1. Compiled by
ANA
SANTI
Illustrations by
NATHALIE LEES
The
Luxury
ReportSPONSORED BY

2. Drapers/November172012
_25
Introduction I Luxury report
T
he fashion industry has had
its fair share of ups and
downs since the global
recession of 2008, but for
the luxury fashion sector,
the ‘downs’ have been few
and far between. The
mainstream market looked on with envy as
profits in the luxury sector soared and huge,
shiny flagships opened as quickly as those in the
mid-market closed.
Luxury fashion seemed invincible, but then
Burberry posted a profit warning in September.
Warning bells began to ring as China – the darling
of growth for luxury – saw growth in its economy
slow. So what does this mean for the UK luxury
market? We decided to find out by launching
Drapers’ first in-depth report into the sector.
In September, we compiled a survey and asked
businesses in the luxury fashion market – including
boutiques, brands, etailers, department stores,
multiples and agents – to tell us how they’re faring
today and their expectations for the future. Over the
next 14 pages, we analyse these findings across
different business segments, from ecommerce and
social media to tourism, international retailing and
distribution and buying strategies.
Further in-depth analysis also comes from
Guy Salter, deputy chairman of Walpole, the
membership group for the British luxury industry,
whose insights help to interpret our findings.
Ana Santi, deputy editor, Drapers
I
nfor is proud to sponsor Drapers’
Luxury Report. In the constantly
evolving world of fashion
it is essential to know your customers
and understand how they identify
with you. Brand identity must be
ingrained in the entire production
process, from initial design to shop-floor delivery
to meet the ever-demanding expectations of
luxury consumers.
Luxury was founded with the model ‘seduce
the customer, control the supply chain’. While this
model is still intact today, we find that many in the
luxury sector have found success using a model
that relies on ‘listen-react-respond to the
customer and collaborate with the supply chain’.
By its very nature, couture will remain the
seductress for luxury fashion. Much of luxury
fashion still manufactures many of its own
products but, as their product lines have evolved,
many are now sourcing globally.
Infor is no stranger to the luxury goods market.
Our first luxury goods customer was signed in
1992 and they are still with us today. For more
than 18 years, we have helped more than 1,100
fashion companies in 194 countries improve
their processes to become more efficient and
competitive. But why do four of the top 10 luxury
fashion companies use us? Because we
understand every business’s individual needs and
tailor our products accordingly.
Robert McKee, director, fashion industry strategy, Infor
‘We ask how the luxury market is
faring and what the future holds’
_ Ana Santi
‘It’s vital to know your customers
and how they identify with you’
_ Robert McKee
Sponsored by

3. luxury report I the current outlook
Drapers/november172012
_26
S
ince the global recession of
2008, one sector of the fashion
industry has appeared, perhaps
unsurprisingly, to weather the
storm. While the mid-market
began to witness plummeting
sales and business closures,
the luxury sector boomed.
But then, this September, UK luxury fashion
bellwether Burberry posted a profit warning.
Admittedly, investors breathed a sigh of relief
this month, as Burberry reported an 8%
increase in revenues for the first half, but
pre-tax profits dropped almost 30% due to
a one-off payment to end its fragrance and
beauty licence.
Yet last month, global consultancy Bain &
Company released its annual Luxury Goods
Worldwide Market Study showing a slowdown
in luxury goods sales. According to the report,
the value of the total luxury goods market is
expected to rise by 5% at constant exchange
rates to €212bn (£170bn) this year, compared
with an increase of 13% last year.
In the same week, LVMH – the largest luxury
goods group by sales – said organic sales growth
in the third quarter had fallen to 6%, compared
with 15% growth in the same period last year.
Mulberry soon followed, also posting a profit
warning, which took almost one third off its
market value.
Luxury
lifestyleDrapers finds out how the luxury fashion sector
is faring and its expectations for the future
Words by ANA SANTI Illustrations by NATHALIE LEES
If you have bricks-and-mortar stores, how many
do you expect to have by the end of 2013?
Same More
On average, by
how much did
turnover increase?
On average, how
much did your
profits increase?
Was your profit for 2011
up or down on 2010?
Down
14.9%
Up
85.1% 23.2%
Down 22.6%
Up 77.4%
18.5%
Fewer
Was your turnover
for 2011 up or
down on 2010?
100%of department stores
said turnover was up
in 2011 against 2010
60.9% 32.8%
6.3%

4. So, should the luxury sector in the UK be
worried? Our survey found a healthy industry,
confident of further growth in the next year.
