore monetized as such.Or not in the place th

151、ey should occupy-with a level of spending well below their potential-for several potential reasons:/They have not been identified as V/UHNWI by the Maisons and they therefore do not benefit from appropriate customer treatment./The Maison does not offer(them)products allowing them to substantially in

152、crease their level of spending./The positioning or history of the Maison does not correspond to their aspirational profile.Location of the UHNWI worldwide 36%30%24%4%4%2%North AmericaAsia-including 18%China and 4%au JapanEuropeLatin AmericaMiddle EastOthers THE population that luxury Maisons are cha

153、sing at the moment is the top 1%of luxury customers.20LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANS7Brand fans Legitimists On one hand,there are the“brand fans”:fully immersed in the Maisons identity(and often dressed by it),they purchase across all its categor

154、ies,both horizontally(product types)and vertically(price ranges).They are,by definition,loyal and act as genuine brand ambassadors.They represent the ideal(though demanding)major clients,and the Maisons are highly creative in their approach to these customers.On the other hand,there are the“legitimi

155、sts”:those who seek products that have established a brands legitimacy.Such customers would buy high jewelry from a renowned jeweler,a Haute Couture dress from a celebrated designer,shoes from a traditional shoemaker,a trunk from a historic trunk maker,and so on.This type of customer is,by definitio

156、n,more challenging to attract for newcomers in the ultra-luxury domain,as legitimacy is often the heritage of a(long)distinguished history.If we were to take a psychographic advantage,we shall notice that the main customer profiles are quite similar to those for all luxury consumers.If we simplify t

157、he exercise to 5 profiles,we will find:However,the prevalence of these profiles varies,with a significant overrepresentation of“old money”and“epicurean hedonist”profiles(primarily in Europe and the United States),and“new money”(especially in Asia and the Middle East).Even though these profiles obvio

158、usly possess specific differences,they have common denominators:/They are looking for products,experiences,attention and more generally an opportunity to spend./They possess a strong need to feel unique.We observe two typologies of V/UHNWI buyers The 5 main customer profilesThe old money The Epicure

159、an HedonistThe new moneyThe socialiteThe avant-garde21LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANS8I.C PRODUCT OFFER:IS THE LEGITIMACY CHALLENGE REAL?It is an oversimplification to assume that Very/Ultra High Net Worth Individuals purchase only ultra-high-qual

160、ity products.If we were to see how much this population spends within certain mature Maisons in this segment,we see that they are driven by:/Very good monetization on core business collections(by maximizing UPT and recurrence of chats)/AND obviously,the development of ultra-luxury product lines with

161、 average values well beyond the core business.It is on this last point of ultra-luxury products that certain Maisons apply a glass ceiling by opposing a lack of legitimacy.If we were to image this assumption,the situation would look like:“I sell leather goods between 2,000 and 4,000,what is my legit

162、imacy in offering bags for 25,000?Who will buy this product?”We can oppose several arguments to this postulate:/The ultra-luxury segment is driven more by supply than by demand./In luxuryand particularly in ultra-luxurythe perceived value often outweighs the actual value.The narrative behind the pro

163、duct,its quality,rarity,the creative proposition,and the caliber of customer relations are all factors that can ignite a customers desire and lead to a purchase./Taking into account the halo effect,surprising the luxury community with unexpected price points is precisely one of the intended outcomes

164、.I.D HUMAN AS A KEYSTONE OF CUSTOMER RELATIONSTaking a step back,the emphasis on V/UHNWI is not a novel concept;it is,in fact,a return to the roots of luxury,a time when the essence of this industry was to cater to the unique and exclusive needs of a select elite(such as watchmaking from the early 1

165、9th century,haute couture up until the 1950s,before the advent of ready-to-wear clothing).While times have evolved,one component has withstood the test of time and continues to be the cornerstone of strategies targeting V/UHNWI today:the human relationship.In the vast majority of instances,the relat

166、ionship between the client and the Maison is personalized,often represented by a small cadre of individuals.Frequently,it is the role of the lead Grand Vendeur,even though the title may vary from one Maison to another.A figure already familiar in the realm of high jewelry,these key salespeople,or Gr

167、and Vendeur,are becoming more prevalent within various Maisons,across all sectors,with the aim to attract,serve,and retain the V/UHNWI demographic.22LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANS9The strategic aspect of the Grand Vendeur comes from the fact that

168、 this population is restricted for the simple reason that this function requires a wide mix of skills:A social connectorCapable of penetrating the most closed circles of V/UHNWI.A narratorCapable of traveling around the Maison and its products,often outside the walls of the store.A salespersonCapabl

169、e of closing sales that may take a long time.An attendantCapable of serving the customer on requests going well beyond the traditional seller/customer relationship.Today we observe that the main challenge of creating or accelerating businesses intended for V/UHNWI often relies on the difficulty of f

170、inding and recruiting these profiles.I.E CUSTOMER TREATMENT:SPACES FOR LIVING,NOT JUST FOR SALE Even if many flagships have comfortable private rooms aimed at receiving these top customers,it is clear that the store is rarely at the center of the ecosystem for these customers.Private BoutiquesThese

171、are exclusive boutiques that serve as a single destination for their clients,offering services by appointment only.During the appointment,the space is dedicated to one customer or a very small,select group of customers.Several prestigious brands have recently established these boutique formats at SK

172、P in Beijing,the leading Chinese luxury shopping mall.Private apartmentThese are living spaces designed to foster customer relationships and strengthen bonds by diminishing the overt transactional nature of interactions.They also provide an opportunity for co-optation,as customers are encouraged to

173、host their own events(such as dinners or cocktail parties)with friends.An example of this concept is the“AP House”by Audemars Piguet,which has embraced this format to enhance its retail presence.Trunk ShowsThis traveling concept consists of bringing the Maison and its most exclusive products as clos

