LUXURY GOODS

Digital and Physical Integration: Luxury Retail's Holy Grail

We have analysed in-store digital proficiency 4 MARCH 2016 We have worked with ContactLab and carried out 61 store visits in New York City, measuring Luca Solca performance on 21 different parameters, looking at three areas: 1) The basic: technology in-store; (+44) 203 430 8503 2) The developed: how digital clients are received and services in-store; 3) The advanced: how digital is leveraged to make the most of traffic in-store. Overall Ralph Lauren is the leader in Melania Grippo bringing digital innovations into stores and connecting Online and Offline environments, followed by (+39) 02 89 63 1724 Bergdorf Goodman and Burberry. We expect several companies to achieve Digital and Physical retail integration in the coming quarters. Guido Lucarelli (+39) 02 89 63 1726 Digital offers an ROIC accretive growth avenue Expanding retail networks at a time of more muted demand growth risks diluting space productivity:

a capital sin for any retailer and a guaranteed way to sink ROIC and TSR. By contrast, digital is one of the profitable "growth pockets" available to luxury goods players today: 1) consumers are ContactLab embracing digital and spending more and more luxury dollars online; 2) being late to the party, luxury players can take advantage of established technologies and choose from a long list of Marco Pozzi service providers. Coupled with their small volumes, this caps their capex requirements; 3) luxury (+39) 02 28 31 181 brands enjoy large average baskets, limiting concerns over fulfilment costs; 4) digital sales carry materially lower SG&A costs (rent, personnel, etc.) and higher margins. Alexandra Bertasio (+39) 02 28 31 181 Combining physical and digital retail has obvious benefits Consumers buying luxury goods both online and in-store spend c.50% more per year than in-store Davide Sarra only customers. When goods are out of stock, offering consumers the opportunity to order online (+39) 02 28 31 181 in-store and receive their purchases at home increases conversion rates and – ultimately – 2 sales/m . Providing order online and pick-up in-store opens cross-selling opportunities – similar to order online and return/exchange in-store. Both ultimately support space productivity. As most luxury brands have become retailers, space productivity must be their North Star. Down the road – as digital luxury takes off – this will require brands to right-size their POS networks, something best-in-class players are already doing.

See Appendix (on p42) for Analyst Certification, Important Disclosures and Non-US Research Analyst disclosures.

Contents

Executive Summary ______3

The Cross Channel Opportunity ______5

Research Methodology ______12

In-Store Digital Proficiency ______14 Technology in-store ______17 Dealing with Digital Clients in-store ______26 Online Promotion while in-store ______34

Exane – presentation ______41

ContactLab presentation ______41

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 2

Executive Summary

We have analysed in-store digital proficiency

We have worked with ContactLab and carried out 61 store visits in New York City, measuring performance on 21 different parameters, looking at three areas: 1) The basic: technology in-store; 2) The developed: how digital clients are received and services in-store; 3) The advanced: how digital is leveraged to make the most of traffic in-store. Overall Ralph Lauren is the leader in bringing digital innovations into stores and connecting Online and Offline environments, followed by Bergdorf Goodman and Burberry. We expect several companies to achieve Digital and Physical retail integration in the coming quarters.

Figure 1: Ralph Lauren leads in bringing digital innovations into stores and connecting the online and offline, followed by Bergdorf Goodman and Burberry. Many luxury brands are trailing In-Store Digital Proficiency, New York, December 2015

0 10 20 30 40 50 60 70 MAX SCORE Ralph Lauren Bergdorf Goodman Burberry Louis Vuitton Saks Macy's Barneys Zegna Coach Hugo Boss Tiffany Cartier Gucci Tory Burch Michael Kors Jeweller Valentino High-End Hermès Runner-up Armani Mega-Brand Premium Fendi Department Stores Loro Piana Balenciaga Bulgari Prada Brunello Cucinelli Givenchy Moncler Bottega Veneta Tod's Chanel Dior Dolce&Gabbana Ferragamo Saint Laurent Céline

Source: ContactLab Analysis

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 3

Digital offers an ROIC accretive growth avenue

Expanding retail networks at a time of more muted demand growth risks diluting space productivity: a capital sin for any retailer and a guaranteed way to sink ROIC and TSR. By contrast, digital is one of the profitable "growth pockets" available to luxury goods players today: 1) consumers are embracing digital and spending more and more luxury dollars online; 2) being late to the party, luxury players can take advantage of established technologies and choose from a long list of service providers. Coupled with their small volumes, this caps their capex requirements; 3) luxury brands enjoy large average baskets, limiting concerns over fulfilment costs; 4) digital sales carry materially lower SG&A costs (rent, personnel, etc.) and higher margins.

Combining physical and digital retail has obvious benefits

Consumers buying luxury goods both online and in-store spend c.50% more per year than in-store only customers. When goods are out of stock, offering consumers the opportunity to order online in-store and receive their purchases at home increases 2 conversion rates and – ultimately – sales/m . Providing order online and pick-up in- store opens cross-selling opportunities – similar to order online and return/exchange in- store. Both ultimately support space productivity. As most luxury brands have become retailers, space productivity must be their North Star. Down the road – as digital luxury takes off – this will require brands to right-size their POS networks, something best-in- class players are already doing.

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 4

The Cross Channel Opportunity

Digital offers an ROIC accretive growth avenue

Expanding retail networks at a time of more muted demand growth risks diluting space productivity: a capital sin for any retailer and a guaranteed way to sink ROIC and TSR. By contrast, digital is one of the profitable "growth pockets" available to luxury goods players today: 1) consumers are embracing digital and spending more and more luxury dollars online; 2) being late to the party, luxury players can take advantage of established technologies and choose from a long list of service providers. Coupled with their small volumes, this caps capex requirements; 3) luxury brands enjoy large average baskets, limiting concerns over fulfilment costs; 4) digital sales carry materially lower SG&A costs (rent, personnel, etc.) and higher margins.

Figure 2: Expanding retail networks at a time of more muted demand growth risks diluting space productivity and ROCE (1/2) LVMH Organics Sales Growth (%) / Stores growth (%) vs ROCE y/y growth /%)

25% R² = 0.9439 2010 20%

15%

10% 2011

5%

0% 2013 2012 -5% ROCE (y/y ROCE % (y/y growth) -10% 2014 2009 -15%

-20% 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Organic Sales Growth (%) / Stores growth (%)

Note: Stores growth and Sales growth refers to LVMH F&LG division only – ROCE is calculated on LVMH Group Source: Exane BNP Paribas estimates and analysis

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 5

Figure 3: Expanding retail networks at a time of more muted demand growth risks diluting space productivity and ROCE (2/2) History of ROCE

Source: Exane BNP Paribas estimates and analysis

Figure 4: ROCE has a direct impact on total shareholders return ROCE improvement (2004-2014 % ppts) vs. TSR (2004-2014 %)

Source: Company Reports, Exane BNP Paribas Estimates and Analysis

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 6

Figure 5: The number of registered and digitally contactable clients continues to rise

40% Number of Digitally-Contactable Clients (y oy % chg)

