BAROMETER PROMISE – EXANE BNP : LUXURY IN THE USA 2016

[ACCEDER A LA VERSION FRANCAISE DU COMMUNIQUE DE PRESSE]

Promise Consulting Inc., an acknowledged consulting and market research firm, joins forces with Exane BNP, a key actor in the European financial market and a specialist in research and analyses for the European, Asian and American luxury sector, to publish the 3nd wave of the 2016 Promise – Exane BNP Barometer on "Exclusivity & Desirability of top luxury brands in the USA".

This barometer classifies the 22 most known, purchased, exclusive and desired brands in the US in the universe of personal luxury goods (fashion). This year’s barometer was conducted amongst the wealthiest American women from the Industry Interviews ranking, Exane Paribas Estimates & Analysis (2015), who were interrogated on the categories ready-to-wear, handbags, shoes and accessories.

With its macro vision of the American luxury market, the barometer establishes basically a section on the brands’ awareness, purchase and the brand image, with a focus on the notions of exclusivity and desirability. 

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EXPERT OPINION

« The first two waves of the “Front Row” Barometer confirmed already the existence of an implicit hierarchy among top luxury brands and the others. Now, after France and China, the Barometer measured in its third year the exclusivity and desirability of top luxury brands amongst the wealthiest women in the US in the sector of women’s fashion (ready-to-wear, bags, shoes and leather accessories). The results outline that the Americans have a very special vision of luxury brands. Considering that Ralph Lauren occupying the first place in terms of penetration, followed by Chanel and Gucci, is not a surprise, the performance of Vera Wang is definitely noteworthy and needs to be emphasized: Indeed, the brand of the American fashion designer with Chinese roots, is ranked on 4th’s position, demonstrating therefore that the brand’s reputation now exceeds the world of wedding dresses, on which the designer brand from Now York initially based its fame, awareness and reputation.
Prada, Versace, Louis Vuitton and Gucci occupy the top four ranks on exclusivity, which is proof enough - if proof was even needed - that the Italian fashion brands highly attract the US customers, while only Louis Vuitton manages to position itself on #3. Should we interpret this as the revenge of designer brands and family businesses as opposed to large international luxury groups? This special attachment to the founder’s personality is also reflected in the performance of Ralph Lauren, who ranks second in desirability despite not claiming to exclusivity. In order to qualify our statement, we need however to recognize the resilience of Louis Vuitton (3rd in exclusivity and 1st in desirability). The flagship brand of LVMH confirms and even strengthens its position on these two criteria that the brand had already obtained in our last two barometers, China and France. Therefore, Mr. Bernard Arnaud’s objective to make "Louis Vuitton, the most desirable brand in the world" does not seem out of reach. While occupying an excellent 3rd place in desirability (behind Louis Vuitton and Ralph Lauren), Chanel receives in terms of exclusivity a surprising 10th place from the wealthiest female customers in the USA, which is in particular due to the perception gap between the brand’s younger and older clients. The brand reveals itself to be less consensual in the US than elsewhere on this criterion. »

Philippe JOURDAN,
Associate of Promise Consulting, University professor and member of the American Marketing Association (AMA)

METHODOLOGY

The PROMISE – EXANE BNP "EXCLUSIVITY AND DESIRABILITY" Barometer has an international vocation and is renewed and published every year in several countries and on several luxury product in the universe of fashion and cosmetics (« soft luxury »). Both measured criteria – DESIRABILITY and EXCLUSIVITY – are based on a general model consisting of 24 key indicators which measure a brand’s performance from a customer’s point of view (« customer-based brand value »). This model, - called Monitoring Brand Assets®- is marketed by Promise Consulting for its numerous  clients in the sector of Fashion, Beauty and Distribution, who use the methodology in order to establish their marketing plans and measure their brand’s performance and return on investment (ROI).

> Collection method: Online Access Panel
> Period of data collection : June 2016
> Country : USA
> Univers : Luxury (prêt-à-porter, handbags, shoes, accessories, etc.)
> Sample : 750 adult women (25-54 years old)  with a monthly household income of + 12 500$
> Theme : BAROMETER PROMISE - EXANE BNP : LUXURY IN THE USA 2016
> List : 22 evaluated brands
> Measured indicators : Awareness, Penetration, Brand Image, Exclusivity and Desirability

DESIRABILITY
The brand desirability index is based on the brands which the respondents recognized among the presented ones. The desirability is measured according to the Likert scale with 7 points (and converted afterwards into an index), among the respondents who consider the brand as "ideal / close to their ideal" and those who think the brand is " not ideal / far from their ideal." It is then presented as the percentage of respondents who opted for the top 2 of the Likert scale, the notes 6 or 7. This scale was tested on its robustness, validity and reliability in an international and multicultural context.

