The high-fashion industry is growing steadily: In the past 15 years, the overall number of luxury consumers has increased from 140 million worldwide to over 350 million.
According to the leading management consulting firm, Bain & Co., the global personal luxury goods market reached $251 billion in revenue in 2014, constituting a 3% increase when compared to 2013. This upward trend continued in the first quarter of 2015, and the market’s full-year performance is expected to increase 2-4 percent.
Most retail industry experts agree that the ability to operate on several marketing channels (including in-store, online and mobile) is a key factor which merchants cannot afford to ignore. This is especially true of high fashion customers that are very mobile and can transition among various purchasing channels and across countries with ease.
One thing is clear – no matter where or how these savvy customers choose to seal the deal, they want to be wooed and courted with an elevated and personally customised shopping experience.
Understanding local luxury purchasing
On the local level, it is important to understand the principles of show-rooming and web-rooming (or reverse show-rooming) within the luxury industry. Show-rooming refers to the practice of examining merchandise in a physical retail store and then buying it online, while web-rooming refers to customers who do their research online but ultimately buy products in-store.
Luxury consumers use both of these shopping methods. Due to the fact that they often purchase expensive items, after viewing a product online they may prefer to complete the actual transaction at a physical store. Whether it is an expensive article of clothing, a couture handbag or a top-priced watch, the customer wants to feel the texture or try the item on personally before closing the high-cost deal.
The fact that the luxury sector is going strong doesn’t necessarily mean that couture buyers are willing to hang the cost. Bain & Co. notes that price awareness and consciousness among consumers have increased significantly, leading to a rise in the off-price luxury market, which now represents more than 30% of total luxury sales.
When shopping abroad, luxury customers often come with a shopping list expressly to find cheaper deals in foreign countries. Bearing all this in mind, the high-fashion buyer may well choose to visit a local luxury store, check out a high-end item and then buy it online or off-price.
The appeal of free delivery and free returns
Many of today’s luxury buyers were not born with a silver spoon in their mouth. In fact, people who rose from rags to riches have a healthy appreciation of the rand and its value. They like special offers and enjoy attractive perks such as free returns and free deliveries as much as any other consumer.
While some luxury retailers are dragging their feet when it comes to free returns and free deliveries, these practices are fast becoming the norm.
A growing trend is same-day deliveries, which is proving to be quite a challenge for luxury retailers. When free delivery is offered, buyers tend to order much more than they would when charged for delivery.
The combination of free returns and free delivery appears to be irresistible to buyers. Laura Morroll, a Managing Consultant of LCP Consulting, notes that a retailer who is sure enough of the quality of its products to offer free returns, inspires customer confidence and loyalty.
In addition, many luxury retailers have discovered that when there is no charge for delivery, there are far fewer returns. As aspirational buyers, consumers might knowingly order an item in the wrong size and keep it for another season (or the next diet, depending upon which comes first).
In order to attract foreign luxury buyers, retailers must create brand awareness in their home countries. Even if buyers decide to purchase luxury goods abroad, they carefully study the various brands and products before leaving home.
Top-end brand retailers need to monitor where the luxury buyers are heading and provide signage and other assistance in the tourists’ native languages at the vacation destinations.
But luxury retailers also cannot afford to ignore consumers who decide to buy at home because they prefer luxury products crafted according to their specific culture. Some luxury brands are already creating lines for local buyers in China and India.
Global purchasing pitfalls
Bain & Co. states that tourism is the major driver of the global luxury industry’s performance. While touristic spending may be widespread, there are pitfalls that retailers must be aware of.
Imagine a tourist purchasing luxury goods in a SA branch of a luxury store and then returning to his or her home in London (or any other city outside of South Africa) only to discover that their return cannot be completed at the local branch of the same luxury retailer due to company policy, often driven by legislative reasons.
This is because luxury returns can only be processed via the same gateway used for the initial purchase, and many retailers use different gateways around the world to optimise payments by region.
While some merchants use a single gateway for all markets, mitigating the problem of international returns, these merchants face other cross-border challenges, such as steep cross-border and currency conversion fees, higher decline rates, and greater fraud risk.
Let’s take a look at some growing luxury markets.
Today, Chinese consumers constitute over 30% of global luxury spending. They are considered the main cause of the shift from local consumption to touristic spending, which now accounts for about 50% of all luxury spending.
The total amount of money the Chinese are spending on their shopping trips is surging, from $18 billion in 2002 to $154 billion in 2014.
Most luxury retail brands already have a presence in China. The exposure to leading luxury brands at home and on the Internet have made wealthy Chinese consumers knowledgeable about luxury brands and differences in pricing at various locations.
Gifting has been identified as an important motive for Chinese luxury product buying. In addition, many members of the growing middle class in China purchase high-end goods to mark themselves as part of the higher social class. At the same time, these luxury goods serve to differentiate them from members of the lower social class.
Some luxury retailers are already selling high-end products designed especially for the Chinese market, which incorporate Chinese designs and imagery.
