Antonio Achille, Partner & Managing Director Milan, February 10th, 2016

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

True-Luxury Global Consumer Insight

10.000+ Consumers

21K€+ Average spend • Top 30% spending 40K€

Note: Markets included: Italy, France, Germany, UK, US, China, Brazil, South Korea, Japan, Russia and Middle East

11 Markets

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

True-Luxury Global Consumer Insight

1

Luxury Barometer®: consumer confidence positive trend

SHORT TERM

"Do you expect to spend more or less on luxury products in the next 12 months?"

More (+20%)

33%

23%

37%

38%

Same

43%

48%

39%

41%

Less (-20%)

24%

29%

24%

21%

2013

2014

2015

2016

9pp

-5pp

13pp

17pp

Luxury Barometer®1

1. Index calculated as percentage of customers who see growth in spend less the percentage who foresee a decrease in spend (Positive – Negative). The index represents a proxy of the expected growth of spend in Luxury by Top Luxury consumes Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

% of respondents

2

400M Luxury Consumers in 2015 to become 480M in 2022

20 k€ 10 k€

5 k€

2015 # (M) Bn(€)1

2022 # (M) Bn(€)1

Beyond money

2

2

Ultra

4

6

Very high

10

12

Total Top Luxury

16

20 +4

2 k€

Top Aspirational

20

26

Aspirational

365

435 +76

Total Luxury Consumers1

~400

~480 +80

1. Including Experiential and Personal luxury, excluding cars and Yachts Note: rounded numbers Source: BCG Analysis

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

CLUSTER

MID TERM

3

Personal and Experiential luxury market to grow from today 845Bn€ to 1135Bn€ in 2022

20 k€ 10 k€

5 k€

2015 # (M) Bn(€)1

2022 # (M) Bn(€)1

Beyond money

2

50

2

90

Ultra

4

92

6

135

Very high

10

103

12

140

Total Top Luxury

16

245

20

365

+120 2 k€

Top Aspirational

20

61

26

86

Aspirational

365

538

435

684

+170 Total Luxury Consumers1

~400

~845

~480 +290

1. Including Experiential and Personal luxury, excluding cars and Yachts Note: rounded numbers Source: BCG Analysis

~1135

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

CLUSTER

MID TERM

4

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Evolving consumer values

Relevance of Intro values confirmed "What is luxury to you?"

34%

66%

26%

74%

28%

72%

28%

72%

29%

71%

29%

71%

34%

66%

34%

66%

38%

62%

39%

61%

47%

63% 71% 60% 72%

68% 58% 54% 67%

1. Respondents were asked to rank the top 3 values: the graph represent the value ranked as the most important Source: BCG 2014 and 2015 ad hoc study (10'000 respondents in 10 countries)

• • • • •

LUXURY 'FOR YOURSELF' - INTRO Quality Exclusivity Craftsmanship Timeless Sustainability

53%

Total

LAST 62% YEAR

• • • • •

LUXURY 'FOR OTHERS' - EXTRO Adorned aesthetics Brand visibility Customization Being Cool/Sexy Iconic Pattern

58% 54%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

% of respondents1

6

How to stay relevant on Intro values? Relevance

% on respondents who have selected intro values 14% (Other)

QUALITY EXCLUSIVITY

86%

=

+ CRAFTSMANSHIP

+ SUSTAINABILITY Total 2015

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

+

7

EXCLUSIVITY

Losing exclusivity = material risk especially for mature generations

"How do you react when you perceive that a Brand is losing or has lost part of its exclusivity?"

Millennials (18-35 yr.)

Total

Gen. X (36-50 yr.)

Baby B. & Silver (51+ yr.)