EXCLUSIVITY
The brand exclusivity Index is constructed thanks to the brands which the respondents recognized among the presented ones. The exclusivity is measured according to a Likert scale with 5 points, increasing from “more accessible” to “more exclusive”. Such as for the desirability, the exclusivity score is equally converted into an index based on the % of respondents, who attributed the notes 5 or 4. This scale was tested on its robustness, validity and reliability in an international and multicultural context.

USA : 1ST LUXURY GOODS MARKET DESPITE ITS LOW GROWTH AT CONSTANT EXCHANGE RATES

A GLOBAL MARKET VALUE OF €237 BN ON PERSONAL LUXURY GOODS
The global market for luxury consumer goods accounts for € 237 billion and represents therefore the second most important segment after luxury cars (€ 379 billion) and hotels (€ 165 billion), which is equivalent to nearly one quarter (24%) of the amount spent in all categories of the luxury sector together. (Source: Luxury Goods Worldwide Market Study, Bain, 2016).

USA: 1ST GLOBAL MARKET
Considering the entire market of luxury consumer goods, the USA is ranked on the first place with almost 79 billion euros purchase (2014). The USA imposes itself on the other countries and is therefore far ahead of Japan (€ 20 billion), China (€ 18 billion), Italy and France (€ 17 billion). If growth remains important, the latter was since 2014 essentially due to exchange rate differentials between the dollar and the euro, wherefore the growth at constant exchange rates is zero.

USA: 2ND MOST IMPORTANT CONTRIBUTER TO THE MARKET GROWTH
With their purchases on luxury consumer goods, US citizens have contributed between 2012 and 2015 to nearly a third of the growth in this market, wherefore the USA can be considered as the market growth’s second contributor, right after China. (Source: Bain & Co, Altagamma, Exane BNP Paribas analyses & estimates).

DIGITAL AND LUXURY IN THE USA, A CONTRADICTION? NOT AT ALL!
Today it is a fact that the luxury market exists beyond the boundaries of physical point of sales. For example, YOOX NET- A- PORTER GROUP is the perfect illustration of this trend. Thus, 49 % of the respondents claim having already bought luxury consumer goods online, either several times or at least once, while 28 % are planning on doing so very soon. (Source : Promise Consulting / Exane BNP).

A MATCH BETWEEN ITALIAN AND FRENCH BRANDS UNTER THE ARBITRATION OF RALPH LAUREN

AIDED AWARENESS: « FRATELLI D'ITALIA »
The graphic on the left visualizes that 5 Italian brands are positioned among the top 10 ranking in terms of aided awareness, while only 3 French brands managed to do so. Gucci is clearly the winner in this category and benefits from an excellent media coverage accompanied by the faultless direction of the young Alessandro Michele.
Although, during the financial year 2015-2016, the sales of Ralph Lauren fell by almost 3%, to 6.3 billion euros, the brand does not suffer from notoriety issues. In terms of notoriety the brand occupies position No. 2 and remains an industry benchmark in its country of origin.

In fact, wasn’t it the US Olympic team which was dressed in blue-white-red by Ralph Lauren at the opening and closing ceremonies of the Olympics in Rio? The arrival of Ralph Lauren’s new executive director Stefan Larsson, former head of Old Navy, will definitely encourage new strategies and marketing approaches for the iconic American brand. Chanel is ranked on the third position of the podium with the brand’s new muse Lily-Rose Depp (as it was already her mother) and saves therefore the honor of the French luxury houses. Finally, we note the emergence of Vera Wang on the 8th position in this ranking, who is well known as a specialist of wedding dresses, including the one of Sex and the City-star Carrie Bradshaw. In this ranking Internet purchases do not disrupt brand awareness, but confirms rather that online shoppers know more brands and that luxury becomes more attracted to digital media which involves the customers, making them even sharper concerning their knowledge of the brands in this sector.

PENETRATION AND AIDED AWARENESS STAND INDEED IN RELATION TO EACH OTHER
With a cumulative penetration of 63%, Ralph Lauren takes the lead on its national market. Far behind, with 43%, Chanel monopolizes the second position followed by Gucci with 41%. In the universe of women’s luxury fashion, the most well-known brands are consequently also the most purchased ones (the podium remains the same, only the order is reversed here).

