Luxury Brand ProposalDavy Chai Flair Li

2012.8

THE GLAMOUR MARKET

“Luxury market soon recovered from the economic downturn.”

worldwide luxury market overview

207 billion

US $ retail value of global luxury goods in

2015

174 billion

US $ retail value of global luxury goods in

2010

19%

Market forecast

“The Asian market rises”

The emerging market drives the growth of the global market

“Asian market shines during the dark economic recession.”

“Emerging economies are becoming the main driver of today’s luxury goods industry.”

43%Worldwide

Emerging market value grew between

2005-2010

6%Worldwide

Developed market value grew between

2005-2010

The market growth of emerging market

2010 2011

6570

8086

58

69Americas +8%Europe +7%Asia-Pasific +19%

The potential of Asian market

The comparison among top 3 biggest luxury markets(2010-2011) $Billion

Source: http://www.bain.de/Images/Bainbrief_Luxury_Goods_Study_10thEdition.pdf

OUR TARGETSWhowhy

Asian shopper

US market

Target market

travelersWe

Asian shoppers

Target market

Asian travelers

Asian-American residents

Why should we target Asian travelers?

The estimated contribution of Asian travelers to US luxury market (2011)

The estimated expenditure of the Asian-Americans in U.S. luxury market (2011)

$2.6 billion

$8.3 billion

Resource: the data of AA market is calculated by timing the population percentage of AA with us whole luxury market sales

of US luxury market

15%of

Europe luxury market

50%

Why should we target Asian travelers?

The expenditure comparison of Chinese luxury

Shoppers spent in outside Asia and inland market (2011) $15B~$18B

The sales of luxury goods contributed by Asian travelers account for

$16Bvs.

Asian trevelers market profile

Market volumeBuying power

Characteristics Key findings

26%

74%

The number of Asian travelers to the US and proportion

7.2 millionThe number of Asian travelers arrived in the U.S. in 2011 v.s.

27.9 million in total

24%the growth of Asian travelers to the U.S. from 2009 to 2010

Resource: U.S. Department of Commerce International Trade Administration Office of Travel and Tourism Industries

Top 6 regions of Asian travelers to the U.S.

RankRegion/ Country of

Residence2011

% Change (2011/2010)

1 Canada 21,028,000 5%2 Mexico 13,414,000 0%3 United Kingdom 3,835,300 0%4 Japan 3,249,569 -4%5 Germany 1,823,797 6%6 Brazil 1,508,279 26%7 France 1,504,182 12%8 South Korea 1,145,216 3%9 People's Republic of China 1,089,405 36%

10 Australia 1,037,852 15%… … … …13 India 663,465 2%22 Taiwan 290,313 0%36 Philippines 166,829 -6%37 Singapore 159,302 14%41 Hong Kong 128,512 -2%

TOP AISAN COUNTRY VISITORS TO US(2011)

Resource: U.S. Department of Commerce International Trade Administration Office of Travel and Tourism Industries

$23,968

$16,660

$13,223

$9,366

$6,769 $6,590 $5,743

$4,694 $4,601 $4,475

2011 top 10 markets to U.S. ($Million)Asian travelers' contribution to

2011 U.S. travel market

Resource: U.S. Department of Commerce International Trade Administration Office of Travel and Tourism Industries

Asian travelers buying power

24%

29%

AsiaEuropeOther regions

$23billion

Asian travelers buying power comparison by regions

Household income(median average) v.s.

per capita spending on each trip(2011)

Japanese Korean Chinese Indian Taiwanese$0

$20,000

$40,000

$60,000

$80,000

$100,000

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$3,500 $3,262

$3,903

$4,864

$4,014 Household Income (median average)

per capita spending on trip(excluding fare)

Asian travelers buying power comparison by regions

Per capita spending on each day v.s.

per capita spending on each trip (2011)

Japanese Korean Chinese Indian Taiwanese$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$427

$141 $102 $106

$193

$3,500 $3,262

$3,903

$4,864

$4,014 per capita spending on each day (excluding fare)

per capita spending on trip(excluding fare)

Who are Asian travelers?

Pure purpose of trip of Asian travelers (2011)

Taiwanese

Indian

Chinese

Korean

Japanese

38%

57%

37%

37%

16%

79%

50%

72%

72%

86%

Business & Conven-tion

Leisure & Visit Friends/Relatives

Japanese Korean Chinese Taiwanese Indian

56% 62% 62%49%

75%

44% 38% 38%51%

25%

Female

Male

Gender portion of Asian travelers (2011)

Japanese

Korean

Chinese

Indian

Taiwanese

4038

36

42

37

Average age of Asian travelers(2011)

22%

22%

18%13%

9%

U.S. Top destinations 2011 for Asian travelers (cities)

New York City-WP-Wayne

Honolulu

Los Angeles

San Francisco

Las Vegas

Washington, D.C.

