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The luxury marketFacts, figures, trends

for fashion, accessories, watches, fragrances

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Summary

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Luxury-goods market

Segments of the luxury-goods market 2008*

by sales worldwide (in %)

* Estimate** E.g. watches, jewelleryFigures in brackets: Change compared to previous yearSource: Bain & Company/Altagamma

Tableware (-2%)

Garments (+/-0%)

Perfumes & cosmetics (+3%)

28

4

23

21

Hard luxury goods** (+7%)

22

Accessories (+5%)

Total sales: EUR 175 billion

Core segments o the market

hold their own

Generally speaking, garments, accessories, jew-

ellery, watches, ragrances and cosmetics are

considered to be constituent parts o the luxury

market. This viewpoint was also adopted in a

study conducted by Bain & Company on behal

o Altagamma, the Italian Association o Luxury

Goods Manuacturers. According to this survey,

garments account or around 28 percent o the

market while accessories, ragrances, cosmeticsand hard luxury goods (especially luxury watch-

es and jewellery) account or 21 to 23 percent.

The market researchers also counted high-grade

tableware as a small segment o the luxury-goods

market. In a study entitled Global Luxury Retail-

ing 2007, Verdict deined the market along

similar lines. In this case, however, ashion / gar-

ments, ragrances, cosmetics, watches and

jewellery and accessories are joined by urniture

and other product groups.

Luxury-goods market up in 2008

but decline expected in 2009

In 2008, the volume o sales in the worldwide

luxury-goods markets rose by three percent to

EUR 175 billion. The development o the luxury

market was hampered, in particular, by the nan-

cial crisis, the stock-market collapse and severe

exchange-rate fuctuations. For 2009, however,

the experts rom Bain & Company anticipate a

decline the rst since 2003. At constant ex-

change rates, they expect a turnover o between

EUR 163 and 170 billion (172 to 178 billion at

current rates). The largest share o the luxury

market by volume is held by Europe. However,

growth in Europe is currently being red by the

upcoming countries o East Europe and the

Asian-Pacic region. Tomorrows leading markets

or luxury products will include not only China

and India but also Russia and Brazil. According

to the experts rom Bain & Company, these

Development of the luxury-goods market

Sales worldwide (in EUR billion)

* EstimateSource: Bain & Company/Altagamma

76

2008*2007200620052004200320022001200019991998199719961995

84

9398

134

111

159

170

130134

128134

146

175

Luxury-goods market by regions 2008*

Sales worldwide (in %)

* EstimateFigures in brackets: Change compared to previous yearSource: Bain & Company/Altagamma

Rest of the world (+9%)

Europe (+5%)

America (+/-0%)

38

5

33

12

Asia/Pacific (+15%)

12Japan (-7%)

Total sales: EUR 175 billion


3/162

HNWI population by countries 2008

Top 10 (in thousands)

Source: Capgemini Lorenz curve analysis (World Wealth Report 2009)

Japan

Germany

China

France

Canada

Switzerland

Italy

Brazil

2,4603,019

1,3661,517

810833

364413

362491

346396

213281

185212

164207

131143

2008

2007

UnitedStates

UnitedKingdomWealth in Germany unchanged

In terms o the number o wealthy individuals,

Germany holds third place in the world ranking.

In 2008, 54 percent o all wealthy people lived inGermany, the USA and Japan. Moreover, per-

sonal wealth and the number o HNWIs in Ger-

many ell less because many rich Germans

pursue a conservative investment policy and

there was no property bubble.

Tourists rom threshold countries

purchase more in Germany

Besides the domestic consumption o high-in-

come Germans, the expenditures o oreign tour-

ists in Germany are also important or the luxury

market. In particular, Russians and Chinese

spend large sums o money during the vacation

period and, despite the crisis, actually increased

their expenditures in 2008 compared to 2007. By

contrast, travellers rom other western industrial

nations, such as Switzerland, the USA and Japan,

spent more careully in 2008.

Luxury orientationis multi-aceted

The signicance o luxury diers greatly in the

various segments o the population. For around

50 percent o people, luxury also means the pos-

sibility o treating onesel. Fine dining is also

popular among hal the population. Many Ger-

mans spend reely, especially on ashions, and

then they are inclined to spend more. Around ten

percent are very keen on hard luxury goods

exclusive brands, watches and jewellery.

Attitudes towards luxury (in %)

* Agree completely/on the whole** Applies completely/on the wholeBasis: Inhabitants aged 20 to 69Source: Communication Networks 13.0 / potential: 49.55 million

I buy primarily exclusive brands*

I like to shop in exclusive/up-market boutiques*

When I go shopping, it sometimes happensthat I spend more money than I intended*

At present, I mainly wear in clothing brands**

I enjoy buying clothes*

Watches are an important aspect of my outfit*

Jewellery is an important aspect of my outfit*

The brand is important even if other less well-knowncompanies offer the same quality at a lower price*

I am happy to spend somewhat moreon a meal in elegant surroundings**

For me, luxury means having time for myselfand to do something for myself**

38.1

49.7

13.4

14.8

12.3

36.8

10.8

8.4

7.8

49.8

Tax-free shopping in Germany 2008

Share of total sales by countries (in %)

Source: German National Tourist Board (DZT/Global Refund 2009)

Russia

China

Switzerland

Korea

Japan

Brazil

United

ArabEmirates

26.6

12.8

8.0

4.1

2.9

2.8

+37.4%

+7.8%

-2.0%

+22.2%

-23.9%

-30.4%

-19.2%

+12.1%2.0

2.3

UnitedStates

Luxury-goods market

countries are likely to grow at rates o between

20 and 35 percent over the next ve years. In the

uture, long-term growth in the wealth o people

in emerging nations and the increasing number

o High Net Worth Individuals (HNWI) will gener-

ate new impulses or the luxury market.


