RETAIL PERFORMANCE. asia. By AuCoeurDuLuxe. marks the 5th year anniversary of AuCoeurDuLuxe!

RETAIL PERFORMANCE By AuCoeurDuLuxe Winter 2013 Edition Copyright ACDL. All rights reserved. Contributors: Christele, Lisa, Sean, Mars, Nathalie & AuCoeurDuLuxe Team Contact Details E: inquiry@acdluxe.com W: www.acdluxe.com asia marks the 5th year anniversary of AuCoeurDuLuxe! We would like to thank all of our clients for their contribution in the past five years. Since 2009, ACDL has opened 4 subsidiaries in Asia and successfully operated across 12 countries. Providing Human Resources advice and marketing analysis to premium and luxury brands, ACDL has trained over 20,000 professionals in service, sales and management capabilities. Since the beginning, we have remained loyal to our company s values: Passionate Passion is at the heart of retail and builds emotion with the brand and its clients. Innovative In a fast changing market, innovation is the only solution. Committed Our commitment to our clients and people we support is uncompromising. Honest With our clients and ourselves, we promote transparency and communication. 2014 shall also see the opening of our Dubai office and continued innovation in our marketing and training platforms. We are very pleased to publish our second edition of Retail Performance Asia our publication dedicated to providing the latest business and customer insights in Asia s luxury, fashion, cosmetics and lifestyle industry. The year has brought on a range of opportunities arising and challenges, as retailers are balancing between the slowing growth in its developing & matured markets and new opportunities arising from emerging areas. In light of this context, we have included topical features, such as: Hong Kong Barometer Report As mainland tourist preferences are shifting, competition is growing and operating costs continue to rise, luxury retailers in Hong Kong are examining new ways to increase revenues for 2014. Brands are recognizing the need to re-connect with the Hong Kong luxury shopper. In ACDL s Barometer Report and Survey, we provide their profile and strategies on how to attract, grow and retain this matured segment. Enhancing Employee Engagement Human Resources in Asia are facing the paradox between the importance of their shop-floor staff in daily client interaction and their staff s high turnover. Due to the churn of employees, brands enter a short-term cycle of search, hire and rehire for their stores. We outline how enhancing employee engagement through five fundamental pillars can help improve and alleviate this impact. In this edition, we have also included our regular features, including: The Market Briefing of Indonesia and New Store Openings in Asia. We hope you enjoy reading our magazine and welcome the opportunity to discuss any of the articles in further detail. Laurence Ouaknine President of AuCoeurDuLuxe 2

Contents 5. Consumer Insights Hong Kong Barometer Report Re-conquering the Hong Kong luxury shopper: ACDL s survey of Hong Kong locals and their shopping expectations 14. Retail Operational Excellence Enhancing Employee Engagement Strategies to address shop-floor staff engagement and retention in Asia 17. Country Briefing Indonesia Market Focus Attractive retail market under increasing regulations and operating challenges 26. Real Estate Happening Store Openings Recent openings in prime shopping districts of Shanghai and Hong Kong 3

About AuCoeurDuLuxe AuCoeurDuLuxe (ACDL) is an international consulting group, specializing in sales operations, marketing analysis and training for the global luxury retail market. We provide end-toend solutions, from data analytics, auditing of sales force to innovative training solutions. ACDL has helped leading luxury groups improve their retail operations and sales capabilities across Asia. The group currently operates in twelve countries, across its four subsidiaries in Shanghai, Hong Kong, Seoul and Singapore. ACDL experts work closely with our partners to ensure optimal sales strategies are implemented, from design through to shop-floor execution. Our extensive research and insights in Asia come from our international experience in luxury retail, coupled with our local expertise across Asia and China. We use findings from our surveys, fieldwork, executive interviews and studies, to provide the latest insights and thought leadership in the industry. We provide the following services to help retail brands boost their point of sales: - - - Field evaluation of sales force (dedicated analysis and recommendations, from mystery shopping, face-to-face interviews and focus group sessions) Internal optimization of sales force (360 approach employee development, incentive policy design and assessment) Training solutions (various pedagogies, customized to the client s needs and requirements and delivered by subject matter experts in local languages e.g. train the trainer, counter coaching and academic content). Regional branches and training locations Seoul Tokyo Shanghai Mumbai Kuala Lumpur Taipei Hong Kong & Macau Bangkok Manila Ho Chi Minh City Singapore Jakarta 4