Finally, Vera Wang has wind in her sails and occupies with a cumulative penetration of 38% the bottom of the podium: the position of the New York designer with Chinese origin illustrates that the brand’s popularity goes far beyond the world of wedding dress, on which the designer initially established her image and reputation.

EXCLUSIVITY : ITALIAN DESIGNERS ADHEAD OF THE FRENCH HAUTE COUTURE HOUSES

By definition, exclusivity is associated with a unique know-how, a recognizable style and a creative and talented bias which can ultimately claim a higher price. In the collective unconscious, the French Haute Couture houses occupy therefore a special position, as we have already revealed in previous barometers, for China and France in particular.

USA & EXCLUSIVITY: LOUIS VUITTON SURROUNDED BY ITALIAN DESIGNERS
The exclusivity ranking (on the right) reveals clearly that the wealthiest American clients measure and perceive exclusivity according to other criteria than the French interrogated women did in particular in 2015 during the 1st wave of the barometer Promise – Exane BNP. Highly valuating the personality of the founders, as well as the creativity and personality of the artistic directors, the Americans classify two Italian brands before France’s first luxury house Louis Vuitton and far before the two French icons, Chanel and Dior.

With its cultural patronage, sports sponsorship with the Louis Vuitton America's Cup World Series, and as newest member of the exclusive club Swiss watch houses, and through the launch of its new fragrances ... Louis Vuitton chooses a dynamic and diverse business strategy and communication, of which Uncle Sam’s country absolutely benefits. Meanwhile, Hermès, Chanel and Dior are positioned further back in the ranking.
Flat for Hermès and Chanel, two statutory brands par excellence, which yet perform better among young American consumers (25-40 years) and which occupy the 4th and 5th position with the respectively scores of 75% and 74%.

USA : A MARKET APART
If the Italian luxury brands clearly occupy the US market on exclusivity, the French luxury houses - embodied by the "Big Four", Hermés, Louis Vuitton, Chanel and Dior - remain a reference in France and China. Design, creativity, heritage, tradition, brightness, quality manufacturing, strong media coverage and the notion of “Made-in-Italy” is a huge success in the USA. Hereby we emphasize on the fact that Gucci, to a 100% owned by the French group Kering, Prada, Versace and Armani are 100% Italian brands.

DESIRABILITY: A RANKING WHERE FRANCE CLEARLY TAKES THE LEADERSHIP

While the American wealthiest customers fall in terms of exclusivity under the spell of the Italian designers Prada or Versace, both brands sacrifice their positions in desirability. Thus, Louis Vuitton (40%) occupies the top step of the podium, closely followed by Ralph Lauren (39%) on its domestic market, and Chanel (39%), the symbol of French luxury.
Note also that Burberry rises on the 4th place (35%) due to its activeness on social networks such as Pinterest and Snapchat. Finally, Vera Wang, the New York specialist in dresses, monopolizes the 5th place (35%). On the other hand, Italian brands emerge not until the 6th position.
France, USA, UK and Italy ... Considering the American melting pot in terms of demography, the Top 10 ranking on "desirability" saw the emergence of luxury brands from these four different countries.

MORE ABOUT PROMISE CONSULTING INC.

Promise is a consulting and marketing group combining the following companies: Promise Consulting Inc., JPL Consulting and Panel On The Web. Promise integrates consulting services and surveys with a strong added value. The company has created an innovative methodology to measure the performance of brands and the ROI of investments centered on brands: Monitoring Brand Assets©. This methodology was deployed in over 35 countries to date, for 250 different brands from the most diverse sectors and has collected up to 1.000.000 online questionnaires.

Based in Paris, New York and Casablanca, the group conducts surveys and provides consulting services all over the world. Promise is more particularly acknowledged for its expertise regarding the measure of brand equity (brand value) from the consumers’ point of view. Promise has successfully developed innovative methods and models that have been rewarded 7 times in 10 years by the profession, both in France and abroad. The group is consulted for the biggest brands in luxury, cosmetics and selective distribution to help their development on the domestic and overseas markets. Promise also operates in numerous business sectors, each time the brands establish a growth strategy to better understand their market, communicate with their consumers, seduce their customers and improve their loyalty.

