Traditional Markets Benefitas Chinaslows
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FT SPECIAL REPORT The Business of Luxury Monday May 12 2014 www.ft.com/reports | @ftreports The Chinese are the world’s biggest tourist spenders and increased their spending by 28 per cent in 2013, Inside » according to the World Tourism Organisation. This underpins belief in Traditional “the growing purchasing power of Brand leader Chinese consumers and their appetite for western luxury brands”, Ms Kering’s Marco Huang Sun says. Bizzarri on how It is also driving the opening of luxury outlets for brands from Ferrag- to balance appeal markets amo to accessible fashion bagmaker and exclusivity Furla in airports around the world, even in Europe where local demand Page 2 remains subdued. Another new focus for luxury goods brands, such as Milan’s Prada, is con- Big names for verting concessions in department tough times benefit as stores into directly operated shops, and driving online sales. High-profile hires Hard luxury brands – with Swatch at the vanguard – are expected to face an increasingly open more stores selling directly to intense battle shoppers. China slows More than half of total luxury pur- Page 3 chases are influenced by online mar- keting, according to a BCG survey of more than 10,000 customers in 10 What next? countries. Social media and the rise of smart- Martin Wolf asks phones and wearable technology are top economists Growth is still focused on Asia-Pacific but sales also opening a new business frontier – as well as a potential threat. about prospects for in developed nations, particularly in the US, The fallout has extended to creative global recovery directors and management at leading have picked up, writes Rachel Sanderson fashion and luxury conglomerates, Page 3 LVMH, Kering and Richemont, all of which have moved to shake up at fter five years of rapid is swinging back to developed coun- least some of their business. Inside Mayfair’s growth driven by voracious tries where half of luxury’s total glo- Louis Vuitton and Gucci, the Chinese demand, the luxury bal sales are made to consumers in leather goods brands of LVMH and hidden gem industry is experiencing a their traditional markets. Kering, respectively, are considered Wartski’s Fabergé cold blast of reality. The US is considered the biggest by analysts to have only just emerged A“The bad news is that easy growth growth opportunity for the luxury from intensive care after their logo- find puts antiques on the back of opening stores in market over the next decade because heavy styles hit saturation in China, dealer in limelight China is over for most luxury of spending by locals as well as tour- prompting a repositioning. brands,” says Luca Solca, head of lux- ists, according to Boston Consulting At Gucci, which accounts for half of Page 4 ury goods research at Exane BNP Group (BCG). Kering’s revenues but where sales Paribas. Accessible luxury brands led by US remained sluggish in the first quarter, China’s lower economic growth, group Michael Kors, which doubled analysts say bolder creative choices anti-corruption crackdown, pollution its European sales at the end of last may be needed, especially since the in the big shopping cities and a year, are also changing the face of the hiring of young designers by other On FT.com » maturing consumer turned off by luxury industry. Kering brands Balenciaga and Saint logos have all been blamed by luxury Scilla Huang Sun, who runs the Laurent led to sharp sales rises. Online coverage of executives for lacklustre sales in 2013, Julius Baer Luxury Brands Fund, Meanwhile, Richemont’s decision the Business of which for many have extended into points out that it is crucial to differen- not to sell its underperforming the first quarter of this year. tiate between the moderation of lux- soft luxury brands, including Mont- Luxury conference Nonetheless, bright spots are emerg- ury sales in mainland China com- blanc and Lancel, means that ing as a result of macroeconomic and pared with the solid demand from in Mexico City social change. For example, the focus Chinese tourists, especially in the US. Not just window shopping: sales in developed markets have started to rise Reuters Continued on Page 2 www.ft.com/luxury360 2 ★ FINANCIAL TIMES MONDAY MAY 12 2014 The Business of Luxury Return to Kering man has the billion-euro touch traditional markets Interview says. Instead, Bottega will increase the size of its smallest stores. Marco Bizzarri Three years ago, Mr Bizzarri Chief executive, luxury couture and decided to limit openings in China Continued from Page 1 leather goods, Kering and raise investment in Bottega’s stores in Europe’s shopping capitals. they now need to be turned round. Talk of a China slowdown “That longer-term approach paid But while the mega-brands stutter, off, as