4/163

Major luxury groups 2008/2009*

(in EUR billion)

* Different business-year periods in some casesSource: Corporate information, own research

17.19LVMH

Richemont

Swatch Group

Polo Ralph Lauren

Gucci Group

Herms

Phillips-Van Heusen

Armani Group

Burberry

5.42

2.21

3.77

1.76

3.38

3.39

1.75

1.62

1.07

Valentino FahionGroup (Hugo Boss)

Luxury holdings top the market

Today, many o the most valuable luxury brands

belong to major luxury-goods groups, e.g., Louis

Vuitton belongs to LVMH, Gucci to PPR and

Cartier to Richemont. Others have been quoted

independently on the stock market or many

years, e.g., Herms, Tiany & Co. and Bulgari.

Additionally, many luxury brands are still managed

by the ounding amilies or owners, e.g. Chanel

and Rolex, and they provide virtually no inorma-

tion about the development o their business.

Some owner-managed labels, including Prada,

Versace and Salvatore Ferragamo, are consider-

ing going public. In view o the current situation

on the nancial markets, however, these plans

have been postponed or the time being.

Luxury brands

The worlds most valuable luxury brands 2008

Top 15 by brand value (in EUR billion)

Source: Interbrand (The Leading Luxury Brands 2008)

Louis Vuitton (F)

Gucci (I)

Chanel (F)

Rolex (CH)

Herms (F)

Cartier (F)

Tiffany & Co. (USA)

Prada (I)

Ferrari (I)

Bulgari (I)

Burberry (GB)

Dior (F)

Patek Philippe (CH)

Ermenegildo Zegna (I)

Salvatore Ferragamo (I)

3.278

16.718

3.836

3.541

4.918

6.388

3.257

2.775

2.730

2.577

2.542

1.578

0.855

0.633

0.559

Brands are particularly valuable

in the luxury market

The brand is the most important asset or manu-

acturers o luxury products. Hence, it is not

surprising that many luxury brands rank among

the most valuable in the world. The biggest lux-

ury brand, Louis Vuitton, also holds 16th place in

the ranking o all international brands. Gucci,

Chanel, Rolex and Herms are also brands that

have an excellent reputation in this market and

generate appropriate levels o sales with theirgood names.

Europe is the most important region o origin or

international luxury brands. Italy and France are

particularly prominent, as is Switzerland when it

comes to watch brands. Thus, the Swiss Rolex

and Patek Philippe brands also made it into the

ranking. Other leading names include Omega,

Chopard, Longines and TAG Heuer. O the US

brands, only one brand, Tiany & Co., managed

to get into the top 15.


5/164

Fashion

Luxury garments worldwide

Market volume (in EUR billion)


Women Men

23.522.0

2008*20072006 2008*20072006

22.0

23.5 23.523.6

* In constant pricesIndex: 2003=100Source: German Statistical Office (Statistisches Bundesamt)

Development of garment sales

in the retail trade* by quarters (index)

92.2

89.0

80

90

100

110

120

130

2009200820072006200520042003200220012000

Luxury ashion market

stagnating worldwide

The worldwide market or luxury ashions has

grown continuously over recent years. On behal

o Altagamma, the Italian Association o Luxury

Goods Manuacturers, the Bain & Company

market research institute calculated an average

annual rate o growth o 4.5 percent or womens

ashions and six percent or mens between 1998

and 2008. In 2008, the rate o growth declined

signicantly to a certain extent as a result oeconomic uncertainties but also due to currency

fuctuations.

Garment trade in Germany

holding its own

In Germany, the garment trade rang up sales

worth just over EUR 60 billion in 2007. According

to estimates, there was no continuation o this

trend in 2008 and, in view o the crisis, it is un-

likely to resume in 2009. A more positive estimate

comes rom the BTE trade association and its

estimates show stable results or the rst our

months o 2009. However, this does not apply

to the luxury-article segment, which has been

suering rom a all in demand rom oreign cus-

tomers in Germany.

The most important segment or the German

garment trade continues to be womens ashions.

In 2007, sales in this segment climbed by around

seven percent according to BTE, so that it ac-

counted or almost hal o the entire garment

market. In the mens wear segment, too, sales

jumped by almost ve percent in 2007 so that

boys and mens clothing represented approxi-

mately 25 percent o the total. The HML Index or

Sales in the Specialist Trade shows the develop-

ment o sales in the rst our months o 2009.