Promise’s CEO, Philippe Jourdan, is the chief-editor of the magazine Adetem, the French Marketing Review (RFM) since 2011. He publishes in academic international magazines on issues related to brand equity in luxury, beauty and selective distribution. He also publishes in the economic and news press (Le Monde, Les Echos, Le Figaro, l’Opinion, La Revue des Marques, etc.). Philippe is also a university professor, researcher at the IRG (CNRS) and was awarded for the best Research article AFM in 2000 and has equally a Social Media Certification. http://www.promiseconsultinginc.com/

MORE ABOUT EXANE BNP

Specialized in European shares, BNP Exane operates in three businesses:

> The intermediation in investment of European shares
> By-products shares named Exane Derivatives
> The asset management via the fund management of investment of medium and long term

BNP Exane mainly works with institutional clients all over the world (pension funds, administrators of funds for banks or for insurers, etc.) and markets its products to a vast range of customers' including administrators of private funds and investments advisers. Exane employs more than 800 people worldwide in offices in Paris, London, Frankfurt, Geneva, Madrid, Milan, New York, Stockholm and Singapore. The research teams of BNP Exane cover more than 600 big companies in the World and are regularly rewarded by Prizes for the high quality of cross-section analyses. For more information: http://www.exane.com.

CONTACT PROMISE CONSULTING
Philippe JOURDAN
Tel : +33 1 78 09 03 64
philippe.jourdan@promiseconsultinginc.com

CONTACT PRESS - AGENCE79
Dimitri HOMMEL-VIKTOROVITCH
Tel : +33 1 41 10 21 57
Mobile : +33 6 98 20 77 12
dhommel@agence79.com

Apolline GILLIOT
Tel : +33 1 46 20 59 08
Mobile : +33 6 60 92 62 28
agilliot@agence79.com

FROM EXANE BNP & PROMISE CONSULTING - SEPTEMBER, 07, 2016

Luca SOLCA
Managing Director
Sector Head Global Luxury Goods
Rue du Rhône 80, 1204 Genève, Switzerland
Tel: +44 203 4308503
Mob: + 44 7881249464
luca.solca@exanebnpparibas.com

Luxury goods brand desirability in America shows domestic and aspirational bias
We find a number of surprises and a few confirmations in the results of our extensive consumer investigation in America: 1) Americans like their local champions; 2) Americans seem more attracted by fashion brands; and 3) Our analysis confirms a strong accessible luxury bias among American consumers.

Luxury brand exclusivity perception is also quirky
Prada, Versace, Louis Vuitton, Gucci and Giorgio Armani lead the group - with Hermès coming in only 6th place. Louis Vuitton, Burberry, Prada and Versace look strong, as they boast higher desirability than purchase - a convergent indicator of exclusivity perception.

We are adding 'brand identity' analysis to our desirability and exclusivity research
Louis Vuitton and Gucci rank in the top 5 of all brand identity traits we have investigated, with the exception of 'elegance', in which Chanel and Prada lead.

Investment conclusions
Our analysis of brand desirability and exclusivity in America reminds us of how important mega-brands remain in this industry. Louis Vuitton stands out as the strongest brand by far, followed by Gucci, which seems to have lost some of the vigour of a few years back but is likely benefiting from its successful and thorough turnaround. These results reinforce our positive ratings on both LVMH and Kering.

Ask for the full document : philippe.jourdan@promiseconsultinginc.com

By Fflur Roberts, 18-08-2016+,Senatus, Luxury Society

There is much discussion about what a slowing economy in China means for the luxury industry. Euromonitor highlights the latest numbers and what it means for the industry.

Over the past decade, China and moreover the Chinese have led the world in luxury shopping. As a By 2015 China offered more luxury retail selling space than Japan and was fast catching up on the US, and the Chinese accounted for over a third of all global luxury spending.

According to Euromonitor International’s latest travel data, the Chinese made almost 3 million trips to the US in 2015, an increase of almost 8% on 2014 and a massive 206% increase in the last five years since 2010. During the same year they made 2 million trips to France, 5 million trips to Japan and 285 thousand trips to the UK.

Overview of the Economy

However in 2014 and 2015, mainland China posted its lowest growth in sales of luxury goods since our records began (a real decline of -3% and +1% respectively). Therefore, Beijing faces some serious challenges. The government wants to change strategy by reducing its reliance on debt-fuelled investment in construction and heavy industry and boosting consumption.

Individuals aged 45-49 are the largest group amongst top earners

Although individuals aged 30-34 commanded the highest average gross income in 2015, the age segment 45-49 represented the largest proportion amongst Chinese in the top income band (ie individuals with an annual gross income over US$150,000) in the same year. By 2030, the age group 40-44 will have become the most prominent amongst the country’s top income earners, representing opportunities for luxury services and high-end family orientated goods (especially given the relaxation of China’s one-child policy).

Between 2015 and 2030, China is expected to add in excess of 3.4 million additional individuals to this wealthy population, making it the fifth largest market in the world in terms of HNWI’s.