30%

20%

40% Rev enues from Digitally-Contactable Clients (y oy % chg) 10% 35%

30% 0% 2012 vs 2011 2013 vs 2012 2014 vs 2013 25%

20%

40% Av ge Yearly Spend by Digitally-Contactable Clients 15% (y oy % chg) 10% 30%

5%

20% 0% 2012 vs 2011 2013 vs 2012 2014 vs 2013

10%

0%

(10%) 2012 vs 2011 2013 vs 2012 2014 vs 2013

Source: ContactLab Analysis

Figure 6: Digitally contactable clients spend more in-store (+16%) (1/2) Client yearly average spending (EUR, worldwide, 2013-14)

1200

1000

800

600

400

200

0 2013 2014 2013 2014

Registered Digitally Contactable

Source: ContactLab2 Analysis

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Figure 7: Digitally contactable clients spend more in-store (+16%) (2/2) Client yearly average in-store spending (worldwide, 2013–14)

120 116 115

110 109

105

100 100

95

90 In-Store Registered Digitally-Contactable Digitally-Contactable (index = 100) 2013 2014

Source: ContactLab Analysis

Figure 8: Whilst still a relatively small channel, online is expected to drive c.40% of luxury market growth over the 2013-20E period – of which c.20% to come from the development of mono-brand e-stores Luxury Goods Market (EUR bn)

350

19% 305 21% 300 20% 40% 250 37% 7% 217

200 51% 4%

147 150

100

50

0 2005 Retail - Retail - Wholesale - Wholesale - 2013 Retail - Retail - Wholesale - Wholesale - 2020E Physical Online Physical Online Physical Online Physical Online

Source: Altagamma & Exane BNP Paribas estimates

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Figure 9: Burberry is a virtuous example of interaction of on-line and off-line operations. Click & collect already represents 15% of Burberry’s on-line sales Burberry – Click-&-Collect in-store

Source: Burberry

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 9

Combining physical and digital retail has obvious benefits

Consumers buying luxury goods both online and in-store spend c.50% more per year than in-store only customers. When goods are out of stock, offering consumers the opportunity to order online in-store and receive their purchases at home increases 2 conversion rates and – ultimately – sales/m . Providing order online and pick-up in- store opens cross-selling opportunities – similar to order online and return/exchange in- store. Both ultimately support space productivity. As most luxury brands have become retailers, space productivity must be their North Star. Down the road – as digital luxury takes off – this will require brands to right-size their POS networks, something best-in- class players are already doing.

Figure 10: Cross-channel clients demonstrate how important digital marketing and e-commerce can become USA, percentage of registered client purchasing history (2011 – 2013) – excl. Wholesale

100%

90% Ecommerce only 80% Cross Channel 70% In-store only 60%

50%

40%

30%

20%

10%

0% 1 Panel of eight worldwide luxury brands. Source: ContactLab Analysis

Figure 11: Cross-channel consumers spend c.50% more than in-store only customers Client yearly average spending (EUR, worldwide, 2013-14)

1200

1000

800

600

400

200

0 E-commerce Clients In-store Clients Cross-channel Clients

Source: ContactLab Analysis

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Figure 12: As most luxury brands have become retailers… Luxury Goods companies retail sales (% of total sales)

75% 73%

71% 71%

70% 69% 67% 65% 65%

61%

60% 59% 59% 58% 57%

55%

50% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Retail % Sales Note: Luxury goods coverage include LVMH F&LG, Kering Luxury, Burberry, Prada, Richemont, Luxottica – unweighted. Source: Company reports, Exane BNP Paribas estimates and analysis

Figure 13: …space productivity must be their North Star ROCE(Lease Adjusted) vs Sales / Square Foot (2014)

30% R² = 0.7046

25% Next

20%

Inditex 15% GAP Foot Locker Primark

Kingfisher 10% 2014 2014 ROCE (Lease Adjusted) 5% Abercrombie Debenhams 0% 190 290 390 490 590 690 790 2014 Sales / Square Foot (EUR) Source: Company Reports, Exane BNP Paribas estimates and analysis

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 11

Research Methodology

We have analysed in-store digital proficiency. We have worked with ContactLab to ascertain how luxury players are proceeding with the integration of physical and digital retailing. We have carried out 61 store visits in New York City, measuring performance on 21 different parameters. We have covered our usual 30 brands list + 4 department stores: Bergdorf Goodman, Saks, Barneys, and Macy's. We have looked at three areas: 1) The basic: technology in-store; 2) The developed: how digital clients are received and services in-store; 3) The advanced: how digital is leveraged to make the most of traffic in-store.

Figure 14: Methodology

• Research timeframe: December 2015

• Panel of 34 players: - 30 Monobrand (Exane BNP Paribas luxury panel) - 4 Multibrand Department Stores

• Data Collection: Visits to 57 Flagship/Stand-Alone Stores in New York (Manhattan) and 4 Department Stores - Direct observation - Questions to Sales Assistants

• Evaluation Criteria: 21 Parameters divided into 3 Categories - Technology in-store - Dealing with Digital Clients in-store - Online Promotion while in-store

Source: ContactLab

Figure 15: Our panel of 34 players: 30 brands and 4 Department stores in NY

30-MONOBRAND PANEL MANHATTAN MULTIBRAND

Jeweller Bulgari Department Store Barneys Jeweller Cartier Department Store Bergdorf Goodman Jeweller Tiffany Department Store Macy's High-End Bottega Veneta Department Store Saks High-End Brunello Cucinelli High-End Chanel High-End Dior High-End Hermès High-End Loro Piana High-End Saint Laurent High-End Valentino Runner-Up Balenciaga Runner-Up Céline Runner-Up Dolce&Gabbana Runner-Up Fendi Runner-Up Ferragamo Runner-Up Givenchy Runner-Up Tod's Mega-Brand Burberry Mega-Brand Gucci Mega-Brand Louis Vuitton Mega-Brand Prada Mega-Brand Zegna Premium Armani Premium Coach Premium Hugo Boss Premium Michael Kors Premium Moncler Premium Ralph Lauren Premium Tory Burch Source: Exane BNP Paribas

