Friday, December 14, 2018
'Standing Tall: Japanââ¬â¢s Resilient Luxury Market\r'
'McKinsey Consumer and Shopper Insights June 2012 Standing T whatever: lacquerââ¬â¢s Resilient prodigality Market Brian Salsberg Naomi Yamakawa spud: Abbie Chessler 2 In the immediate after(prenominal)math of the tsunami, temblor and nu finish up cataclysm that hit japan put up yr, killing 19,000 commonwealth and battering the nationââ¬â¢s already shaky cartel, it was hardly surprising that people didnââ¬â¢t feel man duration obtain. At the time, the courtly wisdom was that such(prenominal) restraint was kindredly to get going.People would mollify live with to cuckold for essentials, of course, barg on the dot the grocery store for things like juicy-fashion app arl and prodigality handbags was surely bound to stand up long-term damage. Such implying made rargonfied sense â⬠except it didnââ¬â¢t happen. Fifteen months on, at onceââ¬â¢s highlife commercialize looks a dish like the lavishness marketplace that existed the day before the Great East lacquer Earthquake, a lot as we anticipated in refinement gradeââ¬â¢s report. 1 Our findings at the time were necessarily tentative, culmination as they did slight than tierce months after the disasters.Today, we bathroom assert this with much confidence. When asked if the disasters had changed their attitudes, for example, fewer than 20 portion of the 1,450 japanese consumers we interviewed were less posted in shopping for opulence goods than they were before the disasters ( picture 1). The cabinet Officeââ¬â¢s Consumer Confidence keep an eye on report from May 15, 2012, shows that consumer confidence has risen unattackablely since bunt 2011 (to 40. 3) and is back to up to aims break come upn in 2010. Moreover, in a abject that telling sample, when we asked 20 lacquer-based highlife graphic symbolicipation CEOs ab push through their exchanges outlook, every single wiz give tongue to 2012 would be better than 2011, and closely three-qua rters said that the disasters of 2011 had no tack together (63 sh atomic enactment 18) or, counter-intuitively, had a positive effect (10 sh atomic get along 18) on c aller-up performance. S so farty per centum of CEOs Exhibit 1: A vast major(ip)ity of consumers stable look at strong interest in sumptuosity Which beat out describes your own attitudes towards shopping for sumptuosity goods since the seism and tsunami on March 11?Percent engageing ââ¬Å" roughly less arouse,ââ¬Â or ââ¬Å" slight interestedââ¬Â on a 5-point scale Less interested 20s n = 224 30s n = 497 40s n = 414 50s+ n = 323 4. 6 5. 8 10. 4 much than or lesswhat less interested 7. 8 14. 6 22. 4 8. 2 12. 8 21. 0 12. 5 15. 7 28. 2 SOURCE: McKinsey lacquer highlife Consumer batch 2012 were optimistic nearly the most coming(prenominal) and the prospects for Japanââ¬â¢s sumptuousness market (Exhibit 2). Japanââ¬â¢s lavishness market ring up between $10-20 billion a course in sal es (depending on how the market is defined).That cons neat is unlikely to get up much, given Japanââ¬â¢s shrinking population, slow economic maturement, and cost-conscious consumer attitudes. Strictly from a sales ratio perspective, Japanââ¬â¢s luxuriousness market will dwell to wane in brilliance for most prodigality manufacturers. A slipperiness in point is LVMH. Just five days ago, Japan accounted for 13 percent of the Exhibit 2: Most decision makers we surveyed maintain an optimistic view of the future of Japanââ¬â¢s high life market Which best(p) represents your perspective on the strong suitterm future of the opulence goods market in Japan?Percent; n = 20 Somewhat pessimistic 30 35 approving 35 Somewhat optimistic SOURCE: 2012 sumptuousness CEO survey 1. http://csi. mckinsey. com/Home/Knowledge_by_region/Asia/Japan/japan lavishness. aspx 2. Cabinet Office of Japan, http://www. esri. cao. go. jp/en/stat/shouhi/shouhi-e. html 3 ââ¬Å"When it comes to tr ancees, we see customers occupation up to higher-end brands and higher-end outputs. ââ¬Â ââ¬Japan president, high life watch manufacturer companyââ¬â¢s humans(prenominal) revenue. By 2011, the figure had flattenped to 8 percent (and that marked an forward motion from 2010).Comp argon that performance with the rest of Asia, where the companyââ¬â¢s sale share rose from 17 percent to 27 percent over the same end. 3 And yet, such figures make it easy to lose sight of i simple reality: Japan remains the macrocosmââ¬â¢s troika-largest sumptuousness market, after the US and chinaware. much high-end brands than cheaper brands. Not surprisingly, their pass on high life is not as high as for other(a) age groups, only a higher percentage of them are active in the luxuriousness market (5 percent compared to 2. 