Consumer Insights Hong Kong Barometer Report By AuCoeurDuLuxe Team Introduction ong Kong, like Japan and Singapore, has always been seen as a shopping mecca, attracting international retailers and tourists from all corners of the world. Retailers continue to enter Asia through Hong Kong, establishing a foothold before a wider expansion into mainland China and the region. In 2012, the city had the largest number of new brand entrants globally, with 51 new retail brands setting up their first stores 1. Store openings had been keeping up with the rapid influxes of predominantly mainland Chinese tourists. Since individual travel was made easier (from the Individual Visit Scheme in 2003), mainland tourists flocked to Hong Kong to enjoy the larger variety of brands, VAT-tax free environment, reputation for authentic products and its shopping experiences. However, China s economic slowdown in 2013 rippled through the global and regional retail landscape. Tourist spending on luxury goods from Golden Week was expectedly sluggish and at least 10% lower than the previous year 2. Whilst the slowdown generally influenced the spending habits and preferences of the rising middle-income classes, confidence levels of High Net Worth Individual (HNWI) Chinese mostly remained unaffected 3. Instead, preferences over where to travel for leisure and shop were shifting. As the Euro depreciated against the Yuan, Europe (in particular France and UK) became increasing popular and competitive as a shopping hotspot. Luxury retailers are concluding 2013 with a range of challenges how to compete against a highly competitive and concentrated market of brands, how to cope with soaring high rents characteristic of Hong Kong and what to do with mainland Chinese tourists, shifting their shopping preferences and habits. In response to these challenges, luxury brands are recognizing the need to: Re-conquer the Hong Kong luxury consumer. Whilst previous years were heavily invested in attracting mainland tourists, brands are entering 2014 with the strategic aim to strengthen and retain customer loyalty among Hong Kong locals. The segment is unique for its region, due to the stronger influences of Western culture and longer heritage of luxury brands. Shoppers are typically more discerning over personal tastes and expectations. Therefore, reconnecting with this demanding segment will be critical to 2014 s success. This Barometer Report identifies the shopping expectations of Hong Kong luxury consumers. From our research and surveys with local luxury shoppers, ACDL has proposed a set of sales and marketing strategies to retain and grow this segment. Report Contents About the Report 6 Market Conditions 7 Hong Kong luxury shopper profile 9 Strategies to attract & re-conquer HK locals 12 Conclusion 13 1. How Global is the Business of Retail?, CBRE, 2013 Edition 2. Response to Golden Week, Hong Kong Retail Management Association, October 2013 3. Asia Pacific Wealth Report 2013, Capgemini and RBC Wealth Management, 2013. 5

Hong Kong Barometer Report About the Report Methodology n order to analyze the trends in Hong Kong s luxury market, ACDL has conducted a barometer survey with a representative sample of Hong Kong luxury shoppers. Respondents were selected based on their luxury consumptions (in fashion, cosmetics and watch & jewelry product segments) and represented: female and male shoppers, aged 20-49 years old and with yearly incomes over USD $60,000 4. Respondents were asked a set of questions regarding their: brand preferences, purchasing habits and shopping experiences in luxury boutiques. In this report, we have outlined key findings from the survey and its importance in today s competitive market. About ACDL s Barometer Reports ACDL conducts a quarterly barometer in specific Asia Pacific countries, to benchmark market activity and customer outlook. We use our in-depth industry knowledge and consulting experiences to provide the latest market insights and actionable strategies for our clients. We hope that people involved in shaping Asia s luxury retail market or have an interest in Hong Kong will find this report interesting. Our previous publishing, including China Barometer 2013, is also available upon request. We welcome the opportunity to discuss the report s findings or other articles in further detail. 4. Respondent breakdown: Gender 70% female and 30% male. Age even split between 20-29, 30-39 and 40-49 groups. Yearly income 48% in mid bracket (USD 60K to 90K), 38% in mid-upper bracket (USD 90K to 120K) and 13% in upper bracket (USD 120K +). 6

Market Conditions Luxury retailers are concluding 2013 with an array of challenges: rising competition, skyrocketing rental rates and changing preferences of mainland tourists. All factors are putting downward pressure on profits and the ability to differentiate. Luxury brands are re-evaluating their strategies for 2014. Attention is now shifting to re-focusing efforts on the Hong Kong luxury shopper. Hong Kong Barometer Report s 2013 draws to a close, luxury retailers are re-evaluating their strategies after a slower year of growth. Profits were put under pressure from a variety of factors: Exhibit 1: Greater China s luxury goods market and proportion for Hong Kong Competition is getting tougher Whether brands entered independently or through distributors, luxury retailers always recognized Hong Kong s pivotal role to unlocking sales in Asia and China. Its advantages and lower risks included: the city s longer history with luxury consumption and Western heritage, favorable tax environment and legal structures and hotspot of mainland tourists. Despite the significant difference in population and size, Hong Kong s total luxury sales (approx. 7.0B) in 2012 was almost half that of mainland China s total sales 5 (Exhibit 1). These market conditions contributed to a saturation of general and luxury retail brands. Over 90% of the world s leading luxury brands established at least one store in Hong Kong 6. In 2012, 51 brands (general retail and luxury) principally from UK, France and US entered the cosmopolitan city, which was the largest number globally for any city. Mainland Mainland China - 15.0B China - 15.0B Macau 0.9B Macau 0.9B Source: Bain & Company, 2012 Hong Kong 7.0B Taiwan 4.5B Taiwan 4.5B Hong Kong 7.0B Brands are faced with challenges of intense competition established brands need to continuously differentiate and retain their clientele, whereas, new entrant brands need to attract and draw the interests of shoppers in order to thrive. Soaring retail rents Competition for space in iconic locations and land for new shopping centers has contributed to Hong Kong s skyrocketing rents. Luxury brands wishing to obtain prime store real-estate are paying, on average, USD $4,335 per square foot / annum 7 (Exhibit 2).Top-tier areas, Causeway Bay, Central and Tsim Sha Tsui, have far surpassed other global cities, New York and London, in top rent fees. Soaring rents have put significant pressure on retailer s operational costs. In order to cope, retailers are forced to either: re-locate to areas with less traffic or limit their store footprint (risking not being seen in a city where store presence is vital) or find better ways to increase its customer base and revenue. Exhibit 2: Hong Kong tops the list as the world s most expensive prime retail rents Retail Retail rent rent (US$) Top Top 5 5 Global prime retail rents Ranking by US$ per square foot, per annum basis Ranking by Top US$ 5 Global per square prime foot, retail per rents annum basis Ranking by US$ per square foot, per annum basis 5000 5000 $4,335 $4,335 4000 4000 3000 3000 Source: CBRE, 2013 $2,970 $2,970 2000 2000 $1,126 $1,080 $1,015 1000 $1,126 $1,080 $1,015 1000 0 Hong Kong New York 0 London Paris Sydney Hong New York London Paris Sydney Kong 5. 2012 Luxury Goods Worldwide Study, Bain & Company, 2012 6. How Global is the Business of Retail, CBRE, 2013 7. Global Retail View Q4 2012, CBRE, 2013. Prime rent = typical achievable open market rent for international retail chain on ground floor until up to 200 sq.m. of highest quality of given market. 7