Income gap is expected to remain wide over the long term

One of the main determinants of income inequality in the country is the condition of urban/rural households, which also affects migrant individuals working in the city, but whose household registration (or “hukou”) is in a rural area.

Luxury brands need to re-think their growth strategies

The impact of a weakening economy is unlikely to stop wealthy Chinese consumers from travelling to buy their luxury goods, but it might change their destination of choice as well as total in-destination spend.

China’s grey luxury goods market

The main players in the grey market are professional shoppers, known in Chinese as daigou, who travel abroad to buy luxury goods in bulk (in effect, by filling their suitcases). They return home to sell their wares either directly or online, and it has developed into a business worth billions of US dollars.

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SOURCE : SMITHERS PIRA - 2016

An insight into the luxury packaging market that continues to grow globally, driven by exciting trends - the surge of personalised packaging, attention to sustainability issues, economic and demographic drivers.

Data from the Smithers Pira report The Future of Global Packaging to 2020 estimates a total world market for all packaging in 2015 worth $839 billion. This will grow steadily at a rate of 3.3% year-on-year through to the end of the decade; with the market will be worth nearly $1 trillion in 2020.

Luxury packaging is a lucrative, fast developing segment of this; Smithers Pira values it at $14.8 billion in 2015. It relative share belies its importance to the broader industry however. It is a segment where higher unit costs and the willingness of brands to invest in designs that directly enhance their products making it a cockpit for the entry and perfection of novel technologies. 

LUXURY IN VARIETY

Luxury packaging designers are increasingly gaining access to high-quality materials, finishes, decoration, innovative shapes, and caps and closures that enhance the consumer experience of the product. In its recent report The Future of Luxury Packaging to 2019 Smithers Pira identifies six key end-use applications:

- Confectionery
- Cosmetics & fragrances
- Gourmet food & drinks
- Premium alcoholic drinks – top-end spirits, wines and champagnes
- Tobacco
- Watches & jewellery

Across these, cosmetics and fragrances is the largest, accounting for a projected 43.3% share of luxury packaging market by value in 2014. This is followed by premium alcoholic drinks and tobacco, which have market shares of 21.9% and 16.5% respectively. In terms of volume, premium alcoholic drinks accounts for the largest share at 46.0%, followed by cosmetics & fragrances, which has a share of 31.0%.

Across the luxury markets under review, cosmetics & fragrances and watches & jewellery are forecast to be the fastest growing sectors for value and volume over the next 4 years. This growth in cosmetics & fragrances and watches & jewellery is driven by increased demand in emerging markets. Consumption of tobacco is set to grow only slowly by comparison over the next five years, with a decline in the developed regions of Western Europe and North America. Profits of luxury packaging suppliers in this area will also be seriously damaged if regulatory mandated plain tobacco packs – currently active in Australia and planned for the UIK – spread. 

All of these applications are potentially profitable markets for packaging manufacturers. This is because luxury packaging margins are typically higher than in mass-market packaging due to the greater perception of value it can add to the product. This is also reflected in a willingness for more investment in design and development work and justifies a larger outlay on materials and converting processes.

As the market expands, luxury applications will outstrip mean expansion in the packaging industry, growing at 4.4% in value terms year-on-year through to 2019 – culminating in a market Smithers Pira estimates at $17.6 billion in that year. Growth will be highest in Asia and the currently modest market of Latin America. The more mature regions of Western Europe and North America will see growth that, while still healthy, is below the global average.

The volume of luxury packaging consumed will increase at 3.1% annually across the same period.

GLOBAL BRANDS

In the 21st century globalised economy, ongoing industry consolidation means there is a smaller number of worldwide luxury houses that own multiple brands across different high-value markets. Examples of such houses are Moët Hennessy Louis Vuitton (LVMH) – the most valuable luxury goods group in the world; Richemont, PPR; and Kering.

Such companies are keen to maintain, and where possible burnish, brand identities on a global scale. They are investing to evolve several key technologies that will help shape and bolster the luxury packaging market over the next five years, including:

- Anti-counterfeiting and brand protection
- Digital printing
- Enhanced embellishment and tactile effects
- Connection to the online world via smart devices and Big Data stores.