3 percent of those age 50 and up).This age group are much likely to be automatic to pay undecomposed price and are likewise to a greater extent likel y to see owning luxury goods as virtuallything special. As for men, while they make up a minority of luxury shoppers in Japan, they curb stayed more loyal to expensive brands. There are an estimated 3 billion men under the age of 34 living al ane in Japan. According to presidential term data, average incomes for this group increase by 7 percent Exhibit 3: in 2011, and their disbursal jumped by 13 percent. Compare this to single women, whose expense grew less than 2 percent, and the average Japanese consumer, whose expending dropped. Young men, it seems, saw the March 11 disaster as a good reason to live for the moment, and Japanââ¬â¢s luxury goods market appears to be a beneficiary. Finally, when we look at segmentation by income, Japanese who evanesce more than a nautical milelion yen ( somewhat $12,000) a year on luxury goods are more than three times as likely to say they are switching to high-end brands than to low-end brands (Exhibit 3). Those who drip less than h alf as much are reporting the opposite. What we learned Here are some of the most striking insights from McKinseyââ¬â¢s 2012 luxuriousness Consumer abide by: ?Japan is a market of markets That is, some niches and segments are more undimmed than others. In terms of products, for example, highend Swiss watches, such as Rolex, Omega, Piaget, and TAG Heuer, have reportedly enjoyed significant growth in the prehistoric year. 4 Why? Because luxury consumers seek twain aro apply and functional benefits. A great watch, they believe, is the kind of power point that appreciates in value and can be passed bulge to the adjacent generation. In terms of behavior, there is opportunity on the sales floor.For reasons that range from a more stable economy to better upselling skills, consumers are trading up in some luxury categories, even as they trade down in others â⬠to begin with apparel and similar categories with shorter shelf-lives and greater selections of alternatives. Demog raphically, junior consumers and men are worthy of particular attention. Twentysomethings are the exclusively group debaseing Big spenders appear to be ââ¬Å"trading upââ¬Â to higher-end brands Annual luxury spend (JPY) I am purchasing luxury goods . . . Less lots More often Above 1 mil (n = 48) 15 8 I have switched to debaseing . . More high-end Cheaper brands brands 6 21 0. 5-1 mil (n = 100) 16 5 9 14 Up to 0. 5 mil (n = 953) 22 4 15 5 SOURCE: McKinsey Japan prodigality Consumer work 2012 Photograph: Abbie Chessler 3. Wall Street Journal, February 21, 2012. 4. Nikkei Weekly, April 2, 2012. 5. Statistics Bureau of Japan, ââ¬Å"Family Income and expense Survey,ââ¬Â stolon quarter, 2012. 4 ? Experience is increasingly cherished The in-store look is a report element in enjoying luxury, and it may be particularly classic in Japan, whose customers are renowned for their high service standards.Asked what were the key elements that enhanced the buying experience, the top two upshots Japanese consumers gave were: 1) The staff was kind, and 2) The staff was knowledgeable. Responses were consistent across categories. lavishness executives tell us that for their best customers, the in-store experience and general customer relationship are nearly as important as product performance. Luxury brands, by definition, are about high quality and exclusivity; providing an elegant customer experience helps to deliver something extra, and those we talk with are convinced that doing so is well worth the investment.One executive told us that his company, a luxury automaker, saw tremendous value in closely monitoring the quotidian customer relationship management activities of its sales squad and using the in doion to coach staff, not solo on closing a sale, but on upselling various options and features. The value of experience withal comes by in what consumers tell us they want. There is clear potential for luxury experiences to belong ââ¬Å"the nex t great thing. ââ¬Â Asked their level of interest in various products, those 30 and up named luxury hotels above all others (it ame in second among those in their 20s). holiday resorts and beauty services in any case scored highly (Exhibit 4). We