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Figure 16: 57 Flagship/Stand-Alone Stores and 4 Department Stores visited in New York Monobrand Store Address in Manhattan New York Monobrand Store Address in Manhattan New York Armani 717 Fifth Avenue, NY 10022, New York Gucci 725 Fifth Avenue, NY 10022 , New York 760 Madison Avenue, NY 10065, New York Hermès 691 Madison Avenue, NY 10065, New York Balenciaga 148 Mercer Street, NY 10012, New York 690 Madison Avenue, NY 10065, New York 149 Mercer Street, NY 10012, New York Hugo Boss Time Warner Building - 10 Columbus Circle Suite 106, NY 10019, New York Bottega Veneta 699 Fifth Avenue, NY 10022, New York (old location) 555 Broadway, NY 10012, New York 650 Madison Avenue, NY 10022, New York (new location) Loro Piana 748 Madison Avenue, NY 10065, New York Brunello Cucinelli 683 Madison Avenue, NY 10065, New York Louis Vuitton 1 East 57th Steet, NY 10022, New York 136 Greene Street, NY 10012, New York 116 Greene Street, NY 10012, New York Bulgari 730 Fifth Avenue, NY 10022, New York Michael Kors 667 Madison Avenue, NY 10065, New York Burberry 9 East 57th Street, NY 10022, New York Time Warner Building - 10 Columbus Circle, NY 10023, New York 131 Spring Street, NY 10012, New York 610 Fifth Avenue, NY 10020, New York Cartier 767 Fifth Avenue, NY 10153, New York Moncler 90 Prince Street, NY 10012, New York Céline 870 Madison Avenue, NY 10021, New York Prada 724 Fifth Avenue, NY 10019, New York 67 Wooster Street, NY10012 , New York 575 Broadway, NY 10012, New York Chanel 139 Spring Street, NY 10012, New York Ralph Lauren 867 Madison Avenue, NY 10021, New York 15 East 57th Street, NY 10022, New York 888 Madison Avenue, NY 10021, New York 737 Madison Avenue, NY 10065, New York 878 Madison Avenue, NY 10021, New York Coach 79 Fifth Avenue, NY 10003, New York 872 Madison Avenue, NY 10021, New York 595 Madison Avenue, NY 10022, New York 711 Fifth Avenue, NY 10022, New York Time Warner Building - 10 Columbus Circle, NY 10019, New York 109 Prince Street, NY 10012, New York Dior 21 East 57th Street, NY 10022, New York Saint Laurent 3 East 57th Street, NY 10022, New York 17 East 57th Street, NY 10012, New York 80 Greene Street, NY 10012, New York 105 Greene Street, NY 10012, New York Tiffany 200 Fifth Avenue, NY 10022, New York 133 Green Street, NY 10012, New York 97 Greene Street, NY 10012, New York Dolce&Gabbana 717 Fifth Avenue, NY 10022, New York Tod's 650 Madison Avenue, NY 10022, New York Fendi 598 Madison Avenue, NY 10022, New York Tory Burch 797 Madison Avenue, NY 10065, New York 112 Greene Street, NY 10012, New York Valentino 693 Fifth Avevue, NY 10022, New York Ferragamo 655 Fifth Avenue, NY 10022, New York Zegna 663 Fifth Avenue, NY 10022, New York Givenchy 747 Madison Avenue, NY 10065, New York

Multibrand Store Address in Manhattan New York Barneys 660 Madison Avenue, NY 10065, New York 754 Fifth Avenue, NY 10019, New York Bergdorf Goodman 745 Fifth Avenue, NY 10151, New York Saks 611 Fifth Avenue, NY 10022, New York Macy's 151 West 34th Street, NY 10001, New York Source: ContactLab

Figure 17: We measured In-Store Digital Proficiency through 21 parameters divided into 3 categories Screens Open WiFi in Store TECHNOLOGY IN STORE SA Tablet In Store Battery Charger Extra Effort: Interactive Mirrors Extra Effort: Interactive Touchscreens

Appointments in Store via Website Appointments in Store via App In-Store Client Recognition via Technology (e.g. via Beacons) Client Recognition via SA dialogue (before checkout) DEALING WITH DIGITAL Question 1 to SA: "Can you retrieve items from my Wishlist?" CLIENTS IN STORE Exchange in Store (declared on website) Return in Store (declared on website) Question 2 to SA: "In case I purchased an item online, can I return it in store?" Online evidence of In-Store "Made to Measure"/"Made to Order"/Monogramming Corner Online evidence of In-Store Cosmetic Corner

E-commerce Invite Online Order in Store Option ONLINE PROMOTION Question 3 to SA: Assistance for Online Shopping while In-Store WHILE IN STORE In-Store Invite for App Download In-Store Invite for Hashtag/Website Visit Source: ContactLab

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In-Store Digital Proficiency

Today, we are just seeing the first steps. Today we are just seeing the first steps in digital and physical integration. Unsurprisingly, it's easier to stuff stores with technology, than to painstakingly redesign the client interface processes - so as to make the most of what digital can bring to incumbent physical retailers. The luxury players we have surveyed scored 39% of the absolute maximum potential for Dealing with Digital Clients in-store but only 17% on the two other important areas: Technology in-store and Online Promotion while in-store. US department stores lead in the pursuit of the "holy grail", scoring an average 50% of the maximum potential. Mega-brands follow with 44%. Premium brands trail at 34% while High-end (17%) and Runners-up (13%) look far behind.

Figure 18: Dealing with Digital Clients in-store criterion is partially exploited, while Technology in-store and Online Promotion while in-store criteria are very far off from their maximum potential In-Store Digital Proficiency, New York, December 2015

SCORE OVER MAXIMUM CRITERIA SCORE MAX POTENTIAL SCORE POTENTIAL % Dealing with Digital Clients in Store 482 1224 39% Technology in Store 111 646 17% Online Promotion while in Store 47 281 17% TOTAL 640 2,151 30% Source: ContactLab Analysis

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Figure 19: Ralph Lauren leads in bringing digital innovations into stores and connecting the online and offline, followed by Bergdorf Goodman and Burberry. Many luxury brands are trailing (1/2) In-Store Digital Proficiency, New York, December 2015

0 10 20 30 40 50 60 70 MAX SCORE Ralph Lauren Bergdorf Goodman Burberry Louis Vuitton Saks Macy's Barneys Zegna Coach Hugo Boss Tiffany Cartier Gucci Tory Burch Michael Kors Jeweller Valentino High-End Hermès Runner-up Armani Mega-Brand Premium Fendi Department Stores Loro Piana Balenciaga Bulgari Prada Brunello Cucinelli Givenchy Moncler Bottega Veneta Tod's Chanel Dior Dolce&Gabbana Ferragamo Saint Laurent Céline

Source: ContactLab Analysis

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Figure 20: Ralph Lauren leads in bringing digital innovations into stores and connecting the online and offline, followed by Bergdorf Goodman and Burberry. Many luxury brands are trailing (2/2) In-Store Digital Proficiency, New York, December 2015

DEALING WITH ONLINE PROMOTION TECHNOLOGY IN STORE Group Brand OVERALL SCORE OVERALL RANKING DIGITAL CLIENTS IN STORE WHILE IN STORE (Ranking) (Ranking) (Ranking) Premium Ralph Lauren 43 1 2 1 4 Department Store Bergdorf Goodman 38 2 1 12 1 Mega-Brand Burberry 38 2 5 4 4 Mega-Brand Louis Vuitton 35 4 5 6 4 Department Store Saks 34 5 21 1 2 Department Store Macy's 33 6 3 11 4 Department Store Barneys 32 7 7 6 4 Mega-Brand Zegna 31 8 12 6 3 Premium Coach 28 9 16 6 4 Premium Hugo Boss 26 10 3 14 11 Jeweller Tiffany 26 10 21 3 11 Jeweller Cartier 25 12 16 5 11 Mega-Brand Gucci 25 12 9 10 11 Premium Tory Burch 23 14 13 14 4 Premium Michael Kors 18 15 21 12 11 High-End Valentino 17 16 13 17 11 High-End Hermès 16 17 21 14 11 Premium Armani 14 18 21 17 11 Runner-Up Fendi 14 18 9 24 11 High-End Loro Piana 14 18 21 17 11 Runner-Up Balenciaga 12 21 21 20 11 Jeweller Bulgari 12 21 21 20 11 Mega-Brand Prada 12 21 16 22 11 High-End Brunello Cucinelli 10 24 21 22 11 Runner-Up Givenchy 10 24 16 25 11 Premium Moncler 10 24 13 28 11 High-End Bottega Veneta 8 27 21 25 11 Runner-Up Tod's 8 27 21 25 11 High-End Chanel 7 29 9 32 11 High-End Dior 6 30 7 33 11 Runner-Up Dolce&Gabbana 6 30 21 29 11 Runner-Up Ferragamo 6 30 16 30 11 High-End Saint Laurent 3 33 21 31 11 Runner-Up Céline 0 34 21 33 11 Source: ContactLab Analysis

Figure 21: Department Stores are the best performing group, reaching 50% of maximum potential, followed by Mega-Brands (44%) and Premium Brands (34%), while High-End and Runner-Up still have limited in-store digital content (17-13%) In-Store Digital Proficiency, New York, December 2015

MAX GROUP GROUP # BRANDS GROUP SCORE % MAX SCORE SCORE Department Store 4 137 274 50% Mega-Brand 5 141 324 44% Premium 7 162 472 34% Jeweller 3 63 198 32% High-End 8 81 468 17% Runner-Up 7 56 415 13%

TOTAL PANEL 34 640 2151 30% Source: ContactLab Analysis

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US players lead against European brands

Overall Ralph Lauren is leading in bringing digital innovations into stores and connecting Online and Offline environments, followed by Bergdorf Goodman and Burberry.

