BCG Altagamma True-Luxury Global Cons Insight 2017 - Presentata

The True-Luxury Global Consumer Insight
4th Edition
Milan, February 16th, 2017

The True-Luxury Global Consumer Insight panel
Copyright © 2016 by The Boston Consulting Group, Inc. All rights reserved.
12 000+ ~36 k€ 10
Consumers Avg. luxury spend Nationalities
Vs. • +1 000 in China
• +15 k€
2016 Ed. • +1 000 in US
Source: BCG-Altagamma True-Luxury Consumer Insight

BCG Altagamma True-Luxury Global Cons Insight 2017 Ed v69 14feb17 Final No BUP.pptx Draft—for discussion only 1 1
We push to be relevant on the highest segments of
the luxury consumers
True-Luxury Consumers sample distribution (% respondents)
Luxury yearly spend1

(k€ per consumer) 3rd edition 4th edition
> 100 k€ 1% 7%
7% 25%
50 - 100 k€ 6% 18 %
20 - 50 k€ 28 % 30 %
10 - 20 k€ 35 % 25 %
5 - 10 k€ 30 % 20 %
Average Spend for

~21 k€ ~ 36 k€
overall sample
Clusters size evolution 4th vs 3rd Edition
1. Expenditure includes personal luxury (e.g. handbags, shoes, sunglasses and other accessories, clothing) and experiential luxury (e.g. hotels, wine and
spirits, exclusive vacations). Excluded cars, yachts, smartphones & tablets
Source: BCG-Altagamma True-Luxury Global Consumer Insight
We set higher thresholds by category vs previous
edition to identify a "True Luxury Consumer"
Personal Luxury Goods Experiential Luxury Goods
Category Threshold Price vs. '16 Category Threshold Price vs. '16
Handbags >1 000 € / each Restaurants >200 € / person
Shoes >300 € / each Wine & Spirits >100 € / bottle
Sunglasses >180 € / each Hotels (leisure) >450 € / night
Other accessories1 >180 € / each2 Cruise / resort >4 000 € / pers./ week
Outerwear / Coats >1 400 € / each Design furniture >3 000 € / each
Dresses for women >1 200 € / each Lighting >1 000 € / each
Suits for men >1 600 € / each
Sweaters / Knitwear >400 € / each Other Luxury Goods
Shirts / Topwear >200 € / each
Jeans / Pants / Skirts >250 € / each Category Threshold Price vs. '16
Fragrances & Cosmetics >100 € / each
Cars >100 000 € / each
Watches >2 000 € / each
Luxury Boats / Yachts >750 000 € / each
Smart watches >400 € / each
Smartphones / Tablets >1 000 € / each
Jewelry >1 200 € / each
Minimum spent 5 k€ in the past year

on personal luxury goods
1. "Other accessories " includes scarves, wallets, belts and ties 2. > 180€/each for Small Leather Goods, >150 €/each for Silk Goods
Source: BCG-Altagamma True-Luxury Global Consumer Insight; BCG
The True-Luxury Global Consumer Insight 4th Edition
Main Outcomes
Steady market, True luxury consumers growing
A rising perception of price-value misalignment
More casual, more customized!
True luxury consumers buying more at home
Luxury goes omnichannel
Monobrand at the heart of an omnichannel experience
#Luxurygoessocial
Behavioral consumer segment evolution
Steady market, True-Luxury Consumers growing
BCG Altagamma True-Luxury Global Cons Insight 2017 Ed v69 14feb17 Final No BUP.pptx Draft—for discussion only 5
The global luxury market worth ~860Bn€ in 2016,
experiential growing faster than personal luxury
Global luxury goods market (B€)

@ Retail value
CAGR
09-13 13-16 16-23F
4-5% 1 187
5.6%
380 8.3% 3.8% 2-3%
9.3% 844 860
730 755
692
623 322 318
511 551 285 291
280
257
207 233 807 9.9% 6.8% 5-6%
522 542
412 445 464
305 317 366
2009 2010 2011 2012 2013 2014 2015 2016 2023F
Personal1 Experiential
1. Personal goods include accessories, apparel, watches & jewelry, fragrances & cosmetics
Source: BCG Luxury Market model
primocapitolo.pptx Draft—for discussion only 6 6
Out of ~400 Mn Luxury Consumers only 17Mn
identified as "True-Luxury Consumers"
CLUSTER 2016 2023
# (M) Bn(€) # (M) Bn(€)
50 k€ Beyond money 0.4 0.5
20 k€ Top Absolute 1.3 2.0