174、e as possible to customers.Brand HomeThe place that embodies the heart of the Maison,whether its history,its know-how or often both.More and more Maisons have recently invested(sometimes massively)to receive their best customers with dignity and provide them with a memorable experience that meets th

175、eir standards in terms of hospitality.Mix of skills of the Grand Vendeur Maisons are increasingly developing dedicated and hybrid formats23LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANS10In addition to these places,there are obviously one-off activations(collect

176、ion presentations,dinners,events)where Maisons accommodate these customers.The trend shows that these activations are:/Closer and closer to the customer.Habits related to Covid have persisted,and the number of local activations remains very high.Note for example,that the number of replicas shows for

177、 major Fashion&Leather Goods brands has been multiplied by 3 between 2019 and 2023./In an increasingly high level of execution.Extreme attention to detail,particularly well-crafted storytelling.I.F MAXIMIZE THE AMPLIFICATION EFFECTIf by nature it is aimed at a tiny minority of customers,the business

178、 of U/VHNWI must not remain in the middle;one of the opportunities(sometimes major ones)lies in the halo effect that this activity is capable of producing across the entire Maison.The products developed and the experiences specially created and experienced by these customers nourish the dreams and i

179、magination around the Maison,thus nourishing desirability.This halo effect is often put in the background because it is less tangible and less measurable than commercial success.Conversely,we believe that it should be put at the forefront in many cases(mainly“late”players in the ultra-luxury field)b

180、ecause its(financial)impact could be much more powerful and fast.Indeed:/Commercial success with U/VHNWI can be long,uncertain,and costly.The chances of moving the sales needle(and even more profits)at the overall level of a Maison are often limited during the initial years.And even in the medium te

181、rm,the volume of V/UHNWI populations combined with capacity constraints on volumes would limit the size of the business./Conversely the halo effect,by working on the elevation of the Maison,can impact the entire product range by gaining pricing power(therefore with a strong impact on gross margins).

182、For example,in Fashion&Leather Goods,those who are the most advanced in the ultra-luxury field are also those who manage to achieve double-digit annual price increases on their“core”leather goods.The amplification effect is obtained by combining two factors:La Maison as a voiceThe customer as a voic

183、eUsing its own(boutiques and digital)channels as well as PR.The challenge is to make the customer an ambassador of the Maison with their inner circle but also with a wider target through social networks.Commercial success with U/VHNWI can be long,uncertain,and costly.Conversely the halo effect,by wo

184、rking on the elevation of the Maison,can impact the entire product range by gaining pricing power.24LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANS11I.G ADAPT ONES ORGANIZATIONWithout making a generalization,we note that within players already well established in

185、 the V/UHNWI target,this part of the business is handled in a dedicated team even if certain support functions are often common to the rest of the organization.We will not make it a best practice,but it reflects the need to have a mindset that is relatively different from the core business of luxury

186、 Maisons:/An absolute need for client centricity to understand and serve customers in line with their expectations./Virtually one-to-one clientele and CRM for tailor-made treatment./Sky is the limit product development with very limited quantities to constantly feed customer desires./Specific,dedica

187、ted living spaces bring the brand to life in a magical way./Specific customer focused KPIs based on a long timeframe(more than a year,and sometimes 3 years for high jewelry).We need to think in terms of Customer Lifetime Value,i.e.,to compare the sales made by a customer with the investment dedicate

188、d to him over a given period.25LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANSLUXURY FAST FORWARD 2023 2024 PART 4:THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANS12After a good decade with its eyes turned eastwards,the Covid period saw dazzling growth of t

189、he American clientele.Now that growth is slowing down,or even going into negative territory,3 major questions arise which correspond to the 3 hypotheses considered:/Was this strong and rapid growth a bubble fuelled by a massive influx of government money and a shift in spending towards luxury produc

190、ts in the absence of the possibility of spending on experiential luxury?/Was this growth a catch-up effect in a country where the weight of luxury was low as a percentage of GDP and in relation to the number of HNWIs.now pointing to more normative growth?/Was this growth the symbol of a new paradigm

191、 for the American consumer,the start of a much more massive and long-lasting catch-up effect pointing to sustained growth over the next few years?II.A-AMERICAN CUSTOMER VS.CHINESE CUSTOMER:UNDERSTANDING THE FORCES AT WORKTo analyse and understand the situation and potential of the American customer,

192、it is interesting to put it in perspective with the Chinese customer.The United States and China stand as two major pillars in the industry.Despite occasional clashes on the geopolitical stage,both giants vie for dominance in the luxury goods market.The last 4 years have seen major changes in this b

193、alance of power,including:The U.S.market has experienced very strong growth,mirrored by robust spending among U.S.consumers.The Chinese market has also seen significant growth;however,consumer growth in China has been moderate.The primary driver of this market expansion has been the reduction in out

194、bound tourism,which has resulted in Chinese customers increasing their spending domestically.Since our analysis focuses on the customer,well be talking about nationalities rather than regions(regional balances being largely driven by tourist flows).Our summary table shows the specific characteristic

195、s of these two markets and their relative evolution since 2019(before/after Covid).While the 2 blocs clash on the geopolitical chessboard,they also clash to dominate the luxury goods market.II THE AMERICAN CUSTOMER BOOM:MIRAGE OR ELDORADO?26LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDI

196、VIDUALS AND THE AMERICANS13UNITED STATESCHINA+TW/HK/MCWeight on the luxury market(based on nationality)2019:21%2023e:24%2019:34%2023e:33%19-23 growth of luxury market(based on nationality)+100%+90%GDP for Gross Domestic Product2019:21,3 TR$2023e:26,0 TR$2019:14,3 TR$2023e:18,5 TR$GDP growth 2019-202