Hong Kong Barometer Report Changing preferences of mainland Chinese tourists This surge of competition and rental rents was largely driven by the influxes of mainland Chinese tourists. The rapid increase of China s wealth and disposable income meant more and more mainlanders were becoming first-time luxury consumers 8. Luxury brands responded to this surge strategically locating stores (such as Kowloon), re-designing the store layout according to their needs, adapting marketing strategies and hiring bilingual staff to attract the mainland tourist. However, the allure of mainland tourists has been shifting in the past year. Previously seen as a prosperous and rapidly growing segment in Hong Kong, tourist spending was impacted by the slowdown of China s economy and changing preferences. These were largely experienced in the Golden Week in October with number of tourists still surging (National Day figures up 60% from the previous year) 9 but with less purchasing luxury goods among the crowds. Various factors influenced this change, including: 1. New laws prohibiting forced shopping (the ban on tour groups going to designated stores, where guides could get a personal commission), 2. Increasing popularity for sight-seeing over shopping as a result, and 3. The government s push in the past year to tighten down on conspicuous spending. Preferences among High Net Worth Individuals were also shifting. The confidence levels among Chinese s wealthy and ultra-wealthy continue to be strong, but these segments are preferring to travel to Europe and the US (further distance) for leisure and for shopping. Luxury retailers are therefore realizing that strategies need to go beyond attracting the mainland Chinese segment, in order to survive in Hong Kong s competitive market. Re-evaluating for 2014 re-conquer the Hong Kong local Luxury brands are now re-focusing their attentions on an enduring customer base the Hong Kong luxury shopper. Hong Kong locals are characterized by their love for retailtainment, with matured and discerning expectations. Whilst much attention has been on attracting the mainland tourist in the past years, luxury brands are re-targeting their efforts to understand the Hong Kong local segment. Brands need to ensure that they are still in touch with the local tastes and expectations. 8. Refer to ACDL s China Barometer Report in-depth look at Chinese luxury consumers 9. Fewer shoppers among flood of mainlanders visiting Hong Kong, SCMP 2013. 8

Hong Kong luxury shopper profile Hong Kong luxury shoppers are typically characterized by their matured, discerning tastes and high brand awareness. As seen especially in Asia, the internet is increasingly used a tool to search, discover and validate luxury brands. Luxury brands need to ensure the online presence matches the store experience and brand image. ACDL s survey highlights to a growing dissatisfaction in the in-store experience particularly in the lack of personalized service, brand / product knowledge of staff and the perceived favoritism toward mainland tourists. Hong Kong Barometer Report n order to reclaim the relationship with Hong Kong luxury shoppers, brands need to fully understand their shopping habits and preferences. This is the only solution to keep up with and exceed the expectations of this demanding clientele. In this chapter, we will uncover: what Hong Kong luxury shoppers know and desire about luxury brands, how they shop and what they want from their shopping experiences. Brand awareness and desire Only comparable with Japan or Singapore, Hong Kong has had one of the most matured relationships with luxury brands in the region. This predominantly has come from two trends: An enduring legacy of luxury brand presence (for instance, Cartier and Chanel, have established stores for over 40 years ago in Hong Kong) and the drive from Hong Kong locals themselves researching and discovering new and boutique brands. In ACDL s barometer survey, over 100 brands were listed by respondents when asked about the top 5 brands that were on the top of their mind 10. To draw a comparison, results previously published by ACDL with the same sample size of respondents, had shown mainland Chinese respondents listed 80 brands in total 11. Luxury houses, such as Chanel, Gucci and Dior, with a longer history, larger marketing budget and store footprint undoubtedly top the list in brand awareness and recognition. Exhibit 3: Top of mind brands for Fashion, Cosmetics and Watch & Jewelry Fashion Rank Brand Mindshare 1 CHANEL 11% 2 BURBERRY 9% 3 GUCCI 8% 4 LOUIS VUITTON 8% 5 DIOR 7% Fragrance & Cosmetics Rank Brand Mindshare 1 CHANEL 16% 2 DIOR 11% 3 ESTEE LAUDER 6% 4 LANCOME 6% 5 GUCCI 5% Watch & Jewelry Rank Brand Mindshare 1 ROLEX 16% 2 CARTIER 15% 3 PIAGET 7% 4 TIFFANY & CO. 7% 5 OMEGA 6% Source: ACDL Survey 2013. Mindshare = Total mentions of a brand, by product category (client s top of mind for 5 brands). 10. Methodology - Respondents were asked to list 5 luxury brands, without prompting, in the fashion, watch & jewelry and cosmetics categories. Results help understand which brands have the highest mind share and impact on the segment. 11. ACDL China Barometer 2013, which was featured in Retail Performance Asia: May 2013 Issue. 9