Chicago

Boston

Where do Asian travelers go?

2011 Rank

Airport 2011 Enplaned Passengers

1 New York JFK 11,704,7002 Miami 8,821,9003 Los Angeles 8,065,2004 Newark 5,710,0005 Chicago O'Hare 5,144,8006 Atlanta 4,675,5007 San Francisco 4,316,0008 Houston Bush 4,198,4009 Washington

Dulles3,117,700

10 Dallas/Ft. Worth 2,603,000

Top 10 busiest airports in general travelers market to U.S. (2011)

Top 3 most common activity participation of Asian travelers while in the United States(2011)

Shopping Sight seeing Dining in the restaurant

What do Asian travelers do in the US?

91% 80%46%

Korea43%

Japanese

Korean

Chinese

Indian

Taiwanese

0%

10%

20%

30%

40%

50% 40%

24%19%

3%

24%

prepaid package

Japanese

Korean

Chinese

Indian

Taiwanese

0

10

20

4 711

21

7

Length of Stay in United States (median nights)

Japanese

31%

China55%

India37%

Taiwanese 31%

% of first trip to the US

1.7Average party size

OR

Asian travelers characteristics

Information Sources Used for Trip Planning(multiple response: top 4 of 12)

Japan South Korea China India Taiwan

Travel Agency 48 % 37% 29% 43% 54%

Personal Computer 45% 49% 35% 23% 27%

Tour Company 24% N/A N/A N/A N/A

Travel Guide 17% N/A N/A N/A N/A

Airline Directly N/A 14% 25% 13% 19%Corporate Travel Dept. N/A 11% N/A 24% N/A

Friends/Relatives N/A 11% 15% N/A 15%

Asian travelers characteristics

o The average age of Asian travelers to the US are 40, which’s around middle age. Chinese are the youngest whose average age is 36.

o Based on the household income, they are considered as middle to

upper middle class in their own societies, which means they have more economical flexibility.

o Shopping is the most common activity when they are travelling in the U.S across all these regions.

o Destination preference: metropolis + resorts.

o Most of the Indian travelers come to U.S. for business trip, thus, they are more likely to be males, stay longer and travel alone

o Over half of the Chinese travelers came to U.S. for the 1st time which implicates that they have less acknowledge and information of traveling in U.S. comparing with other Asian regions.

Key findings

Asian Travelers Insights Study

Brand preferencePsychological motivation

Segments of purchasing behaviorSegments of tourism demand

Top 3 luxury groups and 2011 global sales volume of Asian favored brands

PPRLVMH

Louis VuittonBulgariFendi

GivenchyMarc Jacobs

LoeweCéline

Parfums Christian Dior

TAG Heuer

Richemont

Cartier Montblanc

Alfred DunhillChloé Lancel Piaget

Ralph Lauren watch and jewelry company, 50%

Gucci Bottega Veneta

BrioniYves Saint

Laurent Sergio Rossi

BoucheronAlexander

€7 Billion€15 Billion€23 Billion

Asian favored brands

TIER 1

TIER 2

Ermenegildo Zegna Dunhill MIU MIU Givenchy Valentino Bally Fendi Hugo Boss Celine Aigner Canali Estee LauderLongines Patek philippe Max Mara DKNY Moschino Tag Heuer Jimmy Choo Calvin Klein TOD’s SWAROVSKI Piaget Ralph LaurenLancome Testoni Shiseido Marc Jacobs

1.Louis Vuitton2.Cartier 3.Bulgari4.Gucci5.Chanel6.Tiffany7.Versace8.Dior9.Prada10.Armani

1.Louis Vuitton2.Coach 3.Hermes4.Gucci5.Chanel6.Bottega Veneta7.Bulgari8.Cartier9.Dior10.Tiffany

1.Louis Vuitton2.Gucci3.Burberry4.Chanel5.Hermes6.Prada7.Cartier8.Armani9.Etro10.Ferragamo

*Data for Indian not availableSource:China: http://www.yxqing.com/article-2620-1.htmlJapan: http://www.jmrn.com/UserFiles/File/DCLB_JMRN.pdfKorea: by combining 'the Financial Supervisory Service' and 'Duty-free shop sales data'.

Self-driven

Social-driven

Functionality

Conspicuousness

Individualism

Collectivism

Why Asian shoppers want to buy luxury goods?