Sales by segments Jan. - April 2009

Change over the same period last year (in %)

Basis: Merchandising systems with annual sales of approx EUR 6 billionSource: HML Modemarketing

+8.8

Womens wear Mens wear

+4.9

+4.3

+1.6

-0.5

-1.7

-5.2

-5.6

-6.6

-21.5

Dresses

Coordinates

Knitwear

Trousers

Blouses

Blazers

Coats

Skirts

Outdoorjackets

Costumes/trouser suits

Total

womens wear

Total

mens wear+1.2

Suits

Coats

Knitwear

Trousers

Sports jackets

Shirts

+4.1

Outdoorjackets

+3.6

+2.2

+0.4

-0.6

-1.1

-2.0

+0.7


6/165

Fashion

Sales of the German fashion industry

(in EUR billion)

Basis: Companies with 20+ employees; from 2007 with 50+ employeesSource: textil+mode trade association

2008200720062005

8.939.239.279.23

German ashion industry

in a difcult situation

As expected, 2008 was somewhat disappointing

or the German ashion industry. According to the

textil+mode and GermanFashion trade asso-

ciations, there was a decline in the sales o

the countrys garment manuacturers. Although

based on slightly dierent gures, both associ-

ations registered a decrease o 3.5 percent

whereby the biggest alls took place in the major

segments o outerwear, knitwear and underwear.To date, this negative trend has continued into

the current year, 2009.

One o the main reasons or the sales diculties

o the German ashion industry is the decline in

exports, which have been aected by the eco-

nomic crisis since the autumn o 2008. Overall,

exports o garments only remained stable in 2008

with an increase o one percent a below-aver-

age rate o growth in comparison to the German

economy as a whole. In particular, exports to theEU 15 especially to important countries such

as Austria, The Netherlands and France suered

rom the crisis and sank signicantly. On the

other hand, there was an increase in exports to

expanding regions such as the eastward expan-

sion o the EU, the Asia / Pacic region and the

Middle East, including the Arabian Gul States.

Export development by countries* 2008

Change over the previous year (in %)

* From an export volume of EUR 10 mill ionSource: GermanFashion/German Statistical Office (Statistisches Bundesamt)

+76.3

+60.6

+26.8

+26.3

+24.7

-14.5

-14.3

-13.0

-12.9

-10.8

Top 5 winners

Slovakia

Poland

Saudi Arabia

PR China

Serbia

Top 5 losers

Estonia

United Kingdom

Spain

Italy

Finland

Garment suppliers in Europe 2007

Sales (in EUR million)

* 2007/2008 business year * * Wholesale sales * ** EstimatedSource: Textilwirtschaft

4,400

3,250*

2,147

1,956

1,504

1,456*

1,443

1,347

1,340

1,320

1,244**

1,200***

1,126***

878

850***

Adidas Group

Esprit

Valentino Fashion Group

Benetton Gruppe

Triumph Int. Holding

Burberry Group

Multiline

PPR/Gucci Group

Tommy Hilfiger

Only the Brave

Bestseller Gruppe

Max Mara Fashion Group

LVMH-Gruppe

Giorgio Armani

Dim Branded Apparel

Luxury groups are leaders

in the ashion market

In Europe, some luxury brands and corporate

groups rank among the biggest garment suppli-

ers with international groups being particularly

well represented. In Germany, however, the mar-

ket tends to be dominated by domestic manu-

acturers, such as Hugo Boss, Escada, Gerry

Weber, the Ahlers Group (Baldessarini, Pierre

Cardin, etc.) and F.W. Brinkmann (Bugatti, etc.).


7/166

Accessories

Luxury accessories successul

Over recent years, leather goods and shoes have

ranked among the most successul segments in

the luxury-goods market. According to calcula-

tions by Bain & Company on behal o Alta-

gamma, average annual growth in the shoe

segment amounted to around seven percent

between 1998 and 2008. For 2007, the market

researchers noted a dominant trend in the seg-

ment growth was primarily driven by the top

luxury brands. The demand or cheaper andupcoming brands was signicantly lower.

Leather-goods trade satisfed

According to BBE Retail Experts, there is a clear

upwards trend in the German leather-goods

market with sales having risen by ten percent

rom 2004 to 2008. And urther growth in the small

segment is predicted or the uture. For 2008, the

Federation o the German Leather Goods RetailTrade (Bundesverband des Deutschen Leder-

waren-Einzelhandels BLE) estimates a market

volume o EUR 2.1 billion. In recent years, the

market trend has been towards ashion articles

and leisure accessories. According to the German

Leather Goods and Plastic Products Association

(Bundesverband Lederwaren and Kunststo-

erzeugnisse BVLK), sales in the German

leather-goods industry were driven by domestic

demand and rose by about one percent in 2008.