Continue buying

27%

32%

24%

16%

Buy less frequently

29%

31%

29%

21%

73%

Stop buying

44%

68% 37%

1. % of the respondents indicating at least one brand losing / risking to lose its exclusivity Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

76% 47%

84% 63%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

% of respondents1

8

EXCLUSIVITY

30% of brands at risk of losing Exclusivity "Is there any brand you think is losing or has lost part of its exclusivity?" 100%

17%

% of top brands analyzed 11%

28%

Total brands1

Brands already losing exclusivity2

Brands risking to lose exclusivity3

1. Analysis on top brands included in the survey with at least 200 respondents purchasing their products : ~100 brands 2.Brands losing exclusivity: brands with at least 100 respondents declaring that the brand is losing exclusivity 3. Brands with 50 to 100 respondents declaring that the brand is losing exclusivity Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries))

Brands not at risk

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

72%

9

EXCLUSIVITY

Possible to grow without losing exclusivity? "Is there any brand you think is losing or has lost part of its exclusivity?" Risk of losing exclusivity1 (%)

40%

20%

0%

Luxury brand

1. Brands that have already lost or are expected to lose exclusivity from a consumer point of view Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries), company's annual reports

Size (Revenues 2015) – €Bn

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

60%

10

EXCLUSIVITY

Work on disaffection triggers to prevent exclusivity loss "Which of the following situations would stop you from buying a brand?" % of respondents Total

29%

24%

26%

19%

36%

Poor distribution

27%

25%

28%

23%

37%

Inadequate communication

23%

25%

28%

22%

Unethical Production process

23%

23%

Note: Multiple answer possible Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

21%

11%

19%

14%

39%

21%

20%

31%

39%

28%

19%

22%

31%

35%

19%

31%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Fake copies

11

SUSTAINABILITY

Sustainability a growing value, especially for Millennials "What is luxury to you?" % of respondents who have selected Sustainability as a value

+4pp 19% 17%

+5pp

15% 13%

8%

2013

2014

2015

Note:1. Sustainability ranked among top 3 values (multiple answer possible) Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Millennials

Gen. X

Baby B. & Silver

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

17%

12

SUSTAINABILITY

Sustainability an articulated meaning for Consumers; facade initiatives not accepted “What is more important to you about sustainability?" Total

Millennials

Baby B. & Silver

Gen. X

% of respondents1 48%

44%

Usage of safe products

Animal friendliness

Safeguard of the workers

Social initiatives

48%

50%

42%

44%

30%

29%

31%

29%

27%

30%

26%

30%

Note:1. Sustainability ranked among top 3 values (multiple answer possible) Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

48%

24%

54%

29%

33%

17%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Respect of Environment

13

SUSTAINABILITY

Sustainability becoming a Purchase Booster; Might become also a Purchase Breaker? "Would you be willing to pay more for a sustainable product?"

Yes

1

Safer for my health

2

Higher quality

3

Positive consideration of my acquaintances

16%

Purchase Booster No

IF...

1%

"Would you be ready to leave a Brand if not sustainable?" Yes

10%

Purchase Breaker No

1. Only respondents for which sustainability is a value considered Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

7%

1

Non sustainable products

2

Unethical production process

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

% of respondents1

14

CRAFTSMANSHIP + SUSTAINABILITY

Italy clear leader on Made-in; not yet a clear leader on sustainable manufacturing "Which country of manufacturing do you consider the best for luxury products?"

x2

"Which country do you think could become the leader in manufacturing sustainable products?"

% of respondents for Made-In

% of respondents for Sustainability

20%

17%

17%

16% 11%

12%

9%

10%

6%

... Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

2%

3%

...

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

40%

15

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Millennials: the 6th continent

16

Age

Total # 2015 (M)1

Millennials

Gen. X

Baby Boomers

Silver

18 - 34

35 - 50

51 - 65

65+

2.300 M (~32%)

1.500 M

1.000 M

600 M

1. Total world population 7,2 Bn; 1,8 Bn people under 18 years old not included Source: Economist intelligence unit 2015, BCG 2014-2015 ad hoc study (10'000 respondents in 10 countries), BCG analysis

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Millennials the 6th continent: 2.3bn people

17

1

Different values and myths

2

New language

3

Optimistic

4

True and personal

5

Active advocates

6

Always connected

7

Diverse

1. Total world population 7,2 Bn; 1,8 Bn people under 18 years old not included Source: Economist intelligence unit 2015, BCG 2014-2015 ad hoc study (10'000 respondents in 10 countries), BCG analysis

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

How Millennials are changing luxury?