In addition to these technology developments, there are a number of other factors impacting the direction towards which luxury packaging is developing, including:

- Active packaging that can affect the goods within is increasingly being used for luxury products, with for example, isothermal sleeves for champagne to keep the drink cool;
- Luxury experience packaging where increased physical engagement with the branded pack enriches the consumer’s overall experience. This encompasses designs for novel opening and unwrapping mechanisms; infusing paper and packaging material with long-lasting fragrances; and fixtures, for example magnetic closures for colour cosmetics compact cases so that consumers are able to hear a sound confirming that the product has closed correctly;
- Personalised packaging, where a packaging product is embellished to make it unique and personal to the consumer – a trend that is most prevalent in gift-giving and driven by the technical capability of inkjet printers;
- Sustainability is a megatrend across packaging. Luxury brands too are aware that a greener profile is a worthwhile commitment for products like confectionary and cosmetics. 

SUBSTRATES

The main materials used in luxury packaging are paperboard, glass, metal, plastic, textiles, leather and wood. Paperboard is the most popular material used in luxury packaging, accounting for a projected 41.9% share of luxury packaging market value in 2014. The second most used material in value terms is glass, followed by plastic, with market shares of 30.1% and 15.4% respectively.

Source : Smithers Pira

In terms of market volume, glass accounts for the largest share at 58.3%, followed by paperboard, which has a share of 25.9%. This discrepancy can be explained by the relatively lower cost of glass per tonne, compared to both luxury paperboard and plastic, as well as the higher unit weight and density of glass – particularly in the case of premium alcoholic drinks.

Across luxury packaging materials, plastic and glass are forecast to show the highest growth rates in value terms through to 2019. Plastic is also set to be the fastest growing material in terms of volume.

Demand for both glass and plastic is being driven by the recovery and stronger growth evident in the main luxury markets, particularly cosmetics and fragrances. Glass on the whole is losing share in packaging, but is proving much more resilient and hard to replace in luxury applications. Here it remains popular with brand owners and consumers, due in part to its strong sustainability associations, but more importantly for its high-quality appearance. Rising demand for plastic packaging meanwhile is being driven by its lower cost and lighter weight.

MARKET LANDSCAPE

The mass-market packaging industry is increasingly consolidated – especially in older material formats like glass and metal – but less so for newer rigid and flexible polymer types. The luxury packaging supply industry is also diverse – consisting of a large number of businesses with a broad range of sizes, scopes and product offerings.

There are a number of multi-material companies that have a particular speciality in luxury packaging; for example, the Verpack Group is a leading European manufacturer, specialising in luxury packaging made from both cardboard and plastic. There are also a number of large international packaging groups that specialise in one particular material and supply to the luxury market – for example, Mayr-Melnhof is one of the leading paperboard manufacturers, Ardagh Glass is a top glass manufacturer and Crown Specialty Packaging is a prominent metal packaging supplier.

BRAND PROTECTION

Counterfeiting that leads to lost sales and damaged brand perception is among the top concerns for luxury brands. This is a problem to which luxury pack designs can provide an answer – principally because high-grade materials and embellishments are much harder for counterfeiters to copy convincingly – giving an indication to consumer before they buy.

This opportunity is now coalescing around a number of key trends like enhanced decorative holograms and covert taggants and electronic platforms, where buyer can verify products themselves via smart device. The basic level for this is via QR codes. Such visual signs have a major drawback however in that their block monotone graphics are likely to seriously impinge on the overall appearance of the pack.

Systems that rely on radio-frequency identification (RFID) and increasingly Near-Field Communication (NFC) protocols have the advantage of being discrete. Furthermore the higher margins in luxury packaging mean that cost considerations that inhibit roll-out in mass applications are less of a barrier.

NFC, QR and RFID platforms have the added benefit that they can also allow the consumer and brand to interact – forging a deeper, more enduring relationship. For example, once a consumer has confirmed the authenticity of a purchased product using an internet connection to a secure online database, the same medium can be used to offer vouchers for repeat or complimentary purchases.

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Conference « Luxury and China: insights and perspectives for 2016 and beyond » [06/30] Sharing the event’s most important moments [#promiseconsulting @adetem]

On Thursday, June 30, 2016, at the Café l’Adjugé in Paris, Promise Consulting hosted a conference on "Luxury and China: the challenges and perspectives for 2016 and beyond”.

In total 40 people, professionals from top luxury brands, journalists and consultants in the world of luxury, fashion, beauty and tourism, participated in the breakfast conference initiated by Promise Consulting at the prestigious Parisian auctioneers Drouot from 8:30am to 10:30am.

Continuing a series of lectures on trends and perspectives regarding the development of the world luxury market, Philippe Jourdan, founding partner and Chunyan Li, Senior Consultant and China specialist, combined their expertise and presented together a broad overview of the opportunities and challenges of the Chinese luxury market:

- On the one hand, the cyclical factors were isolated from the structural ones to discern the growth opportunities in a certainly more "bumpy" economic context. Additionally, the conference outlined new and interesting opportunities for Western luxury brands.