Technology in-store

Three of the top four are American: Bergdorf Goodman, Ralph Lauren, Hugo Boss and Macy's. Fourteen brands haven't adopted any digital tool yet. Technology can also be neat and elegant as demonstrated by Dior’s screens-in-staircases and Ralph Lauren’s fitting rooms with interactive mirrors.

Figure 22: Bergdorf Goodman is leading, followed by Ralph Lauren, Hugo Boss and Macy’s. A large group of 14 Monobrands have not adopted any digital tool yet “Technology in-store” overview, New York, December 2015

TECHNOLOGY IN STORE (SUM UP) Open WiFi Extra Effort Extra Effort Interactive Brand RANKING Screens SA Tablet In Store Battery Charger in Store Interactive Mirrors Touchscreens Bergdorf Goodman 1 Ralph Lauren 2 Hugo Boss 3 Macy's 3 Burberry 5 Louis Vuitton 5 Barneys 7 Dior 7 Chanel 9 Fendi 9 Gucci 9 Zegna 12 Moncler 13 Tory Burch 13 Valentino 13 Cartier 16 Coach 16 Ferragamo 16 Givenchy 16 Prada 16 Armani 21 Balenciaga 21 Bottega Veneta 21 Brunello Cucinelli 21 Bulgari 21 Céline 21 Dolce&Gabbana 21 Hermès 21 Loro Piana 21 Michael Kors 21 Saint Laurent 21 Saks 21 Tiffany 21 Tod's 21

Many screens across the store (in relation to store's dimension) Availability of Phone Charger Availability of Interactive Availability of Interactive Offered Yes, engaging use with several large size screens inside the store Mirrors Touchscreens (e.g. large/wall size) Multiple screens across the store (in relation to store's dimension) Yes, non engaging use with with at least one large size clients screen Only 1 large size screen One or more small size screens No Phone Charger inside the Not offered No No Interactive Mirrors No Interactive Touchscreens (e.g. PC size) store No screens Source: ContactLab Analysis

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Figure 23: “Basic” digital tools/services have been adopted by 1/3 of the Panel and can effectively support brand building Technology in-store, New York, December 2015 (1/2)

TECHNOLOGY IN STORE (1/2)

Open WiFi In Store Battery Brand RANKING Screens SA Tablet in Store Charger

Bergdorf Goodman 1 Few screens compared to shop's area, mainly located on one floor Yes (open) No Yes

Ralph Lauren 2 Depending on shop location: many at Polo store, fewer at Ralph Lauren Women, Men, Child and Baby Yes (open) Yes (SA actively using them ) No

Hugo Boss 3 Ground Floor: 2 L Craftsmanship (Suits), First Floor: 1 M Models, Second Floor: 1 M Runway Yes (open) No No Multiple screens of different dimensions on each floor, mainly located on ground floor, also screens in brands' identity Macy's 3 Yes (open) No No corners Ground Floor: 2 S Beauty, 1 S Branding/Products, Second Floor: 1 M Branding/Products, Third Floor: 1 M Burberry 5 Yes (open) Yes (SA actively using them ) No Branding/Products, Fourth Floor: 1 M Branding/Products, Fifth Floor: 1 M Runway Louis Vuitton 5 Ground Floor: 1 M Runway, 1 XS Watches, First Floor: 1 M Men Bags with Monogram, Second Floor: 1 L Branding Yes (open) Yes (SA actively using them ) No

Barneys 7 Few screens compared to shop's area, mainly located on one floor Yes (open) No No Ground Floor: 1 XS Craftsmanship (Watch Making), Staircase: 1 XL Maison History + Runway Models, First Floor: 1 M Dior 7 Yes (open) No No Runway Chanel 9 Ground Floor: 1 XS Craftsmanship (Watch Making), First Floor: 1 L Runway No Yes (SA actively using them ) No

Fendi 9 No Yes (open) Yes (mostly inventory check) No

Gucci 9 Ground Floor: 1 M Runway, Second Floor: 2 M Runway No Yes (few tablets) No

Zegna 12 Ground Floor: 2 M Advertising, First Floor: 1 M Advertising Yes (open) No No

Moncler 13 No No Yes (only 2 as Digital Catalog) No

Tory Burch 13 No No Yes (SA actively using them ) No

Valentino 13 No No Yes (few tablets) No

Cartier 16 No Yes (open) No No

Coach 16 Ground Floor: 1 XL Advertising Yes (open) No No

Ferragamo 16 Ground Floor: 1 XS Branding, 1 M Runway, First Floor: 1 M Runway No No No

Givenchy 16 No Yes (open) No No

Prada 16 No Yes (open) No No

Armani 21 Ground Floor: 1 XL Advertising No No No

Balenciaga 21 Women Store - Ground Floor: 1 XS Models, Lower Floor: 1 S Runway / Men Store - 1 XS Models No No No

Bottega Veneta 21 No No No No

Brunello Cucinelli 21 No No No No

Bulgari 21 No No No No

Céline 21 No No No No

Dolce&Gabbana 21 No No No No

Hermès 21 Men Store - First Floor: 1 XS Runway, Second Floor: 1 XS Branding, Third Floor: 1 XS Branding No No No

Loro Piana 21 First Floor: 2 S Models (no video) No No No

Michael Kors 21 Ground Floor: 1 XL Branding No No No

Saint Laurent 21 No No No No

Saks 21 Few screens compared to shop's area, mainly located on one floor No No No

Tiffany 21 Third Floor: 2 S Craftsmanship (Watch Making) No No No

Tod's 21 No No No No

Availability of Phone Many screens across the store (in relation to store's dimension) with several large size screens (e.g. large/wall size) Offered Yes, engaging use Charger inside the store

Yes, non engaging use with Multiple screens across the store (in relation to store's dimension) with at least one large size screen clients

Only 1 large size screen No Phone Charger One or more small size screens (e.g. PC size) Not offered No inside the store No screens Source: ContactLab Analysis

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Figure 24: More advanced innovations are still rare: Bergdorf Goodman leading with both Interactive Mirrors and Touchscreens, followed by Ralph Lauren, Hugo Boss, Macy’s and Barneys Technology in-store, New York, December 2015 (2/2)

TECHNOLOGY IN STORE (2/2)

Brand RANKING Extra Effort: Interactive Mirrors Extra Effort: Interactive Touchscreens

Bergdorf Goodman 1 Free standing Digital Mirror to take and share pictures Digital Directory with menu (e.g. search designers and locate them, discover more about services,restaurants, etc..)

