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Summary

The luxury market

Facts, figures, trends for fashion, accessories, watches, fragrances

Luxury-goods market

Core segments of the market hold their own

Generally speaking, garments, accessories, jewellery, watches, fragrances and cosmetics are considered to be constituent parts of the luxury market. This viewpoint was also adopted in a study conducted by Bain & Company on behalf of Altagamma, the Italian Association of Luxury Goods Manufacturers. According to this survey, garments account for around 28 percent of the market while accessories, fragrances, cosmetics and hard luxury goods (especially luxury watches and jewellery) account for 21 to 23 percent. The market researchers also counted high-grade tableware as a small segment of the luxury-goods market. In a study entitled Global Luxury Retailing 2007, Verdict defined the market along similar lines. In this case, however, fashion / garments, fragrances, cosmetics, watches and jewellery and accessories are joined by furniture and other product groups.

Segments of the luxury-goods market 2008*

by sales worldwide (in %)
Total sales: EUR 175 billion Tableware (-2%) Hard luxury goods** (+7%) 21 4 Garments (+/-0%) 28

22 Accessories (+5%)

23 Perfumes & cosmetics (+3%)

* Estimate ** E.g. watches, jewellery Figures in brackets: Change compared to previous year Source: Bain & Company/Altagamma

Development of the luxury-goods market

Sales worldwide (in EUR billion)
170 159 146 130 111 93 76 84 98 134 134 128 134 175

Luxury-goods market up in 2008 but decline expected in 2009

In 2008, the volume of sales in the worldwide luxury-goods markets rose by three percent to EUR 175 billion. The development of the luxury market was hampered, in particular, by the financial crisis, the stock-market collapse and severe exchange-rate fluctuations. For 2009, however, the experts from Bain & Company anticipate a decline the first since 2003. At constant exchange rates, they expect a turnover of between EUR 163 and 170 billion (172 to 178 billion at current rates). The largest share of the luxury market by volume is held by Europe. However, growth in Europe is currently being fired by the upcoming countries of East Europe and the Asian-Pacific region. Tomorrows leading markets for luxury products will include not only China and India but also Russia and Brazil. According to the experts from Bain & Company, these
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*

* Estimate Source: Bain & Company/Altagamma

Luxury-goods market by regions 2008*

Sales worldwide (in %)
Total sales: EUR 175 billion Rest of the world (+9%) Asia/Pacific (+15%) 12 38 Japan (-7%) 12 Europe (+5%) 5

33 America (+/-0%)
* Estimate Figures in brackets: Change compared to previous year Source: Bain & Company/Altagamma

Luxury-goods market

countries are likely to grow at rates of between 20 and 35 percent over the next five years. In the future, long-term growth in the wealth of people in emerging nations and the increasing number of High Net Worth Individuals (HNWI) will generate new impulses for the luxury market.

HNWI population by countries 2008

Top 10 (in thousands)
United States Japan Germany China 364 413 362 346 396 213 281 185 212 164 207 131 143
2008 2007

2,460 3,019 1,366 1,517 810 833

Wealth in Germany unchanged

In terms of the number of wealthy individuals, Germany holds third place in the world ranking. In 2008, 54 percent of all wealthy people lived in Germany, the USA and Japan. Moreover, personal wealth and the number of HNWIs in Germany fell less because many rich Germans pursue a conservative investment policy and there was no property bubble.

United Kingdom France Canada Switzerland Italy Brazil

491

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

Tax-free shopping in Germany 2008

Share of total sales by countries (in %)
Russia China Switzerland 8.0 4.1 2.9 2.8 2.3 2.0 +22.2% -23.9% -30.4% -19.2% +12.1% 12.8 -2.0% 26.6 +7.8% +37.4%

Tourists from threshold countries purchase more in Germany

Besides the domestic consumption of high-income Germans, the expenditures of foreign tourists in Germany are also important for the luxury market. In particular, Russians and Chinese spend large sums of money during the vacation period and, despite the crisis, actually increased their expenditures in 2008 compared to 2007. By contrast, travellers from other western industrial nations, such as Switzerland, the USA and Japan, spent more carefully in 2008.

United Arab Emirates United States Korea Japan Brazil

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

Attitudes towards luxury (in %)

I buy primarily exclusive brands* I like to shop in exclusive/up-market boutiques* When I go shopping, it sometimes happens that I spend more money than I intended* At present, I mainly wear in clothing brands**

Luxury orientation is multi-faceted

The significance of luxury differs greatly in the various segments of the population. For around 50 percent of people, luxury also means the possibility of treating oneself. Fine dining is also popular among half the population. Many Germans spend freely, especially on fashions, and then they are inclined to spend more. Around ten percent are very keen on hard luxury goods exclusive brands, watches and jewellery.