18

1

VALUES

Millennials different values "Are these values / activities more or less important to you than they were 2 years ago?" 10% Spirituality

Religion

Patriotism

5%

Family Craftsmanship Education

Ethics

0%

NON-MILLENNIALS VIEW MORE IMPORTANT

Working Out / Fitness Fun

Optimism Sustainability

Change

-5% Conviviality/Festivity

Travel Excitement Multi-Tasking Wealth Beauty Adventure Consuming

-10%

Luxury

Status

-20% MILLENNIALS VIEW MORE IMPORTANT -25%

Professional Success

-15%

-10%

Source: BCG Millennials research overview, BCG analysis

-5%

0%

5%

Glamour

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Wellness

15% 19

2

LANGUAGE

Words/slang frequently used by Millennials

Female Millennials Favorite Slang

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Male Millennials Favorite Slang

Note: Respondents answered the question: "What are the most characteristic, defining or frequently used words, exclamations, jargon, slang or sayings of your generation?" Source: BCG Millennials research overview, BCG analysis

20

2

LANGUAGE

Top 10 abbreviations/text-speak frequently used by Millennials Female Millennials Favorite Text-Speak

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Male Millennials Favorite Text-Speak

Note: Respondents answered the question: "What are your favorite or frequently used abbreviations or so-called "text speak" (e.g. LOL, OMG)?" Source: BCG Millennials research overview, BCG analysis

21

4

TRUE & PERSONAL

Millennials identify themselves with the brand "I feel an emotional connection with the brands I buy" % of respondents that agree 1.3x 66%

Millennials

Baby Boomers & Silver

Source: BCG Millennials research overview, BCG analysis

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

51%

22

5

Millennials expect a two-ways dialogue with brands

ACTIVE ADVOCATES

"Thinking to the communication opportunities offered by digital, which ones do you value the most?" % of respondents

• Gather product info • Access brand content • Price & Product comparison Avg. 42%

Two-ways • • • • Millennials

Gen. X

Baby B. & Silver

Source: BCG 2015 ad hoc study (10.000 core luxury Consumers in 10 countries)

Opinion sharing Feedback sharing Dialogue with brands Influence trends

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

One way

23

5

ACTIVE ADVOCATES

8 out of 10 Millennials are active advocates “Have you recommended a Brand in the last 12 months?" % of respondents Non Advocates

Advocates spontaneously

Millennials

Source: BCG 2015 ad hoc study (10.000 core luxury Consumers in 10 countries)

Gen. X

Baby B. & Silver

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Avg. 76%

Advocates when prompted

24

5

ACTIVE ADVOCATES

Millennials actively broadcast their thoughts Rate products and services on the web

Upload content to the web

Have their own website / blog

% of respondents 2.1x

1.8x 60% 46%

1.7x 29%

29% 12%

Millennials

Non-Millennials

Source: BCG Millennials research overview, BCG analysis

Millennials

Non-Millennials

Millennials

Non-Millennials

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

60%

25

6

ALWAYS CONNECTED

Millennials always connected also when in store Check prices via mobile when in store

Look at the product information in store

Look for coupons or promotions online when in store

% of respondents 1.8x

45%

1.7x

44%

43%

24%

22%

25%

Millennials

Non-Millennials

Source: BCG Millennials research overview, BCG analysis

Millennials

Non-Millennials

Millennials

Non-Millennials

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

2.1x

26

7

DIVERSE

Millennials: an heterogeneous continent

"I can make the world a better place"

Millennial Nurturer "I love to work out, travel, and pamper my baby"

Anti-Millennial "I'm too busy taking care of my business and my family to worry about much else"

Source: BCG Millennials research overview, BCG analysis

Gadget Guru "It's a great day to be me"

Clean & Green Millennial "I take care of myself, and the world around me"

Old School Millennial "Connecting on Facebook is too impersonal, let's meet up for coffee instead!"