Polo Store - Located in fitting rooms: call SA, request additional styles/sizes, "Complete the Look" suggestions, Ralph Lauren 2 adjust lighting, etc

XL Screen to browse online store, use Instagram and get advice on Suits Tailoring (e.g. select your body type - Hugo Boss 3 normal, bulky, skinny..- and desired look - casual, business,..- to receive an email with suggestions for personalized looks), Digital Directory

Macy's 3 Price Checkers, Look Book, other brand related gears (e.g. Kate Spade New York City quiz)

Burberry 5

Louis Vuitton 5

Barneys 7 Digital Directory with menu (e.g. search designers and locate them)

Dior 7

Chanel 9

Fendi 9

Gucci 9

Zegna 12

Moncler 13

Tory Burch 13

Valentino 13

Cartier 16

Coach 16

Ferragamo 16

Givenchy 16

Prada 16

Armani 21

Balenciaga 21

Bottega Veneta 21

Brunello Cucinelli 21

Bulgari 21

Céline 21

Dolce&Gabbana 21

Hermès 21

Loro Piana 21

Michael Kors 21

Saint Laurent 21

Saks 21

Tiffany 21

Tod's 21

Availability of Interactive Mirrors Availability of Interactive Touchscreens

No Interactive Mirrors No Interactive Touchscreens

Source: ContactLab Analysis

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Figure 25: Dior Best Practice: Screens encased in French windows retracing the Maison’s history and today’s Runway Shows Dior, 21E 57th Street, New York

Source: Left Hiroko Masuike for The New York Times (Dec 2010), right Architects Newspaper (July 2011)

Figure 26: Zegna Best Practice: Highlighting the availability of In-Store free WiFi on its website

Source: Zegna Website, US

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Figure 27: Bergdorf Goodman Best Practice:. Battery Charger column Bergdorf Goodman, 754 5th Avenue, New York

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 21

Figure 28: Ralph Lauren Best Practice: Fitting Rooms with Interactive Mirrors allowing customers to: request assistance (e.g. additional sizes/items), receive “Complete the Look” suggestions, choose the lighting setting and send selections to a mobile phone. At the end of the shopping session customers can directly check-out and skip the waiting line Polo Ralph Lauren, 711 5th Avenue, New York

Source: Left Fashion Times (Nov 2015), right picture by Thomas Iannaccone (Nov 2015)

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 22

Figure 29: Bergdorf Goodman: only player to provide Digital Mirrors to take pictures with worn garments. Clients can compare the looks, save them and also share with friends via email or SMS Bergdorf Goodman, 754 5th Avenue, New York

Source: ContactLab Analysis

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 23

Figure 30: Bergdorf Goodman Best Practice: Digital Floor Directory, displaying not only floor descriptions, but also additional useful information (e.g. where to find a specific Designer, Client Services and Personal Styling) Bergdorf Goodman, 754 5th Avenue, New York

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 24

Figure 31: Hugo Boss Best Practice: Just introduced an Interactive Touchscreen to browse the Online Store, follow the brand on Instagram and get advice on Suits Tailoring Hugo Boss, 10 Columbus Circle, New York

Source: ContactLab

Figure 32: Macy’s Best Practice: Look Book Macy’s, 151 W 34th Street, New York

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 25

Dealing with Digital Clients in-store

Ralph Lauren and Saks are leading, followed by Tiffany and Burberry. We expect several companies to achieve Digital and Physical retail integration in the coming quarters.

Barneys is the only one using beacons to recognise customers. Sales assistants of eleven brands stressed the separation of digital and physical retailing activities (!). Seven of these are powered by Yoox; Burberry and Tory Burch Sales Assistants appear the best trained for effective Cross-Channel integration.

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 26

Figure 33: Ralph Lauren and Saks are leading, followed by Tiffany and Burberry “Dealing with Digital Clients in-store” overview, New York, December 2015

DEALING WITH DIGITAL CLIENTS IN STORE (SUM UP)

Question 2 to SA: "In case I purchased an item online, can I return it in store?" Online evidence of In- In-Store Client Question 1 to SA: Client Recognition Exchange in Store Return in Store Store Online evidence of Appointments in Store Appointments in Store Recognition via "Can you retrieve Brand RANKING via SA dialogue (declared on (declared on "Made to Measure" In-Store Cosmetic via Website via App Technology items from my Consistency (before checkout) website) website) /"Made to Order" Corner (e.g. via Beacons) Wishlist?" SA declared between SA answer SA stressing online and offiline SA clear answer /Monogramming Corner answer and Website are synergetic information

Ralph Lauren 1 Saks 1 Tiffany 3 Burberry 4 Cartier 5 Barneys 6 Coach 6 Louis Vuitton 6 Zegna 6 Gucci 10 Macy's 11 Bergdorf Goodman 12 Michael Kors 12 Hermès 14 Hugo Boss 14 Tory Burch 14 Armani 17 Loro Piana 17 Valentino 17 Balenciaga 20 Bulgari 20 Brunello Cucinelli 22 Prada 22 Fendi 24 Bottega Veneta 25 Givenchy 25 Tod's 25 Moncler 28 Dolce&Gabbana 29 Ferragamo 30 Saint Laurent 31 Chanel 32 Céline 33 Dior 33

Cosmetic Corner Yes, message Personalization Services Book an Appointment via In-store client Offered online & in- SA answer offered In-Store, App with Book an received (tested via Yes from Brand Yes offered In-Store and website / recognition before store, or only in- Broadly offered Yes (clear answer) consistent with Synergetic Online/Offline Beauty mentioned Appointment option bluetooth and app - systems (return in store) mentioned phone call / email checkout store website information as sold category in when available) Online in Store Locator Store Locator

Cosmetic Corner Personalization Services offered In-Store, Yes from customer Yes Offered in selected offered In-Store, but not Beauty not account via SA Offered only online (only exchange No remark stores only mentioned Online in Store mentioned as sold tablets or store credit) Locator category in Store Locator

No Book an No No Book an Appointment No SA answer Appointment option (no return / Online/Offline separation No Personalization option available on No No client recognition No Not offered Not offered (unclear / no inconsistent with No presence available on App / exchange stressed Services offered In-Store website answer) website information No App in store)

Source: ContactLab Analysis

Exane BNP Paribas Research & ContactLab Luxury Goods

Figure 34: About 1/3 of players sponsor “Book an Appointment in-store” option on their Websites, but just Tiffany and Cartier also do so through their Apps. No apparent in-store client recognition, neither via Beacons nor via SA interaction, except for Barneys Dealing with Digital Clients in-store, New York, December 2015 (1/3)