7.8 8.4 38.1 10.8 36.8 12.3 14.8 13.4 49.7 49.8

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-known companies offer the same quality at a lower price* For me, luxury means having time for myself and to do something for myself** I am happy to spend somewhat more on a meal in elegant surroundings** * Agree completely/on the whole ** Applies completely/on the whole Basis: Inhabitants aged 20 to 69 Source: Communication Networks 13.0 / potential: 49.55 million

Luxury brands

Brands are particularly valuable in the luxury market

The brand is the most important asset for manufacturers of luxury products. Hence, it is not surprising that many luxury brands rank among the most valuable in the world. The biggest luxury brand, Louis Vuitton, also holds 16th place in the ranking of all international brands. Gucci, Chanel, Rolex and Herms are also brands that have an excellent reputation in this market and generate appropriate levels of sales with their good names. Europe is the most important region of origin for 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. Of the US brands, only one brand, Tiffany & Co., managed to get into the top 15.

The worlds most valuable luxury brands 2008

Top 15 by brand value (in EUR billion)
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) 3.836 3.541 3.278 3.257 2.775 2.730 2.577 2.542 1.578 0.855 0.633 0.559 4.918 6.388 16.718

Source: Interbrand (The Leading Luxury Brands 2008)

Luxury holdings top the market

Today, many of 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 for many years, e.g., Herms, Tiffany & Co. and Bulgari. Additionally, many luxury brands are still managed by the founding families or owners, e.g. Chanel and Rolex, and they provide virtually no information about the development of their business. Some owner-managed labels, including Prada, Versace and Salvatore Ferragamo, are considering going public. In view of the current situation on the financial markets, however, these plans have been postponed for the time being.

Major luxury groups 2008/2009*

(in EUR billion)
LVMH Richemont Swatch Group Polo Ralph Lauren Gucci Group Valentino Fahion Group (Hugo Boss) Herms Phillips-Van Heusen Armani Group Burberry 3.77 3.39 3.38 2.21 1.76 1.75 1.62 1.07 5.42 17.19

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

Fashion

Luxury fashion market stagnating worldwide

The worldwide market for luxury fashions has grown continuously over recent years. On behalf of Altagamma, the Italian Association of Luxury Goods Manufacturers, the Bain & Company market research institute calculated an average annual rate of growth of 4.5 percent for womens fashions and six percent for mens between 1998 and 2008. In 2008, the rate of growth declined significantly to a certain extent as a result of economic uncertainties but also due to currency fluctuations.

Luxury garments worldwide

Market volume (in EUR billion)
Women 23.5 23.6 22.0 Men 23.5 23.5

22.0

2006

2007

2008*

2006

2007

2008*

* Estimate Source: Bain & Company/Altagamma

Development of garment sales

in the retail trade* by quarters (index)
130

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 of this trend in 2008 and, in view of the crisis, it is unlikely to resume in 2009. A more positive estimate comes from the BTE trade association and its estimates show stable results for the first four months of 2009. However, this does not apply to the luxury-article segment, which has been suffering from a fall in demand from foreign customers in Germany. The most important segment for the German garment trade continues to be womens fashions. In 2007, sales in this segment climbed by around seven percent according to BTE, so that it accounted for almost half of the entire garment market. In the mens wear segment, too, sales jumped by almost five percent in 2007 so that boys and mens clothing represented approximately 25 percent of the total. The HML Index for Sales in the Specialist Trade shows the development of sales in the first four months of 2009.

120

110

100

90

92.2 89.0

80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 * In constant prices Index: 2003=100 Source: German Statistical Office (Statistisches Bundesamt)

Sales by segments Jan. - April 2009

Change over the same period last year (in %)
Womens wear
Dresses Coordinates Knitwear Trousers Blouses Outdoor jackets Blazers Coats Skirts Costumes/ trouser suits Total womens wear

Mens wear +8.8 +4.9 +4.3 +1.6

Coats Knitwear Trousers Sports jackets Shirts Outdoor jackets Suits

+4.1 +3.6 +2.2 +0.4 -0.6 -1.1 -2.0 +0.7

-0.5 -1.7 -5.2 -5.6 -6.6 -21.5 +1.2

Total mens wear

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

Fashion

German fashion industry in a difficult situation

As expected, 2008 was somewhat disappointing for the German fashion industry. According to the textil+mode and GermanFashion trade associations, there was a decline in the sales of the countrys garment manufacturers. Although based on slightly different figures, both associations registered a decrease of 3.5 percent whereby the biggest falls took place in the major segments of outerwear, knitwear and underwear. To date, this negative trend has continued into the current year, 2009. One of the main reasons for the sales difficulties of the German fashion industry is the decline in exports, which have been affected by the economic crisis since the autumn of 2008. Overall, exports of garments only remained stable in 2008 with an increase of one percent a below-average rate of growth in comparison to the German economy as a whole. In particular, exports to the EU 15 especially to important countries such as Austria, The Netherlands and France suffered from the crisis and sank significantly. On the other hand, there was an increase in exports to expanding regions such as the eastward expansion of the EU, the Asia / Pacific region and the Middle East, including the Arabian Gulf States.