Absolute 4.5 6
10 k€
Entry Absolute 11 14
5 k€
Total True-Luxury 17 22
+5
2 k€ Top Aspirational 21 28
Other Aspirational 375 440
+72
Total Luxury ~415 ~490

Consumers
+75
Note: rounded numbers

A further polarizing pyramid ahead: True-Luxury
Consumers up from ~29% to ~32% of global market
CLUSTER 2016 2023
# (M) Bn(€)1 # (M) Bn(€)1
50 k€ Beyond money 0.4 20 0.5 40
20 k€ Top Absolute 1.3 30 2.0 53

Absolute 4.5 93 6 141
10 k€
Entry Absolute 11 107 14 147
5 k€
Total True-Luxury 17 250 22 381
+131
2 k€ Top Aspirational 21 61 28 92
Other Aspirational 375 549 440 715
+196
Total Luxury ~415 ~860 ~490 ~1185

Consumers
+325
1. Including Experiential and Personal luxury, excluding cars and Yachts
True-Luxury Consumers maintaining a healthier and
steadier growth for the future
CAGR 2016 - 2023
50 k€ Personal Experiential Total

20 k€
True
10 k€ Luxury 4-5% 7-8% 6-7%
5 k€
2 k€ Aspirational 1-2% 5-6% ~4%
2-3% 5-6% 4-5%

In a slower personal luxury market, there will be
clear winners and losers among Brands
Turnover growth for 20 leading personal luxury brands1
2009 - 2013 2013 - 2016 2016 - 2023

# brands
Strong Growth 14 5
CAGR >10%
Growth
3 6
CAGR 4% to 10%
Flat 1 1 ...
CAGR 0% to +4%
Decreasing 2 8
CAGR < 0%
Average Market
8.3% 3.8% ~2-3%
Growth
1. Sample of 20 leading brands in personal luxury

Source: Press Search; BCG Analysis
In a slower personal luxury market, winners and
losers expected also among categories
True Luxury Consumers net appetite by category1
(net appetite = people increasing spend in the future > +20% – people decreasing spend in the future > - 20%)
40%
33%
21% 15% 10%
0%
-7%
-25%
Fragrances & Watches Small leather Silk

Shoes Handbags Clothing2 Sunglasses
Cosmetics & Jewelry goods goods
1. Index calculated as percentage of customers who see growth in spend less the percentage who foresee a decrease in spend on the category (Positive – Negative).
Multiple options answer (up to 5 categories ) 2. Including jeans / pants; shirts / topwear; dresses / suits; coats / outerwear; knitwear
Source: BCG 2016 ad hoc study (12,000 luxury consumers in 10 countries)
Appetite driven by Millennials with shoes and F&C
key to recruit them - Handbags polarized
Net appetite by category1
Overall By generation
Millennials Gen. X Baby B. & Silver
40% 43% 43% 13%
33% 36% 32% 22%
21% 24% 18% 13%
15% 23% 10% -16%
10% 14% 10% -10%
0% 3% 0% -16%
-7% -3% -11% -14%
-25% -22% -27% -33%
1. Index calculated as percentage of customers who see growth in spend less the percentage who foresee a decrease in spend on the category
(Positive – Negative). Multiple options answer (up to 5 categories ) Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)
Chinese and Americans will continue to drive the
appetite for luxury consumption
True Luxury Consumers net appetite by nationality1

(net appetite = people increasing spend in the future > +20% – people decreasing spend in the future > - 20%)
46%
41%
24% 24%
20% 18%
13% 11% 11%
5%
-10%
Overall
1. Index calculated as percentage of customers who see growth in spend less the percentage who foresee a decrease in spend (Positive – Negative)
2. Share of nationalities in terms of luxury market value
Source: BCG Luxury Market model; BCG 2016 ad hoc study (12,000 luxury consumers respondents in 10 countries)
True-Luxury Consumers showing a good appetite
for 2017
True Luxury Barometer®
"Do you expect to spend more or less on luxury products in the next year?"
More 33% 23% 37% 38% 40%

(+20%)
Same 43% 48% 39% 41% 43%
Less 24% 29% 24% 21% 17%
(-20%)
2013 2014 2015 2016 2017E