DEALING WITH DIGITAL CLIENTS IN STORE (1/3) Question 1 to SA: In-Store Client Recognition via Technology Client Recognition via SA dialogue Brand RANKING Appointments in Store via Website Appointments in Store via App "Can you retrive items from my (e.g. via Beacons) (before checkout) Wishlist?" Yes (select book an appointment option when Ralph Lauren 1 Yes App - No Appointments No No Via SA tablet contacting store via email) Yes App - No Appointments Saks 1 Yes (Men Made to Measure via email) No No No (*only Men "Made to Measure" via email) Tiffany 3 Yes (Diamond Expert / Registry Consultation) Yes App - Yes Appointments No No No Burberry 4 Yes (only 121 Spring Street via phone call) No App No No No Cartier 5 No Yes App - Yes Appointments No No No Barneys 6 Yes (Store Locator, Personal Shopping section) Yes App - No Appointments Yes No No Coach 6 No Yes App - No Appointments No No No Louis Vuitton 6 No Yes App - No Appointments No No No Zegna 6 Yes (Made to Measure) No App No No No Gucci 10 Yes Yes App - No Appointments No No No Macy's 11 No Yes App - No Appointments No No No Yes Bergdorf Goodman 12 No App No No No (Personal Styling section, via email or phone Michael Kors 12 No Yes App - No Appointments No No No Hermès 14 No Yes App - No Appointments No No No Hugo Boss 14 No Yes App - No Appointments No No No Tory Burch 14 No Yes App - No Appointments No No No Armani 17 Yes (Made to Measure) Yes App - No Appointments No No No Loro Piana 17 No Yes App - No Appointments No No No Valentino 17 Yes (Homepage) Yes App - No Appointments No No Via SA tablet Balenciaga 20 Yes (Store Locator) No App No No No Bulgari 20 No Yes App - No Appointments No No No Brunello Cucinelli 22 No No App No No No Prada 22 No No App No No n.a. (no Wishlist option) Fendi 24 Yes (Store Locator) Yes App - No Appointments No No No Bottega Veneta 25 No No App No No No Givenchy 25 No Yes App - No Appointments No No n.a. (no Wishlist option) Tod's 25 No No App No No No Moncler 28 No Yes App - No Appointments No No No Dolce&Gabbana 29 No Yes App - No Appointments No No No Ferragamo 30 No No App No No No Saint Laurent 31 No Yes App - No Appointments No No No Chanel 32 No Yes App - No Appointments No No No Céline 33 No No App No No n.a. (no Wishlist option) Dior 33 No Yes App - No Appointments No No n.a. (no Wishlist option)

Book an Appointment via website / phone call / In-store client recognition before App with Book an Appointment option Yes, specific message received once in Store Yes from brand systems email checkout

Yes, Beacon network detected Yes from customer account via SA (tested via bluetooth and app -when available) tablets

No Book an Appointment option available on No Book an Appointment option available on App / No No client recognition No client recognition No website App

Source: ContactLab Analysis

Exane BNP Paribas Research & ContactLab Luxury Goods

Figure 35: Return-in-store Question: majority of brands SA reply clearly, although for seven brands answers are inconsistent with what is declared on website. 11 Brands stressed that online and offline channels are separated Dealing with Digital Clients in-store, New York, December 2015 (2/3)

DEALING WITH DIGITAL CLIENTS IN STORE (2/3)

Question 2 to SA: "In case I purchased an item online, can I return it in store?" Exchange in Store Return in Store Brand RANKING Consistency between SA answer and SA stressing online and (declared on website) (declared on website) SA clear answer SA declared answer Website information offiline are synergetic

Ralph Lauren 1 Yes (online & in-store) Yes (refund) Yes Yes return in store Yes No remark

Saks 1 Yes (only in-store) Yes (refund) Yes Yes return in store Yes No remark

Tiffany 3 Yes (online & in-store) Yes (refund) Yes Yes return in store Yes No remark

Burberry 4 Yes (only in-store) Yes (refund) Yes Yes return in store Yes No remark

Cartier 5 Yes (online & in-store) Yes (store credit) Yes Yes return in store (store credit) Yes No remark

Barneys 6 No Yes Yes Yes return in store Yes No remark

Coach 6 Yes (online & in-store) Yes (refund) Yes Yes return in store (also exchanges for same price items) Yes No remark

Louis Vuitton 6 Yes (online & in-store) Yes (refund) Yes (Consulted Return Policies) Yes return in store Yes No remark

Zegna 6 No Yes (refund) Yes Yes return in store Yes No remark

Gucci 10 Yes (in-store) Yes (refund) Yes No return in store No (return posible according to web) Separated

Macy's 11 Yes (only in-store) Yes Yes Yes return in store Yes No remark

Bergdorf Goodman 12 Yes (only online) No Yes Yes return in store No (no return info on web) No remark

Michael Kors 12 Yes (online & in-store) Yes (refund) Yes Yes return in store (within 30 days) Yes No remark No (return only with store credit according to Hermès 14 Yes (online & in-store) Yes (store credit) Yes Yes return in store No remark web) Hugo Boss 14 Yes (only online) Yes (refund) Yes Yes return in store Yes No remark

Tory Burch 14 Yes (only online) Yes (refund) Yes Yes return in store Yes No remark

Armani 17 No No Yes No return in store Yes Separated

Loro Piana 17 Yes (online & in-store) Yes (store credit) No n.a. (unclear answer) n.a. (unclear answer) No remark

Valentino 17 No No Yes No return in store Yes No remark

Balenciaga 20 Yes (only online: size/color) No Yes No return in store Yes Separated

Bulgari 20 Yes (online & in-store) Yes (store credit) Yes No return in store No (return posible according to web) No remark No return in store (advice to buy online where full refund is possible, Brunello Cucinelli 22 Yes (in-store) Yes (refund) Yes No (return posible according to web) Separated while only store credit for in store purchases) Prada 22 Yes (only in-store) Yes (store credit) No n.a. (unclear answer) n.a. (unclear answer) No remark Yes return in store (bring back item to store and they will send it Fendi 24 No No Yes No (no return info on web) Separated back for you) Bottega Veneta 25 Yes (only online: size/color) No Yes No return in store Yes Separated

Givenchy 25 Yes (only online: size) No Yes No return in store Yes Separated

Tod's 25 Yes (only online) No Yes No return in store Yes Separated

Moncler 28 No No Yes No return in store, exchanges only Yes Separated

Dolce&Gabbana 29 No No Yes No return in store Yes Separated

Ferragamo 30 No No No n.a. (unclear answer) n.a. (unclear answer) No remark

Saint Laurent 31 No No Yes Yes return in store (store credit) No (no return info on web) Separated

Chanel 32 n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce)

Céline 33 n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce)

Dior 33 n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce)

Offered online & in-store, or SA answer consistent with website Broadly offered Yes (clear answer) Yes (return in store) Synergetic Online/Offline only in-store information

Offered only online Offered in selected stores only Yes (only exchange or store credit) No remark

SA answer inconsistent with website Online/Offline separation Not offered Not offered No (unclear / no answer) No (no return/exchange in store) information stressed Source: ContactLab Analysis

Exane BNP Paribas Research & ContactLab Luxury Goods

Figure 36: In-store Personalization Services and Beauty Corners could be further leveraged online: Bergdorf Goodman, Saks and Gucci only players promoting both services online Dealing with Digital Clients in-store, New York, December 2015 (3/3)

DEALING WITH DIGITAL CLIENTS IN STORE (3/3)

Brand RANKING Online evidence of In-Store "Made to Measure"/"Made to Order"/Monogramming Corner Online evidence of In-Store Cosmetic Corner

Ralph Lauren 1 "Made to Measure" Suits n.a.

Saks 1 "Made to Measure" Suits, scissors and fabrics exposition (Saks Fifth Avenue Collection) Yes (Store Locator)

Tiffany 3 Engraving Service n.a. "Scarf Bar" with personalization options, Gift Wrapping corner with personalized cards, less Burberry 4 No emphasis on "Made to Order" Cartier 5 Watch Fitting, "Set For You" n.a.

