The document summarizes the findings of a survey on the luxury fashion market in the UK. It finds that most businesses reported increased turnover and profits in 2011 compared to 2010. International sales contribute significantly to growth, though most businesses reported less than 30% of sales coming from overseas. Western Europe is currently the top performing international market, though China and other regions show potential. Most businesses expect further international expansion and sales growth in the coming years.

1. The
Compiled by
ANA
SANTI
Illustrations by
NATHALIE LEES
Luxury
Report
SPONSORED BY

2. Introduction I Luxury report
Sponsored by
‘We ask how the luxury market is
faring and what the future holds’
_ Ana Santi
T
he fashion industry has had market? We decided to find out by launching
its fair share of ups and Drapers’ first in-depth report into the sector.
downs since the global In September, we compiled a survey and asked
recession of 2008, but for businesses in the luxury fashion market – including
the luxury fashion sector, boutiques, brands, etailers, department stores,
the ‘downs’ have been few multiples and agents – to tell us how they’re faring
and far between. The today and their expectations for the future. Over the
mainstream market looked on with envy as next 14 pages, we analyse these findings across
profits in the luxury sector soared and huge, different business segments, from ecommerce and
shiny flagships opened as quickly as those in the social media to tourism, international retailing and
Drapers / November 17 2012 _ 25
mid-market closed. distribution and buying strategies.
Luxury fashion seemed invincible, but then Further in-depth analysis also comes from
Burberry posted a profit warning in September. Guy Salter, deputy chairman of Walpole, the
Warning bells began to ring as China – the darling membership group for the British luxury industry,
of growth for luxury – saw growth in its economy whose insights help to interpret our findings.
slow. So what does this mean for the UK luxury Ana Santi, deputy editor, Drapers
‘It’s vital to know your customers
and how they identify with you’
_ Robert McKee
I
nfor is proud to sponsor Drapers’ By its very nature, couture will remain the
Luxury Report. In the constantly seductress for luxury fashion. Much of luxury
evolving world of fashion fashion still manufactures many of its own
it is essential to know your customers products but, as their product lines have evolved,
and understand how they identify many are now sourcing globally.
with you. Brand identity must be Infor is no stranger to the luxury goods market.
ingrained in the entire production Our first luxury goods customer was signed in
process, from initial design to shop-floor delivery 1992 and they are still with us today. For more
to meet the ever-demanding expectations of than 18 years, we have helped more than 1,100
luxury consumers. fashion companies in 194 countries improve
Luxury was founded with the model ‘seduce their processes to become more efficient and
the customer, control the supply chain’. While this competitive. But why do four of the top 10 luxury
model is still intact today, we find that many in the fashion companies use us? Because we
luxury sector have found success using a model understand every business’s individual needs and
that relies on ‘listen-react-respond to the tailor our products accordingly.
customer and collaborate with the supply chain’. Robert McKee, director, fashion industry strategy, Infor

3. luxury report I the current outlook
Luxury S
ince the global recession of
2008, one sector of the fashion
industry has appeared, perhaps
unsurprisingly, to weather the
storm. While the mid-market
lifestyle
began to witness plummeting
sales and business closures,
the luxury sector boomed.
But then, this September, UK luxury fashion
bellwether Burberry posted a profit warning.
Admittedly, investors breathed a sigh of relief
this month, as Burberry reported an 8%
increase in revenues for the first half, but
pre-tax profits dropped almost 30% due to
a one-off payment to end its fragrance and
Drapers finds out how the luxury fashion sector beauty licence.
Yet last month, global consultancy Bain &
is faring and its expectations for the future Company released its annual Luxury Goods
Worldwide Market Study showing a slowdown
in luxury goods sales. According to the report,
Words by ANA SANTI Illustrations by NATHALIE LEES the value of the total luxury goods market is
expected to rise by 5% at constant exchange
rates to €212bn (£170bn) this year, compared
Drapers / november 17 2012 _ 26
with an increase of 13% last year.
In the same week, LVMH – the largest luxury
goods group by sales – said organic sales growth
in the third quarter had fallen to 6%, compared
Was your turnover
with 15% growth in the same period last year.
for 2011 up or Mulberry soon followed, also posting a profit
down on 2010? warning, which took almost one third off its
market value.
Down
14.9%
On average, by
how much did
Up turnover increase?
85.1% 23.2%
On average, how
much did your
profits increase?
Was your profit for 2011
up or down on 2010?
Down 22.6%
18.5%
If you have bricks-and-mortar stores, how many
do you expect to have by the end of 2013?
6.3%
60.9% 32.8% Up 77.4%
Same More Fewer
100%
of department stores
said turnover was up
in 2011 against 2010