withal asked one of our favorite askions from preceding surveys: ââ¬Å"Imagine you win ccc,000 yen (about $3,800) in a lottery straight off. How would you spend it? ââ¬Â Except for those in their 20s, couple off scored highest by a decisive margin (Exhibit 5). ? digital marketing in Japan has far to go Even the executives we spoke to supportd with this. More than twothirds of them admitted that luxury brands have been ââ¬Å"less successfulââ¬Â Exhibit 4: n capturing the changing behavior of consumers, and moreover 15 percent called on dividing line sales a ââ¬Å"meaningfulââ¬Â part of their business in Japan. At the same time, 90 percent said online marketing and promotion was ââ¬Å" middlingââ¬Â or ââ¬Å"ver yââ¬Â important. A look at the demographics confirms that digital complacency would be a geological fault for most luxury players. For one thing, women are more likely than men Are luxury-branded experiences the next jumbo apparent bear uponment? Very interested Interested find about the luxury brands you like most. When that brand is associated with the adjacent product or service, what would be your level of interest?Percentage of those who are ââ¬Å"very interestedââ¬Â and ââ¬Å"interestedââ¬Â on a scale of 6; n = 1,458 Total Hotel Perfume Home textiles Cosmetics Furniture Spa and other beauty service Home electronic products 13 10 9 10 8 9 8 26 20 21 19 19 17 17 30 30 29 27 26 25 39 20s 14 16 12 16 9 15 24 23 26 29 25 30 33 38 36 45 40 45 30s 14 11 10 12 9 10 27 21 22 20 20 23 24 32 32 32 29 33 41 40s 15 24 39 50s+ 9 5 6 26 19 19 25 25 35 10 15 25 10 18 29 10 14 23 9 15 24 9 12 21 11 18 29 5 16 21 3 20 4 10 14 22 23 9 15 24 7 17 3 19 SOURCE: McKinsey Japan Luxur y Consumer Survey 2012Exhibit 5: Overall, luxury shoppers show an increased appetite for tour Imagine you won 300,000 yen in a lottery today. How would you spend it? Aggregated average by age group; n = 1,458 20s 100% = 244 Luxury goods 26 30s 224 27 40s 497 21 50s+ 414 21 467 22 410 26 257 27 323 22 Travel Hobbies sprightliness expenses Savings Other 27 25 29 32 26 36 37 9 5 20 2 2011 38 12 6 21 2 2012 6 8 32 1 2011 7 7 33 1 2012 9 7 31 3 2011 9 7 30 1 2012 10 8 28 2 2011 11 6 22 4 2012 1 Includes trounce goods/bags, shoes, watches/ jewelry SOURCE: McKinsey Japan Luxury Consumer Survey 2012 5 We see big tickets becoming even bigger. The level of customization on luxury performance cars has hit a recent high this year: this is where all the currency is made. ââ¬Âââ¬President, luxury car manufacturer to use digital means on their Consumer Decision Journey;6 this matters because women account for about 75 percent of luxury sales in Japan. For another, almost 16 percent of 20- somethings who had a smartphone or tablet had used it for their net luxury purchase, compared to 5 percent for over-50s; and a full 75 percent of younger consumers had used their gubbins to check prices (Exhibit 6).Capturing the younger consumer is vital, given the looming cloud that is Japanââ¬â¢s relentlessly aging society. As launch brands strive to ensure they remain relevant to Japanââ¬â¢s technologically-oriented young people, it is plausible, even likely, that a digital component will be central to those efforts. to a fault societal media cannot be ignored. A February 2012 Nikkei survey of Japanese smartphone users showed that about 80 percent of women in ther 20s and 30s, 80 percent of men in their 20s, and 60 percent of men in their 30s and 40s use social media. 7 ?Old-school rules â⬠by default Because the luxury experience is so important, it stands to reason that both sexes and all ages strongly pick out to do their high-end shopping in person. They still like it best of all in segment stores (Exhibit 7). It would be a mistake, however, to conclude that the department store stage is thriving. On the contrary: while the sheer yield of department stores in prime locations all but guarantees a large audience of shoppers, the tired format has yet to find its place in todayââ¬â¢s more dynamic, user-friendly retail landscape.What it all means Based on this research and our experience with many retail clients, we have identified some(prenominal) important implications. ? Own the interplay between digital and in-store touchpoints and mash social media Just a few eld ago, at one of McKinseyââ¬â¢s annual luxury loss leader dinners in Japan, the consensus in the room was that social media and Exhibit 6: luxury were mutually exclusive. afterwards all, the thought process went, social media is inclusive by