Luxury Marketing Session 5 - International Markets (PDF)

Luxury marketing Session 5 – International luxury Luxury marketing Session 5 – International trade basics Factors influencing internationalization Climate and Language Growth and natural hazards...

Luxury marketing Session 5 – International luxury Luxury marketing Session 5 – International trade basics Factors influencing internationalization Climate and Language Growth and natural hazards Border policy, nature revenues and conflicts Access to strategic Infrastructures ressources (ex: oil, International (ex: malls) water etc) Political regime relations and trade and stability Demographics Habitat Health Religion Inequalities conditions Laws (ex: work, and well-being economy, trade, business, etc.) Culture Education Currency and Consumption exchange rate patterns 07/10/2024 … 3 Perceptions of culture “Heaven is where the cooks are French, the mechanics are German, the policemen are English, the lovers are Italian, and it is all organized by the Swiss. Hell is where the policemen are German, the mechanics are French, the cooks are English, the lovers are Swiss, and it is all organized by the Italians.” 07/10/2024 4 Why go global? Small or saturated International product COMMERCIAL REASONS domestic market life cycle Market risk Highly specialized firm diversification Decrease production INDUSTRIAL REASONS Scale economies cost ENVIRONMENTAL Improved carbon footprint Improved image REASONS OPPORTUNITY Spontaneous foreign Management REASONS demand Excedent in production 07/10/2024 5 Risks HR risks Cultural risks Innovation risks 07/10/2024 6 Risks Financial risks Political risks 07/10/2024 7 Balancing standardization and adaptation GLOBAL STRATEGY TRANSNATIONAL STRATEGY Products and offers are Products and offers remain the homogeneous across countries same across countries, but many even though necessary international operations ensure adaptations are enforced to cost diminution. Cost pressure maximize sales. EXPORT STRATEGY MULTI-DOMESTIC STRATEGY Essentially influenced by the Foreign markets are targeted domestic market. Headquarters through subsidiary companies. and production are Products and offers are adapted concentrated in the country of taking into account the culture origin. and traditions of targets. Adaptation pressure 07/10/2024 8 Balancing standardization and adaptation Cost pressure TRANSNATIONAL STRATEGY GLOBAL STRATEGY EXPORT STRATEGY MULTI-DOMESTIC STRATEGY Adaptation pressure 07/10/2024 9 Luxury marketing Session 5 – International luxury markets Sales by origin of producer (millions of dollars) 07/10/2024 11 Top10 luxury goods companies by sales 07/10/2024 12 Countries with the highest concentration of top100 luxury companies 07/10/2024 13 Percentages of companies and sales per country 07/10/2024 14 Product sectors of the luxury industry per country 07/10/2024 15 French luxury 07/10/2024 16 Italian luxury From « made in Italy » to « made by Italians » Brands such as Gucci, Brioni, Bottega Veneta, Sergio Rossi or Pomllato were bought by Kering. Bulgari, Loro Piana, Fendi or Emilio Pucci were bought by LVMH. Other countries also detain formerly Italian brands: Valentino (Qatar), Krizia (China), La Perla (Netherlands), Versace (USA). 07/10/2024 17 Swiss luxury Watches and jewelry at the heart of Swiss luxury The Richemont group is the biggest and most influential Swiss luxury group worldwide. Other flagships include the Swatch group and independent watchmakers such as Rolex, Audemars Piguet, Breitling, Richard Mille or Patek Philippe. Those 5 brands represent 55% of luxury watch sales from Swiss firm. 07/10/2024 18 Other western actors 07/10/2024 19 North american luxury The promised land of accessible luxury The North American industry is renowned for its cosmetics and perfumes division (Estee Lauder, Bobbi Brown, Jo Malone, etc) and its accessible luxury brands (Ralph Lauren, Capri, Calvin Klein, Tommy Hilfiger, etc.) 07/10/2024 20 Emerging challengers 07/10/2024 21 Consumer countries Percentage of 1950 1980 2000 2020 2050 (estimate) world luxury consumption Europe 70 50 18 16 15 USA 20 20 22 21 20 Japan 5 15 10 7 5 China 0 5 33 40 50 07/10/2024 22 India Opening of home market Few commercial to foreign investors infrastructures Increasing purcharsing power among middle class and rich people thanks to High customs duties economic growth Important potential market due to demography Experts forecast a 25% growth until 2030 for the luxury Indian market. The driving products for this growth are jewellery, beauty products, catering and cars. License contracts between Western brands and local firms are at the heart of the Indian luxury business model. 