But few businesses were complacent. There
was an air of caution, with the majority not
expecting the economy to pick up until the
end of 2014.
While that overview paints a good picture of
the state of the overall luxury fashion market in
the UK, the most interesting nuggets lie in the
details of our survey. Some 85.1% of
respondents said their turnover was up in 2011
against 2010 and 77.4% echoed the sentiment
in terms of profits. Splitting this down further,
department stores and pure-play etailers
came out on top, with 100% of respondents
in each segment recording a rise in turnover
over the same period. For brands, the number
was 90% and for indies it was 73%. On
average, turnover increased by 23.2% and
profit by 18.5% across all segments.
Luca Solca, senior luxury goods analyst at
investment company Exane BNP Paribas,
is not surprised that independent boutiques,
which had a good year nonetheless, didn’t
fare as well as department stores and brands
last year. “Brands are integrating their
distribution more and more, particularly
with mono-brand stores. The traditional
independent has less of a role to play and
they find it harder to finance their businesses,”
he explains. “And department stores are
performing more of a selection function. Look
at Liberty – it has come up with an interesting
selection of brands and products, with nicher
brands and designers to offer consumers
something different. Luxury consumers are
keen to find novelty. They’re paying more
attention to their spend, to differentiation
and distinction.”
In terms of investment in 2012, 54.1%
of respondents (the highest percentage)
invested in their staff, with 51.4% also
investing in digital marketing and the same
figure investing in new products and brands.
Digital marketing topped the investment list
for brands. For multiple retailers, staff and
digital marketing were most important, while
department stores ploughed money into staff,
new brands and digital marketing.
Looking ahead, 92% and 89% of businesses
expect turnover and profits to rise respectively
over the next year. Luxury brands forecast
turnover to increase by an average of 27%,
while indies expect a 15% rise.
Optimism is clearly in the air and, over
the next few pages, we look at how luxury
businesses hope to fulfil these ambitions.
It seems counterintuitive to those outside the
industry that the luxury sector has experienced
strong growth despite the challenging
economic environment. This resilience hasn’t
surprised me but the level of performance has.
Conditions have worsened recently, so we
must be ready for a tougher ride but I remain
sure our business model is well suited to
continue to benefit from the type and pattern
of affluent spending.
The luxury department stores and the pure-
play luxury etailers have held up particularly
well. Those department stores who strain every
sinew to keep maximum freshness, product
variety, exceptional in-store experience and
service will remain appealing to the luxury
consumer and international tourists.
It’s good to see that businesses have
continued to invest in their online presence and
digital marketing, although it would have been
shortsighted not to do so, as luxury brands’
ability to produce high-quality content gives
them an advantage. Luxury ecommerce will
continue to grow for those that offer a truly
integrated customer experience. Few are now.
Simple things like user experience, navigation
and checkout could be much improved.
Deputy chairman, Walpole
‘Luxury ecommerce
will continue to grow’
/ Industry View /
Guy Salter
Do you expect turnover to rise next year?
What did you invest in this year?
Yes
No
Do you expect profits to rise next year?
Yes
89%
Indies expect
turnover to rise
by an average of
15%in the next year
The average
increase in profit
of multiples was
28% Digital marketing
51.4%
Union Pay
16.2%
Interiors / shopfit
48.6%
Mandarin speakers
16.2%
New EPoS system
16.2%
M-commerce
16.2%
Personal / VIP shopping
27%
Staff
54.1%
CRM systems
29.7%
Opening stores
27%
New products / brands
51.4%
Paying down debt
27%
92%
8%
No
11%
Sponsored by
Drapers/november172012
_27

5. luxury report I going global
Drapers/NOVEMBER172012
_28
Do you sell
internationally?
40%of department stores
sell internationally
via their website
A website 85.7%
A licensing agreement 17.9%
An agent 14.3%
Own international stores 7.9%
Multi-brand retailer 10.7%
What percentage of your business
is from international sales?
What percentage of your sales
in the UK come from tourists?