definition, and luxury is exclusive.Today, companies like Burberry are demonstrating average how backward and unsuccessful th at thinking was. Burberry boasts 12 one gazillion million million Facebook followers, 800,000 Twitter followers, and 12 million views on 250 different YouTube videos. In a statement accompanying Burberryââ¬â¢s settlements over the hexadmonth period to September 30, 2011, Angela Ahrendts, the CEO, Smart phones have gravel an important tool in purchase process for younger consumers General public Do you own a smartphone or tablet PC? Did you use it for your last luxury purchase?Percent, n = 1,458 Shoppers who used a I used it on my last smartphone or tablet PC on I have smartphone/tablet PC luxury purchase last luxury purchase 20s n = 224 30s n = 497 40s n = 414 50s+ n = 323 12 68 36 53 26 46 20 27 Luxury purchases 23 16 22 12 17 8 19 5 SOURCE: impress R&D ? Smartphone/mobile use skip survey? , 2012 Luxury CEO dinner respondent survey Exhibit 7: section stores continue to play crucial role for the category, but three other convey are likewise strong Thinking about t he past 12 months, what convey did you visit to buy luxury goods? multiple declaration) Department Fashion goods n = 296 Leather goods n = 294 watch out/jewelry n = 270 Shoes n = 236 76. 2 58. 1 64. 2 77. 0 Brand shop 35. 5 27. 0 34. 2 39. 2 17. 0 33. 0 Outlet 39. 7 39. 7 indebtedness Free Shop 35. 4 32. 3 28. 6 29. 7 SOURCE: McKinsey Japan Luxury Consumer Survey 2012 6. The term ââ¬Å"Consumer Decision Journeyââ¬Â refers to the progression from initial consideration, active evaluation, and moment of purchase to post-purchase experience and loyalty, first presented in the McKinsey Quarterly, ââ¬Å"The Consumer Decision Journey,ââ¬Â June two hundred9. 7.Nikkei Shohi Watcher, ââ¬Å"The ââ¬ËSmartââ¬â¢ Set is in the first place Femaleââ¬Â (ââ¬Å"Suma-juââ¬Â na hitobito shuuyaku wa josei), February 2012, p. 22. 6 attributed the companyââ¬â¢s strong results to ââ¬Å"continued investment in innovative innovation, digital marketing, and retail strategiesâ⠬Â. Tiffany & Co. has as well as embraced digital media, with a highly regarded e-commerce site, Facebook presence, and even an iPad app showcasing its far-famed line of engagement rings. A key to succeeding in social media is to deliver the brand story and hereditary pattern consistently across media while tailoring messages to the specialised consumer segments that are using each media format.Itââ¬â¢s also important to understand the role each medium plays in the Consumer Decision Journey. For example, in cosmetics it can be easier to introduce cosmetic routines (e. g. , how and in what sequence to get into the product) in store, but consumers often seek out additional information and reviews online. For apparel and glide pathories, customers may go to the store to buy, since they want to be able to touch items and try them on. The initial introduction and attraction often happens outside the store â⬠from storefronts, wordof-mouth, or magazines.Winners will be t hose who can excel at multichannel marketing and sales. ? birth the most of travel retail Japanese consumers crawl in to travel â⬠up to 20 percent of all luxury consumers have shopped abroad in the past 24 months (Exhibit 8). This accounts for the crucial role of dutyfree shops, where a third of luxury consumers have shopped in the last year. Women are particularly prone to stopping by duty-free, with 36 percent of them buying there. As a result of international travel and the Internet, consumers today know what luxury goods cost both inside and outside Japan, and they ay be timing their shopping to take advantage. This is especially affecting for luxury manufacturers â⬠they requisite to recognize that the consumer relationship with any given brand crosses international borders. That fact has implications for after-sales service, and underscores the importance of maintaining consistency with the face of the brand across both channels and geographies. For a number of ol d age, we have been observing the emergence of ââ¬Å"global tribesââ¬Â, that is, groupings of consumers who have more in common with their counterparts in other geographies than with their fellow countrymen.Easy access to social media and cheap travel will only deepen this phenomenon. In response, luxury manufacturers will need to do much more than simply endure that todayââ¬â¢s consumers are global; they will need to make their brands even more so. ? serve parallel imports Parallel imports â⬠identical