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Luxury Goods in Emerging Markets 2013 - Competitive Analysis
1.
2. W H I C H
B R A N D S
DID THE
BEST IN
2 0 1 2 ?
3. Luxury Goods 2013 – Competitive Analysis
The 2012 financial results
are in!
Which brands will outperform amidst a Chinese slowdown and
more discerning customer tastes?
Data compiled from annual reports, Bain
Co., BNP Paribas and Bloomberg, 2012
33
29
17
16.4
16
13
9
8.2
7.6
6
Bottega Veneta
Prada
Christian Dior Couture
Hermes
Salvatore Ferragamo
Yves Saint Laurent
Richemont
Gucci
Tod's
Louis Vuitton
Revenue Growth at Constant Exchange Rates (%)
Industry Growth Rate, 2012
4. T H E
C H A N G I N G
L U X U R Y
L A N D S C A P E
5. Luxury Goods 2013 – Competitive Analysis
The Spread of Luxury Model
in Emerging Markets
Subjugation
• Authoritarian rule
• Poverty and
deprivation
Start of Money
• Economic growth
• Elites start buying
luxe
Show Off
• Acquire symbols
of wealth
• Display economic
status
Fit in
• Large scale
adoption of luxe
• Fueled by need to
conform
Way of Life
• Locked into luxe
habit
• Confident,
discerning buyers
HSBC The Cult of the Luxury
Brand, 2012
India, Brazil
China
Taiwan/S. Korea
Hong Kong, Singapore
Japan
HSBC estimates that over 25% of global
luxury goods sales are made by the
Chinese in 2012, meaning that China
essentially holds great power to make or
break a brand’s profits
6. Luxury Goods 2013 – Competitive Analysis
Increasing customer
sophistication in China
❧ Luxury customers are getting younger
and more knowledgeable
❧ First-mover disadvantage: Louis
Vuitton Gucci
❧ “In the Show” “In the Know”
❧ Leather Coated Canvas
7. Luxury Goods 2013 – Competitive Analysis
Where did LV and Gucci’s
market share go?
Adapted from HSBC, 2012
Dior,
Chanel
Bottega Veneta, Goyard,
Valextra, Tom Ford, VBH
Designer Apparel
Accessories
Louis Vuitton, Gucci,
Tod’s, Prada, Burberry
Coach, Polo Ralph Lauren,
Tory Burch, Tommy Hilfiger,
Agnes B, Longchamp
Designer Eyewear
Designer Cosmetics
Fragrances
Armani Exchange, Abercrombie
Fitch, Jack Wills, Topshop,
Wildfox Couture
Superpremium
Premium Core
Accessible Core
Affordable Luxury
Everyday Luxury
5,000
1,000
300
100
Price points in USD
Number of
points of sale
SUBSTITUTION
Hermes
8. Luxury Goods 2013 – Competitive Analysis
“Mass” vs. “Class”
Exclusivity
Accessibility
Ubiquity
Rarity
Adapted from Financial Times
Research, 2012
10. Luxury Goods 2013 – Competitive Analysis
Background
❧ Founded in Italy, 1913
❧ Currently headed by Patrizio Bertelli and
Miuccia Prada
❧ Targets an international customer base
that is “modern, sophisticated, attuned to
stylistic innovations, and expects
craftsmanship of the highest quality”
11. Luxury Goods 2013 – Competitive Analysis
Background
❧ Core business: Bags, 57% of total
revenue
❧ Produces 8 collections each year
❧ Positioned at slightly higher price
points than LV, Gucci, Burberry
12. Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Financial Resources
❧ Listed in HK and raised $2.14
billion in its IPO
❧ Market Capitalization:
HKD 185,642.69 M at 28/4/13
13. Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Physical Resources
❧ Distribution network of 283
directly-operated Prada stores
❧ 4 Epicenter flagship stores
❧ 10 factories in Italy and a
network of 480 external
manufacturers, 20% of them
abroad
14. Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Technological Resources
❧ Patented fabric “Pocone” - a
waterproof type of nylon with a
fine twisted weave that
appeared as light as a silk
16. Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Human Resources
❧ Highly specialized and
dedicated production
employees – most have worked
over 20 years for Prada
❧ Business acumen and risk-
taking disposition of Patrizio
Bertelli, CEO
18. Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Reputational Resources
❧ 6th most valuable luxury brand
in 2012, with brand value of
$5,788 M (Millward Brown Optimor)
❧ Reputation for
– Sophisticated and subtly appealing
apparel
– High quality and durable leather
goods
19. Luxury Goods 2013 – Competitive Analysis
Capabilities
Fabric innovation
❧ Close partnership with Italian fabric
mills to create unconventional fabrics
every season
❧ Unorthodox use of traditional fabrics
Kid Mohair
in 02 S/S Menswear
“I was forbidden to use it,
and of course,
it became a best seller for us.”