- On the other hand, the enriching insights of the specialist in Chinese culture took into account the emergence of new expectations, especially of those of younger generations, vs the ones of the luxury goods generations.

THEY ATTENDED THE CONFERENCE AND SHARED THEIR OPINION 

"UN GRAND MERCI POUR LA CONFERENCE CONCERNANT LA CHINE, AS ALWAYS INSIGHTFUL, INTERESTING, IN DEPTH AND EASY TO UNDERSTAND" - BENJAMIN, LUXENDREAM

"MERCI ENCORE POUR HIER. C'ETAIT TRES INTERESSANT, D'AUTANT PLUS QUE LA CHINE REPRESENTE UN DE NOS PLUS GROS MARCHES.  REMERCIEZ POUR MOI CHUNYAN ET PHILIPPE POUR LEUR PARTICIPATION" - LUCAS, LACOSTE

"JE TENAIS EGALEMENT A VOUS REMERCIER POUR L'ORGANISATION DE CETTE BELLE CONFERENCE OU NOUS AVONS APPRIS BEAUCOUP GRACE A UNE PRESENTATION TRES CLAIRE" - CAMILLE, CHANEL

"GRAND MERCI POUR CETTE CONFERENCE TRES INTERESSANTE QUI M'A DONNE UN AUTRE REGARD SUR BIEN DES SUJET. ELLE FUT RICHE EN ENSEIGNEMENTS ET TRES CONVIVIALE. BRAVO POUR LE TIMING CAR LE FAIT QU'IL N'Y AIT PAS EU DE DERAPAGE M'A PERMIS DE PROFITER DES CONCLUSIONS" - VINCENT, KPMG

THE SPEAKERS' POINT OF VIEW ABOUT THE CONFERENCE

 CHUNYAN LI

Philippe Jourdan

CHINA: AN ECONOMY IN TRANSITION

Both speakers started with a reminder of some important economic indicators which are necessary to develop and establish a healthy Chinese economy in the World: a slowing but still positive growth, the recent devaluation of the Yuan but with forecasts that should take into account the political will of the Chinese authorities to reduce their dependence of the dollar (and primarily of the US debt).

Based on this perspective, the Chinese economy is in the transition from a "Made IN China" through a "Made BY China" to a "Made FOR China" culture, although the share of GDP devoted to domestic consumption and expenditure of the Chinese government is still behind compared to those traditionally reserved for investment and net exports.

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A LUXURY ECONOMY WHICH IS VERY (TOO) DEPENDENT OF CHINESE TOURIST PURCHASES

In 2000, 10 million tourists traveled the world. During the year 2020, 200 million Chinese tourists are expected to travel abroad. In 2015, they were nearly 105 million to move beyond the Chinese borders. Of course, the first regional destination remains by far Asia. However, while the movements and trips to Hong Kong have recognized a slow-down (in response to the sinophone manifestation of the residents of Hong Kong), the Chinese tourism presents a good performance in France despite its unfavorable security environment. In the end, nearly 77% of the Chinese luxury goods purchases ("personal luxury goods") are realized abroad (24% in Asian countries nearby and 53% outside this sphere).

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CHINA: "IT IS ALL ABOUT DIGITAL, IDIOT"

With more than half of the connected population (50.3%), nearly 3h45 spent on average per day on digital networks and 594 million Chinese connected to their mobile phones, the Internet plays a vital and inescapable role regarding the Chinese communication and information research methods. And we go even one step further: with an increasing tendency, the Chinese are getting more and more likely to realize online purchases to such an extent, that the online US trade is expected to be exceeded by the end of 2016 (forecast: $ 371 billion of Chinese purchases against $ 326 billion for the US).

The Chinese digital landscape has obviously its specifics and is very different from the one of the Western countries. For each type of digital application developed in the West (search engines, social networks, networks of micro-chats and micro-blogging, etc.) there exists a Chinese version, which is far away from just being a clone of its Western counterpart. In particular, among all social networks, Weibo, the Chinese Twitter, and WeChat, a combination of Facebook, WhatsApp and Skype, have become the companies’ most preferred promotion tools. They have respectively reached the 222 million and 650 million active users in 2015.

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THE CHINESE CULTURE: BETWEEN GUANXI AND MIANZI

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According to a Chinese proverb, “Just as a tree needs bark, someone needs his face". The culture of Mianzi ("face") attaches great importance to the various forms of respect, social acceptance and recognition. Everybody lives in and through the eyes of others: a trend of the Chinese elites is therefore to systematically compare themselves to others in terms of both criteria, professional and personal success. Luxury goods subsequently allow the wealthy Chinese to materialize and demonstrate their social status and financial situation to others and thus shape the image they wish to send to those around them (...).