Sales of the German fashion industry

(in EUR billion)
9.23 9.27 9.23 8.93

2005

2006

2007

2008

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

Export development by countries* 2008

Change over the previous year (in %)
Top 5 winners Slovakia Poland Saudi Arabia PR China Serbia Top 5 losers Estonia United Kingdom Spain Italy Finland -10.8 -12.9 -13.0 -14.3 -14.5 +26.8 +26.3 +24.7 +60.6 +76.3

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

Garment suppliers in Europe 2007

Sales (in EUR million)
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 878 850*** 1,504 1,456* 1,443 1,347 1,340 1,320 1,244** 1,200*** 1,126*** 2,147 1,956 3,250* 4,400

Luxury groups are leaders in the fashion market

In Europe, some luxury brands and corporate groups rank among the biggest garment suppliers with international groups being particularly well represented. In Germany, however, the market tends to be dominated by domestic manufacturers, such as Hugo Boss, Escada, Gerry Weber, the Ahlers Group (Baldessarini, Pierre Cardin, etc.) and F.W. Brinkmann (Bugatti, etc.).

* 2007/2008 business year ** Wholesale sales *** Estimated Source: Textilwirtschaft

Accessories

Luxury accessories successful

Over recent years, leather goods and shoes have ranked among the most successful segments in the luxury-goods market. According to calculations by Bain & Company on behalf of Altagamma, 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 segment growth was primarily driven by the top luxury brands. The demand for cheaper and upcoming brands was significantly lower.

Market for luxury accessories worldwide

Market volume (in EUR billion)
Leather goods 20 Shoes

19 17

7.0

7.6

8.2

2006

2007

2008*

2006

2007

2008*

* Estimate Source: Bain & Company/Altagamma

Leather-goods trade satisfied

Sales in the leather-goods retail trade 2008* According to BBE Retail Experts, there is a clear upwards trend in the German leather-goods market with sales having risen by ten percent from 2004 to 2008. And further growth in the small segment is predicted for the future. For 2008, the Federation of the German Leather Goods Retail Trade (Bundesverband des Deutschen Lederwaren-Einzelhandels BLE) estimates a market volume of EUR 2.1 billion. In recent years, the market trend has been towards fashion articles and leisure accessories. According to the German Leather Goods and Plastic Products Association (Bundesverband Lederwaren and Kunststofferzeugnisse BVLK), sales in the German leather-goods industry were driven by domestic demand and rose by about one percent in 2008.
By segment (in %)
Total sales in 2008: EUR 2.1 billion

Miscellaneous 25 30

Baggage

Small leather goods

10

10 Business/ school

25 Womens handbags

* Estimates Source: Federation of the German Leather Goods Retail Trade (Bundesverband des Deutschen Lederwaren-Einzelhandels BLE)

Sales development in the German shoe retail trade

By quarter years in constant prices (index)
120 117 109 108 117 112 113

Shoe trade stable

111 111 106

115

The German shoe retail trade achieved a positive result in 2008 according to figures published by the German Statistical Office (Statistisches Bundesamt). However, the Federation of the German Shoe Industry (Hauptverband der Deutschen Schuhindustrie HDS) reports a 3.6 percent decline in sales revenues for 2008, caused primarily by a low level of demand in the domestic market. By contrast, foreign sales rose slightly.

99

83 80
I 2005 II III IV

83

83

79
I 2006 II III IV I 2007 II III IV I 2008 II III IV I 2009

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

Watches and jewellery

Swiss watches lead the luxury-watch market

The most important export nations for watches are Switzerland, Hong Kong and China. Characteristic of the Asian manufacturers is the bulk business in quartz watches. In 2008, China exported around 550 million watches, the average price of which, however, was just two dollars. The price of watches from Hong Kong rose slightly to an average of eleven dollars. The quantity exported was also high at around 426 million. By contrast, Swiss watches are positioned in a completely different segment and are an institution in the international luxury market. Switzerlands watchmakers have a long tradition. They use the finest, top-grade materials and are characterised by great precision and craftsmanship, especially in the case of mechanical watches. And this is reflected in the average price per Swiss watch exported, which was EUR 563 in 2008 when Swiss watches continued their triumphal worldwide advance with an increase in both the value and quantity of watches exported, especially high-quality mechanical wristwatches. However, sales declined in the first months of 2009. As well, no export increases could be achieved in the upcoming regions of Asia.