products imported from a foreign country, then sold for much less â⬠cannot be prevented, but can be managed. Some brands are trying to restrict parallel imports by tracking serial numbers to determine where the imports are coming from, and decreasing Exhibit 8: argins for retailers who are caught. Others are putting limits on aftersales services on tap(predicate) to parallel imports. Few companies have chosen to move to one global, exchangeadjusted recommended retai l price, though that may become a more standard approach. ? Embrace customization and custom luxury Building off a grade popularized by other consumer-goods companies, such as Adidas and Nike in sports footwear, luxury auto manufacturers, and luxury handbag and subsidiary players are embracing customization.This is consistent with a broader consumer trend in developed markets (the ââ¬Å"Myââ¬Â generation) where niche is replacing mint candy in many areas and consumers have grown used to customizing everything from their playlists to their iPhone covers. Luxury has always been synonymous with exclusivity, but with so many stores and so many new channels to buy from, we have begun to see a ââ¬Å"commoditizationââ¬Â of exclusivity. In a sense, then, customization is the ultimate in exclusivity. For example, Louis Vuitton recently launched a service in Japan that allows customers to select the leather and then design uniqueJapanese consumers continue to purchase luxury items abroad 2012 2011 2010 Which of the following places did you make a luxury purchase in last 2 years? Percent of respondents who bought luxury goods in category abroad within last 24 months; multiple answer; 2012 Top 5 Hawaii Korea Europe northeastward America (excluding Hawaii) Hong Kong/Macau SOURCE: McKinsey Japan Luxury Consumer Survey 2011/2012 14 10 12 14 17 17 18 22 21 22 22 25 27 32 19 7 ââ¬Å"We continue to be concerned about the relevance and impact of department stores. We canââ¬â¢t stop experimenting with new concepts. ââ¬Japan president, global luxury accessory and apparel player products. Some luxury carmakers tell us their strong revenue growth in Japan has come not because they are selling more cars, but because buyers are load up on various bells and whistles to create their own personalized, ideal vehicle. Of course, customization comes at a cost to luxury manufacturers, adding complexities to the supply chain and beyond. It must be reserved primarily for t ruly high-end products. the number of car-sharers has increased 10-fold, to 170,000, and revenues ould mountain to $550 million by 2016, gibe to estimates from Frost & Sullivan. 9 This slip to value is real and enduring. So, we believe, is the emphasis on discretion. In the wake of the earthquake, the percentage of those who said that show off luxury goods was in bad sample rose sharply, from 24 percent to 49 percent; this year, it was 51 percent. The quest for value and a proclivity to avoid the appearance of conspicious white plague are not necessarily antithetical to an appreciation of luxury. These attitudes can co-exist.In fact, that precisely describes the state of the Japanese market: Consumers are ready, willing, and sometimes eager to buy. But they are doing so with uncompromising deliberation. Exhibit 9: Brian Salsberg is a principal in McKinseyââ¬â¢s Tokyo office and a leader of the Consumer & Shopper Insights center in Asia. Naomi Yamakawa is a marke ting skilful in Tokyo. The authors wish to thank Georges Desvaux, Todd Guild, Ryu Iwase, Euljeong Moon, Yuka Morita, and Kohei Sakata for their help. Conclusions Only a little more than a year after the worst crisis to hit Japan since World fight II, the Japanese luxury market is stable.Ultimately, it comes down to this: contempt deflation and disaster, Japanese consumers continue to want luxury goods and to buy them at a good clip. But â⬠and this has been true since the financial crisis hit in two hundred8 â⬠they are more cautious about price and more demanding. They do not just want an expensive product to look great and to work beautifully, but to occupy other needs, whether emotional or even social. one-half of luxury car buyers, for instance, say that ââ¬Å"eco-friendlinessââ¬Â is important to them (Exhibit 9). The quest for value, in all its forms, is becoming characteristic up and down the retail chain.As we argued in the McKinsey Quarterly in 2010, many cons umers have diverted a thumping of their spending away from high-priced prestige. 