197、3+22%+30%Size of the middle class160M individuals375M individualsNumber of HNWI(1M$wealth)25M individuals40%of worldwide total9M individuals14%of worldwide totalMID TERM HNWI expected CAGR+2,5%per year+15%per yearNumber of UHNWI(50M$wealth)140K individuals53%of worldwide total40K individuals15%of wo

198、rldwide totalNumber of cities with luxury penetration6038This comparative table highlights a few key points:/Luxury goods growth in the US has been around 5x faster than US GDP,compared with only 3x faster in China./US luxury remains under-represented relative to HNWI share in the country(40%of HNWI

199、 but only 24%of the market)./US luxury continues to expand geographically(around 60 cities today,some 10-15 more than 5 years ago),while China remains predominantly in Tier1-2 cities at this stage(38 cities).27LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANS14II.B

200、 UNITED STATES:REASONS TO BELIEVEThe very strong growth of the U.S.market has been concentrated on the period 2019-mid-2022,with a market that has roughly doubled in 3 years.This growth has been largely driven by 3 stimulators that we can analyze under the spectrum of the emergence of 3 customer pro

201、files:/Profile 1:customers in new geographical territoriesFor a long time,American luxury was confined to a few key cities on the East and West coasts,and the central U.S.was considered a luxury no-mans-land.Outside these key cities,the market was severely limited both by a lack of customer interest

202、 and by a lack of supply(few or no luxury boutiques);the two issues probably being largely correlated.Indeed,even in developed economies such as the United States,and even among affluent populations,the appetite for luxury is not innate;it presupposes a luxury culture to understand the value proposi

203、tion offered by the Maisons.To provoke thought,we could suggest that consumers must be brainwashed into luxury to stimulate desire for these products.In a candid deconstruction of luxury,we might argue that it involves selling an itemoften at a markup of 8 to 10 times its costto a customer who doesn

204、t actually need it after all,luxury is about satisfying desires,not fulfilling needs).In the pragmatically Cartesian American mindset,which places a strong emphasis on value for money,igniting a desire for luxury goods requires a deep understanding of the products value proposition,including social

205、status,quality,craftsmanship,exclusivity,and longevity.Profile 1Customers in new geographical territories Profile 2Youth Profile 3Middle class50%40%30%20%10%0%-10%2001501005002019 2020 2021 2022 20232019 2020 2021 2022 2023Market growth in%Change(base 100).2019=10028LUXURY FAST FORWARD 2023 2024 THE

206、 ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANS15To cultivate a luxury culture among these yet-to-be-converted American consumers,luxury players have expanded their reach beyond the coastal cities,opening sizable retail spaces in previously overlooked areas.These boutiques immerse local customer

207、s in the luxury experience and the distinctive ethos of each brand,enhancing their appreciation for the nuanced proposition of luxury.Success came quickly,and its not uncommon for cities beyond the usual suspects(New York,Miami,Los Angeles.)to be among the top-selling stores(Houston,Dallas,Atlanta.)

208、./Profile 2:youthThe emergence of the younger age group(18-25)is partly explained by Brand x Product strategies that are more in line with the aspirations(and purchasing power)of this population.These strategies include a sharp focus on more accessible product categories,such as sneakers and fashion

209、 accessories;an embrace of lifestyle branding through the appointment of American cultural icons(e.g.,Virgil Abloh,Pharrell Williams,Matthew Williams)as heads of artistic direction;and an increased use of iconic American figures in advertising campaigns(Beyonc&Jay-Z,Ryan Gosling,Rami Malek,Lily Coll

210、ins,Zendaya,Jaden Smith,etc.).Furthermore,the cryptocurrency boom of 2020-2021 might have spurred spending among certain young groups,either as a means of enjoying the sudden influx of easy money or as a way to preserve capital gains through investments in luxury items known for their stable value.W

211、hile the reality of this trend is acknowledged,we believe it was temporary and primarily contributed to a speculative bubble,affecting only certain goods and brands that are especially popular in the second-hand market./Profile 3:middle classHistorically,luxury goods have seen only moderate penetrat

212、ion among the American middle class,primarily due to their limited attraction to luxury brands.The paradigm shifts were witnessing is the result of several converging phenomena:/Strategies encompassing Brand x Product x Communication have been better tailored to this segment of the population.The Co

213、vid-19 pandemic necessitated a decentralization of strategies,empowering local managers to implement approaches more attuned to their specific clientele./Additionally,although to a lesser extent,the injection of government aid during the pandemic,combined with limited opportunities for discretionary

214、 spending(as experiential luxury sectors such as tourism,dining,and nightlife were largely dormant),likely spurred spending on luxury goods within this demographic.The emergence of the younger age group(18-25)is partly explained by Brand x Product strategies that are more in line with the aspiration

215、s(and purchasing power)of this population.Furthermore,the cryptocurrency boom of 2020-2021 might have spurred spending among certain young groups.We believe it was temporary and primarily contributed to a speculative bubble,affecting only certain goods and brands that are especially popular in the s

216、econdary market.Strategies encom-passing Brand x Product x Communication have been better tailored to this segment of the population.The injection of government aid during the pandemic,combined with limited opportunities for discretionary spending.29LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET W

217、ORTH INDIVIDUALS AND THE AMERICANS16II.C LARGELY STRUCTURAL GROWTH BOOSTED BY CYCLICAL FACTORSIn the light of these factors,one could speak of a correction of many of the anomalies represented by the American luxury market,with a relatively low level of luxury penetration compared to the major metri

218、cs of the American population(size of middle class,GDP/capita,number of HNWIs.).Nevertheless,many observers spoke of an American luxury bubble,fueled in particular by the influx of government subsidies,which would have encouraged an influx of customers,particularly from the middle class and younger

