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Global Luxury Retailing | Verdict Sector Report

  • December 2014
  • -
  • Verdict Retail
  • -
  • 139 pages

Summary
The era of double digit global luxury expenditure growth continues to slip away, with a second year of much softer rises in 2014 up 3.8%. As a result of a slowdown in China - caused by a shift in purchasing behaviour and crackdown on luxury gifting - political problems in Russia and recovering economies in much of Europe, the global luxury market has entered a more modest growth period.

Key Findings
- Make informed regional investment decisions with luxury expenditure forecasts to 2020 based on inputs including the number of wealthy individuals.

- Choose which product sectors to prioritise and grow based on 2015 and 2020 sales forecasts across five sectors and their sub categories.

- Discover the size of the online luxury market and pureplay market in 2015 and forecasts for 2020 to aid investment decisions in digital operations.

- Understand the variety of luxury shopper personas as well as shopping habit differences by region and learn how best to target these consumer groups.

- Use our market share data to analyse which rivals are struggling, allowing you to gain a competitive advantage and build a strategy to steal share.

Synopsis
Asia Pacific will continue to be the driving force of the market, aiding luxury expenditure to grow by 40.5% in the five years to 2020. While geographically smaller, we expect to see a higher level of interest in countries such as Indonesia, Malaysia, Vietnam and Thailand which will drive spend in South East Asia by 76.3% in the next five years.

The importance of personal appearance and looks in China has fallen in 2014, partly due to a gradual shift in consumer sentiment toward wanting more subtle luxury and being less driven to display wealth or enhance appearance through the products they buy. Smaller discreet luxury players like Elie Saab and Paul and Joe should capitalise on this trend.

As new luxury players launch online and introduce country dedicated websites, online luxury spend will grow by 25.3% in 2015 to a 7.1% share of total spend. The online pureplays market will outperform at 35.4% as My Theresa, Yoox, and Far Fetch continue to grow their branded offers allowing them to reach a larger customer base.

Reasons To Buy
- Which regions/markets hold the most potential for the luxury sector and should I invest in them?

- How have consumer spending habits changed in regions such as Western Europe, China and Russia, and how should I adapt my proposition to target them?

- What is the size of the online luxury sector and how can I learn from existing luxury online pureplays and the online discounters?

- Which retailers are gaining market share, and which are struggling to protect their share and why? How will market leader LVMH fare in 2015?

- Which product categories are forecast to deliver the most robust growth? In what regions should luxury houses push diffusion lines?