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Hip-ennial

27

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Personal luxury saturation

30% of consumers at saturation point on personal luxury "Do you plan to buy more items in the near future1?" % of respondents

15%

100%

No, at all conditions

Total

13%

28%

Yes

No, but I might be tempted

1. Question focused on handbags, shoes, dresses & suits and watches only Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

72%

29

Saturation growing from shoes to watches and with seniority "Do you plan to buy more items in the near future1?" % of respondents declaring to be at saturation

Baby B. & Silver

60

Gen. X

40

30 Millennials 20 Shoes

Handbags

1. Question focused on handbags, shoes, dresses & suits and watches only Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Dresses and suits

Watches

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

50

30

1/4 of saturated consumers willing to swap, mainly Millennials and on Shoes and Dresses "You told us you are NOT planning to buy more items. Would you be willing to swap your luxury items1?" CONSUMERS AT SATURATION ONLY2

No

Yes

Who are the swappers?

On which category?

77%

23% Total

26%

23%

Millennials Gen. X

15% Baby B. & Silver

28%

26%

Shoes Dresses Handbags Watches & Suits

1. Question focused on handbags, shoes, dresses & suits and watches only 2. 2. Includes respondents who answered both "No” and "No but I might be tempted" Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

% of respondents

31

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

From owning to being: ~50% of Consumers shifting toward Experiences "Do you have the feeling you are buying less products and more experiences in last years?" % of respondents 7%

Keeping same mix

45%

6%

Avg.

Yes

48%

53%

Total

Millennials

% of spend in Experiential luxury last year Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

36%

Gen. X

34%

Baby B. & Silver

41%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

No

33

Store Storewars wars Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

MM 05.feb.16:

Rent exploding Trend 2009-2015 of rent / mq cost in high luxury streets (Index 100 = 2009)

Rent/ mq (K€) 2009

2015

Hong Kong London New York Paris

12.2 5.5 12.6 7.7

23.3 10.4 23.0 13.3

Tokyo

5.4

8.1

Milan

6.7

8.5

200 180 160 140 120 100 80 2009

2010

2011

2012

2013

2014

2015

Note: Hong Kong: Causeway Bay; London: New Bond Street; New York: 5th Avenue; Paris: Champs Elizée; Tokyo: Ginza; Milan: Montenapoleone Source: Cushman and Wakefield Main Global Street; BCG analysis

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

220

From retail rush to portfolio rationalization Luxury Stores closures as % of openings by geography

2015

57%

49%

CLOSURES = OPENINGS IN 2014

100%

61% 47%

61% 47%

52% 42%

50%

50% 48%

Total

Europe

APAC

Americas

Japan

RoW

% of stores by region

23%

39%

21%

12%

5%

How to stay relevant to consumer? How to maximize store returns? Note: Analysis based on a database of more than 6.500 luxury stores in the world Source: Bernstein / BCG analysis

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

2014 +8pp

36

>50% of Luxury Consumers are frequent visitors; "Newness" key to keep interest alive "How often do you visit a store of your favorite Brand?"

"What are the key reasons for you to visit your favorite Brand in a store?" % of respondents1

Once per year

6%

Twice per year

12%

43%

New product Reward myself

Once every two or three months

30%

42%

New VM / Experience

36%

Need for specific item

35%

Buy more from brand

Once a month

29% Services

52% A few times a month

33%

Invited to special event

25%

New commercials

25%

23%

Total

28%

Peers recommendations

1. Multiple answer possible Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

18%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

% of respondents

37

More frequent product releases expected "Typically new collections are released twice a year (spring-summer and fall-winter). Would you like brands to release items on a more continuous base?" % of respondents

38%

33%

39% 51%

Yes

62%

67%

Total

Millennials

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

42%

31% Avg. 62%

61%

49%

58%

Gen. X

Baby B. & Silver

Mature Markets

69%

Emerging Markets

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

No

38

From a boring box to an intriguing experience: free tips from consumers... "Which innovative services should your ideal store offer?" Interest ratio (# of supporters vs. opponents)