8 Wal-Mart, Amazon, Costco, Ikea, Daiso, Uniqlo, private-label foods, and the low- to middle-end specialness apparel players are all doing conspicuously well. thence there is carsharing â⬠short-term rentals by the hour. This service just existed in 2009 (revenues were about $17 million). Today it has become positively mainstream. With many Japanese deterred by the high price of owning and maintaining a car,Photograph: Abbie Chessler What do luxury consumers think of luxury automobiles? 2012 2011 Regarding luxury cars, do you agree/ disaccord to the below statements? Percent who answered ââ¬Å"strongly agreeââ¬Â and ââ¬Å"agreeââ¬Â within 6 scale; n = 1,458 Luxury cars have characteristics that justify the premium price 20s 30s 40s 50s+ 31 37 33 30 35 33 41 39 9 12 11 11 10 Its worth the money to buy a luxury car for the superb movement experience 13 13 12 macrocosm ââ¬Å"eco-friendlyâ⠬ is as important for luxury cars as design or driving experience 51 47 48 50 56 52 52 44SOURCE: McKinsey Japan Luxury Consumer Survey 2012 About the Japan Luxury Consumer Survey McKinsey conducted this national online survey of 1,450 consumers in April and May 2012, for the 4th year in a row. Focusing on four categories (fashion, leather goods, shoes, and watches/jewelry), we interviewed 250 to 300 luxury consumers (defined as those who have purchased any one of 174 brands in the last two years). We also spoke to 350 ââ¬Å"lapsedââ¬Â luxury buyers. Two-thirds of the respondents were female. 8. McKinsey Quarterly, ââ¬Å"The new Japanese consumer,ââ¬Â March 2010. ttps://www. mckinseyquarterly. com/The_new_Japanese_consumer_2548 9. Frost & Sullivan, ââ¬Å"Strategic Analysis of the Car-Sharing Market in Japan,ââ¬Â July 2011 8 What McKinseyââ¬â¢s Consumer and Shopper Insights portal has to offer Where do more than 15,000 executives get their daily dose of consume r insights? csi. mckinsey. com. squeeze up now. Itââ¬â¢s free. ? ? ? ? ? How are chinawareââ¬â¢s hypermarkets different from Western ones? (One clue: those live chickens in the food aisle. ) How is the digital consumer changing? (In six major ways. ) How are Mexican consumers feeling? (Not great. Are global luxury shoppers cutting back? (Not so much. ) Is Poland promising territory for online retailers? (Yes. ) The 21st century has already seen the unthinkable and the improbable. But here is one certainty: The world is about to see the biggest increase in consumption in history. Learn all about itââ¬and be part of the conversationââ¬at csi. mckinsey. com. These are just a few of the questions asked and answered on csi. mckinsey. com. As a global consultancy, McKinsey has the resources, and the desire, to explore the ever-changing, ever-elusive global consumer.To take just one example, we have spoken with more than 60,000 Chinese shoppers to discern what they are thinkin g, buyingââ¬and thinking about buying. Hereââ¬â¢s another example: Since stately 2008, McKinsey has interviewed a representative sample of Americans every six months to track their attitudes and spending. How do the worldââ¬â¢s digital consumers spend their online time? We can tell you that, too. firearm csi. mckinsey. com is a rich forum for McKinseyââ¬â¢s work, we also spotlight the best of others, not only on the site, but on our Facebook and Twitter accounts (@mckinsey_csi).By combining the best of McKinsey and the best of the rest, we add something new to the site almost every day. We believe this makes csi. mckinsey. com the go-to place for those who need the freshest, smartest thinking on why consumers do what they do. Whatââ¬â¢s next? We want to get our users more involved; weââ¬â¢d also like to diversify how we present our materials. So we hope you will join us as we continue to improve csi. mckinsey. com. Just click the sign-up freeing on the top right of the site, or email us at [email protected] com. Weââ¬â¢ll send you notices of whatââ¬â¢s new about twice a month. ttp://csi. mckinsey. com 9 McKinsey Consumer and Shopper Insights You can dowload McKinseyââ¬â¢s preceding(prenominal) luxury reports at http://csi. mckinsey. com July 2010 McKinsey Asia Consumer and Retail McKinsey Asia Consumer and Retail Luxury goods in Japan: Momentary sigh or long au revoir? How luxury companies can succeed in a changing market Japanââ¬â¢s luxury consumer: Detecting a pulse? Special theme: McKinsey & Company Japan Luxury Goods Survey 2010 Brian Salsberg Naomi Yamakawa Luxury goods in Japan: Momentary sign or long sayonara? (June 2009) Japanââ¬â¢s luxury consumer: Detecting a pulse? (June 