Perceived value

product-related

segments of luxury shoppers based on different motivations

Social-driven self-driven

Individualism

Luxury lover

Intellectual shopper

Luxury follower

Status seeker

Streetwise purchasers

Luxury trip explorer

Premium luxury

tourists

IDENTITY

o Younger o Less purchasing powero Search for the best possible value for the trip

Standard luxury

travelers

o Super-active, independent-minded and educatedo Look for highly personalized and authentic travel

experienceo regardless of the price due to the precious time

o Primarily look for relaxation and a change of paceo Prefer resort places

o Focus on high quality of service and comforto Pay more attention to social status o More followers than pioneers in their choice of

destination

4 types of Asian luxury travel tourists for different tourism demand

segments

HighFrequency

Streetwise purchasers

Luxury trip explorers

Premium luxury

tourists

Standard luxury

travelers

Characteristics of each type of Asian luxury tourist

Budget concern

High demand of

personalized trip

Long Self-preparing time

New touch points of luxury market

OnlineSmartphone

wholesale Sales through third party distributors

Distribution managed in-house

Sales transactions are completed online. It can be operated as both a retail as both a retail and wholesales distribution channel

Retail

Online retail

Distribution channels

Emerging trendAll-Digital platformsE-storesSocial networksPersonal mobile devices

wholesale Retail Online Retail

Traditional

formats

•Department store•boutique

Company owned/franchised branded stores

Websites operated by established retailers such as department stores, wine clubs ,fashion e-boutiques

Emerging

formats•Outlet stores•E-boutiques

•Brand websites•social networks

Transactional branded websites, luxury outlet e-stores, iPad apps, social networking

Current trend

o Use the Internet to gain a better understanding of luxury brands and products

o Luxury online shopping is dramatically growing and people shop for discount and brands that are not available in China.

Online is an important channel for research but not buying

o A recent survey shows accelerating shift to online purchasing among luxury consumers

o Department-store doors and sales have been steadily declining

Channel of purchasing

Channel of information gathering

Luxury customers online behavior

Source: http://www.jingdaily.com/chinas-female-driven-luxury-e-commerce-market-to-surpass-3-billion-in-2012/18347/

AUTHENTIC

SERVICEDEVIATION

The reasons of why they chose retail stores for purchasing

over e-stores

Size Real appearance

Why Asian luxury shoppers prefer physical stores?

Taiwan Urban India

Urban China

korea Japan0%

25%

50%

36%

9%

35% 34%

14%smartphone pene-tration rate

Smartphone penetration rate of target Asian regions

Source:http://www.ipmirror.com/gomobi/whyGoMobi.htmlhttp://communities-dominate.blogs.com/brands/2011/12/smartphone-penetration-rates-by-country-we-have-good-data-finally.htmlhttp://www.livemint.com/2012/06/20165308/Smartphone-usage-on-the-upswin.html

under 19

20~29

30~39

over 40

0% 25% 50% 75% 100%

49%

53%

51%

40%

18%

26%

27%

25%

32%

21%

22%

36%

currently I'm using one smartphone or more

currently I 'm using both the smart phone and feature phone

I only have feature phones

Chinese

Tier1 cities

Tier2 cities

Tier3 cities

0% 25% 50% 75% 100%

55%

50%

47%

21%

27%

25%

24%

23%

28%

Smartphone penetration rate by age groups and top tie cities among the internet users

Source: http://www.d2c-china.cn/news_detail-5.html

Smartphone penetration rate by age groups

Korea

Source: https://wiki.smu.edu.sg/digitalmediaasia/Image:Mobile_Internet_Users-Demographics.jpghttps://wiki.smu.edu.sg/digitalmediaasia/Digital_Media_in_South_Korea#Mobilehttp://www.newmediatrendwatch.com/markets-by-country/11-long-haul/63-south-koreahttp://nielsfootman.com/android-winner-korea-smartphone-boom/

• The smartphone penetration rate is relatively higher across all the age groups compared with other target Asian markets.

• Smartphone market in Korea is currently dominating the whole industry which left less choices for consumers.

Korean

0% 20% 40% 60% 80% 100%

90%92%

74%56% 40s

30s20sunder 19

Penetration rate of smartphone by age groups

Japan

Japanese

-10% 10% 30% 50%

15%

27%

34%

40%

20s

30s

40s

50s

Source: http://nielsfootman.com/android-winner-korea-smartphone-boom/

Japanese

20s

30s

40s

50s+

0% 10% 20% 30% 40% 50% 60% 70% 80%

36%

26%

20%

12%

68%

53%

46%

27%

luxury purchases

General public

n=224

n=497

n=414

n=323

Using smartphone is more common among Luxury shoppers than the general public across all age groups.

Source: mckinsey

Japan

Indian

India

Smart phone penetration rate % of the mobile phone users

(Mar. 2012)

Source: nilsen

Indian

0% 10% 20%

5%13%

8%8%8%

5%

over 40

36-40

31-35

25-30

18-24

under 18

THE END.Thank you.

QUESTIONS?