Hong Kong Barometer Report However, we see a trend among Hong Kong locals who are drawn and attracted by what is niche and boutique. Brands with significantly shorter lifespan in Hong Kong and smaller store footprint were still among the top of mind. These included brands with less than 3 years presence in Hong Kong, such as: Ellie Saab, Alexander Wang, Maison Martin Margiela, Costume National and Balmain. With this in mind, it is unsurprising that Hong Kong luxury customers are more in-the-know of global brands and fashion trends. They seek to understand the brand s point of difference what makes its heritage special, what makes the products suited to their specific needs and desires and how is it separated from others. How do they search and shop The internet is indispensible to the Hong Kong shopper s way of life, as it is a rapidly growing trend in Asia. Based on our survey, 88% of Hong Kong shoppers conducted some sort of research before purchasing a luxury item (Exhibit 4). Out of these respondents, 40% used company websites or blogs to do their research and keep up to date with latest trends. Smart phone apps are becoming ever more popular to retrieve information from brand education through to push notifications from the user s selected brands. Exhibit 4: Where do HK locals search for luxury 17% 12% 2% 18% Source: ACDL Survey, 2013 Tools to search for luxury 28% 23% Blogs/Forums Brand Websites Friends/Family Magazines Other, precise N/A, you do not search information Exhibit 5: Consumer preference to shop for luxury online Whilst brand boutiques are still the most popular channel of purchase, online shopping for luxury goods is also on the rise, both in Hong Kong and mainland China (Exhibit 5). Shoppers are becoming more confident and trustworthy of e-commerce, with Hong Kong shoppers in particular valuing third party certification of vendor authenticity and ease of access to products 12. But taking into account Hong Kong s love of retail-tainment (seeing, feeling and experiencing the brand), the online experience is unlikely to replace the in-store experience any time soon. Instead, the internet is increasingly used as a search, discovery and validation tool for luxury. Brands therefore need to recognize that their online presence must match with the in-store experience and brand image. They need to earn the trust of the shoppers through continuous online communication (e.g. through mobile apps), which are adapted to preferences of the segment. In store expectations In our barometer survey, respondents with a high disposable income (e.g. earning over USD 120K per year) mostly purchased a luxury item every 2-3 months (63% of respondents, results include fashion, watch & jewelry products and excludes cosmetics). The frequency of purchases was understandably linked with the respondent s household income, but we still see respondents with lower incomes, for instance, of 60K-90K USD still buying a luxury item at least 1-2 times per year. Source: Ruder Finn and IPSOS Group Survey 2013 Exhibit 6: Luxury purchases (excluding cosmetics) per year, by income (USD) 90K to 120K Luxury purchases (excluding cosmetics) per year, by income (USD) 120K + 60K to 90K 4% 10% 38% 43% 48% Less than once a year Once every 2 or 3 months 63% 48% 4% 41% 0% 25% 50% 75% 100% Once or twice a year Once per month Source: ACDL Survey, 2013 12. 2014 China Luxury Forecast, Ruder Finn Asia and IPSOS Group, 2013. 10

Exhibit 7 Respondents comments on what is missing in Hong Kong s luxury boutiques Rank Key concerns Portion % What shoppers have said: 1 Personalize service (discovery of needs) 40% Most salespeople in luxury stores provide good service but they cannot discover needs of the customer well. Different people have different expectations and this needs to be understood. They need a deeper understanding of exactly what I need and desire. Hong Kong Barometer Report 2 Brand / product knowledge 3 Perceived favoritism of mainland tourists 25% Especially if there is high staff turnover, new staff might not have sufficient knowledge and experience with the brand. Many seem to not know enough about the products or brand, so don t really convince me to buy. If I raise objections, staff often respond with basic responses, rather than trying to convince or provide alternative arguments. 22% The quality of service is acceptable. However, the amount of mainland Chinese has increased significantly and there are not enough staff to cope. They don t pay much attention to the local customers or have provided me with the time to give details about the products. Source: ACDL Survey, 2013 Hong Kong locals are willing to buy luxury products more or less frequently, however, trends are pointing to a growing dissatisfaction with the in-store experience. Various factors have created this discontent 13 : Top Reason 1: Personalized service (discovery of needs) 40% of shoppers felt that their needs and expectations were not properly understood by the sales staff. This issue relates to both time (spending sufficient time with the shopper to ask and reformulate their needs) and quality (asking efficient and relevant questions to understand). As a result, shoppers are often not convinced by the product recommendation. Beyond meeting to exceeding customer expectations Luxury brands are investing efforts to understand the Hong Kong customer drivers. They have discerning and personalized tastes in luxury which is shown through their vast brand awareness and thirst to discover new brands and trends. But despite their love for retail-tainment, respondents have also pointed to a growing dissatisfaction in the in-store experience. In order to survive in the competitive market, luxury retailers need to address concerns in the store-front and develop strategies to differentiate and attract the Hong Kong luxury consumer. Top Reason 2: Brand and product knowledge 25% of shoppers were not convinced by the staff s product and brand knowledge, as they seek personalized advice and insights from staff that goes beyond what they can search for online. Connecting with the previous reason, shoppers felt that the product recommendation was not best product for me in the market. As a result, they are not convinced by the brand s point of difference, its product features or advantages. Top Reason 3 : Perceived favoritism of mainland tourists 22% of shoppers felt that Hong Kong locals were overlooked by sales advisors, who preferred to serve mainland tourists. Especially in peak periods in-store, respondents recited experiences where the consultation was cut short or the SA showed impatience and preferred to serve the mainland tourists. 13. Exhibit 7 % results are taken from ACDL respondent s answer to: What is missing in Hong Kong s luxury boutiques? 11