Less than 10% 37%
10%-20% 18.5%
21%-30% 7.4%
31%-40% 7.4%
51%-60% 11.2%
61%-70% 7.4%
71%-80% 7.4%
81%-90% 0%
91%-100% 0%
41%-50% 3.7%
Less than 10%
30%
10%-20%
40%
21%-30%
5%
31%-40%
10%
41%-50%
5%
More
than 50%
10%
Yes
81.8%
No 18.2%
If you sell
internationally is it via:
Sponsored by

6. u
International
exchange
W
hen Burberry
posted its profit
warning in
September, the
brand blamed
in part the
slowdown in the
Chinese economy. Bain & Company’s annual
report also attributed the decline in growth of
the luxury goods market to Chinese consumers
spending less at home and giving fewer gifts.
Clearly, luxury businesses have been relying
heavily on thriving international markets,
notably China, to drive overall growth.
In the UK, according to our survey’s
respondents, international sales will continue
to be important to overall growth, but these
businesses have far from saturated their sales
opportunities abroad. Although 81.8% of
respondents sell to international markets,
37% of businesses (the highest percentage)
said less than 10% of their turnover comes from
international sales, with 18.5% (the second
highest percentage) claiming international sales
make up between 10% and 20% of turnover.
“The luxury sector has seen solid growth in
economically emerging Asia with the rapid
evolution of the Chinese and other economies,”
says Robert McKee, director, fashion industry
strategy at Infor. “The recent slowing in the rate
of that rapid economic evolution will have an
obvious impact on that rate of growth – but it
doesn’t have to impact profitability. Of equal
concern has to be the dilution of luxury brand
equity stemming from counterfeit luxury
merchandise making its way into all the markets
globally. Are luxury brands doing all they can
to combat this dilution to both brand equity and
revenue? It would seem that a key to combatting
luxury counterfeiting comes through the use of
technology to verify product pedigree. From
serialisation to the use of embedded RFID
[radio-frequency identification] through the
entire supply chain – from concept to consumer
– the products and all their components have
to be traceable throughout the value chain.”
Of those who sell to international markets,
85.7% do so via a website. Other methods such
as licensing agreements, via multi-brand stores
and own stores, remain relatively low, with
less than 20% of respondents choosing
each model, thereby highlighting potential
new sales channels.
Drilling into these numbers, we found
that 57% of brands and all multiple retailers
sell to international markets, and 32% of indies
do so. Andrew Robb, chief operating officer at
Farfetch.com, which facilitates independent
retailers’ online businesses, says 32% is actually
quite high. “It’s really difficult for independents
to sell online internationally because they have
to deal with the complexities of pricing, returns
and marketing,” he explains. “To be both a great
online and offline retailer you need to invest, but
most boutiques are small. Matches and Browns
have put serious online teams in place and
investment. But if you don’t have an online
channel, you’ll suffer. The boutiques that do it
well will be fewer [in the future]. It comes down
Luxury businesses are looking overseas for growth
Drapers/NOVEMBER172012
_29
44%of respondents
said Western
Europe is their
best-performing
international market
32%of indies sell
internationally
via their website
100%of multiples sell
internationally; 82%
via a website; 36%
via their own bricks-
and-mortar stores
Words by ANA SANTI Illustrations by NATHALIE LEES

7. Drapers/NOVEMBER172012
_30
to the owners having a passion and intuitive
understanding of the online space, and in
particular, online marketing. You need massive
international appeal.”
In terms of specific international territories,
Western Europe gets the top spot, with 44% of
respondents saying it was their best-performing
market. The US topped the list for 36% of
businesses. Other territories were more balanced,
with 28% placing China fourth in the rankings,
the same percentage putting Brazil in fifth place
while 36% said Australia was their eighth
best-performing market.
Looking ahead, 60% of businesses expect
the above mix to change over the next five years.
What is interesting from the results is the way
that different territories will, on the whole, be on
a more level playing field. For example, Western
Europe is still predicted to be the number one
international market for the respondents, but only
30%, rather than 44%, believe so. There could be
two reasons for this. Either the respondents are
simply unsure or, as growth in emerging markets
slows, businesses are more reluctant to put all
their eggs in one Chinese basket and are, instead,
spreading themselves across territories depending
on their business type and those territories’
different demographics. Having said that, 53%
of respondents said China is having the biggest
impact on the global fashion industry, followed
(far behind) by the US at 13%.
China also leads the way in tourism – 40% of
businesses said between 10% and 20% of their
sales in the UK come from tourists, with 46% of
businesses ranking the Chinese top of their tourist
table. 31% said Western Europeans were their
second biggest tourist group. Further down the
list, 23% said Russians were at number six and
46% said Brazilians were ranked seventh.