– Miuccia Prada
20. Luxury Goods 2013 – Competitive Analysis
Capabilities
Avant-garde design
philosophy of Miuccia Prada
❧ Non-conformity to trends
❧ Subtle branding
❧ Dedication to create something
completely new every season
“If you want to make something new, you need to make your
mind blank and just look with your eyes, just judge with
your eyes.” – Miuccia Prada
21. Luxury Goods 2013 – Competitive Analysis
Capabilities
Global sourcing of skilled
artisans
❧ Miuccia Prada went in search of the
most specialized craftsmen all over
the world
– eg. Alpaca wool knitters from Peru,
leather weavers from India, traditional
kilt makers in Scotland
❧ Incredible skill of the artisans were
uncovered to the world through
Prada’s design and direction in 2010’s
“Made in…” collection
22. Luxury Goods 2013 – Competitive Analysis
Capabilities
Effective management of
diverse product portfolio
❧ Products with a range of price
points from high to low
❧ PR and distribution for each
product line tailors to each
target segment
23. Luxury Goods 2013 – Competitive Analysis
Capabilities
Intimate connection with the art
world
❧ Fondazione Prada is a non-profit
organization that sponsors art projects
for public display
– Miuccia Prada and Patrizio Bertelli are both
lovers of contemporary art
– Highly reputed for choosing artists before
they are successful
❧ Long-term partnership with
architect Rem Koolhas
24. Luxury Goods 2013 – Competitive Analysis
Capabilities
Quirky, edgy advertising with
all-star directors and cast
❧ Short films and videos are often
light-hearted and infused with
humor
25. Luxury Goods 2013 – Competitive Analysis
Porter’s Value Chain
Research
Development
Production
Marketing
Sales
Customer
Service
Company
Infrastructure
Technology
Materials
Management
Human
Resources
Support Activities
Primary Activities
INPUT
OUTPUT
26. Luxury Goods 2013 – Competitive Analysis
“Austere
Individualism” –
Prada’s unique
design aesthetic
Fabric Innovation
Intimate connection
with the art world
Global network of
skilled artisans
Miuccia Prada’s
avant-garde design
philosophy
Value Creation – RD
27. Luxury Goods 2013 – Competitive Analysis
“Austere
Individualism” –
Prada’s unique
design aesthetic
Value Creation – RD
Prada’s contemporary designs allow
customers to express their intelligence,
individuality and sophisticated taste by
challenging common ideals of beauty.
28. Value Creation – Production
“Made by Prada”
– Quality-cost
balance
Highly specialized
craftsmen in
owned factories
Global network of
skilled artisans
Effective management
of diverse product
portfolio
Patented Saffiano
leather and Pocone
fabric
29. Value Creation – Production
“Made by Prada”
– Quality-cost
balance
Prada outsources 20% of production
overseas with strict quality controls,
delivering superior products to customers
in a shorter time and with lower costs.
30. Value Creation – Marketing Sales
“Accessible
avant-garde” –
dual facets of
Prada’s brand
identity
Intimate
connection with
the art world
Quirky, edgy
advertising with all-
star director and cast
Strong retail network
with architect
designed flagships
Effective
management of
diverse product
portfolio
31. Luxury Goods 2013 – Competitive Analysis
“Accessible
avant-garde” –
dual facets of
Prada’s brand
identity
Cinema and art projects
enriches Prada’s brand
identity with experimental
creativity. Art installations
and the 4 Epicenter flagship
stores increases customer
engagement.
Value Creation – Marketing Sales
With its diverse product
range, customers of all price
points are able to own a piece
of the cultured refinement
Prada represents.
