Posted by: Magnus Danneck
Associate Director, Germany Marketing
The global market for luxury goods has emerged from the financial crisis significantly faster than expected. The likes of Burberry, Gucci Group, Hermès, LVMH, Polo Ralph Lauren, Prada and Richemont have recently reported double-digit sales growth or even record annual sales. A look at the latest annual reports published by the leading firms impressively shows that the sales contributed by companymanaged shop-in-shops and stores have risen considerably. Almost all renowned luxury brands have been making substantial investments in their own retail structures in recent years, thereby lessening their dependence on wholesale business. Despite the booming online offerings, stationary retailing obviously remains a very important success factor especially in the luxury segment.
Therefore luxury goods retailing is also unique from a real estate perspective. Luxury goods purveyors are currently targeting their expansion drives on the emerging markets where booming local economies are creating a new class of high-income consumers, resulting in a clear increase in demand for luxury goods. At the same time luxury firms have also resumed investing in their mature western markets. Given that all renowned labels have long had a presence on western Europe’s essential luxury shopping streets, their renewed interest in property primarily relates to extensive refurbishments and expansions of existing stores. In addition, firms are working to optimise their locations and networks.
An analysis of this development reveals that substantial sums have been invested in raising space productivity. All renowned luxury goods purveyors continue to invest in the speed of their process chains which is key to managing their company-operated stores efficiently. Apart from the quality of the collection and the brand management activities, success in luxury goods retailing increasingly hinges on the consistent use of all sales channels and the building of networks of company-managed bricks-and-mortar stores. Many firms are currently tapping the stock market for the required capital. In addition, luxury labels are increasingly making use of the networks of the major luxury brand holdings.
In our new report “Glitter and glamour shining brightly” we have brought to light that London’s New Bond Street is the most expensive luxury shopping street in western Europe. Followers-up are Avenue Montaigne in Paris and Stoleshnikov Lane, the top location in Moscow. Hardly surprisingly, the highest density in terms of international luxury labels can be found in Paris. Only London has a similar density of luxury stores. Milan completes the top three, followed by Moscow and Rome.
Taken as a whole the luxury sector is the most internationalised in the retail market, with brands adopting true global strategies. In these days luxury retailers are responding to the return in consumer confidence with healthy expansion plans. Definitely that increased demand for prime space in the best locations is forcing rents up. Other retailers are also looking to benefit from the proximity to famous top-level brands, and this additional demand for scarce showroom space is placing even more pressure on premiums. To draw a conclusion luxury brands not only inspire the most fashionable people – they offer dazzling trends from a property point of view as well.