“Non-EU international spend in the UK has
shown continual growth year on year – with China
leading this growth, reporting spend increases
of 29% year on year between January and
September,” says Richard Brown, vice-president
of tax-free shopping operator Global Blue UK.
“Europe is seen as the world’s leading destination
for luxury shopping, especially among those who
make shopping a priority when travelling.
Products are becoming more diversified and
the demand for high-end, luxury products
and tailor-made services is increasing among
international shoppers. Due to the tax refund
policy and exchange rate, many European luxury
products are estimated to be up to 20% to 30%
lower than in their home nations, and often
overseas tourists will still choose to buy an item
from London, even if it is available in their home
country, so that they are able to talk about buying
it from a famous London store.”
Brown adds that China and the Middle
East remain the top international spenders,
representing 54% of all international non-EU
spend. “Chinese spend has seen steady year-on-
year increases. However, it is the Middle Eastern
nations who have seen the most substantial
increases – 50% year on year in September,
with some individual transactions exceeding
£1m,” says Brown.
He believes that the top international
spenders are unlikely to change dramatically
in the next few years, but adds that Global Blue
has seen significant increases in spend from
Nigerian and Indonesian visitors. “These two
countries, which account for only 9% of the
total non-EU spend, have shown enormous
year-on-year growth in September compared
with last year – Indonesia at 54% and Nigeria
at 32%,” says Brown. “For Nigerians, London
has become a top shopping destination, with
many visiting to purchase UK items cheaper
than imported and sold in their native Lagos,
and Nigerian men particularly enjoy getting
suited and booted in UK designer brands.
“Nigeria is forecast to become Africa’s biggest
economy by next year. Meanwhile, Indonesia is
only in the 15 top international spenders in the
UK, and only 1% of the population are able to
travel for holiday or business reasons, but their
September average monthly sales are comparable
to China and the Middle East.”
I am surprised that of the businesses surveyed,
40% of them noted that only 10% to 20% of
their UK sales came from tourists and that 37%
said international sales made up less than 10%
of their turnover. I would expect those figures
to be higher, with tourists and international
sales accounting for a much bigger percentage
of overall sales of the UK luxury businesses
surveyed. But a factor in this could be the
different trading patterns experienced in
2012 with the Jubilee and the Olympics.
Luxury is a global business attracting
a global clientele. Perhaps some UK luxury
brands need to work harder to become more
commercial and more relevant in certain
key overseas markets. Likewise all brands are
now looking seriously at how to get better
at attracting and selling to affluent visitors.
I am not surprised that the Chinese are
ranked top of the tourist table and we
are working closely with the Government
to help further increase Chinese visitor
numbers to the UK.
Deputy chairman, Walpole
‘Luxury attracts
a global clientele’
/ Industry View /
Guy Salter
luxury report I going global
Chinathe country
impacting most
on the global
fashion sector
at the moment
30%of brands
said they
didn’t expect
more sales
to come from
tourists in
the next year
46%of respondents said the majority
of tourists come from China while
31% said Western Europe was the
second biggest tourist group
Which are your best-performing
international markets?
18% of multiples said this
was their number one market
Western Europe

8. Doingitfor
themselvesWith sales from wholesale divisions expected to continue to
decline over the next five years, brands in the luxury
sector are turning their attention to retail
55%
What percentage of
your total turnover
comes from wholesale?
What percentage of your
turnover do you expect
wholesale to contribute
over the next five years?
39.5%
“The wholesale model does not have
enough margin. Only a few established
wholesalers will survive – those who are
able to review their business and approach
to consumers, including investments in
e-business, to become more internationally
known,” said one respondent
Sponsored by
Words by ANA SANTI Illustrations by NATHALIE LEES

9. u
O
ver the past few years,
we’ve seen many luxury
brands report stronger
sales from their retail,
rather than wholesale,
divisions and, as a result,
have focused their efforts
on growing the former. The luxury brands
surveyed said 55% of sales come from their
wholesale channel but, over the next five years,
they expect wholesale to make up less than
half of total turnover – 39.5%. Respondents
explained the reason for this predicted change,
with one saying “the wholesale model does not
have enough margin”. Another added: “The
wholesale segment is falling down. Only a few
established wholesalers will survive, those who
are able to review their business and approach
to consumers, including investments in
e-business, to become more internationally
known.” One respondent simply said this is
now the “rule of thumb”.
