Metroluxe: Countering Complexity in the Business of Luxury

Do Not Reproduce More Than Two Slides or Charts Without Permission
Metroluxe: Countering Complexity in the
Business of Luxury
January 2017

Metroluxe - BCG (Jan1016) SlideShare.pptx 1Draft—for discussion only
Copyright©2016byTheBostonConsultingGroup,Inc.Allrightsreserved.
The Global Luxury market is worth €1.5 trillion
5573156
404
399
695347129
7077
2,000
1,500
1,000
500
0
Total
1,532
Other2ArtsTechno-
logy
Cars &
Yachts
Hotel &
Exclusive
vacations
Food
& Wine
Furnit-
ure
Perfume
&
Cosmetics
Watches
&
Jewelry
ApparelAcces-
sories
Luxury market (€B, 2015 retail value @current)
Personal luxury
(323 €B)
Experiential luxury
(522 €B)
Cars &
Yachts
(404€B)
P&E 1 Market:
845€B
Others
(284 €B)
1. At constant Exchange rates. Total P&E growth: +3.2% - =11% with FX effects
Note: Some numbers are rounded. 1.Personal and Experiential luxury 2. Including Private Jets, Art de la table, etc
Source: BCG 2015 specific survey, BCG-IPSOS market research
Growth
2014-20151 +1.6% +4.2%

Key trends shaping the present and future of luxury
The New Normal:
Slowing growth and
shifting drivers
Consumers increasingly
looking for experience
vs. status
Changing way of
interaction:
The Rise of Digital
• Intro luxury values (quality, exclusivity, craftsmanship) dominate
• Accelerating shift from “having” to “being”
• Diversify and deliver individual exceptional experiences along the purchase pathway
• Strong reduction in retail expansion: 2/3 of next decade's growth will be organic
• Opportunities in countries where luxury buying is long-established; U.S. consumers
expected to be the main contributor of future growth
• Chinese consumers becoming more sophisticated; accessible luxury market is growing
• Local consumer focus important both in mature and emerging markets
• Luxury sales accelerating online
• Beyond e-commerce, digital a key lever to influence purchase behavior of luxury consumers
• Digital is key to customer interaction across all segments, for e-commerce and beyond
• Multichannel is essential – with ideally seamless integration of e-commerce and B&M
• Word of mouth/advocacy now the No. 1 influencer of luxury purchases
Emerging trends:
Targeting new
consumers
• Many new and innovative ways to target new consumers
• Product offering (new categories, assortment) important to recruit new consumers,
especially Millennials
• Focus on local consumers

Global luxury market growth is slower
1. At constant Exchange rates. Total P&E growth: +3.2% - =11% with FX effects
Note: Some numbers are rounded. 1.Personal and Experiential luxury 2. Including Private Jets, Art de la table, etc
Source: BCG 2015 specific survey, BCG-IPSOS market research
Luxury market (€B, 2015 retail value @current)
5573156
404
399
69
5347129
7077
1,532
0
500
1,000
1,500
2,000
Arts Other2 TotalTechno-
logy
Acces-
sories
Apparel Watches
&
Jewelry
Perfumes
&
Cosmetics
Furniture Food &
Wine
Hotel &
Exclusive
vacations
Cars &
Yachts
Personal luxury
(323 €B)
Experiential luxury
(522 €B)
Cars &
Yachts
(404€B)
∆ vs.
20141
+1.6% +4.2%
Others
(284 €B)

New normal: 2%-4% future growth after past strong growth,
with China remaining the main market
Source: BernsteinSanford; Exane BNP Paribas; BCG – Altagamma luxury survey; BCG analysis
Personal luxury growth (CAGR %)
9%
7%
5%
2002-20071996-2001 2008-2014
2-4%
2015-2022
Personal luxury
Market 2015
(323 €B)
10
4
5
8
20
23
30
0
7
14
21
28
35
Est. Share of total Personal Luxury Goods market (%)
OthersRussiansMiddle
Easterns
JapaneseEuropeansAmericansChinese
Chinese remain the main client
nationality
Development driven
by Chinese (21%
CAGR
compared to 2%
RoW)
Not only growth rate but also source of growth
expected to change

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

Experiential luxury is growing faster than personal luxury
goods purchases in all key markets
2%
3%3%
2%
3%
7%
9%
4%
6%6%
4%
6%
9%
12%
10
-5
0
5
15
CAGR
2011-2015 (%)
JapanGermanyAverage
Europe
FranceBrazilChinaUS
Personal goods
Experiential luxury
Shift from "owning" to "being" happening in all countries
Source: BCG Altagamma study; BCG analysis