Market for luxury accessories worldwide

Market volume (in EUR billion)


Leather goods Shoes

19

17

2008*20072006 2008*20072006

7.07.6

8.2

20

Sales in the leather-goods retail trade 2008*

By segment (in %)

* EstimatesSource: Federation of the German Leather Goods Retail Trade

(Bundesverband des Deutschen Lederwaren-Einzelhandels BLE)

10

10

3025

25

Total sales in 2008: EUR 2.1 billion

Baggage

Womens handbagsBusiness/school

Small leathergoods

Miscellaneous

Sales development in the German shoe retail trade

By quarter years in constant prices (index)

Index: 2005= 100Source: German Statistical Office (Statistisches Bundesamt)

I

2009

IVIIIIII

2008

IVIIIIII

2007

IVIIIIII

2006

IVIIIIII

2005

80

111

99

111

106

79

108

83

120

115

83

117

109

117

112 113

83

Shoe trade stable

The German shoe retail trade achieved a positive

result in 2008 according to gures published by

the German Statistical Oce (Statistisches Bun-

desamt). However, the Federation o the German

Shoe Industry (Hauptverband der Deutschen

Schuhindustrie HDS) reports a 3.6 percent

decline in sales revenues or 2008, caused pri-

marily by a low level o demand in the domestic

market. By contrast, oreign sales rose slightly.


8/167

Watch-export nations 2008 (Top 5)

Source: Association of the Swiss Watch Industry (Verband der Schweizerischen Uhrenindustrie FH)

Switzerland

Hong Kong

China

France

Germany

15.8

7.1

2.7

1.5

1.5

Exports of watch productsby value (in USD billion)

Exports of wristwatchesby quantity (in million)

China

Hong Kong

Switzerland

Germany

USA

550.3

425.8

26.1

12.9

6.4

Swiss watches lead the

luxury-watch market

The most important export nations or watches

are Switzerland, Hong Kong and China. Charac-

teristic o the Asian manuacturers is the bulk

business in quartz watches. In 2008, China ex-

ported around 550 million watches, the average

price o which, however, was just two dollars. The

price o watches rom Hong Kong rose slightly to

an average o eleven dollars. The quantity ex-

ported was also high at around 426 million. Bycontrast, Swiss watches are positioned in a com-

pletely dierent segment and are an institution in

the international luxury market. Switzerlands

watchmakers have a long tradition. They use the

nest, top-grade materials and are characterised

by great precision and cratsmanship, especially

in the case o mechanical watches. And this is

refected in the average price per Swiss watch

exported, which was EUR 563 in 2008 when

Swiss watches continued their triumphal world-

wide advance with an increase in both the valueand quantity o watches exported, especially

high-quality mechanical wristwatches. However,

sales declined in the rst months o 2009. As well,

no export increases could be achieved in the

upcoming regions o Asia.

Source: Association of the Swiss Watch Industry (Verband der Schweizerischen Uhrenindustrie FH)

Exports of Swiss wristwatches

by value and quantity

Value (in CHF billion)Quantity (in million)

200820072006200520042003

9.310.1

12.7

15.9

14.8

11.4

6.2

4.7

24.4 24.9

Jan.-May

2008

Jan.-May

2009

24.4 24.9

26.125.9

10.27.7

Watches and jewellery

German watch industry

eeling the pinch

The German watch industry was unable to gener-

ate an increase in sales over recent years and, in

2008, they ell to just over EUR 500 million. Ac-

cording to the Association o the Jewellery and

Watch Industry (BV Schmuck + Uhren) on the

occasion o the Inhorgenta air, developments

were generally positive in the rst three quarters

o the year beore the impact o the crisis was elt

in terms o a decline in the number o orders

received, as well as postponements and cancel-

lations, especially on the export side.

Sales* of the German watch industry

(in EUR million)

* Estimated on the basis of companies with 20 or more employees (50 or more from 2007)Source: Association of the Jewellery and Watch Industry (BV Schmuck + Uhren)/

German Statistical Office (Statistisches Bundesamt)

2008200720062005

501.6

541.2

581.0

627.5


9/168

2008 was a good year or

the German jewellery industry

Despite the infuence o the nancial and eco-

nomic crisis, Germanys jewellery manuacturers

were once again able to boost their sales, which

rose to around EUR 807 million in 2008, an in-

crease o approximately ve percent. The Christ-

mas business was also satisactory in 2008. In

view o the current crisis, however, the jewellery

sector is taking a somewhat pessimistic view o

the immediate uture. Exports o jewellery romGermany were also good in 2008 and rose by

eight percent to EUR 884 million. The most im-

portant importers o German jewellery were EU

countries and members o EFTA (Iceland, Liech-

tenstein, Norway and Switzerland). The situation

is dierent in the case o imports into Germany

the bulk in terms o value is imported rom

outside Europe with China being a particularly

important producer o costume jewellery.

Precious materials generatethe greatest sales

According to an analysis by BBE Retail Experts,

there is also a trend towards polarisation in this

market with the most successul brands being

those in the uppermost segment, e.g., belonging

to LVMH and Richemont. Also successul at the

other end o the spectrum are suppliers o inex-

pensive costume jewellery, such as Bijou Brigitte

and beeline. However, this only refects the de-

velopment o the individual segments o the

jewellery to a certain extent because the high

price o gold and platinum means that jewellery

made o these materials accounts or the biggest

share in terms o sales. The demand or jewellery

made o precious materials remained high at the

beginning o 2009 with less but more expensive

jewellery being purchased. In times o crises,

investors and buyers bank on goods o lasting

value and the high price o gold continues to

support this trend. Silver jewellery holds a stable

ten percent o sales.