True Luxury
9pp -5pp 13pp 17pp 24pp
Barometer®1
1. Index calculated as percentage of customers who see growth in spend less the percentage who foresee a decrease in spend (Positive – Negative).
The index represents a proxy of the expected growth of spend in Luxury by Top Luxury consumers
Source: BCG 2016 ad hoc study (12,000 luxury consumers respondents in 10 countries)
Only 17% of true luxury consumers declare they will
spend less in 2017
"This year have you spent more or " What are the key reasons for which you
less on luxury products vs last year?" have spent less?"
• Economic instability
• Travel less frequently
More 40% 43% External • Lower confidence in future income
(+20%) • Fear of terroristic attacks
• Luxury prices increase
43% Luxury
• Personal luxury saturation
Same
57% sector • Less special occasions to attend
Mainly low
spender
related • Lower interest in luxury brands
Less Millennials – • Partial shift to premium / fast fashion brands
(-20%) 17% mostly European
• Brands selling too much non core categories
Note: multiple options answer (ranking of three reasons)

Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)
A rising perception of price – value misalignment
BCG Altagamma True-Luxury Global Consumer Insight 2017 Edition_Draft PPT_v44(Storyline).pptx Draft—for discussion only 16
Over the last years the price of luxury iconic items
has increased by far more than inflation
Index: 2010 = 100 155 Luxury iconic

bags price1
3x
118 Global
inflation
100
2010 2012 2014 2016
1. Average luxury products price increase calculated based on 2010-2016 list prices of a panel of iconic luxury handbags
Source: Press search; World Bank; BCG analysis
BCG Altagamma True-Luxury Global Consumer Insight 2017 Edition_Draft PPT_v44(Storyline).pptx Draft—for discussion only 17 17
>50% of Luxury consumers perceive a price/value
misalignment. Americans & Millennials most disappointed
"Do you feel a progressive separation between overall value of Luxury products and their price?"
% of Overall By nationality By generation

respondents
Millennials Gen. X Baby B. &
Silver
42 % 45 %
No 48 % 49 % 51 % 56 % 50 % 54 %
58 % 55 %
Yes 52 % 51 % 49 % 44 % 50 % 46 %

2 / 3 of misalignment perception driven by price, 1 / 3
by exclusivity loss and product quality issues
"Thinking about your favorite luxury brand, you told that you noticed a discrepancy
between the overall value and the price. What are the main reasons for this?"
Emerging Markets
% of respondents perceiving
a price discrepancy Key reasons1
#1 Iconic products' exclusivity loss
#2 Lack of innovation
#3 Overall Brand's exclusivity loss
63 %
100 %
Mature Markets
37 % Key reasons1
#1 Lower material quality
Discrepancy Price Product #2 Lower manufacture quality
increase value
decrease #3 Iconic products' exclusivity loss
1. Multiple options answer (ranking of three reasons)

8 out of 10 disappointed consumers plan to react :
In ~50% of cases likely to translate in lost sales
"In case of a progressive separation between the price and the perceived product value,
what would you do?
% of respondents perceiving a price discrepancy
17 % 45%
Lost sales
100 %
83 % 25%
17% 15%
13%
10% 10% 9%
Buy other Look for Look for Go to Renounce Trade Buy lower
Perceived No reaction Reaction
luxury discounts discounts brand’s to buy down to priced
misalignment brand online offline outlets to premium from same
(multibrand) find brands brand
discounts
Lost sales Going off-price / lower priced items

As a result ~60 out of ~230 Brands surveyed losing
traction, especially total look ones
"Is there a brand on which you have the feeling that you have reduced /
you will probably reduce your luxury spending?"
% of brands recalled by respondents
Lifestyle / Category
74% total look
specialists
100%
36%
26% 19%
Total personal Resilient Affected by Brands Affected by

luxury brands spend decrease spend decrease
Note: Out of the total 12,000 respondents, 79% mentioned a luxury brand on which they reduced their spend. Total personal luxury brands include 230 brands
spontaneously recalled by respondents. Brands affected by spending decrease include those mentioned by more than 50 respondents. Possible to mention
only one brand Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)
Trading down is an attitude also for beyond money
Luxury consumers . Americans the most active
"Do you have the feeling that you have partially shifted your spending from luxury
brands to premium and / or fast fashion brands?"
% of respondents By luxury spend By nationality
7% 10%
Yes 41% 37%

43% 44%
57%
81%
93% 90%
No 59% 63%
57% 56%
43%
19%
Total 5-20 k€ 20-50 k€ > 50 k€