Barneys 6 No presence (No Made to Measure for Barneys private label) Yes (Store Locator) Monogramming Services and Bag Personalization with wide leather selection options, Coach 6 n.a. sewing machine in store Monogramming Services, artisan live monogramming suitcases, colourful name tags Louis Vuitton 6 n.a. exposition, sewing machine in store Zegna 6 "Made to Measure" Suits and Cachemire Personalization n.a.

"Made to Order" Shoes with leather exposition and style options displayed, "Made to Gucci 10 Yes (Store Locator) Measure" Suits with displayed options

Macy's 11 No presence No "Made to Measure" Shirts, collars and wrists exposition (Goodman's Made-to-Measure Bergdorf Goodman 12 Yes (Store Locator) Shirts) Michael Kors 12 No presence No preserce

Hermès 14 "Made to Measure" Shirts, collars and wrists options exposition n.a.

Hugo Boss 14 No presence n.a. Tory Burch 14 No presence No preserce

Armani 17 "Made to Measure" Shirts, collars and wrists options exposition Yes (Store Locator)

Loro Piana 17 "Made to Measure" Suits, materials exposition n.a.

Valentino 17 No presence n.a.

Balenciaga 20 No presence n.a.

Bulgari 20 No presence n.a.

Brunello Cucinelli 22 No presence n.a.

Prada 22 No presence n.a. Fendi 24 "Made to Order" Bags, colours display, materials examples n.a.

Bottega Veneta 25 No presence n.a.

Givenchy 25 No presence n.a.

Tod's 25 No presence n.a.

Moncler 28 No presence n.a.

Dolce&Gabbana 29 No presence No preserce Ferragamo 30 "Made to Measure" Suits and Ties, books with options n.a.

Saint Laurent 31 No presence No preserce

Chanel 32 No presence Yes (Store Locator)

Céline 33 No presence n.a.

Dior 33 No presence No preserce

Cosmetic Corner offered In-Store, Beauty mentioned as sold Personalization Services offered In-Store and mentioned Online in Store Locator category in Store Locator

Cosmetic Corner offered In-Store, Beauty not mentioned as Personalization Services offered In-Store, but not mentioned Online in Store Locator sold category in Store Locator

No Personalization Services offered In-Store No presence

Source: ContactLab Analysis

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 30

Figure 37: Book an Appointment in-store also via App

Source: Tiffany App, US

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 31

Figure 38: Barneys, launch of Beacon Technology at Chelsea Flagship Store (Feb 2016)

Source: Digiday (Feb 2016)

Figure 39: Louis Vuitton: website showing Monogramming service in-store finder

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 32

Figure 40: Burberry Best Practice: “Scarf Bar” simultaneously promoted across web, social, email and store channels

Source: ContactLab

Figure 41: Chanel: website showing Beauty corner at NYC Flagship Store via store finder

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 33

Online Promotion while in-store

Bergdorf Goodman and Saks lead, while 70% of the panel appears to be nowhere.

Figure 42: Bergdorf Goodman, followed by Saks, leading in Online Promotion while in-store; 70% of the Panel are lagging Online Promotion while in-store, New York, December 2015

ONLINE PROMOTION WHILE IN STORE Question 3 to SA: In-Store Invite for App In-Store Invite Brand RANKING E-commerce Invite Online Order in Store Option Assistance for Online Shopping while In-Store Download for Hashtag/Website Visit Bergdorf Goodman 1 Yes Yes (prompted) Yes n.a. Yes (Discover the new bg.com - Made for mobile) Saks 2 No Yes (prompted) Yes No Yes (Visit saks.com) Zegna 3 No Yes (prompted, declared on web) Yes n.a. No Yes (THE WINDOW.BARNEYS.COM - for inside fashion Barneys 4 Yes No n.a. No access/BNYCHILLINOUT) Burberry 4 No Yes (prompted) Yes n.a. No Coach 4 No Yes (prompted) Yes No No Louis Vuitton 4 No Yes (prompted) Yes No No Macy's 4 Yes No n.a. Yes No Ralph Lauren 4 No Yes (prompted) Yes No No Tory Burch 4 No Yes (prompted) Yes No No Armani 11 No No n.a. No No Balenciaga 11 No No n.a. n.a. No Bottega Veneta 11 No No n.a. n.a. No Brunello Cucinelli 11 No No n.a. n.a. No Bulgari 11 No No n.a. No No Cartier 11 No No n.a. No No Céline 11 n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. No Chanel 11 n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) No No Dior 11 n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) n.a. (no Fashion ecommerce) No No Dolce&Gabbana 11 No No n.a. No No Fendi 11 No No n.a. No No Ferragamo 11 No No n.a. n.a. No Givenchy 11 No No n.a. No No Gucci 11 No No n.a. No No Hermès 11 No No n.a. No No Hugo Boss 11 No No (coming soon) n.a. No No Loro Piana 11 No No n.a. No No Michael Kors 11 No No n.a. No No Moncler 11 No No n.a. No No Prada 11 No No n.a. n.a. No Saint Laurent 11 No No n.a. No No Tiffany 11 No No n.a. No No Tod's 11 No No n.a. n.a. No Valentino 11 No No n.a. No No

Stickers on shop Visuals to encourage visitors to Stickers on shop windows suggesting to follow the brand on Yes (clearly stated) Yes (SA ready to help) windows suggesting to online shopping social networks or to visit the website download App

Yes (prompted by client questions)

No stickers on shop No Not Offered Not Offered No stickers windows Source: ContactLab Analysis

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 34

Figure 43: Bergdorf Goodman: E-commerce invite on Screens and Digital Floor Directory Bergdorf Goodman, 754 5th Avenue, New York

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 35

Figure 44: Barneys: E-commerce invite through Stickers on shop windows Barneys, 660 Madison Avenue, New York

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 36

Figure 45: Macy’s: E-commerce invite on Screens above Price Checkers, Screens and Floor Directory Macy’s, 151W 34th Street, New York

Source: ContactLab

Figure 46: Abercrombie&Fitch: Online Order in-store service clearly stated in-store Abercrombie&Fitch, 720 5th Avenue, New York

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 37

Figure 47: Zegna: Online Order in-store service clearly stated in website

Source: Zegna Website, US

Figure 48: Macy’s: App download promotion with numerous visuals in its Herald Square location Macy’s, 151 W 34th Street, New York

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 38

Figure 49: Barneys and Saks: in-store invite for hashtag/website visit through stickers on shop windows

Source: ContactLab

Figure 50: Bergdorf Goodman: in-store invite for website visit through stickers on shop windows Bergdorf Goodman, 745 5th Avenue, New York

Source: ContactLab

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 39

Figure 51: Snapchat Geofilter: Neiman Marcus first player to use Geofilter during NY Fashion Week February 2016

“We will be one of the first brands to use Geofilter during NYFW. It will be live Feb. 11 to Feb. 18 at all three major show venues from 8 a.m. – 8 p.m.” (Natalie Bowman, Vice President of Media at Neiman Marcus, Luxury Daily, 16th February 2016)

“Snapchat [...] is a great tool for sharing what you are doing in that moment. Whether a person is at our store or attending a runway show, we love the idea of making it easy—and fun—to share their story with their friends. It is a unique way to integrate the Neiman Marcus brand into their lives in a more fun and playful manner.” (Natalie Bowman, Vice President of Media at Neiman Marcus, Social by Definition, 16th February 2016)

Source: Luxury Daily (Feb 2016), Social by Definition (Feb 2016)

Figure 52: Neiman Marcus on Snapchat February 2016

Source: Twitter

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 40

Exane – presentation Specialising in European equities, Exane is active in three businesses: – Cash Equities: under the brand name Exane BNP Paribas, Exane provides institutional investors with a range of services, such as research, sale and execution on European equities; – Equity Derivatives: Exane Derivatives has built a robust structured products franchise, based on its longstanding leadership in European convertible bonds and options; – Asset Management: Exane Asset Management is one of the leaders in long/short equity fund management in Europe.