Table Of Contents

Global Luxury Retailing | Verdict Sector Report
Table of Contents
1 Overview
2 Executive Summary
2.1 China causes luxury growth slowdown
2.2 Smaller brands support growth in 2014
2.3 Russia becomes a high risk market
2.4 Asia Pacific will continue to boost luxury spend over next five years
2.5 Southeast Asia will be fastest growing region
2.6 South Korea growth to outperform China in the next five years
2.7 Consumers in India and the US are becoming wealthier
2.8 Less branding and more exclusivity become essential for success in China
2.9 Mature luxury markets demand brand heritage and better value for money
2.1 Accessories will be the fastest performing category
2.11 Online's share of luxury goods market forecast to reach over €23bn in 2015
2.12 Luxury online pureplays will continue to gain traction
2.13 Luxury brands must seize opportunities in airports to drive future spend
3 Recommendations
3.1 Regional opportunities
3.2 Sector opportunities
3.3 Airport formats must be invested in
3.4 A multichannel proposition is essential to improve accessibility
3.5 Recognise different consumers' motivations for purchasing by region
3.6 Tailor proposition to better cater to different consumer personas
4 Market Size
4.1 Market definition
4.1.1 Categories covered
4.1.2 Regions covered
4.1.3 Players covered
4.2 Expenditure Trends
4.2.1 Slowdown in China contributes to softening in growth in 2014
4.3 Regional breakdown
4.3.1 Following year-on-year share declines, Americas picks back up
4.4 Europe
4.4.1 Domestic consumers keep market growth low
4.4.2 European country breakdown
4.5 Americas
4.5.1 Growth in Latin America slows, while retailers in the US see a pick-up
4.5.2 Americas regional breakdown
4.5.3 Latin America suffers slowdown
4.6 Asia Pacific
4.6.1 Asia Pacific continues new era of single digit growth
4.6.2 Asia Pacific regional breakdown
4.6.3 China
4.6.4 Japan
4.6.5 Asia Pacific excluding Japan and China
4.7 The Middle East and Others
4.7.1 Growth exceeds total market in 2015, rising 5.6%
4.8 Luxury goods market segmentation
4.8.1 Accessories continues to drive luxury expenditure
4.8.2 Watches limit growth in watches and jewellery division
4.8.3 Accessories
4.8.4 Perfumes and cosmetics
4.8.5 Watches and jewellery
5 Market Forecast
5.1 Expenditure Trends
5.1.1 Asia Pacific excluding Japan to drive growth in the next five years
5.1.2 Luxury market drivers and inhibitors
5.2 Regional breakdown
5.2.1 Europe is forecast to lose the most share by 2020
5.3 Europe
5.3.1 Europe to gain over €30bn in luxury spend in five years to 2020
5.3.2 European country breakdown
5.4 Americas
5.4.1 Rising wealth in Latin and North America will drive market growth
5.5 Asia Pacific
5.5.1 Asia Pacific to achieve the highest growth in five years
5.5.2 sia Pacific regional breakdown
5.5.3 China
5.5.4 Japan
5.5.5 Asia Pacific excluding Japan and China
5.6 The Middle East and Others
5.6.1 Region to outperform total global luxury growth by 3.7 percentage points in the next five years
5.7 Luxury goods market segmentation
5.7.1 Accessories
5.7.2 Perfumes and cosmetics
5.7.3 Watches and jewellery
6 Trends
6.1 Online luxury market set to reach almost €50bn by 2020
6.1.1 Online's share of luxury sales forecast to more than triple in 10 years
6.1.2 Expanding online pureplays drive the market
6.1.3 Online discounters will grow in popularity in weaker economic climates
6.2 Luxury travel retail
6.2.1 Rising passenger numbers and consumer wealth lure luxury brands to airports
6.2.2 Asia Pacific drives luxury airport spend, both now and in the future
6.2.3 Luxury retail success is driven by the consumer, not the market
6.2.4 Beauty will remain the most desirable sector
6.2.5 Spend on clothing remains small, but its share of spend will grow
6.2.6 Diffusion brands should be made more accessible as low cost carriers broaden traveller base
6.3 Consumer sentiment and spending habits
6.3.1 Europe
6.3.2 Asia
6.3.3 The US, Latin America and the UAE
6.4 Luxury shopper personas
6.4.1 The ostentatious consumer and the gift giver
6.4.2 The trend setter and the loyal follower
6.5 Brands must strike the right balance between accessibility and exclusivity
6.5.1 Young luxury brands should seek a balance between the two
6.5.2 Limited ranges boost exclusivity…
6.5.3 Burberry succeeds in maintaining a good balance between accessibility and exclusivity
7 Market Shares
7.1 Leading luxury players
7.1.1 Richemont makes the greatest share gains in five years to 2015
7.2 Winners and losers
7.2.1 Smaller players
7.3 Operating statistics
7.3.1 Revenue
7.4 Operating margin
7.5 Store presence
8 Methodology
8.1 Building up the market size
8.2 Forecasts
8.3 Exchange rates
8.4 Datamonitor's wealth data
8.4.1 Definitions
8.4.2 Global Wealth Model methodology
9 Appendix
9.1 Categories covered
9.2 Regions covered
9.3 Players covered
9.4 About Verdict Retail
9.5 Disclaimer

