The World’s Leading Fashion Hubs Should Keep Their Concentration of Luxury Stores, But Big Asian Cities Now Have Too Many, Say The Boston Consulting Group and Bernstein
PARIS—Luxury hubs such as New York, London, and Paris are very likely to sustain their density of luxury stores. But brands urgently need to examine the efficiency of their existing store networks—especially across Asia, and particularly in light of the effectiveness of e-commerce.
Those are among the key findings from new research conducted jointly by The Boston Consulting Group (BCG), one of the world’s leading management consulting firms, and Bernstein, the research arm of AllianceBernstein. The research draws from BCG’s proprietary Metroluxe Index, which assesses opportunities for luxury sales by city, and the Bernstein Proprietary Luxury Store Database, which maps the global luxury retail environment by store and indexes approximately 7,000 stores across 36 luxury brands.
“The global luxury market is changing rapidly, and brands need to adapt accordingly,” said Olivier Abtan, a partner and managing director in BCG’s Paris office and the global leader of the firm’s luxury, fashion, and beauty topic area. “China, though it still offers growth, is no longer the El Dorado it once was. Also, the overall slowdown in the market means that savvy brands now prefer variable cost structures to expensive fixed-cost real estate. And e-commerce is becoming a force to be reckoned with in luxury markets.”
The BCG and Bernstein research notes that physical stores continue to play very important roles in brand building for luxury firms. After the abundant openings over the past decade, however, brands today have fewer opportunities for store expansion. The focus now is on initiatives such as moving to better locations, renegotiating rents, and revising store footprints in order to maximize revenue and improve sales density.
The research uncovered three fundamentals that affect the global luxury sector today:
Overall, the BCG and Bernstein study confirms that leading luxury brands are shifting their focus away from the expansion of store networks and toward the efficiency of those networks. Streamlining and optimizing will be the watchwords for luxury brands in the years ahead.
The exhibit below shows the opportunities for luxury brands: where to consider opening new stores and where to emphasize store network efficiency.
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. 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 85 offices in 48 countries.