07/10/2024 23 Africa More middle class and HNWI Dependent on economic growth and on the prices of raw materials The increase in mobile phone use allows brands to promote their products and Too few infrastructures (even though communicate on the Western luxury lifestyle the number of malls has increased) The African luxury market growth is boosted by South Africa and Morroco, and to a lesser extent Kenya, Nigeria, Angola and Ghana. Many purchases from African consumers occur in Europe or Dubai rather than the local market. Western brands have to partner up with local brands to comply with local regulations and governance. 07/10/2024 24 Latin America Political and economic More than 600 000 instability millionaires in Latin America Luxury malls and luxury tourism Protectionism The luxury market in Latin America should increase by 5,3% each year between 2024 and 2032. This growth is supported by luxury tourism and the rise of digitalization. Brazil is considered the biggest market for luxury in Latin America, before Mexico and Argentina. 07/10/2024 25 Luxury marketing Session 5 – Focus on Chinese consumers Luxury consumption patterns in China The tastes of Chinese luxury Quality of products is consumers are different from important for Chinese consumers western luxury consumers. (not to be confused with low cost chinese products successful around the world…) Chinese consumers prefer to spend more on a known brand name as they are recent Habitus: The traits like age, sex, to the game and to assert status education level and the standard in their group of reference. of living and place of residence influence the perception and buying process of luxury goods. 07/10/2024 27 Chinese cultural traits that influence consumption Chinese luxury consumers try to create Collectivism distinction from one group to another through buying luxury goods Social interaction. The behaviors of Chinese consumers Guan-xi are very easily influenced by the existing trust between people who have a good personal relationship. Self esteem. It is important to keep a positive image of one’s personality reflecting through his Face role, his status and traits respecting his or her own group. Chinese society is considered highly hierarchical. Every individual especially the high-net-worth-individuals (HNWI) or Hierarchy luxury goods consumers are very attentive to their status 07/10/2024 within the group, institution or society as a whole. 28 Segmentation of Chinese luxury consumers Traditional business elites Shoppers of advanced and sophisticated luxury goods, as Usually males, over 35 yo a result of periodicity of consumption and experience Buyers of niche luxury goods that are less conspicuous but represent their specific taste Purchase for family members as well Hao Yan Pacific construction group 07/10/2024 29 Segmentation of Chinese luxury consumers Xiao Zhan Actor Newly rich, usually the first Entrepreneurs, businessmen, celebrities generation of their family Less concerned about saving and Relatively younger than willing to spend a large portion traditional business elites of their income on luxury goods New luxury shoppers 07/10/2024 30 Segmentation of Chinese luxury consumers Empowered women Purchase power is expected to continue to rise as they outperform men in education, career and business Include businesswomen and newly rich wives, who have achieved economic independence Zhang Xin Soho China 07/10/2024 31 Segmentation of Chinese luxury consumers Wang Sicong Heir Most brand conscious among all Have six sources of incomes (parents, grandparents x2) which greatly enhances their ability to buy luxury goods Little emperors 07/10/2024 32 Young Chinese consumers https://www.youtube.com/watch?v=VF-4_KF_LrQ 07/10/2024 33 Luxury marketing Session 5 – Focus on Chinese luxury Towards a Chinese luxury industry Qeelin Shiatzy Chen 07/10/2024 35 Why Chinese luxury attracts consumers Anti-corruption policies Western brands are déjà vu Made in China 2025 Rich local history Support from celebrities Tradition of art and craftmanship 07/10/2024 36 Strategies of the Chinese luxury industry BUY DEVELOP Chinese investors buy Western brands Western brands buy Chinese brands 07/10/2024 37 Weaknesses of the Chinese luxury industry Impatience Investors put pressure on firms, favor large distribution channels, thus supporting premium instead of luxury strategies. This fuels a Trust confusion between fashion, Products that are made in China are not perceived as qualitative. Essence of luxury premium and luxury among Chinese Core luxury aspects are neglected in consumers. Chinese firms struggle to China, such as creativity (in favor of overcome this reputation as accomplishment), service (lack in they are not seen as creative. training) and history (due to the political climate). Moreover, the culture of selling online or communicating thanks to famous endorsers sometimes kills the mystique aura and the timelessness of luxury brands. 07/10/2024 38