Development of sales of the German

jewellery industry* (in EUR million)

* Estimated on the basis of companies with 20 or more employees (50 or more from 2007)Source: Association of the Jewellery and Watch Industry (BV Schmuck + Uhren)/


20082007200620052004

807.0769.1762.5

792.4757.6

Imports/exports of jewellery 2008

Share by region (in %)

Source: Association of the Jewellery and Watch Industry (BV Schmuck + Uhren)/German Statistical Office (Statistisches Bundesamt)

Total imports:EUR 774.4 million (+3.1 %)

Total exports:EUR 884.3 million (+8.5 %)

EU

6

61

30

44

6

9

24

EFTA

EFTA

Rest ofEurope Rest of

Europe20

Othercountries EU

Othercountries

Product groups of the German jewellery

industry 2008* Share (in %)

* Estimated on the basis of nine months and companies with 50 or more employeesSource: Association of the Jewellery and Watch Industry (BV Schmuck + Uhren)/


Silverware

Gold and platinumjewellery

Silver jewellery

76

5

6

3

Fancy jewellery

10

Costume jewellery

Watches and jewellery


10/169

Perumes & Cosmetics

Growth in the world market or

luxury ragrances and cosmetics

Bain & Company market researchers calculated

that the worldwide markets or luxury ragrances

and luxury cosmetics were worth EUR 18.4 billion

and EUR 22.4 billion respectively in 2008. Thus,

these segments achieved a good average rate o

growth o ve and seven percent over the years

rom 1998 to 2008. In this connection, perumes

and ragrances were driven, in particular, by suc-

cessul product launches combined with ercecompetition and massive advertising.

Perumeries are optimistic

The trade with ragrances and cosmetics in Ger-

many announced a slight decline o less than one

percent or 2008. Although the previous year

started strongly, this was ollowed by several

poor months and, in particular, a disappointing

Christmas season. Nevertheless, the PerumeryAssociation (Parmerieverband) is taking a cau-

tiously optimistic view o 2009 because crises

have been good or Make-up & Co in the past.

Market for luxury fragrances/cosmetics worldwideMarket volume (in EUR billion)


Luxury cosmeticsLuxury fragrances

18.0

2008*20072006

17.018.4

21.0

2008*20072006

22.421.8

Development of perfumery sales 2008

Source: German Perfumery Association (Bundesverband Parfmerien e.V.)

Total

Face care

Body care

+0.7

+2.7

+0.2

+1.0

+0.6

-0.3

-1.2

13.8%

13.4%

21.8%

6.1%

29.3%

15.8%

Decorativecosmetics

Womensfragrances

EUR 2.67billion

Share Change compared to previous year (in %)

Menscosmetics

Miscella-

neous

German market for body-care products 2008

by segments (in %)

* At consumer pricesSource: IKW Working Group market estimate

Other body-care productsSoaps / syndets

Hair-care products

Skin-care products

24.1

3.1

23.210.5

7.7

Bath/shower products

Deodorants

10.6

7.0

6.7

5.41.7

Decorative cosmetics

Dental/oral-careproducts

Womensperfumes/fragrances

Menscosmetics

Market or body-care growing

By and large, the beauty and care industry was

satised with business in 2008. Expenditures on

body-care products rose to EUR 12.6 billion. The

most growth was achieved in the elds o dec-

orative cosmetics and deodorants. According to

calculations by the Association o the Body Care

and Detergent Industry (Industrieverband Krper-

pfege- and Waschmittel IKW), Germans spent

EUR 153 each on body-care products, an in-

crease o three euros over 2007. Luxury cosmet-

ics grew equally in 2008. According to gures

published by the VKE cosmetics association,

which represents around 50 German manuactur-

ers and distributors o selective cosmetics, sales

o companies with medium to high-priced cos-

metics rose by 1.9 percent to EUR 1.7 billion.


11/1610

The uture o luxury goods

The evolution o luxury

Luxury is closely connected with shortage on the

one hand and desirability on the other. People

are prepared to spend a lot o money on anything

that ulls both criteria, is dicult to achieve and

coveted. In view o the act that both the avail-

ability and desirability o goods and social tastes

change in the course o time, the notion o lux-

ury is subject to a constant process o change.

Through developments, such as the constant

growth in afuence, the collapse o traditionalamily structures and liestyle diversication,

luxury became an extremely heterogeneous and

individual phenomenon in the second hal o the

20th century. For the uture, it can saely be as-

sumed that the homogenous luxury market is a

thing o the past and that the sector will be

dominated by a variety o market segments, all

very dierent in character.