Digital in store

Possibility to buy luxury experiences

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

1.3x

1.2x

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

1.8x

Art & Culture

39

Millennials more interested in experimenting new store realities "Which innovative services should your ideal store offer?" Interest ratio1: Art display & Cultural events

Interest ratio1: Digital In-store

1.9x 1.7x 1.5x

1.4x 1.3x

1.2x 0.7x

Total

Millennials Gen. X Baby B. & Silver

1. Number of supporters divided the number of opponents Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Total

Millennials Gen. X Baby B. & Silver

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

1.8x

40

~70% of Consumers would follow their Brands in new up & coming trendy locations "Would you follow your favorite luxury Brands if they open a store in a new up and coming trendy location?

% of respondents Reasons why... No 34%

Yes

68%

Total

71%

67%

56%

Millennials Gen. X Baby B. & Silver

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

I’m curious I trust It’s cool and about the Brand innovative new locations

Luxury streets became boring / crowded

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

I don’t know

41

Department Stores & Wholesale rebirth? "What was the first channel for you luxury purchases in the past 12 months?"

"Do you have the feeling that you are purchasing more or less frequently in Multibrand?" CONSUMERS BUYING FROM MULTI-BRAND

% of respondents

% of respondents

High end department store

25% 17%

No shift Shopping malls

13%

Multi-brand

12%

Online websites Travel Retail duty free Downtown duty free Off-price and factory outlet

11% 9%

Avg. 50%

More 50% frequently

58%

SHIFTING FROM MONO BRAND

8% 7%

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Total

Millennials Gen.X

BB & Silver

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Mono-brand

Less frequently

42

Why Department Stores & Wholesale are winning? "What are the main reasons for you for shifting from mono-brand stores to..." % of respondents

Brands choice

...Multi-brand stores?

45%

Brands choice

Additional services1

34%

Product assortment

Product assortment

34%

Convenient location

Peers recommendations

19%

1. E.g. food court, hair stylist, beauty spa,.. Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Saving of time

41%

33%

26%

25%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

...High end Department stores?

43

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Digital: always connected

44

6 out of 10 luxury sales digitally influenced "Where have you bought the last item purchased? Where have you researched it?"

58%

% of respondents on last purchase

100 100

Store solo

Researched Online Purchased Offline

Showrooming (viewed in store, purchased on line)

Omnichannel

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Online solo

Total

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

88

45

Brand websites 1st choice; navigability key driver "From which online store did you buy from?" % of respondents

29%

Online marketplace

25%

Dept. store website

21%

Luxury-specialized retailers

17%

9%

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

-9pp

1

Navigability of website

+5pp

2

Price discount

+3pp

3

Free return

4

Payments accepted

5

Quality of customer care

+2pp

-1pp

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Δ 2015-2014

Brands website

Flash sales sites

" Which factors would you consider more important when buying online?"

46

~80% of consumers asking for Omnichannel especially the youngest generations "How important is it for you that a brand can be reached through different channels?" % of respondents

"What do you expect when dealing with multiple channels?" % of respondents

Somehow important

Same promotions & rewards Avg. 44%

Not negotiable / Very Important

Omnichannel index1

86%

Gen. X

84%

Baby B. & Silver

24%

Consistent brand image Intregrated CRM

Millennials

31%

Same product assortment

75%

1. % of respondents for which it is somehow important / very important / not negotiable that a brand can be reached through different channels Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

22%

13%

10%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Not important

Integrated delivery service

47

Integrated customer journey Customer journey: Designer dress purchase

Physical In store

Digital In Store

Gets fashion advice from store personnel

Sell

Support

Uses iPhone to complete purchase

Checks loyalty balance online

Checks Dressfinder App on iPhone

Physical Out of store

At home, tries on dress & prints return label

Sees dress in magazine advertisement

Scans QR code for details online

Reward loyalty

Posts review on Twitter

Uses iPad App to find matching accessories

Digital Out of Store

Source: BCG analysis

Help decide

Ships dress and receives preferred size

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Make aware

Inspire

48

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Price transparency

84% of Consumers check prices in advance of purchasing; 33% always do it "Do you usually get informed about the prices before going to the store for a purchase?" % of respondents 16%

