巴黎银行-2018年零售演变（英文）-2018.2.20-23页-1mb

Summary of RETAIL EVOLUTION 2018

Core Content

The document discusses the evolution of the luxury retail industry, focusing on the shift from traditional physical distribution to digital platforms. It highlights the inflection point in digital luxury distribution, the strategic implications for luxury brands, and the changing landscape in China and the US. The report also includes insights into the future of luxury retail, emphasizing the importance of a closed distribution circuit and the need for brands to adapt to new consumer behaviors and market trends.

Main Points

• Digital Luxury Distribution at an Inflection Point: The luxury retail industry is undergoing a significant transformation with digital channels becoming a major force. Brands that were previously hesitant (referred to as "The Last of the Mohicans") are now investing heavily in digital strategies.

• Digital Strategy Pillars: For brands like Prada, the digital strategy includes:

  • Driving online sales through e-commerce platforms.
  • Developing a seamless omnichannel shopping experience.
  • Increasing investments in digital communications.

• Digital Growth in China: Digital luxury distribution is booming in China, with a duopoly emerging between Tencent and Alibaba. European luxury brands are realizing that growth in China will largely come from digital channels, and they are advised to establish mono-brand stores or directly operated WeChat stores.

• Shift in Retail Models: Traditional physical retail and wholesale distribution are shrinking, and the future store is envisioned as a "point of discovery" rather than just a sales point. This shift requires brands to build a "closed distribution circuit" to maintain control over their brand image and exclusivity.

• Key Strategic Implications:

  • Digital distribution grows faster than the market.
  • Consumers may buy online if they know exactly what they want or go to stores if they are unsure.
  • There is a risk of "discovery" and "purchase" becoming decoupled.
  • The internet magnifies brand management shortcomings.
  • Brands with high wholesale exposure face increased pressure.

• Retail Network Evolution: The number of physical retail points (POS) has been decreasing, especially for aspirational and high-end brands, indicating a trend towards digital and more efficient retail models.

• Operating Costs: Digital retail has lower operating costs compared to physical retail, which makes it more attractive for brands to develop direct digital retail operations. However, some brands still use concessions or wholesale due to temporary needs or market concentration.

• Future Scenarios:

  • Scenario 1: Net-à-Porter is expected to dominate the digital luxury market, becoming the "Amazon of luxury goods online."
  • Scenario 2: As digital luxury becomes more competitive, luxury brands will focus on building their own direct retail operations, and traditional department stores will need to adapt to digital platforms.

• Chinese Market Trends:

  • Chinese Millennials are shaping the future of soft luxury.
  • The real estate market supports luxury demand through wealth effects.
  • Retail consolidation is ongoing, with Gucci and others likely to benefit from this trend in China.
  • Shanghai is becoming the center of retail innovation in China.

Key Information

• Digital Luxury Market Growth: Digital luxury accounted for 9% of the market in 2017 and is projected to exceed 25% by 2025.
• Prada's Digital Strategy: Prada is investing in digital, aiming to self-fund growth and improve omnichannel integration.
• Digital Retail Models: Brands are adopting direct e-commerce, digital concessions, and digital wholesale models.
• Market Data:
  • FW17/18 data shows a significant increase in styles available for purchase online.
  • Entry prices are rising the fastest, while median and top prices are also increasing.
  • Louis Vuitton continues to have the highest entry price among mega-brands, but Hermès has the second lowest.
• Valuation Metrics: The report includes various valuation metrics, including ROCE (Return on Capital Employed) and TSR (Total Shareholder Return), comparing different brands and regions.

Conclusion

The report emphasizes that luxury brands must adapt to the digital landscape to maintain their competitive edge. This includes trimming physical retail and wholesale operations, building a closed distribution circuit, and leveraging digital platforms to enhance brand visibility and consumer engagement. The future of luxury retail will be defined by those who can effectively integrate physical and digital channels to create unique shopping experiences and maintain brand exclusivity.