4. Sponsored by
So, should the luxury sector in the UK be In terms of investment in 2012, 54.1%
worried? Our survey found a healthy industry, of respondents (the highest percentage) / Industry View /
confident of further growth in the next year. invested in their staff, with 51.4% also ‘Luxury ecommerce
But few businesses were complacent. There
was an air of caution, with the majority not
investing in digital marketing and the same
figure investing in new products and brands.
will continue to grow’
expecting the economy to pick up until the Digital marketing topped the investment list Guy Salter
end of 2014. for brands. For multiple retailers, staff and
While that overview paints a good picture of digital marketing were most important, while It seems counterintuitive to those outside the
the state of the overall luxury fashion market in department stores ploughed money into staff, industry that the luxury sector has experienced
the UK, the most interesting nuggets lie in the new brands and digital marketing. strong growth despite the challenging
details of our survey. Some 85.1% of economic environment. This resilience hasn’t
respondents said their turnover was up in 2011 Looking ahead, 92% and 89% of businesses surprised me but the level of performance has.
against 2010 and 77.4% echoed the sentiment expect turnover and profits to rise respectively Conditions have worsened recently, so we
in terms of profits. Splitting this down further, over the next year. Luxury brands forecast must be ready for a tougher ride but I remain
department stores and pure-play etailers turnover to increase by an average of 27%, sure our business model is well suited to
came out on top, with 100% of respondents while indies expect a 15% rise. continue to benefit from the type and pattern
in each segment recording a rise in turnover Optimism is clearly in the air and, over of affluent spending.
over the same period. For brands, the number the next few pages, we look at how luxury The luxury department stores and the pure-
was 90% and for indies it was 73%. On businesses hope to fulfil these ambitions. play luxury etailers have held up particularly
average, turnover increased by 23.2% and well. Those department stores who strain every
profit by 18.5% across all segments. sinew to keep maximum freshness, product
Luca Solca, senior luxury goods analyst at Do you expect profits to rise next year? variety, exceptional in-store experience and
investment company Exane BNP Paribas,
Drapers / november 17 2012 _ 27
service will remain appealing to the luxury
is not surprised that independent boutiques, consumer and international tourists.
which had a good year nonetheless, didn’t It’s good to see that businesses have
fare as well as department stores and brands continued to invest in their online presence and
last year. “Brands are integrating their Yes
digital marketing, although it would have been
89%
distribution more and more, particularly shortsighted not to do so, as luxury brands’
with mono-brand stores. The traditional ability to produce high-quality content gives
independent has less of a role to play and them an advantage. Luxury ecommerce will
they find it harder to finance their businesses,” continue to grow for those that offer a truly
No
11%
he explains. “And department stores are integrated customer experience. Few are now.
performing more of a selection function. Look Simple things like user experience, navigation
at Liberty – it has come up with an interesting and checkout could be much improved.
selection of brands and products, with nicher Deputy chairman, Walpole
brands and designers to offer consumers
something different. Luxury consumers are
What did you invest in this year?
keen to find novelty. They’re paying more
attention to their spend, to differentiation
New EPoS system Opening stores
and distinction.”
The average
increase in profit
16.2% 27%
of multiples was
Do you expect turnover to rise next year? 28% Digital marketing M-commerce
Yes 51.4% 16.2%
92% Union Pay Personal / VIP shopping
Indies expect
turnover to rise
16.2% 27%
by an average of
15%
in the next year
Interiors / shopfit Staff
48.6% 54.1%
Mandarin speakers CRM systems
No
8% 16.2% 29.7%
New products / brands Paying down debt
51.4% 27%