the tourist flows have the anti-corruption drive in China and fails to ruffle rising star, increased in the past five years. return to form of US consumers are Many more Japanese and Chinese benefiting high-end niche players. writes Rachel Sanderson are coming to Europe than they did Loro Piana, bought by LVMH last in the past,” he says. year, and Brunello Cucinelli and Her- Does he see anywhere else taking mès, which do not rely excessively on n April, Francois Henri Pinault, over from China? “Frankly no. We fashion and focus on high-quality head of French luxury group are present in India, in Brazil, but goods in casualwear, are in better Kering, confirmed months of these markets are far short of the shape in China where they have rumours about a shake up in the potential of China. The decision- avoided the anti-logo backlash. The management ranks and promoted making process in China is far brands are gaining traction in the US, IMarco Bizzarri, president and chief quicker,” he says. where consumers prefer a casualwear executive of Bottega Veneta, to a Mr Bizzarri believes the tensions look. new role as head of couture and are typical “of an industry that is Sales at Cucinelli rose 50 per cent in leather goods for the luxury division. going to undergo consolidation China in 2013 and 20 per cent in the The move underlined Mr Bizzarri’s sooner or later”. He believes that US. Bottega Veneta, the ultra-luxe emergence as a rising star of the luxury goods companies need to be brand owned by Kering, saw first luxury industry. At a time when global in order to spread their risk quarter sales up 15 per cent on the executives are sweating about the and have a footprint large enough to end of 2013. slowdown in China and the catch tourist shoppers wherever they Meanwhile, valuations of independ- disruptive effect of technology on are in the world. ent Italian brands Moncler, Tod’s and consumption in mature markets, Mr Another issue arising for the Ferragamo remain high amid expecta- Bizzarri has turned Bottega Veneta industry is the suggestion that tions that they, like Giorgio Armani, into a billion-euro brand with some luxury is starting to mean more than will be takeover targets, as the of the strongest growth in the sector. just clothes and bags for consumers In his new role, the 51-year-old in traditional markets such as the Italian former management US, Japan and Europe. 28% consultant will oversee some of the Moving up: in his new role at Kering, Marco Bizzarri will oversee some of the world’s best-known luxury brands Reuters Analysts suggest that technology is world’s best-known luxury brands, disrupting the market, with Chinese tourist spending growth, 2013 including Bottega Veneta, Saint hankering after the latest Laurent, Alexander McQueen, Stella Mr di Marco, Gucci’s current In Bottega’s case, the focus is on smartphone overshadowing a desire Chinese slowdown drives consolida- McCartney, Brioni and Tomas Maier. Curriculum vitae president and chief executive – at its woven intrecciato – a traditional for the latest handbag. tion. Mirroring the extent to which Kering’s global mega-brand Gucci, the height of the financial crisis in technique from the Veneto region It might amount to as big a the global economy moves into a sus- which accounts for more than half of 2014 Kering, chief executive, luxury 2009. But Mr Bizzarri maintained – where the company is based. The problem for the industry as a tained recovery, luxury will grow too, the company’s luxury sales, will couture and leather goods and was subsequently proved right – brand has expanded from bags into slowdown of sales in China. according to Deloitte Touche Tohm- remain under the aegis of longtime 2012 Kering, non-voting director, that luxury shoppers in Asia would shoes, clothes and homeware, but its Mr Bizzarri believes technology is atsu, the professional services firm, in chief executive Patrizio di Marco. 2009 Bottega Veneta, president and trade up to Bottega’s style of discreet signature criss-cross design has less relevant for Bottega, where the an upcoming report. Speaking to the FT before he takes chief executive but pricey, no logo handbags as they remained constant, patterned on manual craft that goes into its bags Not unexpectedly, notwithstanding on his new job, Mr Bizzarri shrugs 2005 Stella McCartney, president and became more sophisticated shoppers. shoes and even on the bottoms of has become a selling point. The the slowdown in China, growth is off concerns about a slowdown in chief executive The company’s sales in the first drinking glasses. company has invested heavily in the still disproportionately focused on China and the impact of technology 1993-2004 Mandarina Duck Group, quarter rose 14.6 per cent at constant “Craftsmanship is becoming more past couple of years in the men and the Asia-Pacific region.