Yes sometimes

51%

Avg. 84%

84%

Yes always

33%

Total

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Millennials

Gen. X

Baby B. & Silver

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

No

50

Strong price differentials might put at risk ~50% of purchases "How would you react if you were to realize a price difference between your Country and another one?" % of respondents Total

30%

I buy it online at a better price

22%

Wait to buy it abroad

31%

25%

22%

20%

27%

17%

33%

29%

38%

55%

48%

35%

51%

32%

26%

28%

21%

27%

27%

19%

28%

30%

34%

29%

49%

48%

46%

37%

43%

46%

Might switch brand

11%

12%

9%

14%

12%

12%

9%

6%

Don't buy the product

6%

5%

9%

6%

8%

4%

3%

8%

Note: EU includes respondents from Italy, France, Germany, UK Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Still buy it in home country

51

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

What's happening to Chinese

52

From China to Chinese Personal Luxury market by Country and Nationality (€B, retail value @current) Chinese

x4.3 ~100

x3.5 ~70

23

20

2012 CAGR '12-'15

Source: BCG Analysis

2015

+5.5%

+12.6%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Mainland China

53

Where are Chinese purchasing? Chinese Personal Luxury market by location of purchases (€B, 2015 retail value @current) ~13

~100

RoW1

Total Chinese

~14

~13

~2

23

Mainland China

Hong-Kong

1. Russia, Middle East, Other APAC, Other Americas Source: BCG analysis

Macau

Europe

US

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

~35

54

New York / Milan the new Macau? "In which cities have you bought / plan to buy luxury products in the past / next 12 months?"

2016F

Hong-Kong

1

Paris

1

Paris

2

Hong-Kong

2

Tokyo

3

Tokyo

3

Seoul

4

New-York

4

Exiting Macau

5

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Entering Milan

5

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

2015

55

How to capture Chinese consumers abroad? "What is your main reason for buying outside your home country?" Chinese buying in EU

Broader selection

36%

Buy in the country of origin of the brand

31%

Part of travelling experience

31%

Superior customer experience

Chinese buying in US

39%

Lower prices

∆ EU vs. US

30%

Note: Consumer buying both in Europe and US are excluded from the analysis 1. Includes Chinese respondents that spend abroad at least 25% of their personal luxury expenditure Source: BCG 2015 specific survey (10.000 core luxury Consumers in 10 countries)

33%

+6pp

37%

-1pp

22%

+9pp

31%

20%

+10pp

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

% of Chinese respondents1

56

Which category they look for? "Which luxury products have you bought in the last 12 months and how much have you spent?" % of total P&E Luxury spending

Millennials

Non-Millennials 25%

20%

18%

15% 24%

18% 9% 4%

11% 3%

4%

3%

3%

3%

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

22%

19%

57

Chinese closing the Digital gap "Where have you bought the last item purchased? Where have you researched it?" % of respondents

Online solo Showrooming

4%

Online sales 15%

Online sales 12%

ROPO

China 2014

China 2015

Online sales

17%

18%

ROPO

46%

41%

Worldwide average1

Note: 1. China excluded Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Store solo

58

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Milan rebirth

Milan is rising back "In which cities have you bought / plan to buy luxury products in the past / next 12 months?"

2015

2016F

Paris

1

Paris

1

Paris

1

New York

2

New York

2

New York

2

London

3

London

3

Milan

3

4

London

4

5

Hong-Kong

5

Expo effect?