Luxury trends

by the size of the individual target groups

Source: Z_punkt

Democratisation of luxury

Climber luxury

Niche luxury

Immaterial luxury

Artificialshortage

Connoisseurluxury

Superluxury

Sizeoftheco

nsumergroup

Localisation of trends by availability

and material/immaterial aspects of luxury goods

Super luxury

Extremeshortage

Artificial

shortage

Immaterial

luxury

Moderateshortage

Source: Z_punkt

Purelymaterial

Purely

immaterial

Climber luxury

Connoisseur luxury

Niche luxury

Democratisation

of luxury

Z_punkt The Foresight Company

Z_punkt The Foresight Company is a rm

o consultants or strategic questions re-lating to the uture, which has been sup-

porting companies and public authorities

in the elds o strategy, innovation and leadership since 1997.The Z_punkt consultants combine a strategic approach with the

results o research into trends and the uture, and help decision-

makers to cope with present-day problems without orgetting to

make preparations or the uture. Z_punkt works or companiesin the service, high-tech and consumer-goods sectors and has

great expertise and experience in various markets.

Z_punkt is responsible or the chapter on the uture o thismarket analysis. The chapter was written by Klaus Burmeister

and Bjrn Theis.

Facets o luxury

The trend analyses in the market concentrate on

the most important o these market segments

and attempt to do justice to the various acets o

luxury. Characteristic o modern luxury is that it

is, on the one hand, accessible to an increas-

ingly broad range o socio-economic groups

(democratisation o luxury) and, on the other

hand, increasingly dependent on belonging to a

specic group (niche luxury). Besides the as-

sertive demonstration o status by those who

want to document their ascent in the material

world (climber luxury), there is the boundless

luxury o the super-rich (super luxury). More

sensitive souls, or whom this showing o is re-

pugnant, withdraw into private worlds o luxury

where intimate connoisseurship counts (con-

noisseur luxury). New mechanisms are being

tried to create exclusiveness (articial shortage).

And, nally, there is a trend towards luxuries that

are ully decoupled rom goods and can only be

satised by services (immaterial luxury).


12/1611

Advertising market

Watches & jewellery market

Development of advertising expenditures (in EUR million)

* Jewellery shops, range advertising, wristwatches, internet: watches & jewellery, miscellaneousSource: Nielsen Media Research (gross advertising expenditures)

20082007200620052004

Miscellaneous*JewelleryWatches

78 77

89

106

113

44

32

1st half

of 2008

1st half

of 2009

Fashion & accessories market


Source: Nielsen Media Research (gross advertising expenditures)

20082007200620052004

Mail-order trade, textiles/shoesTextile stores/department storesRange advertising, textiles/garmentsCorporate image advertisingLeather goods & accessoriesShoesUnderwear & stockingsClothing

507

579 580605

567

276294

1st halfof 2008

1st halfof 2009

Advertising expenditures o the

clothing sector increasing

According to Nielsen Media Research, the gross

amount spent on advertising in above-the-line

media in 2008 amounted to around EUR 567

million or the ashion & accessories market as

dened here. This represents a drop o six percent

compared to 2007. In the rst hal o 2009, the

market grew, also by six percent. This growth is

due almost solely to the clothing segment and,

in particular, clothing stores, which signicantlyincreased their advertising to a total o EUR 197

million, an increase o almost 30 percent over the

same period the previous year. Most o this

growth can be traced back to the Peek & Clop-

penburg ashion chain, which now is close on the

heels o competitor C&A. However, despite cuts

o six percent, C&A remains the top advertiser in

this segment with expenditures o EUR 47 million.

While clothing stores spend more than hal o

their budgets on newspaper advertising and a

quarter on television commercials, the rest o theashion and accessories sector preers to invest

in consumer publications.

Fashion & accessories media mix

1st half of 2009 by segments (in %)


144.42

21.38

6.60

12.85

47.06

15.64

6.14

3.99

4.61

16.34

5 8Clothing stores

Womens wear

Mens wear

Sport/leisure wear

Shoes

Leather goods

Underwear

Budget inEUR million

2556 3

Daily newspapers Trade magazinesConsumer magazines PostersRadio

Cinema Internet

TV

Range advertising:textiles/garments

Mail-order trade,textiles/shoes

Textile stores/department stores

3

75 914 1

1

57 20 220

11 51 14 149 1

20 1932 3 8127

814 51 7 1

7816 4 2

69 31116

1 2462 112

7 261255

Hope pinned on advertising or

the Christmas season?

Companies in the clocks, watches and jewellery

sector boosted their expenditures on advertising

or the third year running in 2008. On this occa-

sion, however, the increase o six percent was

more moderate than in previous years. Although

advertising or clocks and watches especially

by luxury watch makers accounts or over 60

percent o total advertising expenditures in the

sector, jewellery manuacturers are catching up.