5. luxury report I going global
Sponsored by
Do you sell
internationally?
No 18.2%
Yes
81.8%
If you sell
internationally is it via:
A website 85.7%
A licensing agreement 17.9%
An agent 14.3%
Own international stores 7.9%
Multi-brand retailer 10.7%
What percentage of your business
is from international sales?
Less than 10% 37%
10%-20% 18.5%
21%-30% 7.4%
31%-40% 7.4%
41%-50% 3.7%
51%-60% 11.2%
61%-70% 7.4%
71%-80% 7.4%
81%-90% 0%
Drapers / NOVEMBER 17 2012 _ 28
91%-100% 0%
What percentage of your sales
in the UK come from tourists?
41%-50% More
5% than 50%
10%
Less than 10%
31%-40%
10% 30%
40%
of department stores
21%-30%
5%
sell internationally
via their website
10%-20%
40%

6. International
exchange Luxury businesses are looking overseas for growth
Drapers / NOVEMBER 17 2012 _ 29
Words by ANA SANTI Illustrations by NATHALIE LEES
W 32%
hen Burberry merchandise making its way into all the markets
posted its profit globally. Are luxury brands doing all they can
warning in of indies sell
to combat this dilution to both brand equity and
September, the internationally revenue? It would seem that a key to combatting
brand blamed via their website luxury counterfeiting comes through the use of
in part the technology to verify product pedigree. From
44%
slowdown in the serialisation to the use of embedded RFID
Chinese economy. Bain & Company’s annual [radio-frequency identification] through the
report also attributed the decline in growth of of respondents entire supply chain – from concept to consumer
the luxury goods market to Chinese consumers said Western – the products and all their components have
spending less at home and giving fewer gifts. Europe is their to be traceable throughout the value chain.”
best-performing
Clearly, luxury businesses have been relying Of those who sell to international markets,
international market
heavily on thriving international markets, 85.7% do so via a website. Other methods such
100%
notably China, to drive overall growth. as licensing agreements, via multi-brand stores
In the UK, according to our survey’s and own stores, remain relatively low, with
respondents, international sales will continue less than 20% of respondents choosing
to be important to overall growth, but these of multiples sell each model, thereby highlighting potential
internationally; 82%
businesses have far from saturated their sales via a website; 36%
new sales channels.
opportunities abroad. Although 81.8% of via their own bricks-
respondents sell to international markets, and-mortar stores Drilling into these numbers, we found
37% of businesses (the highest percentage) that 57% of brands and all multiple retailers
said less than 10% of their turnover comes from sell to international markets, and 32% of indies
international sales, with 18.5% (the second do so. Andrew Robb, chief operating officer at
highest percentage) claiming international sales Farfetch.com, which facilitates independent
make up between 10% and 20% of turnover. retailers’ online businesses, says 32% is actually
“The luxury sector has seen solid growth in quite high. “It’s really difficult for independents
economically emerging Asia with the rapid to sell online internationally because they have
evolution of the Chinese and other economies,” to deal with the complexities of pricing, returns
says Robert McKee, director, fashion industry and marketing,” he explains. “To be both a great
strategy at Infor. “The recent slowing in the rate online and offline retailer you need to invest, but
of that rapid economic evolution will have an most boutiques are small. Matches and Browns
obvious impact on that rate of growth – but it have put serious online teams in place and
doesn’t have to impact profitability. Of equal investment. But if you don’t have an online
concern has to be the dilution of luxury brand channel, you’ll suffer. The boutiques that do it
equity stemming from counterfeit luxury well will be fewer [in the future]. It comes down u