Full athletic
experience in-store
New digital
touchpoints
Focus on customer
experience
Organic growth will benefit from bringing more experience
in-store for consumers: Examples
Source: Luxury Daily, Fashionista.com, company websites
'The Fit Room'
In-store workouts on Technogym
equipment, spinning demonstrations,
compete in exercise games, make a
smoothie on Vitamix blenders, try out
tech accessories and shop for full
ranges of athletic wear
'Memory Mirror'
Large interactive screen &
small touchscreen where
consumer compares outfits
side-by-side, e-mails pictures
and can work with a specific
sales associate
'The Burberry Booth'
At Regent St flagship during holiday
season
Customers could film their own 15
second version of the brand's current
ad campaign and share via social
media with friends
Stores offer complimentary
community events (e.g., self-
defense, fitness workshops, yoga
classes) and "One guest
experience" – aims to create 1:1
customer relationship; insights used
for store experience / product
development
Consumer-generated
content

BCG Metroluxe Index
Enabling comparisons of luxury potential among cities worldwide
BCG Metroluxe Index
A proprietary tool developed to measure the luxury status and growth potential of the world’s
richest cities (as defined by GDP per capita) providing an overview of strategic opportunities for
luxury brands.
The Index takes into consideration local demand (the propensity of local affluent consumers to
spend on luxury), tourist demand (the impact of international tourism on luxury spending in each
city), and supply-side drivers (local BCG expert views on the infrastructure that supports luxury
sales, including distribution network maturity, logistics, and the sophistication of the local fashion
and design community).
Bernstein Store Database
Luxury store network analyses are based on the findings from the Bernstein Proprietary Luxury
Store Count database compiled over a two-week period in July 2016 using company store
information available on official brand websites. Data includes all stores that are featured on the
brands' websites and may include temporary stores (e.g., pop-ups) which companies may
exclude from their official store count.

BCG Metroluxe Index
Enabling comparisons of luxury potential among cities worldwide
New York
Tokyo
London
Paris
Seoul
Hong Kong
Los AngelesMilan
Shanghai
Dubai
Beijing
Singapore
Chicago
Osaka
Houston
Moscow
Rome
Taipei
San Francisco
Mexico City
Sydney
Bangkok
Las Vegas
Busan
0
20
40
60
80
100
0 20 40 60 80 100
BernsteinStoreIndex,2016
BCG Metroluxe Index, 2016
Bernstein-BCG Store Index 2016

London
Paris
Milan
Rome
Tokyo
Seoul
Hong Kong
Shanghai
Beijing
SingaporeOsaka
Taipei
Bangkok
Busan
Tianjin
Chengdu
New York
Los Angeles
Chicago
Houston
San Francisco
Mexico City
Washington
Las Vegas DubaiMoscow
0
20
40
60
80
100
0 20 40 60 80 100
BernsteinStoreIndex,2016
BCG Metroluxe Index, 2016
Bernstein-BCG Store Index 2016
Europe
Asia
Americas
RoW
Opportunities for new stores in underpenetrated
U.S. and selected locations in Europe
Opportunities for greater
efficiency in top Asia locations
Store saturation in Tier 2+
Chinese cities
Source: 2016 BCG Metroluxe Index, Bernstein Store index
The Metroluxe Index suggests there are opportunities for
new stores in the U.S./Europe and greater efficiency in Asia

Key Takeaways for Luxury Executives
There is a 'New Normal' for the luxury industry, as expected growth is slower than in the
past decade.
Anticipate footprint reductions in select areas – especially in Asia – and get more sales
per square foot from existing stores.
There is opportunity for luxury market growth in the U.S. and some European cities, and
opportunities for greater efficiency and even store closures in China and Asian cities.
Organic growth will benefit from bringing more experience in-store for consumers.
Look for targeted opportunities to expand the number of stores – especially in many U.S.
cities such as Dallas, Boston and Washington D.C.
Invest in the technology tools and techniques (and the skills to use them) that help
brands get better at segmenting markets and uncovering pockets of demand.
Accelerate omnichannel initiatives to quickly determine the mix of physical and online
channels best suited for individual markets.

To Request an Interview
Author Media Contacts
Alexandra Corriveau
Head of Media Relations, The Americas
The Boston Consulting Group
Corriveau.Alexandra@bcg.com
+1 212 446-3261
Kelli Gould
Global Marketing Manager, Consumer
Gould.Kelli@bcg.com
+1 312 330-7887
Olivier Abtan
Partner
Global Luxury Topic Leader
Abtan.Olivier@bcg.com

Thank you
bcg.com | bcgperspectives.com

Metroluxe: Countering Complexity in the Business of Luxury

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Metroluxe: Countering Complexity in the Business of Luxury