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DCF and vIndustry oaluation pverview arameters PPage 67age 67 I Points of view from EY global sector Store costs management: how to improve internal rate of return and other industry professionals and enhance performance The internet and social media have created a new Store cost breakdown: example generation of constantly connected consumers, who are updated on global trends, sensitive to innovation General construction and willing to share with the world their own shopping 31% experience. Even the way we think about stores and what they should be (and generally retail business Wooden Items Riccardo Pastore management) has changed. Eye-catching signs, 20% furnishings that enhance products’ value perception w Director, Cost and Cash and stunning showcases remain key success factors, Optimization, TAS but modern shops should also be able to interact with ervie v Milan, EY S.p.A. social media and with customers’ smartphones, Other try o proposing offers and personalized content, 1% presenting innovative experiences and responding to Carpets Indus 1% the needs of both teenagers and older consumers Painting — all this while remaining a friendly and enjoyable 3% place to go. Lift and stairs Shelves 4% and furniture As a conseimence, the onerall cost of a store’s life 12% cycle has greatly increased. New high-tech systems Demolition and strip out generate neo expenditmres, reimire periodic 5% maintenance and are subject to rapid obsolescence Electrical works Markup risks. At the same time, costs for furniture and 5% 7% renovations (which in the opening of a new store can Stones account for more than 60% of the budget) have not External windows and doors 6% 5% decreased, putting companies on the spot to make a decision: increase the budget or just say no to certain changes? Each cost can be addressed, preserving quality and concept During the store concept definition phase, companies are so focused on the impact of communication and on the return on investment that the store may postpone ansoering this imestion, identifqing onlq in a later stage solutions that adhere to the budget while still realizing the spirit of the store. The luxury and cosmetics financial factbook 2016

Luxury and Cosmetic Financial Factbook - Page 69 Luxury and Cosmetic Financial Factbook Page 68 Page 70