7. luxury report I going global
to the owners having a passion and intuitive
understanding of the online space, and in
particular, online marketing. You need massive
international appeal.”
In terms of specific international territories,
Western Europe gets the top spot, with 44% of
46%
respondents saying it was their best-performing Which are your best-performing
market. The US topped the list for 36% of international markets?
businesses. Other territories were more balanced,
with 28% placing China fourth in the rankings,
of respondents said the majority
of tourists come from China while
Western Europe
the same percentage putting Brazil in fifth place 18% of multiples said this
31% said Western Europe was the
was their number one market
while 36% said Australia was their eighth second biggest tourist group
best-performing market.
Looking ahead, 60% of businesses expect
the above mix to change over the next five years.
What is interesting from the results is the way
that different territories will, on the whole, be on
a more level playing field. For example, Western
Europe is still predicted to be the number one second biggest tourist group. Further down the make shopping a priority when travelling.
international market for the respondents, but only list, 23% said Russians were at number six and Products are becoming more diversified and
30%, rather than 44%, believe so. There could be 46% said Brazilians were ranked seventh. the demand for high-end, luxury products
Drapers / NOVEMBER 17 2012 _ 30
two reasons for this. Either the respondents are “Non-EU international spend in the UK has and tailor-made services is increasing among
simply unsure or, as growth in emerging markets shown continual growth year on year – with China international shoppers. Due to the tax refund
slows, businesses are more reluctant to put all leading this growth, reporting spend increases policy and exchange rate, many European luxury
their eggs in one Chinese basket and are, instead, of 29% year on year between January and products are estimated to be up to 20% to 30%
spreading themselves across territories depending September,” says Richard Brown, vice-president lower than in their home nations, and often
on their business type and those territories’ of tax-free shopping operator Global Blue UK. overseas tourists will still choose to buy an item
different demographics. Having said that, 53% “Europe is seen as the world’s leading destination from London, even if it is available in their home
of respondents said China is having the biggest for luxury shopping, especially among those who country, so that they are able to talk about buying
impact on the global fashion industry, followed it from a famous London store.”
(far behind) by the US at 13%.
China also leads the way in tourism – 40% of / Industry View / Brown adds that China and the Middle
businesses said between 10% and 20% of their ‘Luxury attracts East remain the top international spenders,
sales in the UK come from tourists, with 46% of representing 54% of all international non-EU
businesses ranking the Chinese top of their tourist
a global clientele’ spend. “Chinese spend has seen steady year-on-
table. 31% said Western Europeans were their Guy Salter year increases. However, it is the Middle Eastern
nations who have seen the most substantial
I am surprised that of the businesses surveyed, increases – 50% year on year in September,
40% of them noted that only 10% to 20% of with some individual transactions exceeding
China
the country
their UK sales came from tourists and that 37%
said international sales made up less than 10%
£1m,” says Brown.
He believes that the top international
of their turnover. I would expect those figures spenders are unlikely to change dramatically
impacting most
on the global to be higher, with tourists and international in the next few years, but adds that Global Blue
fashion sector sales accounting for a much bigger percentage has seen significant increases in spend from
at the moment of overall sales of the UK luxury businesses Nigerian and Indonesian visitors. “These two
surveyed. But a factor in this could be the countries, which account for only 9% of the
30%
different trading patterns experienced in total non-EU spend, have shown enormous
2012 with the Jubilee and the Olympics. year-on-year growth in September compared
of brands Luxury is a global business attracting with last year – Indonesia at 54% and Nigeria
said they a global clientele. Perhaps some UK luxury at 32%,” says Brown. “For Nigerians, London
didn’t expect
more sales
brands need to work harder to become more has become a top shopping destination, with
to come from commercial and more relevant in certain many visiting to purchase UK items cheaper
tourists in key overseas markets. Likewise all brands are than imported and sold in their native Lagos,
the next year now looking seriously at how to get better and Nigerian men particularly enjoy getting
at attracting and selling to affluent visitors. suited and booted in UK designer brands.
I am not surprised that the Chinese are “Nigeria is forecast to become Africa’s biggest
ranked top of the tourist table and we economy by next year. Meanwhile, Indonesia is
are working closely with the Government only in the 15 top international spenders in the
to help further increase Chinese visitor UK, and only 1% of the population are able to
numbers to the UK. travel for holiday or business reasons, but their
Deputy chairman, Walpole September average monthly sales are comparable
to China and the Middle East.”

8. Sponsored by
What percentage of
your total turnover
55%
comes from wholesale?
What percentage of your
turnover do you expect
wholesale to contribute
over the next five years?
39.5%
“The wholesale model does not have
enough margin. Only a few established
wholesalers will survive – those who are
able to review their business and approach
to consumers, including investments in
e-business, to become more internationally
known,” said one respondent
Doing it for
themselves
With sales from wholesale divisions expected to continue to
decline over the next five years, brands in the luxury
sector are turning their attention to retail
Words by ANA SANTI Illustrations by NATHALIE LEES

