Louis Vuitton’s Taipei 101 Maison
The key takeaways from Fondazione Altagamma’s 2012 Retail Insight event in Milan.
“When we talk about retail, we are talking about an increasingly divided world,” explained Claudio Luti, president of Fondazione Altagamma, at its 2012 Retail Insight event in Milan. “Both in regards to the channels, and in terms of the so-called methods of consumer engagement by the brands, especially through the spread of digital technology.”
Fondazione Altagamma, Italy’s luxury lobby group, this week presented three studies on high-end retail and the online presence of the brands in the segment. Concluding that retail integration is the winning formula for high-end brands, whose strategies increasingly focus on single-brand channels such as flagship stores, e-commerce, shop-in-shops, and outlets, in both traditional markets and in new ones.
“The development of retail has been the main driver of luxury brand growth over the last 20 years.”
- The development of retail has been the main driver of luxury brand growth over the last 20 years.
- Increasing the number of single-brand stores quickly and directly increases sales.
- That said, loss in revenue is equally rapid until the store network reaches the correct size.
- Growth has proceeded in parallel with the integration of different retail channels, especially the Internet.
- Minor players must find new solutions to cope with the dilemma of fixed retail costs through ‘Click and mortar’, the integration between physical and online stores.
“Rapid shopping mall development in China brought a glut of retail space supply.”
Retail Profitability in China
- Rapid shopping mall development in China brought a glut of retail space supply.
- In recent years, developers eager to fill their creations have let retail space at significantly lower rental costs in China – when compared to rental costs in Europe, Japan or the United States.
- Coupled with lower personnel costs, Chinese directly owned stores have been some of the most globally profitable.
- Yet many of these leases were offered on a short term basis, as they come up for renewal rental costs for brands will increase.
- Personnel costs in China are also on the rise, threatening profitability.
“The digital retail channel is the fastest growing in the high end sector, representing €6.2 billion.”
Digital Luxury Experience
- The digital retail channel is the fastest growing in the high end sector.
- The online sale of luxury goods represents €6.2 billion, equivalent to 3.2% of total sales.
- When considering the ‘indirect effect’ (sales made in stores but directly generated by online decision making) the channel represents €17.5 billion or 10% of total luxury sales.
- Over the next decade, Asia and South America will be the most promising ‘geographical’ markets for overall growth.
- 72% of consumers use online search to compare products before purchase, using an average of four different information sources.
To further investigate Retailing on Luxury Society, we invite your to explore the related materials as follows:
Fondazione Altagamma gathers together high-end Italian companies, to promote top-quality Italian industry and the culture that supports it.
© Luxury Society, Single-brand Retail Remains a Key Driver of Luxury Growth, 18 September 2012, by Sophie Doran.
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