Watch-export nations 2008 (Top 5)

Exports of watch products
by value (in USD billion)

Exports of wristwatches
by quantity (in million)

Switzerland

15.8

China

550.3

Hong Kong

7.1

Hong Kong

425.8

China

2.7

Switzerland

26.1

France

1.5

Germany

12.9

Germany

1.5

USA

6.4

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

Exports of Swiss wristwatches

by value and quantity
15.9 14.8 12.7 11.4 9.3 24.4 10.1 24.9 24.4 24.9 6.2 4.7 10.2 25.9 26.1
Value (in CHF billion) Quantity (in million)

7.7

2003

2004

2005

2006

2007

2008

Jan.-May 2008

Jan.-May 2009

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

German watch industry feeling the pinch

The German watch industry was unable to generate an increase in sales over recent years and, in 2008, they fell to just over EUR 500 million. According to the Association of the Jewellery and Watch Industry (BV Schmuck + Uhren) on the occasion of the Inhorgenta fair, developments were generally positive in the first three quarters of the year before the impact of the crisis was felt in terms of a decline in the number of orders received, as well as postponements and cancellations, especially on the export side.

Sales* of the German watch industry

(in EUR million)
627.5 581.0 541.2 501.6

2005

2006

2007

2008

* 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)

Watches and jewellery

2008 was a good year for the German jewellery industry

792.4

Development of sales of the German jewellery industry* (in EUR million)

757.6 762.5 769.1 807.0

Despite the influence of the financial and economic crisis, Germanys jewellery manufacturers were once again able to boost their sales, which rose to around EUR 807 million in 2008, an increase of approximately five percent. The Christmas business was also satisfactory in 2008. In view of the current crisis, however, the jewellery sector is taking a somewhat pessimistic view of the immediate future. Exports of jewellery from Germany were also good in 2008 and rose by eight percent to EUR 884 million. The most important importers of German jewellery were EU countries and members of EFTA (Iceland, Liechtenstein, Norway and Switzerland). The situation is different in the case of imports into Germany the bulk in terms of value is imported from outside Europe with China being a particularly important producer of costume jewellery.

2004

2005

2006

2007

2008

* 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)

Imports/exports of jewellery 2008

Share by region (in %)
EUR 884.3 million (+8.5 %)

Total exports:

EUR 774.4 million (+3.1 %)

Total imports:

Other countries 30

Other countries EU 44 61 9 EFTA 24 EU

Precious materials generate the greatest sales

Rest of Europe 6

6 20 EFTA Rest of Europe

According to an analysis by BBE Retail Experts, there is also a trend towards polarisation in this market with the most successful brands being those in the uppermost segment, e.g., belonging to LVMH and Richemont. Also successful at the other end of the spectrum are suppliers of inexpensive costume jewellery, such as Bijou Brigitte and beeline. However, this only reflects the development of the individual segments of the jewellery to a certain extent because the high price of gold and platinum means that jewellery made of these materials accounts for the biggest share in terms of sales. The demand for jewellery made of precious materials remained high at the beginning of 2009 with less but more expensive jewellery being purchased. In times of crises, investors and buyers bank on goods of lasting value and the high price of gold continues to support this trend. Silver jewellery holds a stable ten percent of sales.

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

Product groups of the German jewellery industry 2008* Share (in %)

Fancy jewellery Costume jewellery 6 Silver jewellery 10 5 Silverware 3

76 Gold and platinum jewellery

* Estimated on the basis of nine months and companies with 50 or more employees Source: Association of the Jewellery and Watch Industry (BV Schmuck + Uhren)/ German Statistical Office (Statistisches Bundesamt)

Perfumes & Cosmetics

Growth in the world market for luxury fragrances and cosmetics

Bain & Company market researchers calculated that the worldwide markets for luxury fragrances 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 of growth of five and seven percent over the years from 1998 to 2008. In this connection, perfumes and fragrances were driven, in particular, by successful product launches combined with fierce competition and massive advertising.

Market for luxury fragrances/cosmetics worldwide

Market volume (in EUR billion)
Luxury fragrances 21.0 17.0 18.0 18.4 Luxury cosmetics 21.8 22.4

2006

2007

2008*

2006

2007

2008*

* Estimate Source: Bain & Company/Altagamma

Perfumeries are optimistic

Development of perfumery sales 2008 The trade with fragrances and cosmetics in Germany announced a slight decline of less than one percent for 2008. Although the previous year started strongly, this was followed by several poor months and, in particular, a disappointing Christmas season. Nevertheless, the Perfumery Association (Parfmerieverband) is taking a cautiously optimistic view of 2009 because crises have been good for Make-up & Co in the past.
Share Change compared to previous year (in %)

Total

EUR 2.67 billion

+0.7

Decorative cosmetics Miscellaneous Face care Body care Womens fragrances Mens cosmetics

13.8% 13.4% 21.8% 6.1% 29.3% 15.8% -1.2 -0.3 +0.2 +0.6 +1.0

+2.7

Market for body-care growing

By and large, the beauty and care industry was satisfied with business in 2008. Expenditures on body-care products rose to EUR 12.6 billion. The most growth was achieved in the fields of decorative cosmetics and deodorants. According to calculations by the Association of the Body Care and Detergent Industry (Industrieverband Krperpflege- and Waschmittel IKW), Germans spent EUR 153 each on body-care products, an increase of three euros over 2007. Luxury cosmetics grew equally in 2008. According to figures published by the VKE cosmetics association, which represents around 50 German manufacturers and distributors of selective cosmetics, sales of companies with medium to high-priced cosmetics rose by 1.9 percent to EUR 1.7 billion.