In China, "the formality must be mutual". Indeed, the Chinese highly value social relationships within their close circle, also known as the famous “Guangxi”. Having a good "Guanxi" allows the Chinese to benefit from mutual support and to proceed or solve problems faster. Finally, the favor – also called "RenQuing" in Chinese - can be a real credit or a true debit. Seen from this perspective, offering a valuable gift, no matter if it is a product or a powerful experience also enhances the "face" ("Mianzi") of the interlocutor (…).

THREE GENERATIONS OF LUXURY BRANDS CLIENTS IN CHINA

Nowadays there are three clearly identified generations of luxury goods consumers in China, which strongly differ in terms of their profile, expectations and their luxury experiences.

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The first generation is the one of the Baby Boomers. Born between 1950 and 1964, they fully lived in the era of President Mao, wherefore their state of mind is marked by nationalism and idealism and their life shaped through the frugality they recognized during their youth. The Cultural Revolution presents for them a strong reminder of the sustainable weakening of traditional and ancestral values ​​of the Chinese society, whereby some of them reminisce still about the great famine of 1958 to 1961. Being in the position to make decisions and confident about their power, they combine both, power and wealth, which enables them to get everything they want, and of which they were deprived in the first part of their lives.

The second generation is the Generation X (1965-1979). The children of the economic reform, initiated in 1978, were educated by MAO and trained by Bill Gates. This high tension has caused confusion and a certain sense of insecurity among them. This fact represents the reason for their opportunistic behavior and their search and need for material security. They were among the first to consume luxury goods, whereby 60% of them purchase these products to increase their self-esteem. Approximately 80 % of the Chinese private companies are run by representatives of this generation.

The third generation is the Generation Y (1980-1995).  Since their early childhood, people of this generation benefited enormously from the economic reform, without having gone through very difficult times. Generation Y is confronted with a wide variety of consumer choices, wherefore their behavior and habits westernize, although they kept their Chinese roots. Ordering a Big Mac at McDonalds' or a coffee at Starbucks, using the iPhone or iPad to connect themselves to the Internet and chat with strangers, or buying products on WeChat or e-commerce websites, became part of their daily lives.

 THE FRENCH LUXURY BRANDS THAT REMAIN VERY APPRECIATED

The Conference concluded with the presentation of the results of the Barometer Front Row, jointly conducted by Promise Consulting and Exane BNP. This barometer measures for different countries the Exclusivity and Desirability of Luxury Brands in the world of fashion (ready-to-wear, bags and shoes) as well as for the domain of Cosmetics (perfumes, skincare and makeup).

 [TO VISUALIZE THE COMPLETE RESULTS CLICK HERE]

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ABOUT PROMISE CONSULTING

Promise Consulting is a company specialized in marketing studies and consultancy, issued from the merge of Promise Consulting Inc., JPL Consulting and Panel on the Web.

Promise Consulting integrates services of market research and marketing consultancy delivered with a high added value. We created an innovative measuring methodology of a brand’s performance and its return on investments (ROI): the “Monitoring Brand Assets ©”. This methodology, deployed in nearly 50 countries, has surveyed 250 brands in multiple sectors, totaling over 1,5 millions questionnaires. 

Established in Paris, New-York and Casablanca, Promise Consulting conducts studies and services of consultancy in the whole world. Promise Consulting is mostly known for its expertise in measuring a brand’s value from the clients’ perspective.

Promise Consulting has developed innovative techniques and models, was awarded 7 times in 10 years, by its Peers nationally and internationally. It provides insights and recommendations to the most notorious brands in luxury, cosmetics and retailing sectors, helping them develop on national and foreign markets. It is also active in several sectors of the industry, every time the brands are looking for an effective growth strategy in order to better understand the market, to reach their customers, attract them and, finally, keep them.

Pr Philippe Jourdan, CEO of Promise Consulting, is the editor-in-chief of Adetem’s journal, the French Journal of Marketing (Revue Française de Marketing, RFM), since 2011. He publishes in academic journals internationally on the problems of the valuation of the brands in luxury, beauty and selective distribution. He also publishes in the economic press and news media (such as Le Monde, les Echos, le Figaro, l’Opinion, la Revue des Marques, etc.). Philippe is a university professor, researcher at the IRG (CNRS) and laureate of the Best Article of Research AFM 2000. He holds a certification in social media.