On February 18th, on his way back from Shanghai and before catching a flight later in the afternoon to Moscow, Stéphane Truchi came to speak to the students of ESSEC MBA in International Luxury Brand Management. Mr Truchi is the director of Ifop, an opinion poll, market research and media research institute with presence in Europe, North America, South America, and Asia. He was invited by Xavier Bertrand, himself a specialist of how to conduct business in emerging markets and an expert of India where he set up Chanel’s subsidiary nearly 10 years ago. Mr Bertrand invited Mr Truchi as a guest speaker in his series of lectures dedicated to luxury in emerging markets.
Market research is key to consumer understanding. Mr Truchi introduced us to the latest version of a study called “Living luxury” with a focus on BRIC countries. The study is conducted every 2 or 3 years with an exclusive focus on people who actually buy luxury goods, in order to provide a clear understanding of luxury consumption trends. Mr Truchi’s introduction instantly captured the attention of the whole class. “Every time a specific brand asks Ifop to conduct a study,” he explained, “Ifop goes back to consumers. This process enables Ifop to stay close to customers at all time and spot new trends of luxury consumption.” Besides, Ifop produces a yearly professional trend report, based on interviews of professionals of the sector whom Ifop enquires about their visions on the luxury market and what their priorities are.
“Living luxury” is conducted following several criteria: lifestyle and values, how luxury customers consume (in order to capture consumption trends rather than category trends), luxury living and what brands customers associate with luxury. “The latter,” explained Mr Truchi, “Enables us to see how a market is structured, and appreciate the differences from one market to the other. Knowing what brands are associated with luxury also gives us a very clear vision on the level of maturity of a market”. Consumers are also asked what is influential for them and how they connect to the Internet and use social networks.
I can’t cover the entire presentation in just one post, so I will focus on a few key findings. Some of them reinforced some existing knowledge, but most of them broke down a few well-established clichés. Of course, when we talk about BRIC countries, we immediately think of China. Despite a 20% decrease in the luxury market from 2012 to 2013 explained by 1) a saturation of the market, which cannot support double-digit forever and 2) a very specific issue about gifting, Mr Truchi insisted that “China still has beautiful days ahead.” While this sudden drop naturally raised an alarm, professionals insist that while China has become a little less dominant, it remains by far the most strategically important market. China’s rising middle class and youth generation aspires to luxury. They aren’t impressed by big international brands; they want much more and demonstrate increasing expertise. Their most demanded criterion is quality, followed by value for price, brand history, customer experience, and customer service. It’s a very demanding market which has rapidly evolved over the past 10 years. “Chinese customers have become more education,” said Mr Truchi. “Of course, we are talking about the top 10% of customers, so it’s not everywhere, but the aspirational crowd is moving up very fast. Furthermore, there’s a kind of local pride in being Chinese. It’s a new trend, it’s moving fast, and it gives local luxury brands the chance to emerge in the future. This will be the dominant trend in the years to come.” Subsequently, there is a growing interest in niche brands with increasing logo strength and visibility. Hong Kong remains very influential in China and is the 4th luxury hub in the world. Luxury consumption is strongly linked to market confidence.
“The more a market is confident, the more luxury consumption is going to be strong.” Because luxury consumption is linked to pleasure and attraction to spending money, customers with more confidence in the future will tend to buy more luxury. Looking at the confidence index of the BRIC countries, one can see that they are always more confident in their domestic market than in the global situation of the world. They feel that they are in a good place whereas a few years back, the mature markets had a very positive image. “But today, the western crisis has shown a different picture. BRIC consumers feel much better about their own countries. The most optimistic countries, such as India, Brazil and Mexico are also the most strategic for luxury markets.” Indian people in particular are very optimistic. Indian youth are very optimistic and have a real ambition for success and making money.” Indian people are extremely entrepreneurial.” Mr Bertrand commented.
After being hit by the crisis 2 or 3 years ago, Russia is back to being a strategic and stable market for luxury goods. Just like in China, there is a new trend in Russia for national pride. Russians customers are still very exuberant in the way they consume luxury goods, but they aspire to an experiential relationship with luxury. Their preferred products are jewels, watches and cognac. Just like Brazil, Russia is a very emotional market, where luxury consumption is associated with pleasure and reward.
Although it’s not an emerging market, Mr Truchi also gave us an update on the United States’ return to the role of a leading luxury market. “The US is a mature market in the bigger cities, but the center of the US is like an emerging market. It has huge potential for luxury brands. Finding strategies to penetrate this market would unlock a new world of opportunities.” In fact, Mr Truchi confessed his surprise that there is no specific strategy from the major luxury brands to penetrate the US market. “They prefer to investigate new territories rather than concentrating on the US,” which, according to M. Truchi, “is a real question”.
The United Arab Emirates have a small, but extremely wealthy population. Furthermore, they have built an impressive distribution network that provides an equally big opportunity for brands to develop their visibility and distribution. Additionally, these markets are very approachable as far as tax is concerned.
On the contrary, Brazil has very high taxes and barriers to entry, which has even led some global brands to leave the country. But now, it has become such a major market that it cannot be overlooked.
Japan is recovering slowly but surely and has grown 10% from 2012 to 2013. After a decade of natural disasters, Japan is back as the important luxury market it used to be.
When asked what brands embody luxury, consumers answered in patterns following three major trends:
- There is a global consistency about what brands embody luxury;
- Most of them are European: Louis Vuitton, Chanel, Dior, Cartier, Hermès;
- Luxury is mostly associated with fashion and jewelry.
Finally, Indian and Chinese customers are the biggest lovers of luxury brands. Their most demanded criteria while shopping abroad, to which luxury brands should pay attention, are:
- Product availability
- Product variety
- Service
For more information on Ifop and "Living luxury," check out the Ifop website.