As investment firm Exane BNP paribas’
Luca Solca says: “If wholesale isn’t dead, then it’s
severely damaged.” Solca explains that industry-
wide, deep discounting over the past few years
has led brands with a traditional wholesale model
to become more protective and take more control
of all elements of their business, from pricing,
to marketing and distribution. “The strongest
brands are taking steps to manage their own
distribution. But brands have to be prepared
to invest more capital back into their business to
finance directly-operated stores, for example.”
He also expects fewer independent boutiques
to enter the market. “The more sophisticated
boutiques will become masters of selection,
in a smaller scale to department stores.”
This shift is also affecting the skillset among
luxury professionals, says Mathew Dixon,
director at luxury recruitment consultancy
Hudson Walker International. “Nobody used
to talk heavily about sales [in the luxury sector]
but brands are developing much more aggressive
business models with underlying sales ethics. It’s
a very sales-driven environment now with more
commercially-oriented roles.”
As for buying strategies among retailers,
forward order remains the norm, representing
62% of total budget. But in the next year, this
is expected to contribute to more than half of
buyers’ budgets – 53%. Respondents listed
the following as their best-selling brands (in no
particular order): Vivienne Westwood, J Brand,
Equipment, Isabel Marant, Alexander McQueen,
Stella McCartney, Diane von Furstenberg, Louis
Vuitton, Rick Owens and By Malene Birger.
Looking at specific markets, sales were
generally up on a year ago for the majority
of respondents – 89% – across womenswear,
menswear, kidswear, accessories, footwear and
lingerie. Only 10% of respondents said sales
were down in womenswear, kidswear, footwear
and lingerie, with menswear and accessories
showing a clean sheet. 25% of respondents
said menswear sales were up between 10%
and 20%. Meanwhile, 50% said footwear
sales had increased between 0% and 10%,
and 46% said womenswear sales had risen
by between 10% and 20%, while 27% said
accessories had seen the same increase.
Wholesale will always be with us but it is
tougher than ever. It’s not just the squeeze
on margins but the lack of control. There is a
trend towards getting out of accounts that are
either too accessible or don’t present the right
environment for luxury, even if that means
taking a short-term hit on revenues.
The strength of menswear and accessories
isn’t a surprise and in my view is based on
underlying strong fundamentals.
Deputy chairman, Walpole
‘Wholesale is
tougher than ever’
/ Industry View /
Guy Salter
46%of respondents said womenswear
sales were up between 10% and
20% compared with a year ago
50%of footwear sales were up between
1% and 10% compared with a year ago
19%of brands are
producing more
collections than
a year ago
27%of respondents said
accessories sales were
up between 10% and 20%
compared with last year

10. luxury report I buying & distribution
Drapers/november172012
_34
Manufacturing case study Honey Clothing
Customers
ChristopherKane,
PaulSmith,Preen,
RolandMouret
As a Sedex-certified
[an ethical and
responsible supply
chain standards body]
premium outerwear
manufacturer, trading
is relatively sound
and improving every
year. More and more
British designers and
high-end brands are
making some of their
lines here in the UK
and we are benefiting.
I think the luxury
sector has traded
better than the rest
of the fashion market
[in the economic
downturn].
The British Fashion
Council has better
organised London
Fashion Week in recent
years, which has
motivated high street
brands and designers.
Consumers are
more aware of where
their clothes are being
made and they are
willing to pay extra if
made well in an ethical
working environment
in this country.
We’re experiencing
demand for high-
quality pure wool, and
specialised leather is
growing each year.
London-based
manufacturers are
competing with
established
manufacturers from
France and Italy.
Established British
designers are also
choosing to bring back
their production from
continental Europe to
this country. As long as
we can keep up the
quality, the demand
will grow further.
Mahbub Ullah, accounts manager
Manufacturing case study Johnstons of Elgin
CustomersBurberry,
Chanel,Hermès
Trading is tough. A
mild winter in 2011 left
our customers with
too much inventory in
our product categories
resulting in small
orders for 2012. The
Olympics, weather
and a less competitive
currency in relation to
the eurozone all
impacted on tourist
travel in August 2012,
which affected our
customers.
A slowdown in
developing markets
is also affecting our
global luxury clients.
The luxury sector
has traded better than
the wider market,
however, it has slowed
in terms of growth
potential compared
with two years ago.
Opportunity still exists
in markets such as
Brazil, India, Russia and
China, which, although
slowing down, will
continue to grow.