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

German market for body-care products 2008

by segments (in %)
Soaps / syndets Other body-care products Deodorants 1.7 3.1 5.4 Hair-care products Bath/shower products 6.7 Mens cosmetics 7.0 24.1

Womens perfumes/ fragrances

7.7 23.2 Skin-care products 10.6 Decorative cosmetics

10.5 Dental/oral-care products

* At consumer prices Source: IKW Working Group market estimate

The future of luxury goods

The evolution of luxury

Luxury is closely connected with shortage on the one hand and desirability on the other. People are prepared to spend a lot of money on anything that fulfils both criteria, is difficult to achieve and coveted. In view of the fact that both the availability and desirability of goods and social tastes change in the course of time, the notion of luxury is subject to a constant process of change. Through developments, such as the constant growth in affluence, the collapse of traditional family structures and lifestyle diversification, luxury became an extremely heterogeneous and individual phenomenon in the second half of the 20th century. For the future, it can safely be assumed that the homogenous luxury market is a thing of the past and that the sector will be dominated by a variety of market segments, all very different in character.

Z_punkt The Foresight Company

Z_punkt The Foresight Company is a firm of consultants for strategic questions relating to the future, which has been supporting companies and public authorities in the fields of strategy, innovation and leadership since 1997. The Z_punkt consultants combine a strategic approach with the results of research into trends and the future, and help decisionmakers to cope with present-day problems without forgetting to make preparations for the future. Z_punkt works for companies in the service, high-tech and consumer-goods sectors and has great expertise and experience in various markets. Z_punkt is responsible for the chapter on the future of this market analysis. The chapter was written by Klaus Burmeister and Bjrn Theis.

Luxury trends
by the size of the individual target groups
Super luxury Connoisseur luxury Size of the consumer group Artificial shortage Immaterial luxury Niche luxury Climber luxury Democratisation of luxury
Source: Z_punkt

Facets of luxury
The trend analyses in the market concentrate on the most important of these market segments and attempt to do justice to the various facets of luxury. Characteristic of modern luxury is that it is, on the one hand, accessible to an increasingly broad range of socio-economic groups (democratisation of luxury) and, on the other hand, increasingly dependent on belonging to a specific group (niche luxury). Besides the assertive demonstration of status by those who want to document their ascent in the material world (climber luxury), there is the boundless luxury of the super-rich (super luxury). More sensitive souls, for whom this showing off is repugnant, withdraw into private worlds of luxury where intimate connoisseurship counts (connoisseur luxury). New mechanisms are being tried to create exclusiveness (artificial shortage). And, finally, there is a trend towards luxuries that are fully decoupled from goods and can only be satisfied by services (immaterial luxury).

Localisation of trends by availability and material/immaterial aspects of luxury goods

Purely material Super luxury Climber luxury Democratisation of luxury Niche luxury Extreme shortage Artificial shortage Immaterial luxury Purely immaterial
Source: Z_punkt

Connoisseur luxury

Moderate shortage

10

Advertising market

Advertising expenditures of 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 for the fashion & accessories market as defined here. This represents a drop of six percent compared to 2007. In the first half of 2009, the market grew, also by six percent. This growth is due almost solely to the clothing segment and, in particular, clothing stores, which significantly increased their advertising to a total of EUR 197 million, an increase of almost 30 percent over the same period the previous year. Most of this growth can be traced back to the Peek & Cloppenburg fashion chain, which now is close on the heels of competitor C&A. However, despite cuts of six percent, C&A remains the top advertiser in this segment with expenditures of EUR 47 million. While clothing stores spend more than half of their budgets on newspaper advertising and a quarter on television commercials, the rest of the fashion and accessories sector prefers to invest in consumer publications.

Fashion & accessories market

Development of advertising expenditures (in EUR million)
579 507 580 605 567
Mail-order trade, textiles/shoes Textile stores/department stores Range advertising, textiles/garments Corporate image advertising Leather goods & accessories Shoes Underwear & stockings Clothing

276

294

2004

2005

2006

2007

2008

1st half of 2008

1st half of 2009

Source: Nielsen Media Research (gross advertising expenditures)

Fashion & accessories media mix

1st half of 2009 by segments (in %)
Daily newspapers Consumer magazines Budget in EUR million 144.42 21.38 6.60 12.85 47.06 15.64 6.14 3.99 4.61 16.34 1 4 16 16 55 62 69 7 2 12 11 1 Cinema Trade magazines Internet 56 14 20 11 20 51 32 81 78 11 26 24 3 19 75 57 14 7 9 12 15 20 14 8 7 1 42 3 5 25 3 8 9 3 1 2 1 TV Radio Posters

Clothing stores Womens wear Mens wear Sport/leisure wear Shoes Range advertising: textiles/garments Leather goods

Hope pinned on advertising for the Christmas season?