In the rst hal o 2009, the advertising market

shrank by more than 25 percent compared with

the rst hal o 2008. Given, however, that busi-

nesses run around 40 percent o their advertising

in November and December, it will not be pos-

sible to assess advertising expenditures or the

year until ater Christmas 2009. Around 90 per-


13/1612

Advertising market

Perfumes & cosmetics market



20082007200620052004

620

Sun/tanning lotionsFace and body-care productsComplete series, care & cosmeticsCorporate image advertising,body careDecorative cosmeticsBody careFace carePerfume & fragrance samples

626

695713

733

354 346

1st halfof 2008

1st halfof 2009

Watches & jewellery

Development of the media-mix structure (in %)


1st half of 2009advertising expenditures: EUR 32.40 million

2008advertising expenditures: EUR 113.24

Dailynews-papersTrade

magazines

69

1

442

15

20

2 22

68

21

Consumerpublications

PostersRadio

TV

Dailynews-papersTrade

magazines

Consumerpublications

PostersInternetRadio

TV

Perfumes & cosmetics media mix

1st half of 2009 by segments (in %)


61.47

128.91

49.30

49.29

7.70

39.58

2.81

6.67

32 1

Face care

Body care

Face/body care

Budget inEUR million

613

Complete series,care andcosmetics

3

36 6111 2

34 6211 3

16730 1

3 2981 60

25 1111 59 12

53 222 32 9

27 6411 7

Corporate imageadvertising

Perfumes &fragrances

Decorativecosmetics

Sun/tanninglotions

Daily newspapers Trade magazinesConsumer magazines PostersRadio

Cinema Internet

TV

Cosmetics sector to invest in

advertising against the trend

With an advertising budget o approximately EUR

733 million (gross), the perumes & cosmeticsmarket once again increased its expenditures

by about three percent in 2008. Expenditures

ell slightly in the rst hal o 2009. However, the

individual segments developed dierently with

companies increasing their advertising expend-

itures or ace and body care especially com-

plete series by almost 30 percent in 2008.

Advertising or decorative cosmetics was also

raised by eleven percent in 2008 and nine per-

cent in the rst hal o 2009. With an increase in

spending o over EUR 15 million (up 63 percent)in the rst hal o the year, care products and

cosmetics are most probably responsible or the

act that overall expenditures ell only slightly.

Perumes and ragrances, the second biggest

segment ater ace care in terms o advertising

expenditures, declined in 2008 and the rst hal

o 2009. Most companies attach great importance

to advertising, especially in times o economic

crisis. According to VKE cosmetics association,

almost 30 percent o companies in the luxury

cosmetics sector want to maintain their advertis-

ing expenditures in 2009 at the same level as in

2008. Another 17 percent plan to increase them.

As in the past, the emphasis is on classic adver-

tising in print media. However, the internet is

catching up quickly and, in this connection, the

sector currently aces a number o challenges in

relation to advertising. Thus, ollowing the rag-

mentation o the media, consumers are not only

more dicult to reach but are also characterised

by new patterns o consumption via new sales

channels. The result a urther increase in com-

petitive pressure.

cent o all advertising appears in the print media

with consumer publications holding a dominant

position in the media mix. Television commercials

play only a secondary role, a act rom which

other media, such as posters and radio, proted

in the rst hal o 2009.


14/1613

Communication

High level of interest in luxury products

Extremely/very interested (share in %)

Basis: Population aged 20 to 69 (49.78 million)

* Agree fully/on the whole with I mainly purchase exclusive brands and/orI like to shop i n exclusive/up-market boutiques

** Extremely/very important aspects for wristwatches: handmade and/or exclusive brandand/or well-known brand

Source: Communication Networks 12.0

Luxury buyers*(5.78 million)

17.8

11.6

21.722.0

27.4 26.6

33.6

27.5 26.3

32.3

20.3

46.0Premium-watch buyers**(8.85 million)

Population,aged 20-69

Fashion Trendsand

lifestyle

Genuine jewellery(gold, diamonds,platinum, etc.)

Cosmetics,perfumes,toilet water

Wrist-watches

Exclusive target groups

or exclusive products

Exclusiveness is a decisive keyword in the luxury

market. By no means can everyone aord these

expensive, high-quality products and thats

certainly not desirable because becoming an

article or the mass market would harm the aura

o such brands. Thereore, advertisers in the

luxury market must ensure they accurately target

consumers who are receptive to their brand and

who t with its image. For the luxury market de-ned here, these consumers could be luxury

buyers who explicitly preer selected brands or

shops. For luxury-watch makers, the very special

target group o premium-watch buyers is o

paramount importance. In the case o wrist-

watches, these buyers attach particular im-

portance to luxury qualities the watches must

be handmade or come rom exclusive and

amous brands.

Attitudes to fashion (in %)

Basis: Population aged 20 to 69 (49.78 million)* Agree fully/on the whole with I mainly purchase exclusive brands and/or

I like to shop in exclusive/up-market boutiques** Extremely/very important aspects for wristwatches: handmade and/or exclusive brand

and/or well-known brandSource: Communication Networks 12.0

When it comes to fashion trends,Im always up to the minute

17

32

51

21

33

45

11

38

21

13

31

70

31

46

19

20

31

41

49

47

5

22

16

20

10

30

23

27

9

37

I like to try new clothes

I always buy clothesfrom the latest collection

The brand is important evenif other, less renowned suppliers

offer the same qualityat a lower price

I prefer to buy one high-qualitygarment to two cheaper articles

A handbag and/or belt areimportant parts of my outfit

Watches and jewellery areimportant parts of my outfit

I change my watch to matchthe occasion and my outfit

I frequently buy accessories(belt, handbag, sunglasses) of

the same brand as my clothing

I frequently buy shoesof the same brand as my clothing

I frequently buycosmetics/fragrances of

the same brand as my clothing

Agree fully/on the whole with:

Populationaged 20 to 69(49.78 million)

Luxurybuyers*(5.78 million)

Premium-watch buyers**(8.85 million)

7

19

26

Luxury buyers are keen on ashion

Buyers o luxury products are very keen on

products rom the ashion, liestyle, jewellery,

cosmetics and watches segments and, in the

case o ashions, are particularly trend and brand

conscious. No less than one in two o them keeps

abreast o the latest developments. 70 percent

preer high-quality products. Moreover, they

attach great importance to a smart appearance

and accessories, such as bag, watch and

jewellery, which are oten sold as matching the

garments o a given ashion brand, are simply

part o this. They also tend towards well-known

brands when buying cosmetics and ragrances.

Premium-watch buyers are also characterised by

a very great anity to luxury. However, they are

signicantly less interested in ashion than luxury

buyers precision timepieces are their passion.

Premium-watch buyers are interested in watches

or watches sake and not as part o their outt.


15/1614

Communication

Advertising is credible generally speaking

Applies fully/on the whole (in %)

Basis: Population aged 20 to 69 (49.78 million)

* Agree fully/on the whole with I mainly purchase exclusive brands and/orI like to shop i n exclusive/up-market boutiques

** Extremely/very important aspects for wristwatches: handmade and/or exclusive brandand/or well-known brand

Source: Communication Networks 12.0

20

33

3940

33 32

23

2725

Populationaged 20-69

(49.78 million)

Luxury buyers*

(5.78 million)

Premium-watch buyers**(8.85 million)

109

16 16

13 14

Advertising in magazines

Advertising on television

Poster advertising

Advertising by e-mail

Advertising on theinternet/online services

Magazine ranking

Premium-watch buyers*

* Population aged 20 to 69 and as purchasing criteria for a wristwatch: handmade and/orexclusive brand and/or well-known brand

Basis: Top 12 by cost per thousand; affinity > 101; title selection (MA-adjusted):Current-affairs magazines, business press, lifestyle magazines

Format: 1/1 p. 4c bleed (average prices 2009 gross)Source: Communication Networks 12.0 / potential: 8.85 million

FOCUS

Stern

Der Spiegel

Guter Rat

Wirtschaftswoche

FOCUS-MONEY

Capital

Manager Magazin

Fit for Fun

Neon

Playboy

Cinema

FOCUS-BlueChip-Kombi

Cost per thousand(in EUR)

Coveragein %

12.5

14.0

13.0

2.3

3.4

1.8

3.2

2.5

2.8

1.9

2.4

1.4

13.6

44

43

48

69

92

97

100

103

109

117

112

47

79

Magazine positioning

Luxury buyers*

* Population aged 20 to 69 and agree fully/on the whole with I mainly purchase exclusive brandsand/or I like to shop in exclusive/up-market boutiques

Basis: Top 15 by cost per thousand; affinity >101; title selection (MA-adjusted): Current-affairs magazines,business press, lifestyle magazines

Format: 1/1 p. 4c bleed (average prices 2009 gross)Source: Communication Networks 12.0 / potential: 5.78 mil lion

Der Spiegel

Cinema

Stern

FOCUS

FOCUS-BlueChip-Kombi

FOCUS-MONEY

Cost per thousand (EUR)

Coverage (%)

Capital

Wirtschaftswoche

Bunte

MensHealth

Gala

FitforFun

Playboy

ManagerMagazin

50 60 70 80 90 100 110 120 130 140 150 160 170 180

0

5

10

15

20

Print advertising appeals

to luxury target groups

Luxury brands have to cultivate their image con-

tinuously and an important aspect o this is the

choice o appropriate advertising media. Al-

though, the two luxury-oriented target groups see

advertising as being more credible than the po-

pulation as a whole, there are signicant dier-

ences between the individual media, parallel to

the degree o receptiveness. For both luxury and

or premium-watch buyers, magazine advertise-ments are the most persuasive with 40 percent

o this target group according advertisements the

highest level o credibility. Poster campaigns are

also rated positively. Less well received is adver-

tising in the electronic media, on television and,

above all, in e-mails and on the internet.

Established media brands score

in the luxury market

O the various groups o magazines, news, current

aairs and business magazines are advertising

media o interest to advertisers in the luxury

market. FOCUS and FOCUS-MONEY are popular

with advertisers because they oer excellent

value or money and a clear target-group orien-

tation. For target groups o importance in mar-

keting and strategic terms, they provide extensive

coverage and outstanding cost eectiveness.

FOCUS is distinguished by broad coverage al-

most 13 percent o both the exclusive luxury

buyer and premium-watch buyer target groups.

And, by booking FOCUS-MONEY, the modern

business magazine, in the FOCUS BlueChip

combination, this coverage can be expanded

even more. FOCUS and FOCUS-MONEY oer

advertisers in the luxury market outstanding

planning eectiveness or communicating with

top target groups.


16/16

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