9. 19%
of brands are
producing more
collections than
46% 27%
a year ago
of respondents said
of respondents said womenswear
accessories sales were
sales were up between 10% and
up between 10% and 20%
20% compared with a year ago
compared with last year
50%
of footwear sales were up between
1% and 10% compared with a year ago
O
ver the past few years, brands are taking steps to manage their own Hudson Walker International. “Nobody used
we’ve seen many luxury distribution. But brands have to be prepared to talk heavily about sales [in the luxury sector]
brands report stronger to invest more capital back into their business to but brands are developing much more aggressive
sales from their retail, finance directly-operated stores, for example.” business models with underlying sales ethics. It’s
rather than wholesale, He also expects fewer independent boutiques a very sales-driven environment now with more
divisions and, as a result, to enter the market. “The more sophisticated commercially-oriented roles.”
have focused their efforts boutiques will become masters of selection,
on growing the former. The luxury brands in a smaller scale to department stores.” As for buying strategies among retailers,
surveyed said 55% of sales come from their This shift is also affecting the skillset among forward order remains the norm, representing
wholesale channel but, over the next five years, luxury professionals, says Mathew Dixon, 62% of total budget. But in the next year, this
they expect wholesale to make up less than director at luxury recruitment consultancy is expected to contribute to more than half of
half of total turnover – 39.5%. Respondents buyers’ budgets – 53%. Respondents listed
explained the reason for this predicted change, the following as their best-selling brands (in no
with one saying “the wholesale model does not / Industry View / particular order): Vivienne Westwood, J Brand,
have enough margin”. Another added: “The ‘Wholesale is Equipment, Isabel Marant, Alexander McQueen,
wholesale segment is falling down. Only a few
established wholesalers will survive, those who
tougher than ever’ Stella McCartney, Diane von Furstenberg, Louis
Vuitton, Rick Owens and By Malene Birger.
are able to review their business and approach Guy Salter Looking at specific markets, sales were
to consumers, including investments in generally up on a year ago for the majority
e-business, to become more internationally Wholesale will always be with us but it is of respondents – 89% – across womenswear,
known.” One respondent simply said this is tougher than ever. It’s not just the squeeze menswear, kidswear, accessories, footwear and
now the “rule of thumb”. on margins but the lack of control. There is a lingerie. Only 10% of respondents said sales
trend towards getting out of accounts that are were down in womenswear, kidswear, footwear
As investment firm Exane BNP paribas’ either too accessible or don’t present the right and lingerie, with menswear and accessories
Luca Solca says: “If wholesale isn’t dead, then it’s environment for luxury, even if that means showing a clean sheet. 25% of respondents
severely damaged.” Solca explains that industry- taking a short-term hit on revenues. said menswear sales were up between 10%
wide, deep discounting over the past few years The strength of menswear and accessories and 20%. Meanwhile, 50% said footwear
has led brands with a traditional wholesale model isn’t a surprise and in my view is based on sales had increased between 0% and 10%,
to become more protective and take more control underlying strong fundamentals. and 46% said womenswear sales had risen
of all elements of their business, from pricing, Deputy chairman, Walpole by between 10% and 20%, while 27% said
to marketing and distribution. “The strongest accessories had seen the same increase. u

10. luxury report I buying & distribution
60%
of etailers’ budgets
go on forward order
Forward order is
expected to make up
Manufacturing case study Honey Clothing 53%
of total buying
Mahbub Ullah, accounts manager
Drapers / november 17 2012 _ 34
budget in the
next 12 months
Customers high-end brands are motivated high street London-based
Christopher Kane, making some of their brands and designers. manufacturers are
Paul Smith, Preen, lines here in the UK Consumers are competing with
Roland Mouret and we are benefiting. more aware of where established
I think the luxury their clothes are being manufacturers from
As a Sedex-certified sector has traded made and they are France and Italy.
[an ethical and better than the rest willing to pay extra if Established British
responsible supply of the fashion market made well in an ethical designers are also
chain standards body] [in the economic working environment choosing to bring back
premium outerwear downturn]. in this country. their production from
manufacturer, trading The British Fashion We’re experiencing continental Europe to
is relatively sound Council has better demand for high- this country. As long as
and improving every organised London quality pure wool, and we can keep up the
year. More and more Fashion Week in recent specialised leather is quality, the demand
British designers and years, which has growing each year. will grow further.
Manufacturing case study Johnstons of Elgin
James Dracup, group managing director
Customers Burberry, which affected our China, which, although Next year I expect
Chanel, Hermès customers. slowing down, will continued growth
Trading is tough. A
A slowdown in
developing markets
continue to grow.
Both private-label
with private-label
couture and luxury 46%
of womenswear sales were
mild winter in 2011 left is also affecting our supply to global brands, and a more
up between 10% and 20%
our customers with global luxury clients. brands and the effective sales effort compared with a year ago
too much inventory in The luxury sector development of from our own
50%
our product categories has traded better than our own-brand offer company in the
resulting in small the wider market, with independent Scottish tourist market,
orders for 2012. The however, it has slowed wholesale customers the wider market and of footwear sales were
Olympics, weather in terms of growth and via our own retail particularly the US. up between 0.1% and 10%
compared with last year
and a less competitive potential compared has driven growth. We intend to grow
currency in relation to with two years ago. Menswear is our export sales from
the eurozone all
impacted on tourist
Opportunity still exists
in markets such as
particularly strong as
is the local Scottish
the current 25%
turnover to more
27%
of respondents said
travel in August 2012, Brazil, India, Russia and tourist market. than 30%. accessories sales were
up 10%-20% on last year