Both private-label
supply to global
brands and the
development of
our own-brand offer
with independent
wholesale customers
and via our own retail
has driven growth.
Menswear is
particularly strong as
is the local Scottish
tourist market.
Next year I expect
continued growth
with private-label
couture and luxury
brands, and a more
effective sales effort
from our own
company in the
Scottish tourist market,
the wider market and
particularly the US.
We intend to grow
our export sales from
the current 25%
turnover to more
than 30%.
James Dracup, group managing director
60%of etailers’ budgets
go on forward order
46%of womenswear sales were
up between 10% and 20%
compared with a year ago
50%of footwear sales were
up between 0.1% and 10%
compared with last year
27%of respondents said
accessories sales were
up 10%-20% on last year
Forward order is
expected to make up
of total buying
budget in the
next 12 months
53%

11. Drapers/november172012
_35
Manufacturing case study
Harris Tweed
CustomersBrooksBrothers,Chanel,Saks
Trading is currently very good. We are sampling
well for autumn 13, and our top-end customers
appreciate the marketing and images we have
created to promote the history and provenance
of Harris Tweed.
We believe the luxury sector has traded
well because clients seek quality and products
that last. Price deflation over the past 20 years
has created a disposable product, which is
no longer acceptable. Our customers want
a product that is robust and fit for purpose,
and they are prepared to pay for it.
We have also developed two new finishes
working with WT Johnson textile finishers of
Huddersfield. The new finishes and creative
colours and designs will drive sales.
Demand in the UK luxury sector is less strong
than in other countries such as Japan, the US
and Europe, probably because the UK high
street brands over the years have driven the
price of Harris Tweed down, so it does not
reflect the artisan processes of carding,
spinning, hand-loom weaving and finishing
that the luxury market tends to respect,
appreciate and pay for.
Malcolm Campbell, sales
and marketing director
for the Carloway Mill
Manufacturing case study
Alfred Brown
Customers
Aquascutum,Jaeger,
PaulSmith
Trade is very good.
We think people
are buying less but
spending more on
individual items,
which is helpful to
us, because being
a European weaver
we will always be at
the luxury end.
In difficult
economic climates,
the luxury and bottom
ends of the market
hold up better than
the middle market.
Fabric woven in
Britain is still strong
and this plays into
the luxury market.
The biggest driver
is the fact that all our
fabrics are woven in
Britain and some of
this sentiment is
beginning to show
in the womenswear
market, which is
growing for us.
Our biggest market
though is menswear –
semi-plain fabrics are
strong, especially
slightly bolder colours.
Next year, I expect
traditional English
fabrics, with a modern
twist, to drive sales.
I think the Jubilee
and Olympics have
given us a belief in
ourselves as a nation
and this encouraged
the demand for British
manufacturing and
goods. We have had a
good year and we will
be pleased if we can
maintain this growth
in the year to come.
Ian Brown, joint managing director
How is your buying
budget split?
Forward order
61.67%
Closer to and in-season
16.88%
Resort / pre-collections
16.88%
House brands
51.67%
Own brands
40.83%
What is your
best-selling brand?
Alexander McQueen
By Malene Birger
Diane von Furstenberg
Equipment
Isabel Marant
J Brand
Louis Vuitton
Rick Owens
Stella McCartney
Vivienne Westwood
58%of respondents said menswear
sales were up between 0% and
10% while 25% said they were
up between 10% and 20%
Sponsored by

12. Drapers/november172012
_36
luxury report I social media
Themoveto
multichannel
W
ith digital
marketing listed
high among the
different areas
of business that
respondents
invested in for
2012, it comes as no surprise that the internet,
and social media in particular, are crucial to the
growth of the luxury sector.
Almost 33% said up to a fifth of their business
comes from online sales, while 22% said online
sales account for between 21% and 40% of
turnover. More than 90% expect online sales to
account for even more of their total turnover in
the next 12 months, with 56% citing online sales
as the biggest growth area for their business. Any
reservations that luxury brands had about selling
their collections online have disappeared, with
100% of respondents unconcerned about their
products being sold on a stockist’s website rather
than a bricks-and-mortar store.
Martin Newman, chief executive of ecommerce
consultancy Practicology, says these figures are
encouraging and expects bigger growth for the
luxury sector from online sales. “The [businesses]
who take that leap are the ones that link their
multichannel functions, and I’d say department
stores [have a better chance] because they have a
broader product proposition,” he says.