Hong Kong Barometer Report Strategies to attract & re-conquer HK locals ACDL recommends the following three key areas: Differentiate, Locate and Train, to strengthen and retain the loyalties of the Hong Kong luxury shopper. As 2013 concludes, luxury brands are recognizing the need to re-focus their efforts on the Hong Kong luxury shopper. ACDL has compiled the following recommendations to target and retain this segment: Differentiate Facing a mature shopper, brands need to share their DNA and foster genuine brand ambassadors as sales advisors, which would help shoppers understand how each brand is unique. Hong Kong luxury consumers desire to have a deep perspective on how they can relate to a brand on a personal level. Selling speeches therefore have to evolve, to ensure the message is clear and alluring to shoppers. Sales advisors need to align their service with all touch points for the brand e.g. what is evoked through advertising (print, digital), what is portrayed in the brand s online presence and its image in the store front. Recognizing this need in matured markets like Hong Kong and others, ACDL has collaborated on several projects to improve the story-telling abilities of sales advisors and ensure that the shopping experience entirely reflects the brand s DNA and exceeds the shoppers expectations. Exhibit 8: Key clientele per shopping district Prime shopping locations and profiles of key clientele Tsim Sha Tsui Key luxury malls: Harbour City, 1881 Heritage, The One, K11 Mall, Elements Key demographic: Mainland tourists and local HK (mostly in Elements) Key purchasing drivers: Price disparity between mainland China, wider product range and authenticity, customized shopping experience (in Mandarin). Kowloon Tong (Festival Walk) Key demographic: Local HK (normally middle to upper incomes and Gen Y) Key purchasing drivers: Moderately pricesensitive, although can purchase beyond their income levels, me-too purchases (both for luxury and general retail). Causeway Bay Central Key malls: IFC, The Landmark, Prince s Building Shopping Centre Key demographic: Hong Kong business / financial executives and expatriates Key purchasing drivers: Matured and refined tastes, view luxury as personalized and way of life, product quality. Convenient shopping location (near offices) Pacific Place Key demographic: High-income locals, ROW tourists and expatriates (driven by hotels) Key purchasing drivers: Shopping experience (luxurious, enjoyable and exclusive), matured and refined attitudes, prefers to take the time when making a purchase Mid-High end malls: Times Square, Fashion Walk, Hysan Place, Sogo Key demographic: Mainland & ROW tourists, local HK Key purchasing drivers: Priceconscious, me-too brands. High end malls: Lee Gardens Key demographic: High-income local residents and expatriates Key purchasing drivers: Premium, niche tastes, luxury catered for families (e.g. children s range). Source: ACDL research, mystery shopper programs and client engagements 12

Locate As mentioned in this report, the cost per square foot in Hong Kong s prime shopping areas is the highest globally. Therefore, luxury brands need to strategically place and design its stores and ensure resources are efficiently allocated. From Tsim Sha Tsui to Pacific Place, each prime shopping location is largely separated by the regular types of shoppers. Segments include: Hong Kong locals, mainland tourists, Rest of World (ROW tourists) and expatriates (Exhibit 8, previous page). Sub segments can be also developed for Hong Kong locals. We recognize that each brand has different circumstances and constraints when it comes to its store footprint. But as a general perspective, we suggest that brands target: Central if they wish to attract the Hong Kong executive, Tsim Sha Tsui - Elements, Kowloon Tong - Festival Walk or Causeway Bay for middle-upper income residents and Gen Y, and Lee Garden and Pacific Place for the upper-income local. Conclusion Market conditions have made operating in Hong Kong a riskier business for retailers it is becoming harder to develop a unique point of difference in a highly competitive market, operational costs are rising and one of the key customer segments, mainland tourists, and their shopping habits are shifting away from Hong Kong. Luxury brands are therefore adapting their strategy for 2014, with the focus on: re-conquering the Hong Kong luxury shopper. In this report we outlined customer drivers and strategies to attract and retain this demanding segment. Luxury brands that are focused on understanding their unique preferences and translating these into the online interaction and in-store experience will ensure the most success for the year ahead. Hong Kong Barometer Report By analyzing the types of customers and their shopping habits per store location, luxury brands can: 1. Align its merchandise and store layout to the needs and desires of the shopper segments, 2. Ensure staff are efficiently located to best serve the clientele (e.g. based on language ability), and 3. Ensure staff are effectively trained to understand the specific needs and motivations of the shoppers. Train Training programs for sales staff need to understand and exceed the discerning interests of Hong Kong luxury shoppers. In this report, we have outlined three core issues in the in-store experience that are causing dissatisfaction. These included: 1. The ability to offer personalized service, 2. Brand / product knowledge and convincing skills of staff, and 3. The perceived favoritism towards mainland tourists. ACDL clients and partners are reacting by establishing retail academies and investing more in their training. Dedicated programs are continuously adapted to the shopper s expectations and disseminated across all staff in the country, to get them up-to-speed quickly and efficiently. For both large and small brands, distributors or companyoperated, these training programs must first and foremost address the gap in the in-store experience - between the customer and the staff s level of service. 13