11. Sponsored by
How is your buying
budget split?
Forward order
61.67%
Closer to and in-season Manufacturing case study
16.88% Harris Tweed
Malcolm Campbell, sales
Resort / pre-collections and marketing director
16.88%
for the Carloway Mill
Customers Brooks Brothers, Chanel, Saks
House brands
51.67% Trading is currently very good. We are sampling
well for autumn 13, and our top-end customers
appreciate the marketing and images we have
Own brands
created to promote the history and provenance
40.83% of Harris Tweed.
We believe the luxury sector has traded
well because clients seek quality and products
that last. Price deflation over the past 20 years
has created a disposable product, which is
58%
no longer acceptable. Our customers want
a product that is robust and fit for purpose,
and they are prepared to pay for it.
Drapers / november 17 2012 _ 35
of respondents said menswear We have also developed two new finishes
sales were up between 0% and
working with WT Johnson textile finishers of
10% while 25% said they were
up between 10% and 20% Huddersfield. The new finishes and creative
colours and designs will drive sales.
Demand in the UK luxury sector is less strong
than in other countries such as Japan, the US
and Europe, probably because the UK high
street brands over the years have driven the
price of Harris Tweed down, so it does not
reflect the artisan processes of carding,
What is your spinning, hand-loom weaving and finishing
best-selling brand? that the luxury market tends to respect,
appreciate and pay for.
Alexander McQueen
By Malene Birger
Diane von Furstenberg
Equipment
Isabel Marant
J Brand Manufacturing case study
Louis Vuitton
Rick Owens
Alfred Brown
Stella McCartney Ian Brown, joint managing director
Vivienne Westwood
Customers hold up better than strong, especially
Aquascutum, Jaeger, the middle market. slightly bolder colours.
Paul Smith Fabric woven in Next year, I expect
Britain is still strong traditional English
Trade is very good. and this plays into fabrics, with a modern
We think people the luxury market. twist, to drive sales.
are buying less but The biggest driver I think the Jubilee
spending more on is the fact that all our and Olympics have
individual items, fabrics are woven in given us a belief in
which is helpful to Britain and some of ourselves as a nation
us, because being this sentiment is and this encouraged
a European weaver beginning to show the demand for British
we will always be at in the womenswear manufacturing and
the luxury end. market, which is goods. We have had a
In difficult growing for us. good year and we will
economic climates, Our biggest market be pleased if we can
the luxury and bottom though is menswear – maintain this growth
ends of the market semi-plain fabrics are in the year to come.