Luxury Consumers trading down to premium brands
almost 2x than to fast fashion ones
"Do you have the feeling that you have partially shifted your spending from luxury
brands to premium and / or fast fashion brands?"
% of respondents % of respondents trading down
Yes 41%
70%
Premium 64%
No 59%
Fast
fashion
36% 46%
Total Total
Note: Multiple options answer. In calculating the % of respondents trading down to premium and fast fashion brands, respondents trading down to both
premium and fast fashion brands were counted twice
More Casual, more Customized!
Casualwear with increasing appeal vs. formal
for 2 / 3rd of True-Luxury Consumers
"Has your attitude towards formal wear changed?"
% of respondents
34 %
100 %
66 %
Overall No change Decrease of

perceived formal in favor
in formal of casual

Casualwear fuelled by wardrobe saturation for the
eldest, higher appeal and acceptance for the youngest
"What are the key reasons driving the lower appeal for formal wear in your mind?"
% of respondents Overall By generation
with lower appeal
for formal wear
Enough formal wear

for formal occasions
55% 55% 54% 61%
Casual suitable
to more occasions
51% 52% 50% 49%
More comfort
with casual
48% 50% 48% 40%
Follow casualization
at the office
37% 40% 36% 28%
Formal wear now

too expensive
29% 33% 28% 19%
Note: multiple options answer (up to three reasons)

The Luxurization of the Casualwear
Luxury sneakers Luxury down jackets
Market @ Retail value (Bn€) Market @ Retail value (Bn€)
9.3 Bn€ 16.0 Bn€ 9.6 Bn€ 13.0 Bn€

Sneakers 0.9 Down jackets 0.5
3.0 2.0
Other shoes 8.4 Other outerwear 9.1
13.0 11.0
2009 2016 2009 2016
Source: BCG Luxury market model

Growing demand for customization
"Is customization relevant for you when purchase luxury?"
Avg.
% of respondents answering "Yes" 22%

Avg.
23 % 23 % 23 %
22 % 14%
20 %
17 % 18 %
16 %
15 % 15 % 15 %
13 % 13 %
10 %
2013 2014 2015 2016

Bespoke is the most desired feature;
different customization priorities by product category
"Which are the elements of customization that you value the most?"
% of respondents considering each customization aspect relevant
#1 Bespoke #2 Product #3 Service #4 Made to #5 Initials or

products configuration measure writings
57% 53% 52% 50% 47%
1st category
by relevance
Note: multiple options answer (ranking of three reasons)

Made-in Italy still leading, fuelled by Apparel,
Bags and Shoes
"Which country of manufacturing do you consider the best for luxury products?"
Drivers of the increase (2014-2016)

% of respondents
that check Made-in1 Δ 2014-2016 (pp)
+13 pp +20 pp -3 pp -5 pp
29% 11
32% 40%
23% 5 19% 20% 21% 18% 15% 10%
12% 4 2014 2016 2014 2016 2014 2016 2014 2016
+6 pp +1 pp +10 pp +18 pp
10% 0
53%
26% 35%
6% -5 14% 20% 16% 17% 16%
6% 0 2014 2016 2014 2016 2014 2016 2014 2016
... +7 pp +2 pp +0 pp +2 pp
10% 17% 8% 10% 11% 11% 8% 10%

3% -2
2014 2016 2014 2016 2014 2016 2014 2016
1. Excluding cars, luxury boats, design and lightening

Made-in Italy recognized worldwide, while
Made-in U.S. mainly appreciated by Americans
Made-in preference (Italy vs. US) by consumer nationality

Focus on Personal Luxury1
% of respondents
40% Made-in
30%
20%
Made-in
10%
0%
1. Excluding cars, luxury boats, design and lightening

True Luxury Consumers buying more at home
True-Luxury Consumers are buying more in their
home country
"Where did you buy your last luxury item?"1 "Where did you buy your last luxury item?"1
% of Chinese respondents % of American respondents
23%
35% Abroad 35%
Abroad 61%
Of which Of which
16% 20%
online online
77%
65% Local 65%
Local 39%
2014 2016 2014 2016
1. For Top 4 EU nationalities (French, German, Italian, British) local purchases from 48% in 2014 to 79% in 2016. For Japanese local purchases from 71% in
2014 to 82% in 2016 2. Includes both cities where respondents bought in the last 12 months and plan to buy in the next 12 months. Multiple options
answer (all cities that apply) Note: Hong Kong, Taiwan and Macau included in "Abroad" Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)
Chinese increasingly back home to buy luxury
"Where did you buy your last luxury item?"
% of Chinese buying locally1
Daigou Effect 65%