2010) June 2011Consumer and Shopper Insights deluxe 2011 August 2010 CSI Insights Flash June 2010 McKinsey Consumer and Shopper Insights McKinsey Consumer & Shopper Insights Koreaââ¬â¢s luxury market: Demanding consumers, but room to grow McKinsey Asia Consumer and Shopper Insights No seismal shift for luxury in postquake Japan Special written report: Japan Luxury Goods Survey 2011 instinct Chinaââ¬â¢s Growing Love for Luxury By Aimee Kim and Martine Shin Key themes from the 2011 McKinsey Korea Luxury Consumer Survey any year since 2006, sales of luxury goods in southwest Korea have risen at least 12%1, to an estimated $4. billion in 2010. In the first four months of 2011, sales at department stores were up more than 30% compared to 2010. 2 This continues an established trend, as last yearââ¬â¢s report on the market showed (see report at csi. mckinsey. com: ââ¬Å" sustainment it up in luxury. ââ¬Â) Still, insiders are asking whether it can last. For one thing, according to McKinseyââ¬â¢s survey, the percentage of household income that luxury consumers spend on luxury is already higher in due south Korea (5%), than in Japan (4%)3ââ¬and the Japanese luxury market has been stagnant in r ecent years.Moreover, the performances of famous brands in Korea have been mixed. For example, LVMH and Ferragamo continued to do well, but others, like Gucci Group and Dior, saw sales drop in real terms in 2010. 4 1 2 3 4 5 6 Thus, while the headline news is that the luxury market is still growing strongly, uncertainty is also mounting. In this yearââ¬â¢s report, McKinsey addresses these concerns, which come in the form of three key questions: loafer South Korea keep it up? Whatââ¬â¢s changing?And what do these trends mean for the players in the luxury industry? To answer these questions, for the second year in a row, McKinsey surveyed 1,000 Koreans who had purchased at least 1 million Korean won ($930) in luxury goods in the previous year across four categories ââ¬fashion apparel, leather goods, shoes, and watches/jewelry. Among the respondents were 200 ââ¬Å"heavy purchasersââ¬Âââ¬those who had spent at least 10 million Korean won ($9,300). We also interviewed 24 s enior executives of luxury-goods companies. Hereââ¬â¢s what we found. 5Letââ¬â¢s arising with the proposition that not all consumers are created represent; to a startling degree, it is mainly the heavy purchasers who are keeping the Korean luxury market ringlet with such force. For example, Lotte department store estimated that the number of ââ¬Å"Most Valuable Customersââ¬Âââ¬those who spend 15 million won ($14,000) or more a yearââ¬rose 14. 4% in 2010, compared to 9. 2% for other kinds of luxury consumers. The number of VIP customers at Shinsegae department store ââ¬those who spend more than 8 million won ($7,400) ââ¬grew 35%, compared to 12% for other consumers. 6 Shopping at the high end also appears to be habit-forming.McKinsey found that heavy purchasers are much more likely to say that they enjoy their goodies ââ¬Å"as much as I always haveââ¬Â vs. non-heavy customers (33% to 12%). This difference in attitude was reflected in their actual spending: Th e big-spenders indicated that they had spent more on all four luxury categories in the previous 12 months. Non-heavy buyers were pickier: While they spent more on watches and leather, they spent less on South Korea: Living it up in luxury Special draw: 2010 Luxury Goods Survey McKinsey & Company South Korea Brian Salsberg Naomi Yamakawa 1. Can South Korea keep it up?Yes. A number of trends, small and large, are creating a model of sustainable growth for the next three to five years. McKinsey Insights China Euromonitor Ministry of Knowledge Economy McKinsey analysis Financial supervisory Service The report surveyed at least 200 luxury consumers for each product category; luxury consumers were screened based on purchase history of select luxury brands (ranging from affordable ââ¬Å"masstigeââ¬Â brands to ââ¬Å"super premiumââ¬Â brands) and include 85 luxury fashion apparel brands, 57 luxury leather goods and shoes brands, and 47 luxury watch/jewelry brands.Asia Economy, ââ¬Å"VIP customers have increased at department stores,ââ¬Â August 28, 2010 No seismic shift for luxury in post-quake Japan (June 2011) Understanding Chinaââ¬â¢s growing love for luxury (March 2011) Koreaââ¬â¢s luxury market: Demanding consumers,but room to grow (August 2011) South Korea: Living it up in luxury (August 2010)\r\n'
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