219、populations.After this post-Covid boom,the question that legitimately arises is to understand what part cyclical is(and therefore destined to disappear)and what part is structural(and therefore destined to persist).What is the new normative level of growth for the United States over the next 5 years

220、?Quickly cutting the suspense,we broadly defend the thesis that a very large part of this growth was structural and provides a new solid foundation for the American luxury market.And paradoxically the current slowdown in the American luxury market is,in our opinion,the best argument for this.From th

221、e second half of 2022,all the elements were present to create a very strong shock in the American luxury market:End of government aid(from the end of 2021);Significant decline in financial markets;Bank bankruptcies(SVB for Silicon Valley Bank);Significant drop in cryptos;A terrible comparison base e

222、ffect with a market that had doubled in 2 years;High inflation which penalizes the purchasing power of the middle class and the youngest.Many observers spoke of an American luxury bubble,fueled in particular by the influx of government subsidies,which would have encouraged an influx of customers,par

223、ticularly from the middle class and younger populations.What is the new normative level of growth for the United States over the next 5 years?30LUXURY FAST FORWARD 2023 2024 THE ULTRA HIGH NET WORTH INDIVIDUALS AND THE AMERICANSLUXURY FAST FORWARD 2023 2024 PART 4:THE ULTRA HIGH NET WORTH INDIVIDUAL

224、S AND THE AMERICANS17 S&P5002020 2021 2022 20232 0002 5003 0003 5004 0004 500 5 000 NASDAQ2020 2021 2022 20238 00010 00012 00014 00016 00018 0006 000 BITCOIN2020 2021 2022 202310 00020 00030 00040 00050 00060 0000 INFLATION2020 2021 2022 20231%2%3%4%5%6%0%7%8%9%10%Obviously,there are ups and downs b

225、ecause the American customer is particularly ON/OFF in regard to the economic cycles.but it is precisely because he is ON/OFF that the decline in the market should have been massive if the surge in the American market had been simply cyclical.II.D LUXURY JUNKIESLuxury is a hard drug:those who have t

226、asted it are not ready to quickly give up this new image that luxury has given them of themselves even less in a country where appearance is king.Over the next 12 months,the upheavals will likely remain,with the level of confidence of American households remaining largely impacted by:/Moderate econo

227、mic growth;/High inflation;/Political uncertainty(presidential election in November 2024)./A tense global geopolitical context.In the medium term,the fundamentals remain solid and the American consumer even with the recent catch-up remains a relatively under-represented consumer in view of its econo

228、mic power(GDP/inhabitant,number of HNWI).The conquest of the American consumer is far from complete and will go through the same levers:By continuing to improve geographic coverage;By investing massively in communication:evolution of media spending,the number of pop-ups,the number of local shows;By

229、increasing the bridges between luxury and American culture.LUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS31 4When one is asked to think about luxury,our imagination often focuses on ultra-luxury.The reality of the market is rather different.Far from concerning HNWIs(High Net Wor

230、th Individual)only,the luxury markets consumer base represented some 400 million people in 2022 and is forecasted to reach 500 million by 2030.In a book which was published by Altagamma a few years ago,Mr Franois-Henri Pinault even wrote that the size of the luxury market is 3 billion people.Of cour

231、se,it all depends on the definition of luxury,yet its been a while since luxury has moved away from scarcity.What has been at stake is to continuously develop the perception of exclusivity,as exclusivity leads to excitement and desirability.And one of the key pillars to nourish this perception,is di

232、stribution.Challenged by the need to continuously adapt to changing client preferences and technology,to maintain exclusivity requires a flexible and dynamic approach to distribution.Luxury brands business models and channel strategies are undergoing significant shifts.How are these models evolving

233、and what key challenges lie ahead for luxury brands?I.A EVER MORE SOPHISTICATED ENVIRONMENTS TO IGNITE THE DESIRE TO LIVE THE BRAND 1.A.1 Cultural temples of luxury in the spotlightMegabrands are taking retail to new levels.Paradoxically,in the age of e-commerce and where the industry is starting to

234、 work on the metaverse,cultural temples of luxury that shine brightly are well grounded in the real world.Just to name a few,in March 2022,Dior unveiled its magnificent store 30 Avenue Montaigne,offering a variety of features for guests to enjoy,these include ateliers for Haute Couture and High Jewe

235、lry,a caf,a restaurant,a gallery and a hotel suite.Chanel unveiled the renovation of its iconic address 18 Place Vendme in May 2022,doubling the size of the initial boutique and offering guests an exceptional journey into the private world of Mademoiselle.In October 2022,Herms opened a new home at 7

236、06 Madison Avenue,New York,with a concierge desk,a butler service on each floor,and three bars,one for coffee,one for champagne,one for cocktails.During the same month,Cartier re-opened its legendary boutique on 13 rue de la Paix,where archives,a winter garden,and the Residence,a place of life and g

237、atherings,are present.Last April 2023,Tiffany unveiled its outstanding Landmark on Fifth Avenue,New York.Distribution:One objective,many roadsI THE UNDISPUTED TRIUMPH OF BOUTIQUE-LED DIRECT-TO-CONSUMER(DTC)FOR FASHION&JEWELRY BRANDS Temples of luxury:(re)openings 2022-2023DIORCHANELHERMSCARTIER30 Av

238、enue Montaigne-ParisMarch 202218 Place Vendme-ParisMay 2022706 Madison Avenue-New YorkOctober 202213 rue de la Paix-ParisOctober 2022TIFFANY&COFifth Avenue-New YorkApril 2023LUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS32 5With an average annual sales surpassing 150K/m2 in thes

239、e mega-flagships,allowing to build without counting,the objective is rather clear:create cultural capital for their brand and build a strategic competitive advantage,which is un-replicable by anyone.And these powerful brands do not just stop there.We all remember Dior,taking over Harrods with a fest