List of Tables
Table 1: Global luxury market definition, 2014
Table 2: Global retail expenditure on luxury goods (€bn/$bn), 2010-15e
Table 3: Retail expenditure on luxury products by region (€bn), 2010-15e 5e
Table 4: Year-on-year growth of retail expenditure on luxury products by region in euro terms(%), 2010-15e
Table 5: Retail expenditure on luxury products by region ($bn), 2010-15e
Table 6: Year-on-year growth of retail expenditure on luxury products by region in dollar terms(%), 2010-15e
Table 7: European expenditure on luxury products (€bn/$bn), 2010-15e
Table 8: Americas expenditure on luxury products (€bn/$bn), 2010-15e
Table 9: Asia Pacific expenditure on luxury products (€bn/$bn), 2010-15e
Table 10: China expenditure on luxury products (€bn/$bn), 2010-15e
Table 11: Japanese expenditure on luxury goods (€bn/$bn), 2010-15e
Table 12: Asia excluding Japan and China expenditure on luxury goods (€bn/$bn), 2010-15e
Table 13: The Middle East and Others expenditure on luxury goods (€bn/$bn), 2010-15e
Table 14: Global expenditure on luxury goods by product category (€bn), 2010-15e
Table 15: Year-on-year growth of global expenditure on luxury goods by product category (%), 2010-15e
Table 16: Global retail expenditure on luxury products (€bn/$bn), 2015e-20e
Table 17: Retail expenditure on luxury products by region (€bn), 2015e-20e
Table 18: Year-on-year growth of retail expenditure on luxury products by region in euro terms(%), 2015e-20e
Table 19: Retail expenditure on luxury products by region ($bn), 2015e-20e
Table 20: Year-on-year growth of retail expenditure on luxury products by region in dollar terms (%), 2015e-20e
Table 21: European expenditure on luxury products (€bn/$bn), 2015e-20e
Table 22: Americas expenditure on luxury products (€bn/$bn), 2015e-20e
Table 23: Asia Pacific expenditure on luxury products (€bn/$bn), 2015e-20e
Table 24: China's expenditure on luxury products (€bn/$bn), 2015e-20e
Table 25: Japanese expenditure on luxury products (€bn/$bn), 2015e-20e
Table 26: Asia excluding Japan and China expenditure on luxury products (€bn/$bn), 2015e-20e
Table 27: The Middle East and Others expenditure on luxury products (€bn/$bn), 2015e-20e
Table 28: Global expenditure on luxury goods by product category (€bn), 2015e and 2020e
Table 29: Online expenditure on luxury goods (€bn/$bn), 2014, 2015e and 2020e
Table 30: Airport passenger numbers (million) and growth rate (%), by region, 2010-14e
Table 31: The percentage of consumers who agree/strongly agree and disagree/strongly disagree that their disposable income is increasing (%), 2014
Table 32: Leading luxury houses' global market shares (%), 2010-15e
Table 33: Leading luxury houses by revenue (€m), 2010-15e
Table 34: Leading luxury houses by revenue growth (%), 2010-15e
Table 35: Leading luxury houses' stores (numbers), financial year 2013/14
Table 36: Kering directly operated stores (numbers), financial year 2013
Table 37: Global luxury market definition, 2014