Hong-Kong

4

Milan

Milan

5

Hong-Kong

Note: The calculations excludes consumers in their home country Source: BCG 2014 and 2015 ad hoc study (10'000 respondents in 10 countries)

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

2014

60

Milan becoming cooler and more trendy, especially for emerging markets consumers "Based on your experience in Milan, do you feel that the city is:" % of respondents They prefer: 18%

22%

16%

10%

Doubters

30% Neutral

Becoming more cool / trendy

32%

49%

32%

1

New-York

2

London

3

Paris

33%

45%

52%

60%

Total Mature markets Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

Supporters

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Losing grip

Emerging markets 61

Milan: strong potential on Art and Culture still not fully leveraged “What are the first associations coming to your mind when thinking to the city of Milan?" % of respondents

Total

Art and culture

61% 36%

57% 25%

57% 30%

Music and theatre

19%

18%

Food

16%

18%

Nightlife

13%

16%

15%

Business

12%

18%

Sport

10%

11%

Source: BCG 2015 ad hoc study (10'000 respondents in 10 countries)

18%

70%

53% 49%

47%

64% 52%

70%

63% 31%

40%

20%

15%

25%

7%

7%

4%

5%

9%

15%

3%

9%

6%

14%

7%

15%

8%

6%

11%

11%

8%

26%

22%

23% 14% 20%

20% 5% 14%

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

Shopping / Fashion

62

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

True-Luxury Global Consumer segmentation

63

The CONSUMER era: key takeaways Growth to continue

New • • • • • • • •

Short term (2016): confirmed consumer confidence positive trend Mid term (2022): 400M consumers to become 480; market to increase by 290€Bn

Consumer realities Evolving values: Exclusivity not granted, Sustainability growing Millennials the 6th continent Personal luxury saturation happening The "Store War" has begun: newness key to capture the Consumer Digital influence era continuing Price transparency under the spotlight From China to Chinese Milan rising back

12 unique segments entering your stores with different expectations • •

Absolute Luxurer, Megacitier and Experiencer representing 50%+ of the market Social Wearer the fastest growing segment

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

• •

64

Antonio Achille Partner and Managing Director - Milan Antonio Achille is a Partner and Managing Director in the Milan office. He is a senior leader of the Consumer & Retail team and he leads globally the Luxury practice for the firm.

He has developed an extensive knowledge on the Global Luxury Consumer and he is responsible for the database that includes a comprehensive view on over 40.000 consumers from 20 countries, developed in cooperation with Altagamma, the trade association for the Italian luxury industry. The actionable insights of the study are presented at the yearly event “True-Luxury Global Consumer Insight”. In addition he contributes to the annual Luxury Summit, one of the most valued discussion forum for the sector. He is also member of the Scientific Committee of one the first Italian master on Luxury. He is author and co-author of most of the recent BCG publication on Luxury such as "Luxury ecosystem advantage" , "Shock of the New chic",.. Antonio is extensively quoted, as Luxury and Consumer expert, in Italian and International media, such as NYT, FT, The Economist, WWAD, Bloomberg, CNBC, Il sole 24 ore, Il Corriere della Sera,...

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

For 20 years, he has been advising National and International Groups on issues that include corporate strategy, organization, digital, supply chain, merchandising, growth acceleration and operational improvement. Within the luxury sector his experience includes apparel, leather goods, eyewear, selective fragrances, jewelry/hard luxury in department stores, franchising and duty free. The geographical scope of his work includes most of the Europe markets, North America, China, Turkey and Korea.

About BCG and its Luxury practice

Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries.

Within the Firm, The Luxury practice, with more than 200 experts worldwide, advises Brands and Retail companies bringing together the experience of its centers of competence located in all key must-be geographies for the sector: Milan, New York, Paris, Shanghai, Hong Kong and Tokyo. BCG Luxury team has a deep and relevant experience driving profitable growth with leading Brands and Retail companies, from strategy to marketing and operations, and a unique point of view on consumer segmentation.

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises.

BCG contacts

INTERNATIONAL PRESS: • Gloria Galimberti

email: [email protected]

or +39.02.65599444

email: [email protected] email: [email protected]

or +39.02.65599704 or +39.02.65599328

ITALIAN PRESS: • Francesco Guidara • Francesca Prosperi

Copyright © 2015 by The Boston Consulting Group, Inc. All rights reserved.

For a copy of BCG "True-Luxury Global Consumer Insight" please contact:

Thank you bcg.com | bcgperspectives.com