High Price Gap Locally
(Mainland
Strong Yuan China)
41%
30% 39% Government Initiatives
(Duty Rates, Boarder Controls)
Global Pricing
Weak Yuan
2013 2014 2015 2016
1. Hong Kong, Macau, Taiwan excluded

True Luxury Consumers are buying more in their
home country
"Where did you buy your last luxury item?"1 "Where did you buy your last luxury item?"1
Top destinations for luxury shopping2 Top destinations for luxury shopping2
% of Chinese respondents % of American respondents
2015 2016 2015 2016
#1 Paris Tokyo #1 Paris London
#2 Tokyo London #2 London Tokyo
#3 New York Paris #3 Milan Paris
#4 Milan New York #4 Dubai Dubai
#5 Dubai Milan #5 Hong Kong Milan
1. For Top 4 EU nationalities (French, German, Italian, British) local purchases from 48% in 2014 to 79% in 2016. For Japanese local purchases from 71% in
2014 to 82% in 2016 2. Includes both cities where respondents bought in the last 12 months and plan to buy in the next 12 months. Multiple options
answer (all cities that apply) Note: Hong Kong, Taiwan and Macau included in "Abroad" Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)
Luxury goes Omnichannel
Store solo sales decreasing but omnichannel the
real trend vs. online solo sales
"Where have you bought your last luxury item? Where have you researched it?"
% of respondents on last purchase
2013 2016
53% Digitally Influenced 61% Digitally Influenced
7% 10%
8% 9%
100
100
38%
42%
100% 100%
47% 39%
46% Omnichannel 51% Omnichannel
Store ROPO1 Show Online Total Store ROPO1 Show Online Total
solo rooming2 solo solo Rooming solo
2
1. Researched Online, Purchased Offline 2. Researched Offline, Purchased Online

Digital influence growth fuelled by Americans
"Where have you bought the last item purchased? Where have you researched it?"
Overall By nationality
Digitally influenced
purchases1 2016 (%)
61% 64% 72% 54%
( On line solo + Show
rooming + ROPO)
22 pp
Trend 2013-2016 9 pp 8 pp
(Δ pp) 6 pp
1. Considering the last luxury purchase

Millennials the most digitally influenced
"Where have you bought the last luxury item purchased? Where have you researched it?"1
Overall By generation
% of respondents on Millennials Gen. X Baby B. & Silver

last purchase
Store solo 39% 32%

42%
56%
ROPO
46%
42% 41%
28%
Showrooming 12%
9% 7% 6%
Online solo 10% 10% 10% 10%
Digitally influenced
61% 68% 58% 44%
purchases (%)
1. Mainly personal items (~90%), among experiential includes wine & spirts, furniture, smartphones,..
60% of online purchases are perceived to be
additional to physical retail purchases
"Do you have the feeling that your spending online is in addition to or
cannibalizing your luxury spending in physical stores?"
% of respondents1 Overall By nationality
2016 19% 21% 22% 17% 15%

online purchases
In addition 56%
61% 62% 66%
to physical 77%
Cannibalization 39% 44% 38% 34%

23%
1. Considering the online channel among the top 3 channels used over the last 12 months
Full price multibrand eShops key for Millennials :
Brands' websites and Marketplaces for the eldest
"Which kind of online store did you buy the product from?"
% of respondents Overall By generation
Brand owned online

stores 34% 33% 33% 37%
Full price multi-brand
online stores
46% 49% 46% 36%
(e.g. Net à Porter, Dept.
Store e-commerce)
Online marketplace
(e.g. Amazon, TMall, JD.com) 20%
15% 14% 15%
Discount specialized 6% 7%
5% 4%
online stores (e.g. Yoox)

Demand for an omnichannel experience is growing
fast , driven by Chinese and Americans
"How important is it for you that a brand can be "What you would expect when
reached through different channels?" interacting with your preferred luxury
brand through multiple channels?"1
Overall By nationality (2016)
% of respondents % of respondents considering omni-
channel not negotiable/very important
2014 2016
8% Consistent Brand
15% 13% 54%
Not important 25% 19% 23% Image
38%
36% Integrated Delivery
39% 49%
41% and Service Level
Somehow 38% 38%
important
39% Same Rewards
54% 51%
Not negotiable / 37% 46%
40% 39%
very important Customer relationship
38%
Management
1. Multiple options answer (ranking of three reasons)