Companies in the clocks, watches and jewellery sector boosted their expenditures on advertising for the third year running in 2008. On this occasion, however, the increase of six percent was more moderate than in previous years. Although advertising for clocks and watches especially by luxury watch makers accounts for over 60 percent of total advertising expenditures in the sector, jewellery manufacturers are catching up. In the first half of 2009, the advertising market shrank by more than 25 percent compared with the first half of 2008. Given, however, that businesses run around 40 percent of their advertising in November and December, it will not be possible to assess advertising expenditures for the year until after Christmas 2009. Around 90 per-

Underwear Textile stores/ department stores Mail-order trade, textiles/shoes

Source: Nielsen Media Research (gross advertising expenditures)

Watches & jewellery market

Development of advertising expenditures (in EUR million)
113 106 89 78 77
Miscellaneous* Jewellery Watches

44 32

2004

2005

2006

2007

2008

1st half of 2008

1st half of 2009

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

11

Advertising market

cent of 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 fact from which other media, such as posters and radio, profited in the first half of 2009.

Watches & jewellery

Development of the media-mix structure (in %)
advertising expenditures: EUR 113.24

2008

advertising expenditures: EUR 32.40 million

1st half of 2009

Trade magazines

Cosmetics sector to invest in advertising against the trend

With an advertising budget of approximately EUR 733 million (gross), the perfumes & cosmetics market once again increased its expenditures by about three percent in 2008. Expenditures fell slightly in the first half of 2009. However, the individual segments developed differently with companies increasing their advertising expenditures for face and body care especially complete series by almost 30 percent in 2008. Advertising for decorative cosmetics was also raised by eleven percent in 2008 and nine percent in the first half of 2009. With an increase in spending of over EUR 15 million (up 63 percent) in the first half of the year, care products and cosmetics are most probably responsible for the fact that overall expenditures fell only slightly. Perfumes and fragrances, the second biggest segment after face care in terms of advertising expenditures, declined in 2008 and the first half of 2009. Most companies attach great importance to advertising, especially in times of economic crisis. According to VKE cosmetics association, almost 30 percent of companies in the luxury cosmetics sector want to maintain their advertising 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 advertising in print media. However, the internet is catching up quickly and, in this connection, the sector currently faces a number of challenges in relation to advertising. Thus, following the fragmentation of the media, consumers are not only more difficult to reach but are also characterised by new patterns of consumption via new sales channels. The result a further increase in competitive pressure.

Radio Posters TV 22 1 5

Daily newspapers 20

Radio Posters Internet Daily newsTrade TV 4 1 papers magazines 2 2 4 21

69 Consumer publications

68 Consumer publications

Source: Nielsen Media Research (gross advertising expenditures)

Perfumes & cosmetics market

Development of advertising expenditures (in EUR million)
695 620 626 713 733
Sun/tanning lotions Face and body-care products Complete series, care & cosmetics Corporate image advertising, body care Decorative cosmetics Body care Face care Perfume & fragrance samples

354

346

2004

2005

2006

2007

2008

1st half of 2008

1st half of 2009

Source: Nielsen Media Research (gross advertising expenditures)

Perfumes & cosmetics media mix

1st half of 2009 by segments (in %)
Daily newspapers Consumer magazines Budget in EUR million 61.47 128.91 49.30 49.29 7.70 39.58 2.81 6.67 1 8 3 1 2 1 27 25 Cinema 3 1 1 32 36 34 30 29 1 53 1 59 2 64 32 1 67 60 11 2 12 9 7 1 Trade magazines Internet 61 61 62 13 2 3 11 TV Radio Posters

Perfumes & fragrances Face care Body care Decorative cosmetics Corporate image advertising Complete series, care and cosmetics Face/body care Sun/tanning lotions

Source: Nielsen Media Research (gross advertising expenditures)

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Communication

Exclusive target groups for exclusive products

Exclusiveness is a decisive keyword in the luxury market. By no means can everyone afford these expensive, high-quality products and thats certainly not desirable because becoming an article for the mass market would harm the aura of such brands. Therefore, advertisers in the luxury market must ensure they accurately target consumers who are receptive to their brand and who fit with its image. For the luxury market defined here, these consumers could be luxury buyers who explicitly prefer selected brands or shops. For luxury-watch makers, the very special target group of premium-watch buyers is of paramount importance. In the case of wristwatches, these buyers attach particular importance to luxury qualities the watches must be handmade or come from exclusive and famous brands.