India’s gems and jewelry sector contributes around 6-7% of the country’s GDP. The domestic gems and jewelry industry has the potential to grow to $85 billion by 2018. The latest Gold Demand Trends report from the World Gold Council indicates that the total consumer demand for gold in India last year exceeded that of China.
India’s marriage market is huge. It is estimated at nearly $35 billion and is growing at about 25 percent per year. Due to the fact that jewelry signifies a woman’s married status in Indian culture, finely crafted gold jewelry is in high demand. Rather than using a wedding ring as Western cultures do, Indians wear a variety of ornaments according to regions.
Women often wear special jewelry just for their wedding ceremonies. Thus, the love for high-end jewelry comes naturally to wealthy Indian consumers, who are known to pour many thousands of dollars into their weddings to pay for jewelry, designer clothes, cars, gifts and more.
According to Karoline Huber of luxury watchmaker IWC Shaffhausen, in India it is common practice to invite a brand representative to one’s home to provide hospitality and view luxury items in a domestic environment, rather than visit a boutique or shopping mall.
Here, too, luxury brands are seeking to cooperate with local relationship experts in order to customise luxury goods to local holidays, customs and festivities. Some brands are already customising their products; for example, Hermès has created its sari collection in India.
Nevertheless, many Indian consumers prefer to travel abroad to do their luxury shopping, perhaps because they do not want to appear ostentatious in a country where there is widespread poverty.
When discussing the connection between the Middle East and luxury consumption, it is important to understand that it is a “two-way street.” Dubai serves as a major hub for luxury buyers from all over the world, but many Middle Eastern buyers also migrate to Europe for their luxury shopping.
The Middle East is one of the ten largest luxury goods markets, with sales exceeding $6.74 billion, according to a market study of the Middle East published by Bain & Co. After conducting price comparisons for high-end items worldwide, many consumers from all over the world are looking for new shopping destinations, such as Dubai, South East Asia and Australia. The report indicates that Dubai accounts for 30 percent of the luxury market in the Middle East region.
Whether the location of luxury shopping is in the Dubai or London, religion is an important guiding source for decision making among 71 percent of the consumers as compared to a global average of 32 percent.
Every year prior to the holy month of Ramadan, Middle Eastern shoppers arrive in London, and purchase an array of luxury gifts before flying home for a month of daily fasting. Another shopping surge occurs during the Eid al-Fitr holiday, which marks the end of Ramadan.
Despite the fact that no male outside of their household will ever see Arab women in haute couture dresses, Arab women buy high-priced designer clothing from the world’s leading fashion houses.
Although tourists from the oil-rich United Arab Emirates, Kuwait, Saudi Arabia and Qatar make up only a small percentage of total visits to Britain in comparison to U.S. and European luxury consumers, they are generally more lavish spenders. Official figures indicate that Middle Eastern tourists came second in total spending for luxury goods last year, reaching $1.5 billion.
In order to gain an edge, today’s high-end brands must craft a specialised shopping experience for luxury buyers at every physical and online channel, both domestically and globally. This includes understanding cultural and religious nuances, and speaking the foreign customer’s language both literally and figuratively to address the pitfalls standing in the way of truly frictionless luxury customer experiences globally.
This article was originally posted here on Entrepreneur.com.
A Look At Youth Mentorship During Global Entrepreneurship Week (GEW)
Entrepreneur: A person who sets up a business or businesses, taking on financial risks in the hope of profit.
Global Entrepreneurship Week kicks off from 12 November – 16 November. Around the world, entrepreneurs are carving out their paths and are taking matters into their own hands.
Back home, Futureproof wants to instil a culture of curiosity, tenacity and risk taking in every South Africa – young or old, intrapreneur or entrepreneur.
In fact, we go as far as to teach young children from the age of 8-years-old about the art of entrepreneurship as part of our countrywide school program. Most recently, the company has seen success in the Orange Farm area and is teaching 110 Grade 3’s to master the art of entrepreneurship.
To celebrate this week, the team at Futureproof interviewed several well-known entrepreneurs and asked them the big question: ‘What do you wish someone had told you before you became an entrepreneur?’ Here’s what they had to say:
Clive Murray, the founder and CEO of World Water Exchange: “Making money is easier than keeping it. Don’t change the rules you make for yourself when times get tough.”
Marc Ashton, former MD of Moneyweb and CEO of Dynamic Body Technology:
- Don’t start a business…
- If you are feeling foolish and still wan to then do it with partners.
- If you are doing it with partners then lay out the terms of divorce upfront.
CEO and Co-Founder, Lisa Illingworth says that Futureproof has made it their life’s mission to aid children with the real-life, hands-on skills that they need to succeed as entrepreneurs.
“Text books just don’t teach the things that entrepreneurs really need to know. So much growth and economic activity can be realised out of entrepreneurial ventures, but we are all too scared to take the leap… why? Because we don’t feel supported and we would probably prefer to stay in our comfort zones”.