How effectively are Luxury Brands responding to the
omnichannel expectations? (I)
~100 brands included
in the analysis1
Brands' satisfaction distribution (2016)
Omnichannel Satisfaction Index = (People mentioning as the best brand – people mentioning as the worse brand)
100%
50%
0%
-50%
1. Only personal luxury goods, Included only brands with statistical significant observations in total satisfaction
How effectively are Luxury Brands responding to the
omnichannel expectations? (II)
~100 brands included
in the analysis1
Omnichannel needs Brands' satisfaction distribution (2016)
Consistent brand image
Integrated delivery
and service level
Same Rewards
across channels
Customer relationship
management
Satisfaction Index2
1. Only personal luxury, Included only brands with statistical significant observations 2.# respondents who selected the brand as best brand –
# respondents who selected the brand as worst brand Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)
Monobrand at the heart of an omnichannel experience
Monobrand stores losing traffic and sales;
Japan and China more resilient
"Have you bought your last luxury item from a monobrand store?"
Overall By nationality (2016)
% of respondents
36%
35%
7%
32% Abroad At home
30%
27% 11% 27%
26% 26%
19% 6% 6%
12%
29%
21%
20% 20% 12%
11% 15%
3%
9%
2014 2016
Trend '14-'16

Too many stores opened in the past vs. market growth
Global retail footprint1 growth vs. Personal Luxury Market growth (2014-2016)
@ Constant Exchange Rate

3x
5.0%
2x
4.0%
1.9%
1.6%
0-1%
0.0%
... 2014 2015 2016
Market Growth Retail Footprint Growth (Store #)
1. # stores
Source: BCG Analysis, "Luxury Goods Store Wars 2016" - Bernstein
Shopping experience and product assortment the
main reasons for monobrand disaffection
"Do you have the feeling that you will "Which are the reasons for which you
purchase more or less frequently in are purchasing less frequently
monobrand stores?" in mono-brand physical stores?" 1
% of respondents
Less 21%
frequently 33% 32%
Same 52%
frequency 17% 16%
More 27%
frequently
Monotonous Lack of Price Proximity

shopping product
experience assortment
newness

But monobrand still at the heart of an omnichannel
True-Luxury consumer experience around the Brand
Monobrand influence Reasons to buy in Monobrand

% of respondents
on last purchase
#1 Try & touch the product

Monobrand
Solo 27%
#2 Offer range of the brand
Researched in
Monobrand 7%
Purchased Online
#3 Product customization
Researched in 22%
Monobrand Experienced / trustable
Purchased in other 15% #4 sales staff
physical channel
Monobrand #5 Presence of signature /

Influence 49% exclusive items
Monobrand influencing 22% of purchases

done in other channels

#luxurygoessocial
Word of Mouth the 1st influence lever on True Luxury
Consumers, thanks to digital /social media
"Which of these levers has an impact on how you develop opinions or purchase decisions?"
% of respondents
2013 2016
Magazines 2 50% WoM1 19% 38% 57%
WoM1 32% 11% 43% Magazines2 39%
Store Brand
39% websites3
33%
windows
Brand Store
websites3
34% windows
26%
TV & TV &
Movies
24% Movies
23%
Events 20% Events 17%
Celebrities 20% Celebrities 16%
Seen Seen
Worn
13% Worn
12%
Physical Social Media & Online Blogs

Note: Multiple options answer (ranking of five levers) 1 Includes physical Word Of Mouth, Social Media and Other online blogs 2. Editorials and
Commercial in Magazines. Includes both traditional & digital magazines 3. Includes also Brand's App
Source: BCG 2014 ad hoc study (10'000 respondents in 10 countries)
72% of true luxury consumers use Social Media to
interact with their favourite luxury brands
"Do you use Social Media to interact with luxury brands?"
Overall By generation By nationality
% of respondents Millennials Gen. X Baby B. & Silver
No
23% 18% 22%
28% 28% 34%
47% 12% 51%
Yes, 13% 16%
occasionally 15% 16%
15%
24% 17%
72% 70%
Yes, 57% 64% 56% 62%
51%
frequently1
29% 32%
1. At least one Social Media used more than once per day
Facebook, YouTube, Instagram the hottest Platforms
Instant messaging with very high frequency
"How frequently and which Social Media do you use to interact with luxury brands or
social media peers to share opinions?"
Users (% of respondents)
50% Focus on Content
Facebook
40%
30%
20%
1)
10%
2)
Focus on
Interaction/Service
Frequency
0%
of usage
≥1 time per day
≤1 time per week
1. Tencent QQ 2. Sina Weibo