Retail Operational Excellence Enhancing Employee Engagement Strategies to address shop-floor staff engagement and retention By Laurence Ouaknine, President of AuCoeurDuLuxe Introduction hop floor employees are essentially the face of the brand - they hold the relationship with the customer, conclude the sales transaction and foster customer loyalty. However, the retail industry is notorious for low staff engagement and high staff turnover. The situation is often worse in Asia. In an industry where customer satisfaction and loyalty is absolutely paramount, what can retailers do to enhance employee engagement. Trends in Asia Retailers in Asia are facing a paradox between the importance of their shop-floor staff to daily customer interaction and their staff s low engagement and high turnover. We see this trend has come from various factors: Organic growth of stores The rapid development of economies like China and in the ASEAN has seen an enormous increase in its people s disposable income and consumer confidence. Retailers are taking advantage of these opportunities through aggressive store expansions. This surge has been predominantly driven by the rising middle-income classes, especially in lower tiered cities. For example, by 2020 in China, an estimated 68% of growth in the fashion apparel market will come from tier 3 and 4 cities (compared to 23% from tier 1 and 2) 1. Brands therefore need to quickly search, recruit and train people needed to meet their store requirements. Demand outstripping labor supply Retailers are facing the conundrum of demand from store expansions outstripping the current supply of experienced and qualified labor. This demand is two-fold, coming from the brand s own expansionary plans and that of its competitors. In lower-tiered cities where we see the largest gap, consumers and employees have had a shorter history of shopping for leisure and brand awareness. In these markets that are relatively new or rapidly growing, an adequate pipeline of qualified and experienced staff is just not currently available. Higher confidence to move In situations where there is high demand and the economy is strong (i.e. brands are growing and competitors are entering the market), employees naturally have a higher confidence to move. Any dissatisfaction in the job specification or daily operations can easily bring about this change. As the fight for talent gets more intense, competitor brands are poaching experienced staff with the right skills with better perks or higher salaries. Facing this challenge, brands tend to dedicate fewer resources to a mid-term strategy for retaining their best staff and instead, more focused on a short-term solution to recruit. Recruitment cycle For the Human Resources Department, more efforts are therefore dedicated to recruiting to meet the stores needs, which comes at the expense of implementing engagement and retention strategies. Socio-economic factors have further made HR s role more difficult. Generation Y, who are the main target for fulfilling sales advisor positions, are more willing to move jobs and have less financial pressures than previous generations (e.g. living at home or supported by their families). Mass recruitment of sales advisor positions can make it unclear or highly competitive for these people to reach the store manager level or beyond, with front line sales roles not as well-considered as white collar positions. Furthermore, the economic growth also encourages people to open their own boutiques, particularly if they are exceptional in sales. In order to cope with these factors, HR are forced to lower the pre-requisites for staff experience (i.e. asking for less years in retail or in store management), focus on financial incentives to quickly recruit staff or provide generic or glamorized job specification to new recruits, which can all risk the long term needs of the brand. 1. China Apparel 2020, OC&C, 2013 14

The Impact These trends have had inevitable impacts on employee engagement and staff turnover: Less qualification and less experience A store manager for a fashion apparel brand in a developed market typically requires a minimum of 3 years experience. In an emerging market, the minimum experience can be dropped to as low as 1 year. They can be less equipped to meet the daily demands of the store, for instance, how to lead their team to sales performances (and bonuses) or how to coach staff to improve their competencies. This puts more pressure on ensuring the correct induction and training programs. Staff are therefore under more pressure to meet their targets and can become eager to leave for easier brands (e.g. high traffic stores or brands that are easier to sell products). Lower engagement with the brand After recruitment, few brands manage to keep an effective communication with their front line staff, beside sales targets and product launches. Few continue communication on the subjects of company values (and how they interact with their personal life), strategy and competitive advantages. They may forget to engage employees toward a common goal and to sell the brand s values to them. Only a few brands can rely on their global presence and prestige when hiring and retaining staff, without the need to engage in a salary war. However, not all brands are fortunate with this situation. In the effort to convince staff to join during the recruitment phase, job specifications are often oversold. Employees can be driven by the financial offer, as oppose to their interest and engagement with the brand. They can become disillusioned by the reality of the daily store life and, as a result, morale and job satisfaction significantly plummet in the beginning months. Higher staff turnover (conclusion) These impacts lead to higher staff turnover, which represents a significant expense for any brand, including the direct costs (recruitment and selection, replacement costs) and indirect costs (loss of productivity, reduced performance and low morale). Fixated on meeting the short-term needs of its stores, retailers are forced into an endless cycle of search, hire and re-hire. Strategies to change Back to the fundamentals Brands are trying to understand what drives its high turnover of shop-floor staff and what can be done to alleviate its impact. Based on our experiences working directly with HR in Asia and knowing their challenges, we have noticed that many brands may overlook the fundamentals pointed out by Maslow s hierarchy of needs. When it comes to recruitment, retailers often focus solely on the first pillar Salary. They need to develop the higher points to really see an impact on engagement and retention. Five key pillars to enhance employee engagement Salary Compe@@ve with the market Source: ACDL 2013 Internal branding Embed company work culture Recogni2on Non- financial and financial measures Impact on employee engagement and reten0on Personal development Matching job needs to the Clearly defined individual s in recruitment personal and through circumstance training Career development We understand that the ability and speed to adopt the following steps will be different for each brand, considering the brand s size (number of stores), available resources / investment, location (matured vs. developing markets) and brand prestige. When working on front line staff retention, ACDL has developed customized solutions based on the brand s specific needs and challenges. We advise that others who are trying to alleviate their staff turnover need to look at their own challenges and employee drivers. In doing so, brands should still not forget the fundamentals when it comes to engagement and retention, which are listed below. 1/ Salary in line with the market Employees in Asia are particularly sensitive to salary difference. In some countries, like China, studies have concluded that a 300 RMB per month increase can motivate shop-floor staff to change their jobs, irrespective of other factors like current job satisfaction 2. Brands also must realize that the salary is not the only trigger for shop-floor staff. They need to test the individual s motivations during the recruitment phase - understand what other financial motivations or non-financial motivations (e.g. training programs, career progression) drives the individual. Brands must ensure the job specifications and the proposal are aligned with their expectations. 2/ Internal branding Internal branding is just as important as external branding. It ensures that employees can strongly identify themselves with the brand s personality / culture and its interactions with their professional and personal life. Other industries (such as IT) tend to overtake retail in the global best employer ratings, including Google and Apple, who heavily invest in making their workplaces an engaging, co-operative and enjoyable environment. Although some retailers, such as Nordstrom and Saks Fifth Avenue who are among the top rankings, have been successful in promoting a strong brand and an attractive work culture and environment. Developing this culture and processes obviously depends on each company s situation and resources. Regardless if the brand is small or large, core measures are recommended, including: 1/ Company values need to be tangible, not generic and specific to the brand, 2/ these must be well-communicated right from the recruitment process and, 3/ values need to be personified in management (e.g. store managers, supervisors and retail managers) and their daily communication. Overall, shop-floor staff who feel a sense of belonging and pride for the brand, will ultimately spread a positive word-ofmouth. Enhancing Employee Engagement 2. Labour Turnover in apparel retail chains in China, International Journal of Industrial Engineering and Management 2012. 15