32. Luxury Goods 2013 – Competitive Analysis
Value Creation –
Customer Service
Decreases
customer
satisfaction
and sours retail
experience
Unpleasant,
unhelpful, and
impolite staff
Reluctant to repair
faulty items
Inability to give
public feedback on
Facebook
33. Luxury Goods 2013 – Competitive Analysis
Core Competencies
❧ Forerunner of style and trends
❧ Iconic nylon bags and Saffiano
leather bags
❧ Brand identity infused with
cinema and art
34. M O R E T H A N
T H E T R E N C H
A N D C H E C K
35. Luxury Goods 2013 – Competitive Analysis
Background
• Founded in 1856 in Britain
• Currently headed by Angela Ahrendts and
Christopher Bailey
• Targets customers who want functionality as
well as timeless elegance, across genders and
generations
• Core business: Outerwear
36. Luxury Goods 2013 – Competitive Analysis
Background
Burberry
Prorsum
Burberry
London
Burberry Brit
37. Luxury Goods 2013 – Competitive Analysis
Financial Resources
❧ Listed in London since 2002
❧ Market Capitalization:
GBP 5,968.76M as at 29/4/13
Resources - Tangible
38. Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Physical Resources
❧ Wide network of distribution
channels
– 192 Mainline stores
– 208 Concessions within department
stores
– 44 Outlets
❧ 2 factories in Britain and 90
external manufacturers, mostly in
Italy
40. Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Human Resources
❧ 1,500 employees worldwide
❧ Artistic vision of Christopher
Bailey
– British
– Designer of the Year (2009),
British Fashion Awards
– Menswear Designer of the Year
(2007, 2008)
41. Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Reputational Resources
❧ 10th most valuable luxury brand
in 2012, with brand value of
$4,090 M (Millward Brown Optimor)
❧ Reputation for
– Rich British heritage
– Casual, wearable, affordable
luxury with high fashion appeal
42. Luxury Goods 2013 – Competitive Analysis
Capabilities
Close association with all
things British
❧ Diverse cast of British musicians,
actors, and models in ads
– “It” Girls like Kate Moss, Emma
Watson, Cara Delevingne
❧ Burberry Prorsum stages runway
shows in London Fashion Week
❧ Burberry Acoustic showcases
emerging British bands
43. Luxury Goods 2013 – Competitive Analysis
Capabilities
Pioneer in Digital Marketing
❧ Well-established presence on social
media platforms
❧ “Art of the Trench”
– Users could upload photos of
themselves wearing Burberry trench
coats
– Aspirational customers can participate
by commenting, liking, and sharing
– Existing customers can click-through to
make a purchase
44. Luxury Goods 2013 – Competitive Analysis
Capabilities
Burberry at Regent Street: Retail
Entertainment
❧ Flagship store that has become a
local and tourist attraction
❧ Museum-like brand exhibits
❧ Huge event space with monthly
music gigs by Burberry Acoustic
❧ Mirrors transform into screens and
display relevant video content when
triggered by RFID tags in products
45. Luxury Goods 2013 – Competitive Analysis
Capabilities
Burberry Bespoke: Mass
Customization of trench coats
46. Luxury Goods 2013 – Competitive Analysis
Capabilities
Commitment to corporate
responsibility
❧ Sustainable production
❧ Burberry Foundation - helps
young people develop their skills,
confidence and connections in the
fashion industry
❧ Extensive employee training and
performance-based remuneration
47. Luxury Goods 2013 – Competitive Analysis
Capabilities
Operational Excellence
❧ Streamlined supplier, IT, and
logistics networks
❧ Use of SAP worldwide
48. Value Creation – RD
“Classicism with
a Twist” – Non-
stop reinvention
of the iconic
trench and plaid
Iconic and
patented check
pattern and
garbadine trench
Artistic vision of
Christopher Bailey
Burberry Bespoke:
Mass Customization
Operational
Excellence
49. “Classicism with
a Twist” – Non-
stop reinvention
of the iconic
trench and plaid
Value Creation – RD
Burberry’s relentless reinterpretation of
the trench and plaid allow customers to
capture a slice of British heritage that
reflects modern trends and personal
tastes.
50. Value Creation – Production
“Designed in
Britain” –
delocalization of
production
Close association
with all things
British
Reputation for rich
British heritage
2 factories in Britain,
one specialized in
trench coats
Operational
Excellence
51. “Designed in
Britain” –
delocalization of
production
Value Creation – Production
Delocalization of production does not
disassociate Burberry with Britain.The
lower labor costs and faster delivery allow
more collections to be delivered to
customers, who continue to identify
Burberry with British high society.
52. Value Creation – Marketing Sales
“Great Brand,
Great Company”
– inspiring
emotional
connections
Pioneer in Digital
Marketing
Regent Street
flagship: Retail
Entertainment
Commitment to
Corporate
Responsibility
Operational
Excellence
53. “Great Brand,
Great Company”
– inspiring
emotional
connections
Value Creation – Marketing Sales
Aggressive digital and in-store marketing
reaches a broad audience and invites them
to participate in the world of Burberry and
foster a deep identification with the brand.
Efforts in corporate responsibility builds
an image of conscientiousness as well.