Behavioral Consumer Segments Evolution
primocapitolo.pptx Draft—for discussion only 54
Where does behavioral segmentation apply?
Behavioral Segmentation
50 k€
20 k€ True-Luxury
Consumers
10 k€
5 k€
Top Aspirational
2 k€
Other Aspirational Occasional Luxury Consumers
1. Including Experiential and Personal luxury, excluding cars and Yachts

Absolute Luxurer, Megacitier and Social Wearer have
driven market growth over the last years
Contribution to luxury market growth by segment (2013-2016)

Total P & E Market generated by True Luxury & Top Aspirational consumers – Bn€
of total 4 1 -1 -1 -1
~90% growth 5 -3 -4
6 312
13
16
22
255
Abs. Social Status Luxe Omni
2013 Experiencer 2016
Luxurer Wearer Seaker Immune Gifter
#LITTLE Rich Timeless Class-
Megacitier Fashionista
PRINCE Upstarter Proper pirational
Segment Value
83 54 23 21 38 9 17 20 5 20 16 6
Size, Bn€
Absolute Luxurer growing by spend increase, Megacitier

and Social Wearer growing by luxury consumer number

Each geography has its own segment mix
Segment distribution by nationality
% of # of luxury
consumers Overall
Fashionista 11% 12% 14% 9% 6%
Megacitier 11% 16% 10% 9% 3%
Classpirational 10% 7% 8% 7% 15%
Experiencer 9% 4% 10% 13% 10%
Timeless Proper 9% 6% 9% 11% 15%
Status Seeker 9% 7% 9% 9% 9%
Social Wearer 8% 8% 10% 8% 3%
Absolute Luxurer 8% 6% 11% 10% 3%
Rich Upstarter 8% 22% 0% 1% 0%
#LITTLEPRINCE 8% 5% 8% 9% 3%
Omni Gifter 6% 6% 4% 7% 11%
Luxe Immune 5% 0% 6% 7% 21%

Top 3 Segments

Working well on a segment pays back
Share of # of luxury consumers, %
Absolute
Megacitier Social Wearer
Luxurer
+7pp +3pp +9pp
17% 15% 13%
12%
11%
10% 8%
8%
4%
Overall 2013 2016 Overall 2013 2016 Overall 2013 2016

2016 2016 2016
5 brands with highest 5 brands with highest 5 brands with highest
penetration in the penetration in the penetration in the
segment segment segment

Example: a Brand successfully changing its consumers
mix towards more attractive behavioral segments
Example for an high-end
personal luxury brand
Segment with highest penetration vs. segment with lowest penetration
for a successful and growing brand
Segment Share of # of luxury consumers, %
+6pp
Avg. Spend 40k€ 14%
Growing1 +11% p.a. 8%
Tends to be very loyal
Absolute Luxurer
Overall Brand share
Avg. Spend 3k€ -5pp

10%
Diminishing1 -15% p.a.
5%
Less loyal to a brand
Classpirational Overall Brand share
The luxury brand here represented achieved a

+ 16 % revenue growth p.a. in the last 3 years
1. Segment Generated Market

The True-Luxury Global Consumer Insight 4th Edition
Main Outcomes
1 In a moderate growth luxury market, True-Luxury Consumers maintaining a healthier and steadier pace
2 In a slower personal luxury market expected winners and losers both among Brands and among Categories
3 Discrepancy between perceived value and price puts at risk affection of ~50% of consumers
4 Casualwear with increasing appeal vs. formal for 2 / 3 of True-Luxury Consumers
5 Customization a growing request and purchase driver, especially in Apparel
6 Consumers buying more in their home country, especially Chinese
7 Store solo sales decreasing but omnichannel the real trend vs. online solo sales
8 Monobrand stores losing traffic and sales, not only for online effect
9 True-Luxury Consumers massively engaging on Social Media with their favorite Brands
10 Strong differences in Brands performances within winning Luxury Consumers BCG Behavioral segments
Thank you
bcg.com | bcgperspectives.com
The True Luxury Consumer: What BCG could do for
Luxury Companies leveraging the study
1 Launch an ad hoc survey on True Luxury Consumer of the brand to bring

insight to the next level on key topics relevant for the business
Brand Equity • e.g. Categories, Geographical Markets, Consumer generations
to support • e.g. Digital, retail execution, megacities penetration,
sales boost • ....
2 Voice of Launch an ad hoc consumer study tailored on the specific target consumer
consumers to of a Brand to inform key business decisions
inform key • e.g. Possible merge / demerge of two lines
decisions • ...
3 Develop a tailored and proprietary consumer behavioral segmentation for

