2018零售业的演变（英文版）_21页_1mb

Retail Evolution 2018 Summary

Core Content

The document outlines the evolution of the luxury retail industry, particularly focusing on the shift from traditional physical distribution to digital platforms. It highlights the growing importance of digital channels in China and the need for luxury brands to adapt their distribution strategies to maintain brand equity and exclusivity.

Main Points

Digital Luxury Distribution is at an Inflection Point

• Digital growth: Digital luxury distribution is growing faster than the overall market, with projections indicating it will account for over 25% of the market by 2025.
• Consumer behavior: Consumers who know exactly what they want tend to buy online, while those who are unsure may visit physical stores.
• Risk of discovery vs. purchase decoupling: The risk of consumers discovering a brand online but purchasing elsewhere increases.
• Brand management: The internet acts as a magnifying lens for brand management shortcomings.
• Wholesale-dependent brands: These brands face increasing pressure due to the lack of control over distribution and pricing.

Physical Retail and Wholesale Distribution Must Shrink

• Shrinking physical retail: The role of physical stores as a "point of physical distribution" is becoming obsolete.
• Future stores: The future store will serve as a "point of discovery," offering unique experiences.
• Closed distribution circuit: Long-term winners must build a closed distribution circuit that integrates physical and digital channels.
• Price discipline: Brands must ensure tighter price discipline and brand deployment to avoid brand trivialization.

Strategic Implications for Luxury Brands

• Trim physical and wholesale exposure: Brands should reduce their reliance on traditional retail and wholesale channels.
• Enhance store relevance: Stores should be more relevant and differentiated.
• Build integrated distribution: A strong integration of physical and digital distribution is essential.
• Reconsider wholesale, grey market, and off-price activity: Brands need to rethink their involvement in these areas to protect brand equity.
• Risk of brand trivialization: Brands that fail to adapt may risk being trivialized by digitally native competitors.

Key Information

Digital vs. Physical Sales

• Digital sales growth: Digital sales accounted for 9% of the market in 2017 and are projected to grow significantly.
• ROCE vs. Sales/Sq Ft: The return on capital employed (ROCE) for digital retail is higher than physical retail due to lower SG&A costs.

Retail Network Evolution

• Physical retail decline: Physical retail networks are shrinking, with brands like Gucci and Prada experiencing significant churn.
• Store closures: Some brands, like Lancel, are experiencing negative growth in their physical retail presence.
• Online sales as % of total: Online sales are increasing as a percentage of total retail sales, especially in China.

Market Trends in China

• Digital dominance: Chinese consumers are increasingly turning to digital platforms for luxury purchases.
• Tencent and Alibaba: These platforms are dominant in the Chinese market, with Tencent leading in high-end digital retail and Alibaba in mass fashion and aspirational luxury.
• Monobrand stores: Luxury brands are advised to establish monobrand stores or directly operated WeChat stores to maintain exclusivity.

Valuation and Investment Insights

• Investment implications: Brands with strong digital presence are more attractive to investors.
• Valuation metrics: Key valuation metrics are provided, including ROCE, TSR, and price per unit.
• Market share: Net-à-Porter is expected to dominate the digital luxury market, while some brands like Prada are downgraded due to poor performance in digital channels.

Conclusion

The luxury retail industry is undergoing a significant transformation, driven by the rapid growth of digital distribution. Brands must adapt by trimming physical and wholesale exposure, building integrated distribution models, and leveraging digital platforms to maintain their brand equity and exclusivity. The shift is particularly evident in China, where digital platforms are reshaping the market landscape.