PPage 46age 46 DCF and valuation pIndustry oaramevervieterws I Points of view from EY global sector Digital tango with China and other industry professionals Many luxury “maisons” focused in 2015 on digital 2 Dior challenges and Asian markets expansion. After the 1 booming era where one store per week was the store opening rate, now it may be time for brands to 3 Bally rethink their business model entirely. Many recognize 0 the high potential of the e-commerce and mobile 3 Coach Paolo Lobetti Bodoni commerce (m-commerce) markets, but few are able 19 to compete in them profitablq, and enen feoer are MED RCP Advisory Leader, Advisory able to successfully combine their e-commerce and 4 Louis Vuitton Turin, Ernst & Young Financial Business Advisors S.p.A. retail strategies. 1 Nowadays, brands are more cautious about opening 4 Zegna new stores, having experienced challenging 0 relationships with local partners and distributors and 4 waiting a long time for returns on their investments. 7 Armani Looking at the number of store opening and closings by some relevant brands (see graphic at right), we 5 Gucci can see that it may be time for them to consider full 1 Ivan Chan expansions only and to contemplate how to balance 5 Dunhill and link stores with the digital space, known as the 1 Partner, Tax online to ofÖine, or G*G, integration. Hong Kong, Ernst & Young Tax Services Limited Full physical store expansion by brands is based on 6 Bottega Veneta the brand awareness paradigm that they need to 2 have stores to intensify their contact with customers 11 Hugo Boss and increase brand awareness. Brands are beginning 6 to realize that, in Asia, they face rural regions with high population growth but where opening stores to Number of stores Closed 2015 Opened 2015 get in touch with customers is simply too capital Source: EY intense and less effective. Luckily, these consumers Lilly L Cheung are highly connected digitally, with a higher Senior Manager, Tax penetration rate of chat and m-commerce platforms Shanghai, Ernst & Young Certified Tax Agency Co. Ltd. than in the European Union (EU). The luxury and cosmetics financial factbook 2016