S.E.A. LUXURY MARKET TREND REVIEW

22 July 2013 Tan Wee Hoon

Planning Director BBDO Singapore

weehoon.tan@bbdo.com.sg

MARKET SIZE OVERVIEW

Source: Bain & Company

• Singapore remains major regional hub (8th largest luxury destination worldwide), including spending from Chinese tourists

• Thailand (Bangkok), Malaysia (Kuala Lumpur) relevant for domestic spending

• High potential amongst growing pool of HNWI in Vietnam (Hanoi, HCMC) and especially Indonesia (Jakarta) – fastest growth of HNWI worldwide, set to triple to nearly 100,000 by 2015 (Source: CLSA, Julius Baer Bank)

1. NICHE LUXE

ABOUT: Niche luxury brands are growing in markets like Singapore and Malaysia, as luxury consumers in these markets mature and a more discerning segment – influenced by their brand discoveries online/on their travels – emerges. WHY: Mainstream luxury brands lose appeal amongst these discerning consumers who are not driven by brands as badges. They seek to “be in the know” with brands that carefully maintain their “best kept secret” appearances, while being no less luxurious.

1. NICHE LUXE

Judith Leiber, the brand most famous for its Swarovski-encrusted cupcake clutch in the show Sex And The City, opens store in Kuala Lumpur in Jan 2013

Jo Malone, niche perfume brand from London (now owned by Estee Lauder) famous for pairing unusual ingredients and creating versatile fragrances that can be mixed and blended to create unique scents, opens standalone boutique in Singapore late 2013

EXAMPLES:

Carrie K, Singapore’s home-grown artisan jewelry brand founded by an ex-advertising executive, has multiple distribution channels that has helped to grow the business both locally and regionally – boutique, brick-and-mortar stockists, online retailers

1. NICHE LUXE

LEARNINGS: 1. Entering new markets positioned as a lesser-known

“niche” brand (even if more well-known in other markets) can actually help grow a brand through discerning luxury customers looking for alternatives from the mainstream.

2. Be clear what is that special something your brand offers, and if you have a claim to fame, flaunt it!

3. Creating word-of-mouth through influencers, and establishing online presence both in terms of communication and distribution is crucial.

ABOUT: Even as SEA markets see more flagship stores of big brands opening in luxury-dedicated malls, discerning luxury consumers are looking to a growing number of multi-label retailers for their curation of the fresh and unique – from fashion to beauty to furniture and other lifestyle goods. Whether they are local independents or global chains, these luxury curators are a great asset to niche brands. WHY: To keep their customers’ appetite for non-mainstream luxury satiated, multi-label retailers are constantly on the look-out for new brands to feature. Independents in particular are usually discerning luxury consumers themselves, with an entrepreneurial vision to support brands with a difference (local, eco, etc.).

2. CURATED LUXURY

2. CURATED LUXURY EXAMPLES:

Galeries Lafayette recently opened in Jakarta, supporting a range of niche brands that are exclusively available at their stores

Sephora – a must-stop for beauty consumers looking to discover new brands – opened in Singapore and Malaysia and is set to expand to the rest of SEA

Strangelets is a quirky independent shop in Singapore with an eclectic mix of lifestyle offerings

Beauty box providers like

Singapore’s Vanity Trove provides a

new form of luxury curation

Owned by local designer Farah Khan, M Store in Kuala Lumpur is a multi-label boutique supporting local and niche designer brands

The Selected Shop in Bangkok is a new concept store curating the best in emerging Thai talent and limited edition international lifestyle products

LEARNINGS: 1. Riding on the brand of a well-regarded luxury curator is a

good way to enter a new market, offering a “taster” to luxury consumers and allowing the brand to “test-market” before investing in further distribution infrastructure.

2. Understanding the vision and philosophy of the curator brand and what your own brand brings to the table is key to getting onto the curator’s list.

3. Increasingly, curator stores offer products crossing categories (e.g., Strangelets offers items from jewelry to clothing to homeware and popsicle!), but with a common thread in either philosophy or design aesthetics – evaluate where your brand stands, beyond its product category.

2. CURATED LUXURY

3. LUXURY FOR LESS ABOUT: Southeast Asia has always faced counterfeits and grey markets for luxury goods. Now, there are even more ways for consumers to shop for their favourite luxury brands – niche or mainstream – at a discount. As avid luxury consumers turn their passion into online business ideas, they are allowing others to enjoy luxury for less by renting, buying pre-loved items or enjoying exclusive online membership discounts.

WHY: Growth of well-educated, internet-savvy middle-class has increased proportion of Gen Y and Z with appetite for luxury. This generation’s demand for uniqueness (niche brands), 24/7 availability (online shopping), coupled with lower spending power has created a big opportunity for online luxury entrepreneurs.