Enhancing Employee Engagement 3/ Recognition Recognition of shop-floor staff can come through nonfinancial and financial means. We firstly note non-financial means, specifically praise from management, as it very effective for motivation but under-utilized. Front line staff are often acknowledged by the store manager, but have very little contact with general management. In Asia, where people highly respect hierarchy and the collective group, we encourage higher management to develop stronger lines of communication and give praise to front line staff for exceptional work. Empowerment can also come from offering special opportunities to lead or manage tasks. Recognition through financial incentives (e.g. bonuses or rewards) is still important, but measures are frequently limited to the staff s sales performance. An evaluation system needs to move beyond this transactional view and incorporate a measure for the employee s engagement. For example, through: Peer Review (interaction with other staff the willingness to help colleagues and flexibility) and Mystery Shopping (interaction with customers the level of service, attitude and proactivity). ACDL manages both internal and external surveys and have noticed that a sales advisor s level of service and engagement can sometimes be hidden behind their sales data. Those who proactively promote the brand engender stronger customer loyalty and retention and those who establish rapport are better praised by their colleagues. Tools to assess employee engagement and, if developed correctly, would foster higher morale on a daily basis and altruism among colleagues. 4/ Career development The progression of the staff s professional development should be clearly defined in the job specifications. Right from the recruitment and induction, employees need to see their career path (e.g. from junior-mid-senior sales to level 1-2 store manager) and the skills and experience that are acquired under each role. Some retailers are leading the way, such as Saks Fifth Avenue, who have established specialized Executive Development Programs, to foster their staff s career in store management and director level. These programs are especially pertinent for Gen Y, who have a high emphasis on career growth, a thirst for learning and improvement and high mobility if these needs are not satisfied. 5/ Personal development Very few brands have been able to reach this level of personal development, which involves matching the job requirements with the personal interests and individual circumstances of valued staff. Mainly multi-national companies in developed countries (with the resources, norms and staff expectations) employ such models, such as: day care facilities or flexible working hours for parents (e.g. L Oreal). Nevertheless, smaller retailers in Asia can still look toward these examples as sources of inspiration, when devising short or long-term incentives for their valued employees. Conclusion Factors, including socio-economic and growing competition, will always make it difficult to stop the high staff turnover in Asia s retail industry. However, based on our consulting experiences working with Human Resources, strategies can be developed to slow down and alleviate its impact. Enhancing employee engagement is a critical component to do so, which can be achieved in the five fundamental pillars outlined in this article. We recognize that each brand entering Asia has differing circumstances and resources, so we stress that engagement and retention strategies need to be customized to the brand s specific requirements and employee drivers. For large and small brands, they need to break away from the short-term cycle of search, hire and re-hire for their stores. For each additional month gained from a front line staff productively staying with the brand, the store s productivity and the brand s competitiveness will improve. 16

Country Briefing Indonesia Market Focus Attractive retail market under increasing regulations and operating challenges By David Gravet, Asia Business Development Director of AuCoeurDuLuxe Introduction uring my last visit to Jakarta in September 2013, Indonesia s capital city, I discovered a new city landscape with buildings and shopping stores rapidly growing. Jakarta has one of the highest number of shopping malls in the world, at over 250 malls, which are considered not only as shopping destinations, but as social meeting points. With 240 million people, Indonesia is ranked the 4th most populated country globally, including a 95.5 million urban population spread across its five cities: Jakarta, Surabaya, Medan, Bandung and Bali. For the last five years, the Indonesian economy has recorded steady growth, at an average 6% year on year, due to government reforms and strong domestic consumption worth 60% of annual GDP. Retail sales are also driven by an emerging middle class who have rising purchasing power, estimated at USD 5,000 in 2014 and projected to reach USD 25,000 by 2025. The Indonesian retail market is, however, under strict domestic regulations. Government officials are targeting the retail sector to raise tax revenue and boost the local economy. Numerous rules, regarding ownership and number of stores, are in place to benefit local operators. The political environment and the lack of transparency in business practices will remain a challenge, especially in 2014, when national elections will be taking place next summer. As a Brand and Business Executive for sports and lifestyle brands for the last 15 years in Asia, I am very excited to share with you some key economic and retail insights about Indonesia. I hope this report allows you to have a better understanding of the market potential, foreign brand presence and mode of operation. I hope you find the chosen insights and observations relevant for your strategic growth development in the Region Asia Pacific. For further information on this report, feel free to contact me at: d-gravet@acdluxe.com. Regardless of these ongoing government regulations and growing operating costs (related to rising minimum wages and real estate prices), the Indonesian retail market remains a clear focus for foreign brands in the South East Asian markets. All major Global brick & mortar fast-fashion retailers have set their footprint, from Zara to H&M and including UNIQLO in the beginning of 2013. Recently, Apple has also received the approval from the authorities to open a Flagship and start its business to consumer channel on-line. 17