Actionable the brand, applying BCG behavioral segmentation to Brand CRM data
• To capture future organic growth and boost LFL retail sales
consumer
– Inform key decisions in merchandising, assortment, CRM, marketing,...
segmentation – Define and launch pilots
– Measure and scale up
BCG Authors
Nicola Olivier Federico
Pianon Abtan Bonelli
Senior Partner Partner and

and Managing Managing
Director Director Principal
- Milan - Paris - Milan
Leading Fashion & Luxury Division Global Lead of Fashion & Luxury Fashion & Luxury Division Core
in Italy Division Member
26 years @ BCG 17 years @ BCG 8 years of Strategy Consulting in F&L
Expertise areas Expertise areas Expertise areas
• Business planning, strategy • 20+ fashion & Luxury (vendor) due • Focus on luxury and premium
definition and implementation in diligences in the last 3 years alone industry in all categories
Fashion and Luxury • Deep expertise in digital strategies • Assisted 40+ luxury groups
• Retailing and retail development • Retail transformation and concept • Led large transformations, focusing
• Go to market strategy definition for definition across Europe and Africa on distribution, retail, merch., ...
luxury brands in Europe, US & Asia • Deep expertise in Merchandising, • Interim General Manager of Recarlo
• Deep expertise in Digital strategy Category Management and Product in 2012
Development
Contacts Contacts Contacts
Pianon.nicola@bcg.com Abtan.olivier@bcg.com Bonelli.federico@bcg.com
Tel. +39 02 65599 204 Tel. +33 1 4017 4381 Tel. +39 02 65599 608
Mobile +39 335 237556 Mobile +33 6 03 61 61 00 Mobile +39 335 8495649
Thank you
bcg.com | bcgperspectives.com

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The True-Luxury Global Consumer Insight

Milan, February 16th, 2017

Source: BCG-Altagamma True-Luxury Consumer Insight

True-Luxury Consumers sample distribution (% respondents)

Luxury yearly spend1

Average Spend for

Clusters size evolution 4th vs 3rd Edition

Personal Luxury Goods Experiential Luxury Goods

Minimum spent 5 k€ in the past year

Steady market, True luxury consumers growing

A rising perception of price-value misalignment

More casual, more customized!

True luxury consumers buying more at home

Monobrand at the heart of an omnichannel experience

Behavioral consumer segment evolution

Global luxury goods market (B€)

2009 2010 2011 2012 2013 2014 2015 2016 2023F

20 k€ Top Absolute 1.3 2.0

Other Aspirational 375 440

Total Luxury ~415 ~490

Note: rounded numbers

20 k€ Top Absolute 1.3 30 2.0 53

Other Aspirational 375 549 440 715

Total Luxury ~415 ~860 ~490 ~1185

50 k€ Personal Experiential Total

2-3% 5-6% 4-5%

Note: rounded numbers

Turnover growth for 20 leading personal luxury brands1

2009 - 2013 2013 - 2016 2016 - 2023

1. Sample of 20 leading brands in personal luxury

Fragrances & Watches Small leather Silk

Millennials Gen. X Baby B. & Silver

40% 43% 43% 13%

33% 36% 32% 22%

15% 23% 10% -16%

10% 14% 10% -10%

-7% -3% -11% -14%

-25% -22% -27% -33%

True Luxury Consumers net appetite by nationality1

More 33% 23% 37% 38% 40%

Same 43% 48% 39% 41% 43%

2013 2014 2015 2016 2017E

Note: multiple options answer (ranking of three reasons)

Index: 2010 = 100 155 Luxury iconic

2010 2012 2014 2016

% of Overall By nationality By generation

Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)

1. Multiple options answer (ranking of three reasons)

Lost sales Going off-price / lower priced items

Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)

Total personal Resilient Affected by Brands Affected by

% of respondents By luxury spend By nationality

Yes 41% 37%

Total 5-20 k€ 20-50 k€ > 50 k€

Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)

% of respondents % of respondents trading down

"Has your attitude towards formal wear changed?"

Overall No change Decrease of

Source: BCG 2016 ad hoc study (12,000 respondents in 10 countries)

Enough formal wear

Formal wear now

Note: multiple options answer (up to three reasons)

Luxury sneakers Luxury down jackets

Market @ Retail value (Bn€) Market @ Retail value (Bn€)