12. luxury report I social media
The move to What proportion of your business is online?
multichannel
None 15.8%
0.1%–20% 32.9%
21%–40% 22.4%
41%–60% 14.5%
61%–80% 6.6%
100% 7.8%
Investing in online, particularly social media platforms,
is key for retailers’ growth in the luxury sector
Words by ANA SANTI Illustrations by NATHALIE LEES
W
ith digital their game though, with only 57% of brands
marketing listed and 45% of indies on Twitter. 57% of brands / Industry View /
high among the have a Facebook page, while 41% of indies do so. ‘It’s a powerful way
Drapers / november 17 2012 _ 36
different areas
of business that Newman believes social media offers the
to build consumers’
respondents biggest opportunities to brands “because they Guy Salter
invested in for have a stronger relationship with the end
2012, it comes as no surprise that the internet, consumer, it’s about how you leverage social Social is a hugely influential communications
and social media in particular, are crucial to the media and create a community,” he says. “I channel. A lot of luxury brands are reticent
growth of the luxury sector. question the traction of Google+, but if a brand about engaging with their consumers via social
Almost 33% said up to a fifth of their business isn’t on Pinterest, it’s missing out. Pinterest media, as it can be difficult to retain control. But
comes from online sales, while 22% said online seems to have the highest level of engagement if harnessed in the right way, it is a powerful and
sales account for between 21% and 40% of where the engagement is very product-focused. effective way to build a brand’s consumer base,
turnover. More than 90% expect online sales to Facebook is harder – people are engaging with generating customer engagement and loyalty,
account for even more of their total turnover in friends and family on it.” attracting visitors to online stores and driving
the next 12 months, with 56% citing online sales Infor’s Robert McKee agrees: “Today, sales. Everyone is still learning.
as the biggest growth area for their business. Any Facebook is a community – a very successful Deputy chairman, Walpole
reservations that luxury brands had about selling community – but luxury fashion companies
their collections online have disappeared, with have the ability to create their own communities.
100% of respondents unconcerned about their Brand loyalty in mainstream fashion is very much Do you have a presence on any of the following?
products being sold on a stockist’s website rather ‘easy come, easy go’, but luxury fashion enjoys
than a bricks-and-mortar store. a prestige factor that is not afforded to the
Twitter 97.1%
Martin Newman, chief executive of ecommerce mainstream. Whether it’s brand loyalty or
consultancy Practicology, says these figures are conspicuous consumption, the merchandise
encouraging and expects bigger growth for the is sought-after. This brand loyalty represents Facebook 94.3%
luxury sector from online sales. “The [businesses] a group of people with like interests – or – a
who take that leap are the ones that link their community. Luxury companies need to begin Pinterest 57.1%
multichannel functions, and I’d say department building their own online social communities
stores [have a better chance] because they have a around this brand loyalty. Listen to your Instagram 37.1%
broader product proposition,” he says. communities. From colour palettes to silhouettes,
Mark Henderson, chairman of the London your community has an opinion and they’re Google+ 37.1%
Luxury Quarter and non-executive chairman of anxious to share that with you.”
British tailor Gieves & Hawkes, says click-and- Most businesses – 97.1% – use social media
collect is a “phenomenal” opportunity for luxury for brand awareness, which topped the list
brands: “The majority of luxury purchases are above marketing in second place, customer
pre-considered and that is an enormous service in third place and sales ranked last.
opportunity for luxury retailers, certainly It is encouraging to see that 68.6% of
the [‘collect’] opportunity because shopping respondents have a daily presence on social
is an experience of temptation.” media, with 8.6% using different platforms
Luxury brands have embraced social media “more than 10 times a day”. With the purpose
– 97.1% are on Twitter; 94.3% on Facebook; of social media being instant and regular
57.1% on Pinterest and 37.1% on both Instagram engagement with customers, a strong presence
and Google+. Brands and indies need to step up on these sites is a must.

13. Sponsored by
Do you expect your online business
to grow in the next 12 months?
Does selling your Yes
No
Yes
6.6%
93.4%
collections via a
stockist’s website 0%
(by 1%–10%) 39.5% rather than a bricks-
(by 11%–25% ) 25% and-mortar store
(by 26%–50%) 10.5%
%
00
concern you?
(by more than 50%) 15.8% No
Not applicable 2.6%
1
40% 27%
of indies have a
of department daily presence on
stores have a daily the main social
presence on media channels
the main social
media channels
48%
82%
of multiples have
of brands have
a daily presence
a daily presence on the main social
on the main social media channels
media channels
How active are you on the main social media sites?
More than 10 times a day 8.6%
Daily 68.6%
Several times a week 5.7%
Weekly 8.6%
Several times a month 0%
Monthly 5.7%
Less often 2.8%
Do you have any
of the following?
What do you use the main social media channels for? An app 41.2%
A mobile- 76.5%
optimised site
Sales Brand awareness
Use of QR codes 35.3%
45.7% 97.1%
Customer service Marketing 9%
62.9% 77.1% of indies have an app,
mobile-optimised site
and use QR codes