The agreement between Exane and BNP Paribas, signed in 2004 and strengthened in 2010 and 2011, was renewed in its entirety in April 2015 for a five-year period, revolves around three core elements: – An operational partnership in European cash equities where BNP Paribas conferred exclusivity on secondary equity brokerage and the distribution of primary market activity to Exane under the Exane BNP Paribas brand; – A balance sheet partnership, which is particularly well suited to our Equity Derivatives business, providing financing and support for our rating; – A capital partnership uniting the strength of BNP Paribas with the independence of Exane.

Exane works primarily with institutional clients worldwide (pension funds, fund managers for banks and insurers and hedge funds), and markets its derivatives products to a broader pool of clients comprising private asset managers and investment advisors. Exane has a workforce of c.900 employees operating from offices in Paris, London, Frankfurt, Geneva, Madrid, Milan, New York, Stockholm and Singapore. Exane BNP Paribas equity research team covers over 602 companies. UK companies represent the biggest part of our coverage universe (25% of covered market cap), followed by France (16%) and USA (8%). Our research receives regular acclaim in leading industry surveys. For further information, log on to our website at www.exane.com ContactLab presentation ContactLab is a market leader in digital direct marketing products and services and a strategic partner for enterprise clients who wish to manage a customer engagement model on a global scale. With offices in Milan, Paris and Munich, over 1000 customers, 15 years of experience and more than 130 specialists, ContactLab provides comprehensive solutions to enable top clients and brands to meet and exceed their business objectives through sophisticated CRM programs with their customers and prospects. ContactLab is exclusively dedicated to the Enterprise segment with strong focus and expertise in the luxury industry, supporting leading brands worldwide in multiple languages, with a special tang towards Asian markets - in particular China - and emerging markets. Over the years, ContactLab has expanded its offering by including added value services to its leading technological platform for outbound messaging enabling the uptake of digital marketing as a user-centric strategic tool for business growth. ContactLab’s solutions are based on a triple player approach: - Technology: focusing on digital direct multichannel messaging with a solid platform developed in-house since 2001, offering the highest level of security, scalability and deliverability. - Agency: a full range of added value marketing services covering customer life-cycle engagement, from the definition of the data capture strategy, to the creative concept, to project execution, to the analysis of email impact on the bottom-line. - Business Strategy Consulting: a proven set of capabilities including digital audit and strategy, Top Management Tableau de Bord, customer segmentation and data mining on complex databases, interpolating email shipments with e-commerce and retail transactions. The ContactLab offering also includes Market Research products and services with a dedicated team aiming to identify behavioural trends by applying the CAWI methodology. ContactLab produces and publishes multi-country reports on European digital behaviours on a regular basis. ContactLab has also created and developed NewsletterMonitor, a freeware internet application for competitive benchmarking, to monitor, track, analyze and compare over 4 million emails sent by more than 15,000 brands over the last 7 years. ContactLab was founded by Massimo Fubini, an internet industry veteran and an opinion leader in the New Media and Digital Direct Marketing arena since 1995. He gained experience in Internet security in the mid-nineties, working for the military. He contributed to the network security rules for the Italian public administration. He has been a member of the Technical Committee at Audiweb - AssoComunicazione web sector for 7 years. He is a recognized keynote speaker on direct marketing and privacy topics. For more information visit our website www.contactlab.com and www.newslettermonitor.com.

Disclosures All stock-specific commentary and recommendations in this report are solely based on Exane Research.

ContactLab This report is co-authored by Exane and ContactLab and draws upon research and analysis of both Exane and ContactLab. ContactLab does not make investment recommendations, in this report or otherwise, and nothing in this report should be interpreted as an opinion by ContactLab either on market forecasts or on the prospects of specific companies. This report and all of its content are strictly confidential. It may not be circulated or otherwise reproduced in whole or in part. The analyses set out in the Report are the result of the aggregation of public materials and data coming from a sample of industry players. Use of this report by any person for whatever purpose should not, and does not, absolve such third party from using due diligence and care in verifying the report’s contents. Any use which a person makes of this document, or any reliance on it, or decisions to be made based on it, are the responsibility of such person. ContactLab, its affiliates and representatives accept no duty of care or liability of any kind whatsoever to any person, and no responsibility for damages, if any, suffered by any person as the result of decision made, or not made, or actions taken, or not taken, based on this document.

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 41

DISCLOSURE APPENDIX

Analyst Certification We, Melania Grippo, Guido Lucarelli, Luca Solca, (authors of or contributors to the report) hereby certify that all of the views expressed in this report accurately reflect our personal view(s) about the company or companies and securities discussed in this report. No part of our compensation was, is, or will be, directly, or indirectly, related to the specific recommendations or views expressed in this research report.

Non-US Research Analyst Disclosure The research analysts named below were involved in preparing this research report. Research analysts at Exane Ltd and Exane SA are not associated persons of Exane Inc. and thus are not registered or qualified in the U.S. as research analysts with the Financial Industry Regulatory Authority (FINRA) or the New York Stock Exchange (NYSE). These non-U.S. analysts are not subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Melania Grippo Exane SA Guido Lucarelli Exane SA Luca Solca Exane SA

Exane SA is regulated by the Autorité des Marchés Financiers (AMF) in France, Exane Ltd is authorised and regulated by the Financial Conduct Authority in the United Kingdom, and Exane Inc. is regulated by FINRA and the U.S. Securities and Exchange Commission in the United States.

Research Analyst Compensation The research analyst(s) responsible for the preparation of this report receive(s) compensation based upon various factors including overall firm revenues, which may include investment banking activities.

Disclosure of the report to the company/ies

Companies Disclosures NONE

1 – Sections of this report, with the research summary, target price and rating removed, have been presented to the subject company/ies prior to its distribution, for the sole purpose of verifying the accuracy of factual statements. 2 – Following the presentation of sections of this report to this subject company, some conclusions were amended.

Definitions For an explanation of definitions used in Exane research reports, please see the glossary at https://www.exane.com/jsp/action/commun/JSPacLexique.jsp

Commitment to transparency on potential conflicts of interest: BNP Paribas While BNP Paribas (“BNPP”) holds a material ownership interest in the various Exane entities, Exane and BNPP have entered into an agreement to maintain the independence of Exane's research reports from BNPP. These research reports are published under the brand name “Exane BNP Paribas”. Nevertheless, for the sake of transparency, we separately identify potential conflicts of interest with BNPP regarding the company/(ies) covered by this research document.

The latest company-specific disclosures, valuation methodologies and investment case risks for all other companies covered by this document are available on www.exane.com/toolbox/compliance.

Exane BNP Paribas Research & ContactLab Luxury Goods 4 March 2016 page 42

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