3. LUXURY FOR LESS

Singapore-based Clout Shoppe, like competitor Reebonz, holds pop-up sales for members with heavy discounts on branded goods and second-by-second count-down to the end of each sale. They ship to other markets in Asia. They also offer installment payment plans and pre-loved items

EXAMPLES: Jakarta-based Banananina uses Facebook to announce availability of new items along with the prices, offering an option for consumers to buy online or offline. Malaysia-based ImpianWanita does the same for cosmetics and fragrances, offering a wide range of niche brands not available in the stores

BBM Group buying: Savvy luxury consumers in Indonesia turn their travels to the US/Europe into buying trips for friends, taking advantage of the cheaper prices overseas, and mobile social networking at home

Bangkok-based Siam Borrow Bag offers a

rent-instead-of-buy option for fashionistas

3. LUXURY FOR LESS

LEARNINGS: 1. Luxury-for-less players can be either a threat or

opportunity for luxury brands – they are not going away, and will instead grow, so brands need to find ways of working with them.

2. Niche brands can help consumers discover them through co-marketing with these players, but in order not to erode brand equity, choose the partners carefully, and focus on offering experiential, service or other added value to differentiate non-discount brick-and-mortar channels

4. MASSTIGE

ABOUT: This is the opposite of “luxury for less”. Brands are giving a luxe twist to everyday products and charging higher than normal prices, albeit still affordable by “luxury” standards.

WHY: With growing affluence, SEA consumers are trading up in their consumption of everyday goods and developing an appetite for little luxuries they can afford.

When French patisserie Laduree opened in Singapore, 650 customers were served on opening day, breaking world record. And the famous macaroons don’t come cheap – they each ranged from SGD3.60 for a regular macaroon, to SGD7.60 for the ones luxed up with gold leaf.

EXAMPLES:

4. MASSTIGE

Who knew hairbands could be so luxurious? Malaysian

designer brand Sereni & Shentel offers customers

the chance to design their own hairband online, to the tune of an eyebrow-raising

RM129 (for a hairband!) – but it’s affordable chic in comparison to traditional

luxury brand/items.

In Singapore, Kerbside Gourmet has given takeaway street food a gourmet twist, and even added a social cause to it – to solve hunger due to poverty – with its policy of “buy one, give one”. For every meal it sells, it gives away a meal to the underprivileged.

LEARNINGS: 1. Giving regular products a “luxe-up” can up their novelty

factor and attract impulse buys from emerging luxury consumers keen to own a little piece of “luxury”.

2. This strategy could also be used to increase sales during festive periods or special occasions, when consumers are looking for gift ideas that would impress their recipients.

4. MASSTIGE

5. BEYOND BLING

ABOUT: While the glamour of high-end branded goods continues to drive developing luxury markets, a new approach to luxury is emerging in the more developed markets. Brands that spell eco-chic, socially-responsible luxury or experienced-based luxe are building affinity with the more well-heeled consumers. WHY: As luxury consumers mature, the “feel-good” factor no longer comes from mere acquisition of the product, but from unforgettable memories of experiences, or from knowing their luxury spending is also doing good.

Malaysia’s Tiny Tapir offers eco-friendly products for babies (like the above reusable diaper priced at RM95) and moms, as well as home care items, travel friendly products like reusable bottles, and tools for the gardening enthusiast. Started by expats, they initially produced environmentally safe alternatives for baby clothing

EXAMPLES:

5. BEYOND BLING Johnny Walker’s John Walker &

Sons Voyager is a great example of experience marketing. The luxury

yacht will set sail from Shanghai in Sept and sail through to iconic events in Asia, where the most

progressive individuals in the region will be invited aboard to

experience the pinnacle in luxury craftsmanship and to celebrate the

launch of its new triple malt

One of Indonesia’s biggest travel agencies has created the for-invitees-

only luxury e-commerce venture Bobobobo, which offers unique, luxury

experience packages for travel and city jaunts, as well as a small

selection of luxury items

Bisou Bon Bon and Bisou Rose in Malaysia is a store that believes in giving back –owner Shelby Kho sells bath materials and soaps made from natural ingredients, while ensuring a portion of the profits is donated to charity

LEARNINGS: 1. Discerning luxury consumers don’t just buy into the

“what” of a brand, but the “why” of a brand – the values you stand for.

2. Be clear about your brand purpose is, and communicate it through everything you do. Johnny Walker, for example, which is a visionary brand that believes in “changing the game”, chose a highly experiential way to engage with game-changers amongst their customers and prospects.

4. BEYOND BLING