240、ive wonderland last Christmas,or Louis Vuitton creating an artistic buzz like no other with Yayoi Kusama.As the luxury market continues to grow,leaders are showcased simultanously.It is interesting to put these impressive recent initiatives into perspective.The 2000s first decade was already the per

241、iod of imposing flagship stores that shone to the moon on Ginza,Canton Road,or on the Fifth Avenue.Pritzker Architecture Prizes were competing to design amazing facades on the famous avenues in the world,and the luxury industry did reconciliate architecture and retail:Rem Koolhaas,Shigeru Ban or Jea

242、n Nouvel to name a few.Following which,for the next decade,megabrands went on a break,refocusing on more intimate,less intimidating spaces.However,feeling the need for a more holistic brand immersion,new projects started to emerge in 2021,XXL again,but this time the store and the retail experience a

243、re part of a much broader program,where customers are invited to spend the day.1.A.2 Digitally augmented stores are spreading A lack of tourists,supply chain constraints and rising costs have not stopped smaller fashion&jewelry brands from thriving in the ever-evolving luxury retail landscape.Throug

244、h new locations and engaging experiences,brands have been expanding their customer base to position themselves for continued success.Most recent store openings,ranging from successful brands such as Saint Laurent,Celine,or Moncler have increased in size to provide additional space for client treatme

245、nt and artful experiences.Clients thirst for exclusives and community-led styles has further shaped their strategies.Store network clustering has gotten more sophisticated to include client communities target criteria.Some brands are de-standardizing their concepts for greater authenticity and local

246、 anchorage.Mainly to create a sense of cultural depth that leads to a genuinely satisfying lifestyle experience.Meanwhile,considerable investments from luxury groups and brands are put into digital transformation to fuel continuous improvements on online user experience,social media integration and

247、omnichannel services.The enduring expansion of digital engagement and e-commerce is creating a soaring effect,unraveling extra-demand,even if we observe that unprecedented e-commerce growth rates during COVID of+30%are coming back to normal,with a consensus of an expected CAGR(Compound Annual Growth

248、 Rate)growth around 10%until 2025.I.B A MODEL THAT PROVES TO BE RIGHT,BUT IS GETTING MORE COMPLEX TO OPERATEIf many luxury players strongly aspire to a boutique-led DTC model,as it brings control over brand positioning and storytelling and reinforces exclusivity,even best in-class with all the resou

249、rces needed to maintain direct relationships across channels stumble upon a few roadblocks.Let us share the ones we have come across most frequently.The objective with mega-flagships is rather clear:create cultural capital for their brand and build a strategic competitive advantage.Brands are de-sta

250、ndardizing their concepts for greater authenticity and local anchorage.LUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS33 6I.B.1 Dont miss out on the human touchOne of the key foundations of luxury brands is the human relationship.As brands invest heavily in store CAPEX(Capital Ex

251、penditure)and digitalization,many acknowledge that their brand human touch is paramount in building loyalty and creating lasting relationships with clients.The challenge starts with recruiting and retaining the right talents,as we explain in our chapter on People,those who will make the brand story

252、come to life in an authentic way,deliver a personalized meaningful client treatment and create an experience that goes beyond the product itself.Provided that the brand manages to find and retain its talents,continuous investment in regard to learning must not be overlooked.Megabrands dedicate 1 tra

253、iner for about 70 FTE(Full-Time Equivalent)when a good industry benchmark is 1 trainer for 100 FTE.When it comes to onboarding,best-in-class brands give as much as 3 weeks to newcomers before they begin selling,although we have recently found newly hired sales associates who are encouraged to face t

254、he client only after 2 days!Moreover,to be able to convey the brands human touch consistently worldwide,not to mention with authenticity,brands learning philosophy is evolving from a top-down check-list approach to a behavioral&transformational learning approach,leaving room for experimentation to e

255、ngage and grow soft skills.I.B.2 Omnichannel,really?As most brands have embarked into building their omni-ecosystem,with new infrastructure,tools,and capabilities across the value chain,the perfect execution of the one-stock one-client holy grail is easier said than done.Globally speaking,and as we

256、have observed through several assessments,brands manage to offer a variety of omnichannel journeys,however significant discrepancies are present among these journeys,often due to irregular guidelines,policies and learning support worldwide.The omni-services that brands provide are not systematically

257、 conducted from all stores,due to staff reluctancy or product unavailability.And when the products are unavailable,the staff often fails to convert the prospect through alternatives.Personalized post-visit follow-ups for clients remain rare and are often inexistant for prospects.Beyond the innovativ

258、e and enthusiastic speeches on the virtues of omnichannel to meet customers expectations,the reality on the field is often much different:sell what you have,and it wont be that bad,an injunction that can be understood for extremely desirable brands,for which customers are willing to lower their expe

259、ctations.Next-generation commerce options,such as social commerce or livestreaming dominate the conversation but also remain poorly tackled.The Customer Service Center(CSC)is an interesting touchpoint to highlight,as its reason to exist is drastically shifting from an after-sales service to a new sa

260、les channel.Although it does not create the exact same customer experience produced by face-to-face servicing,CSC as a store does offer exciting opportunities such as selling during low traffic periods and outside of usual working hours or establishing new relationships with customers from other cit

261、ies and countries.In a business model that is essentially based on the human relationship,there is the crucial question of maintaining authentic relationships.Most brands have embarked into building their omni-ecosystem however significant discrepancies are present among client journeys.The Customer

262、 Service Center is just starting to shift from an after-sales service to a new client service&sales channel.MegabrandsGood industry benchmark1 trainer for about 70 FTE1 trainer for about 100 FTELUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS34 7If brands today manage to offer goo