14. Brands expect
online sales to
be the biggest
growth driver
next year
36%
of multiples believe
the economy will
pick up from 2014 Are you confident about
onwards, while 15% business over the next 12 months?
believe the economy
will pick up at the Not at all. 0%
end of next year I am worried my
business might fail
Not really. I think 13.6%
it’s going to be tough Outside London,
which are the other
I think things will 23.7% hot spots in the UK?
remain the same
Manchester
I am quite confident 30.5% Liverpool
trade will begin to pick up Birmingham
Leeds
I am confident my 27.1% Oxford
business will grow Cambridge
Bicester Village
Very. Things are 5.1%
going really well
When do you believe the
economy will start to pick up?
Start of 2013 14.8%
End of 2013 18.5%
Not until 2014 25.9%
Not until 2015 25.9%
Not until 2018 14.9%
International
What is the biggest growth
and online area of your business?
expansion
55.6%
Online
are two of
the most
popular areas
of growth for
27.8%
International
multiples
38.9%
Sales in store

15. future prospects I luxury report
Sponsored by
Great
expectations
While few expect the economic gloom to lift in the near future, many in the
luxury sector are optimistic that their business will continue to grow
Drapers / november 17 2012 _ 39
Words by ANA SANTI Illustrations by NATHALIE LEES
D
espite respondents’ earlier Henderson cites Harrods as a great example side by side. The future looks pretty good. I am
comments that they expect of the type of business that will lead growth in hugely optimistic.”
turnover and profit to grow the luxury sector. “We seem to have particularly
next year, 25.9% (the joint good department stores in this country. Harrods For Infor’s Robert McKee, the success of the
highest percentage) do not is an outstanding business, and [managing luxury sector lies in its analysis of information.
expect the economy to pick director] Michael Ward is a genius,” he says. “At the core is business intelligence, pulling in
up until 2014, while the “It’s a fabulous experience of temptation as information from different sources. The luxury
same number think it will be even later – not until you can move from one brand to another. industry is much more right-brained, therefore
2015. Meanwhile, 18.5% believe there could be Equally, walking into the Louis Vuitton store it has a great deal of difficulty in intellectualising
some improvement by the end of next year, while is not the same as walking into the Louis Vuitton its business models. Luxury often makes money
the optimistic few – nearly 15% – think it could concession. I think they [department stores in spite of itself, because of its prestige, but the
be early in the new year. and own-brand stores] live incredibly comfortably luxury sector has huge potential, even beyond
Over the next 12 months, 30.5% are “quite its current results; it needs to be more technology-
confident” that trade will pick up, with 27.1% attuned,” he explains. “Too much emphasis is
“confident” that their business will grow. Nearly / Industry View / put on high margins rather than efficient business
a quarter believe trading will remain the same, ‘Long-term prospects practices. History is littered with luxury apparel
while 13.6% predict “it’s going to be tough”. The
majority – 55.6% – believe growth next year will
are extremely good’ companies that forgot to run an efficient business.
Let’s not forget that when all the glamour is
be driven by online sales. Guy Salter stripped away, you still have a business to run.
If you have to flatten growth, it doesn’t mean
The Bain report estimates that the luxury Forecasts for continued growth in luxury are you have to flatten profits. You should be
goods market will grow by 4% to 6% from 2013 positive across all markets and categories, but able to control your profitability with better
to 2015, pushing the sector to between €240bn the next 12 months could be challenging, and operating efficiencies.”
(£192.3bn) and €250bn (£200.3bn) by 2015. sales increases are likely to be more modest While luxury businesses do have reason to be
Mark Henderson, chairman of the London than in recent years. Ongoing uncertainty in optimistic, the industry is likely to experience
Luxury Quarter and non-executive chairman of the eurozone, the muted outlook for the UK a readjustment. Recent profit warnings and
Gieves & Hawkes, believes the luxury sector will economy and concerns about China’s slowdown in markets such as China mean that
continue to grow “because people want the best”. slowdown could have a short-term impact. companies will need to work harder to find
He adds: “Tourism is growing, and London’s However, long-term prospects look good. I’m pockets of growth. There may be a short-term
reputation is growing. The trend at the moment as excited as I have ever been about the future. slowdown, or even short-term losses, but
is towards craftsmanship and individualism, Deputy chairman, Walpole businesses that understand their brand’s values
which supports the luxury sector’s values.” and adapt to a changing market will prosper.