High level of interest in luxury products

Extremely/very interested (share in %)
Luxury buyers* (5.78 million) Premium-watch buyers** (8.85 million)

46.0

32.3 27.4 22.0 17.8 11.6 21.7 27.5 26.3 20.3 26.6

33.6

Population, aged 20-69

Fashion

Trends and lifestyle

Genuine jewellery Cosmetics, (gold, diamonds, perfumes, platinum, etc.) toilet water

Wristwatches

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 brand Source: Communication Networks 12.0

Attitudes to fashion (in %)

Agree fully/ on the whole with: When it comes to fashion trends, Im always up to the minute
Population aged 20 to 69 (49.78 million) Luxury buyers* (5.78 million) Premiumwatch buyers** (8.85 million)

17 51 32 21

I like to try new clothes 33

45

Luxury buyers are keen on fashion

Buyers of luxury products are very keen on products from the fashion, lifestyle, jewellery, cosmetics and watches segments and, in the case of fashions, are particularly trend and brand conscious. No less than one in two of them keeps abreast of the latest developments. 70 percent prefer high-quality products. Moreover, they attach great importance to a smart appearance and accessories, such as bag, watch and jewellery, which are often sold as matching the garments of a given fashion brand, are simply part of this. They also tend towards well-known brands when buying cosmetics and fragrances. Premium-watch buyers are also characterised by a very great affinity to luxury. However, they are significantly less interested in fashion than luxury buyers precision timepieces are their passion. Premium-watch buyers are interested in watches for watches sake and not as part of their outfit.

I always buy clothes from the latest collection The brand is important even if other, less renowned suppliers offer the same quality at a lower price I prefer to buy one high-quality garment to two cheaper articles

11 38 21 13 46 31 31 70 49 19 41 31 20 47 37

A handbag and/or belt are important parts of my outfit Watches and jewellery are important parts of my outfit I change my watch to match the occasion and my outfit 9

27 20

I frequently buy accessories (belt, handbag, sunglasses) of the same brand as my clothing I frequently buy shoes of the same brand as my clothing

5 22 16 10 30 23

I frequently buy cosmetics/fragrances of the same brand as my clothing

7 26 19

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 brand Source: Communication Networks 12.0

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Communication

Print advertising appeals to luxury target groups

Luxury brands have to cultivate their image continuously and an important aspect of this is the choice of appropriate advertising media. Although, the two luxury-oriented target groups see advertising as being more credible than the population as a whole, there are significant differences between the individual media, parallel to the degree of receptiveness. For both luxury and for premium-watch buyers, magazine advertisements are the most persuasive with 40 percent of this target group according advertisements the highest level of credibility. Poster campaigns are also rated positively. Less well received is advertising in the electronic media, on television and, above all, in e-mails and on the internet.
33

Advertising is credible generally speaking

Applies fully/on the whole (in %)
40 33 27 20 16 16 9 10 13 14 25 39 32 23
Advertising in magazines Advertising on television Poster advertising Advertising by e-mail Advertising on the internet/online services

Population aged 20-69 (49.78 million)

Luxury buyers* (5.78 million)

Premiumwatch buyers** (8.85 million)

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 brand Source: Communication Networks 12.0

Magazine positioning

Luxury buyers*
Coverage (%) 20

15

Stern

FOCUS-BlueChip-Kombi
Der Spiegel

FOCUS
10

Established media brands score in the luxury market

Of the various groups of magazines, news, current affairs and business magazines are advertising media of interest to advertisers in the luxury market. FOCUS and FOCUS-MONEY are popular with advertisers because they offer excellent value for money and a clear target-group orientation. For target groups of importance in marketing and strategic terms, they provide extensive coverage and outstanding cost effectiveness. FOCUS is distinguished by broad coverage almost 13 percent of both the exclusive luxury buyer and premium-watch buyer target groups. And, by booking FOCUS-MONEY, the modern business magazine, in the F OCUS BlueChip combination, this coverage can be expanded even more. FOCUS and FOCUS-MONEY offer advertisers in the luxury market outstanding planning effectiveness for communicating with top target groups.

