Strategy and Value Creation of the European Luxury Firms

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Strategy and Value Creation of the European Luxury Firms

© CCMP 2010

Auteur(s) : Philippe Chereau & Pierre-Xavier Meschi Etablissement(s) créateur(s) : IAE Aix-en-Provence & SKEMA Business School Remarque : This case was written by Philippe Chereau, Professor at SKEMA Business School, and Pierre-Xavier Meschi, Professor at IAE Aix-en-Provence (U. Paul Cézanne) and SKEMA Business School. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

© CCMP – 2010 – Strategy and Value Creation of the European Luxury Firms – Philippe Chereau & PierreXavier Meschi – IAE Aix-en-Provence & SKEMA Business School

SOMMAIRE

I.

The Luxury Goods Industry: Overview .......................................................... 3

II. The Luxury Goods Industry: Competitive Trends .......................................... 5 III. The Luxury Goods Industry: European Competition .................................... 10 A. B. C. D. E. F. G. Bulgari ............................................................................................................ 10 Burberry ......................................................................................................... 12 Gucci ............................................................................................................... 14 Richemont....................................................................................................... 17 Hermès ........................................................................................................... 20 LVMH .............................................................................................................. 22 Tod’s ............................................................................................................... 25

2 © CCMP – 2010 – Strategy and Value Creation of the European Luxury Firms – Philippe Chereau & Pierre-Xavier Meschi – IAE Aix-en-Provence & SKEMA Business School

I.

The Luxury Goods Industry: Overview

Over the years, luxury has built-up a reputation as recession proof industry. After all, even though the industry growth has slowed down in the mid 2000s, luxury firms have managed to democratize and widen their clientele base in the 1990s and have opened doors to prestige mass consumption ― the “masstige clientele” ― pursuing a dual strategy by wooing aspirational consumers as well as its traditional elite customers. But those days might be over, and luxury proves to be a cyclical industry also suffering from the continuing deterioration of the economic situation. Indeed, total sales worth US$ 222.7 billion in 2008 are expected to decline around 10-15% in 2009 and stabilize in second half 2010 after a further decline of 4%, assuming Europe, the United States and Japan will continue to deteriorate (– 5%) during the first half of 2010. There is no longer hiding place in the high end. The 1997-2003 period has emphasized the connection between the luxury goods industry and the world economic situation. The 2004-2008 period has confirmed that the new configuration of the luxury goods industry strengthens this connection (see Figure 1). In the present context, emerging economies seem to feature short-term factors limiting adverse trends on the contrary to more mature markets such as Europe, the United States or Japan. It is also expected that growth forecasts vary from one region to another (see Figure 2), and from one product segment to the other. Segment forecasts predict that the luxury goods industry will progress further, but in a distinctly different manner (see Table 1). The most valuable forecasts are in the segments of accessories, ready-to-wear, leather goods, and home decoration products. Contrary to common ideas, jewellery and watches perform less well than more ephemeral luxury goods such as accessories or ready-to-wear.

Figure 1 – Luxury goods industry and the...
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