263、d interactions,thanks to an accommodating and helpful staff,the CSC experience,in most cases,remains case-resolution-oriented.Once again over here,adapted learning and a proper setting need to be further considered to deliver CSC distant sales as a luxury boutique experience.We have identified three

264、 interesting approaches providing CSC with a branded environment for distant sales:/CSC located within a flagship store,as Celine offers rue Duphot in Paris,allowing CSC teams to use the boutique environment and stock to conduct their sales,bringing synergies among teams and offering a genuine possi

265、bility to leverage retail teams.However,this option implies setting up shop on a prime location./CSC centers equipped with a store-like environment,like Gucci 9,(a network composed of client service centers in Florence,New York,Tokyo,Seoul,Singapore,Shanghai open 24/7)favoring an ultra-professional

266、set-up with a structure,a design and tools tailored to best support distant sales.The difficulty here can be with recruitment./CSC operating through a virtual store,such as Charlotte Tilbury virtual beauty gifting wonderland,offering a playful and instantaneous environment appealing to new generatio

267、ns,easy to update and animate,but preventing from building genuine human connections.CSC as a store leads us to another omnichannel topic on top of the list of luxury brands:clienteling.During COVID,the re-conquest of local clients has undeniably proven to be a wise move,an activity even qualified a

268、s a life insurance by some brands.Since then,best-in-class have revised their client pyramid to include sub-segments for their growing pool of VIPs and to better leverage spenders on priority segments.Many brands have developed and rolled out their clienteling App to guide sales associates throughou

269、t the day.Contact plans have been enriched.Even so,to create memorable moments for clients repeatedly and consistently,one requires radical customer-centricity and the shift towards a true client-centric culture is yet to be seen?Which Luxury brand can seriously claim to have the Customer Lifetime V

270、alue as a main business driving force through its entire organization?Areas of improvement that brands must tackle are at 3 levels:/Break the silos&place the client are the core of business decisions,aligning organization,governance,and processes between HQ,regional and local teams./Build an interna

271、l client management community to animate&embark retail teams,leveraging ambassadors to secure key programs roll out and adoption at the market level./Identify the essential client KPIs to follow at each level of the organization,from sales advisors to HQ,ensuring readability&actionability of the das

272、hboards.I.B.3 The come-back of Operations with a big OThe new DTC ecosystems have brought along new operational requirements with them such as:/The deployment of digital solutions for stock management(reception,inventory,reservations,transfers,shipping,destocking)./The evolution of the stores status

273、 towards a logistics platform./The emergence of new tasks in addition to the traditional operations,related to the development of new sales channels and omnichannel services:click and collect,click-from-store,remote sales,e-commerce shipments from the boutique,consignments.Clienteling is on the rise

274、,but a change of mindset on Customer Lifetime Value is still needed.LUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS35 8These new omnichannel shifts imply a necessary transformation of the processes and organizations around store operations,that luxury houses must now further embr

275、ace.Brands must move from the monitoring of new KPIs(Key Performance Indicator)with an internal control approach(shrinkage,shop soil,accuracy rates)to a more client-centric approach targeting both client satisfaction and process efficiency(share of e-commerce/click-from-store/remote sales processed

276、within target lead-time).Brands should also review incentive schemes from the ones based on back-only-related KPIs,to more collective approaches that reward both teams for participating in achieving the stores objectives,reinforcing solidarity and unity between front and back teams.Last but not leas

277、t,brands should consider integrating new profiles,evolving from a pure execution approach supporting the front teams to more digital-friendly profiles who are able to fully grasp the omnichannel transformation and move towards a client-centric approach,showing an ability to think strategically and a

278、ct as a relay for the store manager on operations-related topics.I.B.4 The cost threshold of it allIf across all fashion&jewelry brands,the future is always more digitally augmented direct retail,without the resources of megabrands for which wholesale remains typically in the region of 0 to 10%,most

279、 small and midsize brands opt for a progressive approach with wholesale for some still representing as much as 70%.Indeed,this DTC model is clearly favorable to the powerful because the entry ticket is increasingly high and getting higher and higher.As a matter of fact,multi-brand retailers continue

280、 to play their role in the ecosystem of many brands as they are a great way to tap into an audience that brands wouldnt necessarily have reached through their own direct channels.Where does this take us in 5 to 10 years?Could this lead towards malls and department stores that favor proven profitabil

281、ity and therefore only accept 5 brands on the ground floor?This business is nourished and infused by the creativity and diversity of its artistic expression.Continuing to bring in this diversity could lead to a request from malls and department stores to ask for exclusivity on small brands.It could

282、also generate increased occasional speaking such as Jacquemus recent pop-up at Galeries Lafayette,no doubt a highly visible operation,which hopefully also brought the brand its expected return on investment.New omnichannel shifts imply a profound transformation around store operations.New creative w

283、ays will need to be found by smaller brands to overcome higher and higher barriers to entry to this boutique-led DTC model.LUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS36 9II FOR OTHER LUXURY PLAYERS,DTC AS WELL,BUT DIFFERENTLYOne should certainly not make the fashion&jewelry m

284、odel the only variable in the luxury industry.If megabrands spaces remain an aspiration to many,products qualities have a different bearing on the ideal distribution model.Each luxury player should make a fresh approach towards its DTC.II.A FINE WATCHMAKING:THE POWER OF THE COMMUNITY AT COREThis mar

285、ket,which accounts for 15%of the personal luxury goods,is a mechanical wonder in the analog world.True symbols of status,combining art and science,fine watches are always perceived as pieces one might dream about owning one day,even by those who already have many.Premiumization has been the mega-tre

286、nd in the industry with rare luxury watches reaching stratospheric values in recent years.On top,fine watches have gone from being a passion activity for those in-the-know to becoming a mainstream core collectible,spurred by wider trends such as hype,social media expansion,the rise of crypto wealth,