Mark Henderson, chairman of the London
Luxury Quarter and non-executive chairman of
British tailor Gieves & Hawkes, says click-and-
collect is a “phenomenal” opportunity for luxury
brands: “The majority of luxury purchases are
pre-considered and that is an enormous
opportunity for luxury retailers, certainly
the [‘collect’] opportunity because shopping
is an experience of temptation.”
Luxury brands have embraced social media
– 97.1% are on Twitter; 94.3% on Facebook;
57.1% on Pinterest and 37.1% on both Instagram
and Google+. Brands and indies need to step up
their game though, with only 57% of brands
and 45% of indies on Twitter. 57% of brands
have a Facebook page, while 41% of indies do so.
Newman believes social media offers the
biggest opportunities to brands “because they
have a stronger relationship with the end
consumer, it’s about how you leverage social
media and create a community,” he says. “I
question the traction of Google+, but if a brand
isn’t on Pinterest, it’s missing out. Pinterest
seems to have the highest level of engagement
where the engagement is very product-focused.
Facebook is harder – people are engaging with
friends and family on it.”
Infor’s Robert McKee agrees: “Today,
Facebook is a community – a very successful
community – but luxury fashion companies
have the ability to create their own communities.
Brand loyalty in mainstream fashion is very much
‘easy come, easy go’, but luxury fashion enjoys
a prestige factor that is not afforded to the
mainstream. Whether it’s brand loyalty or
conspicuous consumption, the merchandise
is sought-after. This brand loyalty represents
a group of people with like interests – or – a
community. Luxury companies need to begin
building their own online social communities
around this brand loyalty. Listen to your
communities. From colour palettes to silhouettes,
your community has an opinion and they’re
anxious to share that with you.”
Most businesses – 97.1% – use social media
for brand awareness, which topped the list
above marketing in second place, customer
service in third place and sales ranked last.
It is encouraging to see that 68.6% of
respondents have a daily presence on social
media, with 8.6% using different platforms
“more than 10 times a day”. With the purpose
of social media being instant and regular
engagement with customers, a strong presence
on these sites is a must.
Investinginonline,particularlysocialmediaplatforms,
iskeyforretailers’growthintheluxurysector
Social is a hugely influential communications
channel. A lot of luxury brands are reticent
about engaging with their consumers via social
media, as it can be difficult to retain control. But
if harnessed in the right way, it is a powerful and
effective way to build a brand’s consumer base,
generating customer engagement and loyalty,
attracting visitors to online stores and driving
sales. Everyone is still learning.
Deputy chairman, Walpole
‘It’s a powerful way
to build consumers’
/ Industry View /
Guy Salter
What proportion of your business is online?
Twitter 97.1%
Facebook 94.3%
Pinterest 57.1%
Instagram 37.1%
Google+ 37.1%
None 15.8%
0.1%–20% 32.9%
21%–40% 22.4%
41%–60% 14.5%
61%–80% 6.6%
100% 7.8%
Do you have a presence on any of the following?
Words by ANA SANTI Illustrations by NATHALIE LEES

13. Do you expect your online business
to grow in the next 12 months?
No 6.6%
Yes 93.4%
(by 1%–10%) 39.5%
(by 11%–25% ) 25%
(by 26%–50%) 10.5%
(by more than 50%) 15.8%
Not applicable 2.6%
How active are you on the main social media sites?
More than 10 times a day 8.6%
Daily 68.6%
Several times a week 5.7%
Weekly 8.6%
Several times a month 0%
Monthly 5.7%
Less often 2.8%
What do you use the main social media channels for?
40%of department
stores have a daily
presence on
the main social
media channels
82%of multiples have
a daily presence
on the main social
media channels
Does selling your
collections via a
stockist’s website
rather than a bricks-
and-mortar store
concern you?
48%of brands have
a daily presence
on the main social
media channels
27%of indies have a
daily presence on
the main social
media channels
Sales
45.7%
Customer service
62.9%
Marketing
77.1%
Brand awareness
97.1%
9%of indies have an app,
mobile-optimised site
and use QR codes
Do you have any
of the following?
No
100%
Yes
0%
An app 41.2%
A mobile- 76.5%
optimised site
Use of QR codes 35.3%
Sponsored by

14. What is the biggest growth
area of your business?
Online
55.6%
International
27.8%
Sales in store
38.9%
International
and online
expansion
are two of
the most
popular areas
of growth for
multiples
When do you believe the
economy will start to pick up?