List of Figures
Figure 1: Global retail expenditure on luxury goods (€bn), 2010-15e
Figure 2: Share of expenditure on luxury products by region (%), 2010 and 2015e
Figure 3: European expenditure on luxury products (€bn), 2010-15e
Figure 4: Mulberry UK revenue y-o-y change (%) and prices in continuity lines (£), 2014
Figure 5: European country breakdown (%), 2015e
Figure 6: European country breakdown (€bn) and year-on-year growth (%), 2014 and 2015e
Figure 7: Luxury expenditure in Russia (€bn) and year-on-year growth (%), 2014 and 2015e
Figure 8: Americas expenditure on luxury products (€bn), 2010-15e
Figure 9: Americas regional breakdown (%), 2015e
Figure 10: Americas regional breakdown (€bn) and year-on- year growth (%), 2014 and 2015e
Figure 11: Major new developments in Brazil and Mexico, 2014 and 2015
Figure 12: Asia Pacific expenditure on luxury goods (€bn), 2010-15e
Figure 13: Inhibitors of growth across Asia Pacific in 2014
Figure 14: Asia Pacific regional breakdown (%), 2015e
Figure 15: Asia Pacific regional breakdown (€bn) and year-on-year growth (%), 2014 and 2015e
Figure 16: China expenditure on luxury goods (€bn), 2010-15e
Figure 17: Japanese expenditure on luxury goods (€bn), 2010-15e
Figure 18: Asia excluding Japan and China expenditure on luxury goods (€bn), 2010-15e
Figure 19: The Middle East and Others expenditure on luxury goods (€bn), 2010-15e
Figure 20: Luxury goods category splits (%), 2010 and 2015e
Figure 21: Accessories category breakdown (%), 2015e
Figure 22: Accessories category breakdown (€bn) and y-o-y growth (%), 2014 and 2015e
Figure 23: Perfumes and cosmetics category breakdown (%), 2015e
Figure 24: Perfumes and cosmetics category breakdown (€bn) and y-o-y growth (%), 2014 and 2015e
Figure 25: Watches and jewellery category breakdown (%), 2015e
Figure 26: Watches and jewellery category breakdown (€bn) and y-o-y growth (%), 2014 and 2015e
Figure 27: Global retail expenditure on luxury products (€bn), 2015e-20e
Figure 28: Luxury market drivers and inhibitors, 2015-20
Figure 29: Share of expenditure on luxury products by region (%), 2015e and 2020e
Figure 30: European expenditure on luxury products (€bn), 2015e-20e
Figure 31: European country breakdown (%), 2020e
Figure 32: European country breakdown (€bn) and five year growth (%), 2015e and 2020e
Figure 33: Luxury expenditure in Russia (€bn) and five year growth (%), 2015e and 2020e
Figure 34: Americas expenditure on luxury products (€bn), 2015e-20e
Figure 35: Americas regional breakdown (%), 2020e
Figure 36: Americas regional breakdown (€bn) and five year growth (%), 2015e and 2020e
Figure 37: Asia Pacific expenditure on luxury products (€bn), 2015e-20e
Figure 38: Asia Pacific regional breakdown (%), 2020e
Figure 39: Asia Pacific regional breakdown (€bn) and five year growth (%), 2015e and 2020e
Figure 40: China's expenditure on luxury products (€bn), 2015e-20e
Figure 41: Japanese expenditure on luxury products (€bn), 2015e-20e
Figure 42: Asia excluding Japan and China expenditure on luxury products (€bn), 2015e-20e
Figure 43: The Middle East and Others expenditure on luxury products (€bn), 2015e-20e
Figure 44: Luxury goods category splits (%), 2015e and 2020e
Figure 45: Accessories category breakdown (%), 2020e
Figure 46: Accessories category breakdown (€bn) and five year growth (%), 2015e and 2020e
Figure 47: Perfumes and cosmetics category breakdown (%), 2020e
Figure 48: Perfumes and cosmetics category breakdown (€bn) and five year growth (%), 2015e and 2020e
Figure 49: Watches and jewellery category breakdown (%), 2020e
Figure 50: Watches and jewellery category breakdown (€bn) and five year growth (%), 2015e and 2020e
Figure 51: Online's share of global expenditure on branded luxury goods (%), 2010, 2015e and 2020e
Figure 52: Online expenditure on branded luxury goods (€bn), 2015e-20e
Figure 53: Strengths and weaknesses of luxury online propositions, 2014
Figure 54: Global luxury expenditure through online pureplays (€bn), 2014, 2015e and 2020e
Figure 55: Growing luxury pureplays threaten Net-a-Porter's leading market share, 2014
Figure 56: FarFetch's boutique finder, 2014
Figure 57: Major online luxury outlet sites in each region, 2014
Figure 58: Updated retail offers at Shenzhen, Heathrow and Jakarta airports
Figure 59: Airports to target in Asia, 2014
Figure 60: Airport presence in India
Figure 61: Popular countries for Chinese consumers to visit
Figure 62: Jo Malone destination fragrance format, Heathrow T5
Figure 63: Diffusion brands to increase brand accessibility
Figure 64: Consumer sentiment and attitudes toward luxury in Europe, 2014
Figure 65: Consumer sentiment and attitudes toward luxury in Asia, 2014
Figure 66: Consumer sentiment and attitudes toward luxury in the Rest of World, 2014
Figure 67: The percentage of consumers who view looks and appearance as important/very important (%), 2014
Figure 68: Prada Double Bag craftsmanship video, 2014
Figure 69: The percentage of consumers who view being fashionable as important/very important (%), 2014
Figure 70: Burberry runway to reality, 2014
Figure 71: Percentage of consumers that consider themselves as savers or spenders (%), 2014
Figure 72: Luxury shopper personas: the ostentatious consumer and the gift giver, 2014
Figure 73: A letter from Tom Ford, 2014
Figure 74: Luxury shopper personas: the connoisseur and the bargain hunter, 2014
Figure 75: The Burberry Trench Eyewear Collection, 2014
Figure 76: Luxury shopper personas: the trend setter and the loyal follower, 2014
Figure 77: Accessibility versus exclusivity, 2014
Figure 78: Accessible and exclusive brands, 2014
Figure 79: Celebrities in Burberry's personalised poncho, 2014
Figure 80: Market shares of leading luxury players (%), 2015e on 2010
Figure 81: Winners and losers (percentage point change), 2015e on 2014
Figure 82: Market shares of smaller global luxury players (%), 2015e
Figure 83: Revenue of leading luxury players (€m), 2015e and 2010
Figure 84: Group operating margins of leading luxury players (%), 2013/14

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