287、as well as an overall revamping of the industry with an Apple watch,that managed to put the wrist back at the center of the attention of youth.The market has been growing double-digit,driven by both price mix and volume,and as we look ahead,one has got the green light,as confirmed by 2023 Watches an

288、d Wonders that reports an edition beyond expectations with best forecasts.When it comes to distribution,the market was historically structured around scattered multi-brand wholesale,that created a complex environment in which brands ambitious sales targets have led to an overflow of merchandise,even

289、tually fueling discounting and grey markets.Investments into direct retail aiming at controlling product flow,prices&client experience obviously made no sense,if wholesale channels were heavily fueled simultaneously.As most of the problems were self-inflicted,the industry common strategy over the pa

290、st 10 years has been regaining commercial discipline over commercial ambition,cleaning the distribution,and adopting a more sell-out-oriented culture.Today,the situation has gotten much better.At one end of the spectrum,we find Richard Mille with a fully integrated direct retail model,and at the oth

291、er end,Rolex who opted for a franchise model.In between,watch manufacturers distribution combines directly operated stores,franchises,and multi-brand watch specialists,with many brands recently engaging into a DTC acceleration.Indeed,while the vastly streamlined slate of wholesale is still underway,

292、fine watchmakers have managed in the recent years to crack their direct sales business model,accomplishing remarkable work on their brand equity,coupled with the introduction of more expensive models,impacting price mix and desirability.Regaining commercial discipline over commercial ambition has be

293、en the industry common strategy over the past 10 years.LUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS3710As this new chapter on retail acceleration ushers in a period of reappraisal which is filled with a promise,brands will however need to secure a few important dimensions such

294、 as:Beyond the boutique experience,while reflecting upon new ways to get closer to their customers,fine watchmakers have probably two characteristics running for them that open-up opportunities for other direct channels:they have a strong community and truly transmittable goods.Let us share two exam

295、ples of initiatives that have leveraged these characteristics.Hublot,after deploying a CRM(Customer Relationship Management)in its direct boutiques worldwide,integrated Hublotista Club,its exclusive community of members,to ensure that its approach be fully connected from sales to customer service.Al

296、l owners of Hublot watches,whether they purchased through a direct or an indirect channel,can register their purchase,create a wishlist,view their warranty certificate and receive exclusive invitations to dinners or sporting events,via the community.As a second example,Breitling was the first brand

297、in 2020 to offer NFT (Non Fongible Token)powered watches.This blockchain-backed proof of ownership protects Breitling watch owners and unlocks access to unique services,such as an online estimation tool and a Breitling trading platform.It also allows owners to transfer their watchs ownership with a

298、secure transaction and to provide full traceability.From pushing product-first to being client-centric,luxury watchmakers are likely to identify different paths.However,we might ask ourselves if a common area for everyone to further explore should not revolve around:how to better leverage their comm

299、unity and transmittable goods business,in order to drive growth through Customer Lifetime Value?If owning a watch is a personal affair,it is also a profoundly social one.Reflecting upon this idea has already led brands to imagine and implement other direct touch points,such as private appartements o

300、r private client directors,to engage their customers more personally.II.B BEAUTY:CUSTOMER INTIMACY&EXPERIENCE TO DRIVE DIFFERENTIATIONWhen looking at prestige beauty which represents 20%of the luxury goods market,one cannot be but fascinated by this buoyant innovative playground.A multitude of brand

301、s co-exist on the core segments of Fragrance,Skincare,Makeup,and Haircare to offer an infinite declination of products,at a high rhythm of renewal.This novelty-driven and promotion-driven market requires continuous major investments on Research&Development,industrial capabilities,and Advertising&Pro

302、motions to build legitimacy and to stay ahead of the game.Beauty is a market where scale matters and brings considerable competitive advantage,explaining why smaller players usually either die or end up joining a global group.Beauty is a market where scale matters and brings considerable competitive

303、 advantage.1Making sure that when clients enter their Instagram,WeChat or physical stores,their experience is proprietary and consistent,regardless of the touchpoint,thus,defining an Experiential Signature.2Constantly working on optimizing their retail&client equations,with a specific focus on selli

304、ng skills,boutique animation and clienteling.3Adopting a DTC culture,while implementing the right set of KPIs,a client-centric organization and a solid staff engagement program.Now that many brands are accelerating on DTC,they could explore how to better leverage their community and transmittable go

305、ods business.LUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS38LUXURY FAST FORWARD 2023 2024 PART 2:DISTRIBUTION:ONE OBJECTIVE,MANY ROADS11Although geographies,product segment&brand power shape players distribution strategy,and for all trending shifts in the market,beauty remains

306、dependent on a dense territorial network.A certain critical mass of points of sale is non-negotiable to ensure the relevance of the brand in the consumers mind.As a matter of fact,DNVBs(Digital Native Vertical Brand)pre-covid hype that lean on a radical approach B+Flagship only has shown its flaws.T

307、he consensus today is that brands require both to succeed.Having said that,the real challenge remains in finding the right combination but also the ability to crack the direct retail business case,especially on the US and European markets,as many brands have experienced major setbacks in terms of pr

308、ofitability.To build a laser-sharp distribution ecosystem,channels&touch points need to better complement each other and bring distinctive value to customers.Through our different missions,we observe that the roll out of beauty brands distribution strategy into a channel and touch point-specific vis

309、ion,could be much further explored.The added value of DTC is always clear in our clients mind,through valid principles(brand image elevation,CX(Customer Experience)enhancement,customer knowledge improvement.)but is often not concretely infused into specific concepts.This is particularly important as