In fact, while entrepreneurship could literally catapult our country, an article in the Daily Maverick in 2017 described entrepreneurship in South Africa as ‘Sitting backwards on a donkey riding further away’.
Issues that entrepreneurs will come to face, even in their younger years is that of funding issues, lack of mentorship and opportunities, low skill levels, compliance and of course, poor standards of education and lack of access to education.
The current structure of the education system was initially designed in an entirely different age to achieve economic outcomes that are no longer viable due, in large, to the rapid innovation and adoption of technology.
“Gearing the country up for the forth industrial revolution is proving to be a challenge in both the public and private sectors. Are we really ready and how we use this particular week of the year to relook the problems and derive opportunities from them?” says Lisa.
Lisa provides context on the issues that entrepreneurs face. “Imagine this: you have a brilliant idea but no investment. You have no clue where to begin but you take it to the banks and a few potential investors. Without a solid plan and ‘street smarts’, the deals fall through, or you jump through hoops, give away more than half of your company and land up working tirelessly with no returns. This a reality for many who really don’t know how to launch an idea, understand its feasibility and raising the capital they need through mechanisms that won’t cannabalise the business at a later point.”
Lisa says that the country remains hopeful for President Ramaphosa to implement his vision for entrepreneurship as stated in the SONA 2018. “The President stated that ‘establishment through the CEOs Initiative of a small business fund – which currently stands at R1.5-billion – is an outstanding example of the role that the private sector can play. Government is finalising a small business and innovation fund targeted at start-ups’,” she continues.
“We need to change how and what schools are teaching for this to be realised on a large scale and providing the foundations so that these kinds of funding initiatives will have the best possible chance of growth and success”.
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How Schindlers Attorneys Became Involved In The Landmark Cannabis Case
Everything you accomplish accumulates and eventually comes back to assist you further along in your career. This is how a final year LLB assignment became the basis for a Constitutional Court case.
Schindlers Attorneys are the law firm that were involved in the landmark Constitutional Court judgement on cannabis use within a private space. Paul-Michael Keichel, Partner at Schindlers Attorneys shares how they came to be the foremost legal experts on cannabis and how they became involved in the Constitutional Court case:
How the journey began
“In 2005, my first year at Rhodes University, whilst studying for Intro to Law, it occurred to me that there were strong constitutional points that could be raised to objectively justify the decriminalisation of cannabis in South Africa,” explains Paul-Michael Keichel.
“In my final year LLB, 2009, I took Constitutional Litigation as an elective (largely motivated by the creation of a timetable clash, which meant that I’d not have to sit another semester of lectures for a module that I had failed the previous year). This provided me with the opportunity to write an assignment titled “A Critical Analysis of Prince and an Objective Justification for the Decriminalisation of Marijuana in South Africa”, in which I composed my argument (based on the right to equality in our Constitution).”
The start of the partnership
“Fast forward to 2013 and the Dagga Couple find themselves at Schindlers (where I am a first-year associate) to register their NPC, “Fields of Green for All”. The attorney handling the registration (who I’d also bored with my argument) suggests to the Dagga Couple that they speak to me. It turns out that they already knew of me, because my assignment had (unbeknownst to me) done the rounds on the underground cannabis networks. We get chatting and I rope-in my brother, Maurice Crespi, the managing partner of Schindlers,” explains Keichel.
“We are the only firm out of many approached by the Couple who are willing to take on their trial action against 7 state departments and Doctors for Life to push for a declaration of constitutional invalidity of the laws prohibiting cannabis use/possession/dealing in South Africa. We decide to run the challenge for them pro bono.”
The Cape ruling that started it all
“Prince and Acton et al have their matter heard in the Cape, which resulted in the 2017 Judgment. We run a portion of our trial (including expert evidence from international scientists and doctors – the best in field), but it is rendered part-heard. We then heard that Prince and Acton et al’s matter will be heard by the Constitutional Court in November 2017 and we decide, with the Dagga Couple, to intervene in that matter, upon which it is confirmed that my 2009 assignment forms the on-record basis of a major chunk of Prince and Acton et al’s arguments in support of legalisation.”
“Our involvement in the Constitutional Court was such that we provided clear legal argument and authority to support and expand upon what Prince and Acton et al were trying to say to the Court. Ultimately, much of what we submitted has found its way into the judgment of the Constitutional Court.”
How a final assignment became the foundation for a Constitutional Court case
“So, an idea (bolstered by wanting to create a timetable clash) resulted in an assignment, which provided certain credibility and impetus to cannabis activists. Two of these activists ended up being our clients, which, despite being handled pro bono, has brought Schindlers immeasurable positive publicity, and which, ultimately, contributed to the decriminalisation (and potential future legalisation and commercialisation) of cannabis in our country.”
“Schindlers now has a dedicated “Medicinal and Recreational Cannabis Law” department, through which we will continue to make submissions to parliament, apply for licenses on behalf of our clients, support those who have been arrested and charged.”
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