54. Value Creation – Customer Service
“Democratic
Luxury” –
building positive
relationships
Pioneer in Digital
Marketing
Regent Street
flagship: Retail
Entertainment
Commitment to
Corporate
Responsibility
Operational
Excellence
55. “Democratic
Luxury” –
building positive
relationships
Value Creation – Customer Service
Flexible communication channels online
and friendly, courteous, helpful staff in
stores enable Burberry to understand their
customers better and provide an
accessible, human touch to the brand.
56. Luxury Goods 2013 – Competitive Analysis
Core Competencies
❧ Inimitable British heritage
❧ Signature trench coat and plaid
pattern
❧ Integrated online and offline
marketing to deliver
synchronized products and
experience
57. W H E N Y O U R
O W N I N I T I A L S
A R E E N O U G H
58. Luxury Goods 2013 – Competitive Analysis
Background
❧ Founded in 1966, Italy
❧ Acquired by PPR in 2001
❧ Currently headed by Marco Bizzari
and Tomas Maier
❧ Targets uber-wealthy, modest and
discreet customers
59. Luxury Goods 2013 – Competitive Analysis
Background
❧ Core business: Bags, 85% of revenue
in 2012
❧ Price points much higher than
competitors, most over 2000 euro
and reaching 50,000 euro for some
60. Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Financial Resources
❧ Company under PPR, listed in
Paris since 1988
❧ Market Capitalization of PPR:
€20,977.02M
62. Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Technological Resources
❧ Intrecciato – a leather weaving
technique that allows thin leather to
work with sewing machines while
achieving the strength and body for
leather accessories
63. Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Human Resources
❧ Over 100 artisans in BV’s
factory, all skilled in Intrecciato
❧ Tomas Maier, head designer
– Precise perfectionist who seeks
understated elegance
– Saved BV from the brink of
bankruptcy and increased sales by
800% since joining in 2001
64. Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Reputational Resources
❧ Reputation for
– Artisanal craftsmanship
– High quality and durable leather
goods
65. Luxury Goods 2013 – Competitive Analysis
Capabilities
Philosophy of “Stealth
Luxury” Branding
❧ No logo on its products
❧ Maintains high quality
❧ Generates a sense of exclusiveness
66. Luxury Goods 2013 – Competitive Analysis
Capabilities
Long-term sustainability
of craftsmanship
❧ Craftsman school in Italy
– Generates a new generation of
craftsman
❧ Only those with more than 15
years of experience with the
brand will participate in the
production of Intrecciato
67. Luxury Goods 2013 – Competitive Analysis
Capabilities
Effective management of a
less diverse product portfolio
❧ Products with very limited
discounting and sales
❧ Focuses mainly on leather
goods with high quality
68. Value Creation – RD
“Covetable
classics” –
Timeless designs
with a singular,
evolving vision
Contemporary
functionality
Impeccable
quality and
craftsmanship
Tomas Maier’s
understated yet
current design
aesthetic
Gradual expansion of
diversified product
lines
69. Value Creation – RD
“Covetable
classics” –
Timeless designs
with a singular,
evolving vision
Bottega Veneta focuses on the fundamental
integrity of the product, making sure that they
are rare and valuable in themselves, not
because of a logo or a tag.The timeless designs
make it easy for customers to wear or use them
for a long period of time, regardless of trends.
70. Value Creation – Production
“Made in
Veneto” – The
assurance of
uncompromising
quality
Production takes
place even before
runway shows
Higher quality
materials than other
luxury brands
Produced pieces are
handpicked by creative
director Tomas Maier
Goods are only made
in Veneto, Italy
71. Value Creation – Production
“Made in
Veneto” – The
assurance of
uncompromising
quality
With its price points set in a higher and narrower range
than most luxury brands, Bottega Veneta knows its target
customer expects higher quality materials and
craftsmanship from them. “Made in Veneto” promises as
much. But they took it one step further and started the
manufacturing process before the runway shows,
ensuring first dibs on the finest materials.
72. Value Creation – Marketing Sales
“Less is More” –
discreet yet
recognizable to
the initiated
Logoless,
understated
designs
BV Initials Project:
When your own
initials are enough
Slower expansion into
emerging markets
Less discounting
than other luxury
brands
73. Value Creation – Marketing Sales
“Less is More” –
discreet yet
recognizable to
the initiated
The high net worth individuals in Bottega Veneta’s
target segment do not aspire to own products marked
by logos to prove their status. Instead, the brand
molded itself to represent the anti-thesis of many
other luxury brands – a quiet, stealth type of luxury
that wealthy customers in the know appreciated.
74. Luxury Goods 2013 – Competitive Analysis
Core Competencies
❧ Bottega Veneta applies
Intrecciato across most of its
categories.
❧ “Stealth luxury” branding to
position itself in the market
positioning
❧ Able to capture consumers’
changing tastes and preferences