310、 product assortment is much less of a lever as it is in other luxury segments for obvious reasons of product scale.DTC,in the end,is expressed in terms of P&L(Profit&Loss)objectives and quantified growth yet lacks real declination in terms of DTC levers&DTC equation principles,often resulting in a l

311、ack of performance.Brands should further reflect upon how their direct channels could serve them to reach specific client targets,such as Generation Z or top customers,or how DTC could create more brand intimacy and entice customers to come back more frequently.Today,brands DTC value propositions of

312、ten lack traction power versus wholesale;a frustrating acknowledgment considering how much beauty customers like to be taken care of and when one does take care of them,how much are they willing to spend repeatedly.As brands fight for clients eyes through high media investments,further reflection on

313、 DTC could help them fight for clients heart and affirm their distinctiveness through experience,working on their Experiential Signature and a unique set of personalized Illustration of beautys buoyant playground Direct and indirect channels&touch points need to better complement each other and brin

314、g distinctive value to customers.LUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS3912services.There is no need to convince anyone that in a world of hyper product choice,the capacity to offer intimacy and memorable experiences to customers can make a difference.Beauty is a field o

315、f experimentation in the digital world.As brands sharpen their distribution they can explore how to better leverage digital to create intimate interactions at scale.Last but not least,beyond simple e-commerce,beauty is a field of experimentation in the digital world,as social-commerce and VR-commerc

316、e(Virtual Reality)are getting adopted and digital tools are being developed by numerous players.Groups that have significantly accelerated their digital initiatives have seen profit margins increase,highlighting that there is a clear correlation between margin improvement and the digital aspect.If f

317、ootprint,store locations and formats need to be better addressed within a sharper distribution strategy,future success undeniably also lies in brands capacity,to increase their digital mastery and create intimate interactions at scale,through privileged channels and smart devices.II.C-WINES&SPIRITS:

318、GOING BEYOND BOTTLES WITH UNIQUE DESTINATIONSLuxury Wines&Spirits(W&S)are not left out when it comes to exploring routes to reach their customers directly.Indeed,the industry is facing a paradoxical and complex situation:/On the one hand,production constraints which will remain structurally high in

319、many categories(Champagne,Cognac,etc.)put the maximization of value per bottle at the core of the strategy(price levers,mix or integration of the distribution margin)./On the other hand,a distribution that is probably the least qualitative in the luxury industry(food retail and often generalist wine

320、 merchants)is not very conducive to brand elevation.From renovating their wineries,distilleries,opening-up boutiques,bars,speakeasies,restaurants,to developing e-commerce,membership clubs and networks of private client directors,or to launching one-stop-shops with exclusive portfolios,over the past

321、5 years or so,players of this industry have engaged into crafting their stories and offering innovative experiences to customers.Supported by a dynamic experiential luxury market,as shown below,these initiatives serve several strategic ambitions:Wines&Spirits often face a paradoxical situation:produ

322、ction constraints putting value strategy at core,yet with a widespread distribution not conductive to brand elevation.Brand elevationto enhance the perceived value of products,hence impacting pricing and gross margin.to increase brand recognition,hence impacting sell-out.Brand awarenessLUXURY FAST F

323、ORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS4013 Sales evolution of luxury product business versus luxury experience business(2012-2022)2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022CAGR2010-2019Overall growth 2019-2022EExperience-based goods8%6%Personal goods6%25%Experie

324、nces9%-7%If there is irrefutable value in experimentation,the difficulty for the W&S players comes with embracing a wide variety of concepts and touchpoints all at once,with no scale yet.Creating branded spaces that are highly impactful and performing is a difficult exercise,let alone the extra chal

325、lenge of having to invent new business models,sometimes combining off trade with on trade practices within wholesale driven organizations.Behind the scenes,developing and operating such unique experiences require substantial effort and time from internal teams who,not so long ago,did not know much a

326、bout DTC and are still on the learning curve.To complicate the situation,projects are often scattered across brands&markets thus involving many stakeholders,with no one accountable for the full scope of DTC.Moreover,as the thinking process is often image driven or individual to move from being a lux

327、ury W&S brand and become a luxury house,thus developing new revenues and growing brand equity.to optimize returns on investment on brand initiatives and to increase market share.to gain expertise on VM(Visual Merchandising),product allocation,logistics,and eventually increase sell out,bargaining pow

328、er and gross margin.Brand diversificationGain customer knowledgeStronger wholesaleLUXURY FAST FORWARD 2023 2024 DISTRIBUTION:ONE OBJECTIVE,MANY ROADS4114P&L driven,the decisions that would make sense from a consumer standpoint and that would maximize CLV are not always taken.With these projects unfo

329、lding,bringing along with them their burden of complexities,structuring questions are being raised:/How to make our DTC projects simpler and leaner,thus not engaging too many stakeholders internally,while addressing all the necessary details?/How to ensure fluidity for our DTC projects within our ex

330、isting organizational matrix of brands and markets,with the right reporting,processes&governance?/How to deliver a level of excellence comparable to what established luxury brands achieve when there is no scale yet and much smaller teams?Future success on DTC lies in W&S players capacity to bring fo

331、cus,consistency and to work in unison-one vision,one strategy,one team to achieve proof of concepts that turn into real game changers.Otherwise,the risk is that these initiatives,as beautiful as they may be,eventually end up disappearing when they become too costly to develop and operate in view of

332、no major impact on the business.To move forward,W&S players need to further architecture the vision of experience they want their brands to deliver to their customers across direct&indirect touchpoints.Following which,they need to work on their offer strategy and define product rules of allocation s

333、upporting this vision.The creation of a DTC business unit embracing all direct touch points,cascading from HQ to local teams,and positioned at the highest level in the organization,is also highly recommended to gain tractive force internally and bring coherence in the client journeys.Finally,the organization needs to empower support functions with the creation of a core operating model specificall