Bunte 5

Fit for Fun Capital Manager Magazin Wirtschaftswoche Cinema Gala

0 50 60 70 80 90 100

FOCUS-MONEY
110 120 130 140 150

Mens Health 160

Playboy

170

180

Cost per thousand (EUR) * Population aged 20 to 69 and agree fully/on the whole with I mainly purchase exclusive brands and/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 million

Magazine ranking

Premium-watch buyers*
Coverage in % Cost per thousand (in EUR)

FOCUS Stern Der Spiegel Guter Rat Wirtschaftswoche FOCUS-MONEY Capital Manager Magazin Fit for Fun Neon Playboy Cinema FOCUS-BlueChip-Kombi

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

43 44 48 69 79 92 97 100 103 109 112 117 47

* Population aged 20 to 69 and as purchasing criteria for a wristwatch: handmade and/or exclusive 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

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Your contacts

Address FOCUS Magazin Verlag GmbH PO Box 81 03 07; D-81903 Munich Arabellastrae 23; D-81925 Munich Managing Directors Helmut Markwort Frank-Michael Mller Advertising Director Ingo Mller (+49) 89 92 50-23 43 Alexander Kirschner (Deputy) -20 60 Senior Advertising Manager Michael Mergenthal -20 76 Fax -24 94 E-Mail michael.mergenthal@focus.de Assistant Aynur Civelek Fax E-Mail -24 39 -20 61 anzeigen@focus.de

Burda Community Network GmbH Service Manager Journal Design & Placement Marlene Gunesch (+49) 89 92 50-29 51 Fax -29 52 E-Mail marlene.gunesch@burda.com

Representations abroad
Asia (except India, Japan) Charlton DSilva Publicitas Australia Level 9 215-217 Clarence Street Sydney NSW 2000, Australia Phone (+61) 2 9252 3476 Fax (+61) 2 9252 2022 E-Mail charlton.dsilva@publicitas.com Austria Helmut Weginger Anzeigenreprsentanz Max Schrems-Gasse 5/3/9 A-2345 Brunn am Gebirge Phone (+43) 22 36 32 00 68 Fax (+43) 22 36 32 00 72 E-Mail office@weginger-media.at Belgium Peter Landsheere Publicitas NV Airway Park D; Lozenberg 23 BE-1932 Zaventem Phone (+32) 2 6 39 84 32 Fax (+32) 2 6 39 84 44 E-Mail peter.landsheere@publicitas.com France/Luxembourg Olivier Berton Burda Community Network International Business Centre Opera-Bourse 13-15 rue Taitbout F-75009 Paris Phone (+33) 1 72 71 25 24 Fax (+33) 1 72 71 25 99 E-Mail olivier.berton@burda.com Great Britain Meike Brunkhorst factor-m Unit 102, Canalot Studios, 222 Kensal Road; GB-London W10 5BN Phone (+44) 20 89 64 52 22 Fax (+44) 20 80 43 14 21 E-Mail meike@factor-m.co.uk Greece/Cyprus Christina Skiada Permedia Athens S. A. 4, Kastorias & Messinias Street GR-15344 Gerakas Phone (+30) 21 11 06 03 50 Fax (+30) 21 06 61 84 57 E-Mail info@permedia.gr India Vimal Anand Global Media Network M-138, Greater Kailash IN-New Delhi 110048 Phone (+91) 11 416 38 077 Fax (+91) 11 292 10 993 E-Mail info@gmnindia.net Italy Robert Schoenmaker Lagardre Global Advertising c/o Hachette Rusconi Viale Sarca, 235 I-20126 Milano Phone (+39) 02 62 69 44 41 Fax (+39) 02 62 69 00 10 E-Mail robert@l-g-a.it Italy Tourism Marina Funedda Verlags- und Werbeagentur Bianco Media Service Gampenstrasse 97/n I-39012 Meran Phone (+39) 04 73 20 06 64 Fax (+39) 04 73 20 92 87 E-Mail office@touristikpromotion.com Japan Jiro Semba Intergroup Communications, Ltd. 1-4-16-102 Zaimokuza J-Kamakura 248-0013 Phone (+81) 4 67 25 27 63 Fax (+81) 4 67 25 28 37 E-Mail jiro.semba@bz01.plala.or.jp Netherlands Peter Landsheere Publicitas BV Mercurius Building, 8th Floor Herikerbergweg 175 NL-1101 CN Amsterdam Zuid-Oost Phone (+31) 20 311 97 10 Fax (+31) 20 363 28 23 E-Mail peter.landsheere@publicitas.com Scandinavia Kai von Borck Mandel Marketing & Strategy Consulting Plan 6 Sveavgen 66 SE-11134 Stockholm Phone (+46) 8 50 31 31 35 Fax (+46) 8 22 20 22 E-Mail kvb@mandel-media.com Spain/Portugal Alfredo Umlauff SUA Comunicacin y Medios S. L. Jan, 2 1G E-28020 Madrid Phone (+34) 9 15 35 80 02 Fax (+34) 9 15 35 80 19 E-Mail aumlauff@suacom.com Switzerland Robert Langenberger Burda Community Network International Balz-Zimmermann-Str. 7 CH-8302 Kloten Phone (+41) 44 81 02 146 Fax (+41) 44 81 02 152 E-Mail robert.langenberger@burda.com USA/Canada Salvatore Zammuto BCN International GmbH 9035 Bluffview Trace Roswell, GA 30076, USA Phone (+1) 770 650 4824 Fax (+1) 770 650 9036 E-Mail salvatore.zammuto@burda.com

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