Start of 2013 14.8%
End of 2013 18.5%
Not until 2014 25.9%
Not until 2015 25.9%
Not until 2018 14.9%
Brands expect
online sales to
be the biggest
growth driver
next year
Outside London,
which are the other
hot spots in the UK?
Manchester
Liverpool
Birmingham
Leeds
Oxford
Cambridge
Bicester Village
36%of multiples believe
the economy will
pick up from 2014
onwards, while 15%
believe the economy
will pick up at the
end of next year
Are you confident about
business over the next 12 months?
Not at all. 0%
I am worried my
business might fail
Not really. I think 13.6%
it’s going to be tough
I think things will 23.7%
remain the same
I am quite confident 30.5%
trade will begin to pick up
I am confident my 27.1%
business will grow
Very. Things are 5.1%
going really well

15. Drapers/november172012
_39
Great
expectations
D
espite respondents’ earlier
comments that they expect
turnover and profit to grow
next year, 25.9% (the joint
highest percentage) do not
expect the economy to pick
up until 2014, while the
same number think it will be even later – not until
2015. Meanwhile, 18.5% believe there could be
some improvement by the end of next year, while
the optimistic few – nearly 15% – think it could
be early in the new year.
Over the next 12 months, 30.5% are “quite
confident” that trade will pick up, with 27.1%
“confident” that their business will grow. Nearly
a quarter believe trading will remain the same,
while 13.6% predict “it’s going to be tough”. The
majority – 55.6% – believe growth next year will
be driven by online sales.
The Bain report estimates that the luxury
goods market will grow by 4% to 6% from 2013
to 2015, pushing the sector to between €240bn
(£192.3bn) and €250bn (£200.3bn) by 2015.
Mark Henderson, chairman of the London
Luxury Quarter and non-executive chairman of
Gieves & Hawkes, believes the luxury sector will
continue to grow “because people want the best”.
He adds: “Tourism is growing, and London’s
reputation is growing. The trend at the moment
is towards craftsmanship and individualism,
which supports the luxury sector’s values.”
While few expect the economic gloom to lift in the near future, many in the
luxury sector are optimistic that their business will continue to grow
Henderson cites Harrods as a great example
of the type of business that will lead growth in
the luxury sector. “We seem to have particularly
good department stores in this country. Harrods
is an outstanding business, and [managing
director] Michael Ward is a genius,” he says.
“It’s a fabulous experience of temptation as
you can move from one brand to another.
Equally, walking into the Louis Vuitton store
is not the same as walking into the Louis Vuitton
concession. I think they [department stores
and own-brand stores] live incredibly comfortably
Forecasts for continued growth in luxury are
positive across all markets and categories, but
the next 12 months could be challenging, and
sales increases are likely to be more modest
than in recent years. Ongoing uncertainty in
the eurozone, the muted outlook for the UK
economy and concerns about China’s
slowdown could have a short-term impact.
However, long-term prospects look good. I’m
as excited as I have ever been about the future.
Deputy chairman, Walpole
‘Long-term prospects
are extremely good’
/ Industry View /
Guy Salter
side by side. The future looks pretty good. I am
hugely optimistic.”
For Infor’s Robert McKee, the success of the
luxury sector lies in its analysis of information.
“At the core is business intelligence, pulling in
information from different sources. The luxury
industry is much more right-brained, therefore
it has a great deal of difficulty in intellectualising
its business models. Luxury often makes money
in spite of itself, because of its prestige, but the
luxury sector has huge potential, even beyond
its current results; it needs to be more technology-
attuned,” he explains. “Too much emphasis is
put on high margins rather than efficient business
practices. History is littered with luxury apparel
companies that forgot to run an efficient business.
Let’s not forget that when all the glamour is
stripped away, you still have a business to run.
If you have to flatten growth, it doesn’t mean
you have to flatten profits. You should be
able to control your profitability with better
operating efficiencies.”
While luxury businesses do have reason to be
optimistic, the industry is likely to experience
a readjustment. Recent profit warnings and
slowdown in markets such as China mean that
companies will need to work harder to find
pockets of growth. There may be a short-term
slowdown, or even short-term losses, but
businesses that understand their brand’s values
and adapt to a changing market will prosper.
future prospects I luxury report
Sponsored by
Words by ANA SANTI Illustrations by NATHALIE LEES