Indonesia Market Focus Key Economic Indicators General Fact & Figures Location Southeastern Asia, archipelago between the Indian Ocean and the Pacific Ocean Language Bahasa Indonesia (official, modified form of Malay), English, Dutch, local dialects (of which the most widely spoken is Javanese) Area 1,904,569 sq km country comparison to the world: 15 Ethnic Group Javanese 40.6%, Sundanese 15%, Madurese 3.3%, Minangkabau 2.7%, Betawi 2.4%, Bugis 2.4%, Banten 2%, Banjar 1.7%, other or unspecified 29.9% (2000 census) Climate tropical; hot, humid; more moderate in highlands Religions Muslim 86.1%, Protestant 5.7%, Roman Catholic 3%, Hindu 1.8%, other or unspecified 3.4% (2000 census) Resources petroleum, tin, natural gas, nickel, timber, bauxite, copper, fertile soils, coal, gold, silver Others 44% of population is < 25 years old City Inhabitants (millions) % of Total Population Jakarta 9.12 4% Surabaya 2.51 1% Bandung 2.41 1% Medan 2.13 1% Semarang 1.30 1% * 2010 Census data Country Population 000 Actual GDP 2012 Est. (USD) GDP / Capita (PPP) 2012 Est. (USD) GDP Growth Est. 2012 Export 2012 Est. (Billion USD) Import 2012 Est. (Billion USD) Indonesia 251,160 1.24 Trillion $5,100 6.2% $187 $179 China 1,343,000 12.38 Trillion $9,100 7.8% $2,021 $1,780 India 1,205,000 4.73 Trillion $3,900 5.4% $309 $500 Malaysia 29,179 0.05 Trillion $16,900 4.6% $239 $197 Sri Lanka 21,481 0.01 Trillion $6,100 6.8% $10 $19 Philippines 103, 775 0.04 Trillion $4,300 4.8% $52 $63 Thailand 67,448 0.66 Trillion $10,300 6.4% $226 $218 Hong Kong 7,183 0.38 Trillion $52,300 1.4% $466 $487 Singapore 5,460 0.33 Trillion $61,400 1.3% $436 $375 Taiwan 23,300 0.92 Trillion $39,400 1.3% $300 $269 South Korea 48,955 1.64 Trillion $32,800 2.0% $553 $514 Vietnam 92,478 0.36 Trillion $3,600 5.0% $114 $105 Source: CIA World Fact Book publications - 2013 18

Key Shopping Malls & Department Stores In Jakarta Name Size Floor Year Brands Sold Indonesia Market Focus Pacific Place JI. Jend. Sudirman Kav, S2 n/a 8F 2007 Ermenegildo Zegna - Montblanc - Guess - Hermes - Hugo Boss - Louis Vuitton - Tod s - Valentino - Polo Grand Indonesia Jl. Jenderal Sudirman, Pintu Satu Senayan, Jakarta 10270 640,000 m2 8F Chanel - Aigner - Loewe - Salvatore Ferragamo - Burberry - Giorgio Armani - Bottega Veneta - Harvey Nichols Entertainment X'nter JI.MH Thamrin Kav.28-30, Central Jakarta 4F 2004 La Mer Collections - Skin Food - Y3 by Yohji Yamamoto Plaza Indonesia JI.M.H Thamrin No.28-30 Plaza Senayan Gelora Bung Karno, JI. Asia Afrika No.8, Senayan Ratu Plaza JI. Jend. Sudirman Kav.9, Jakarta 10270, Jakarta Lotte Shopping Avenue Jl. Prof. Dr. Satrio Kav 3-5, South Jakarta Senayan City Gelora Bung Karno, JI. Asia Afrika Lot.I9, Senayan Tanah Abang Blok A Tanah Abang, Central Jakarta 40,000m2 5F 1990 130,500 m² 4F 1996 6,500 m² 5F 1979 48,000 m² 7F 2005 13,000m 2 12F 2005 Bulgari - Christian Louboutin - Cartier - Chanel - Celine - Bottega Veneta - DKNY - Ermenegildo Zegna - Emporio Armani - Bally. {Full list on http://www. plazaindonesia.com/directory.php?id_ref_menu=6} Aigner - Alfred Dunhill - Bally - Coach - Dior - Fendi - Ermenegildo Zegna - Hugo Boss - Louis Vuitton - Kate Spade - Gucci - MaxMara - Omega- Montblanc - Paul Smith Carrefour Hypermarket - Numerous Electronic - Computer Vendors A full-line department store in the Korean style with categories including foods, imported brands, fashion apparel, appliances and furniture. Uniqlo - Gucci - Dior - Prada -Tiffany - Burberry - Marc Jacobs - Chanel - Calvin Klein BCBG Maxazria - Burberry - Crocs - Calvin Klein - Furla - Gucci - Guess - Gap - Hush Pupplies - Max & Co. - Rado - Salvatore Ferragamo - Tod s - YSL Fashion - Accessories - Bag & Shoes - Jeans & Underwear Galeries Lafayette Jakarta Pacific Place Mall SCBD, Jalan Jend. Sudirman Kav. 52 53, Jakarta, Indonesia 12190 12,000 m 2 on 3 floor 2013 French luxury department store company Galeries Lafayette {http://www.galerieslafayette.co.id/en/brands/} Sarinah Department Store JI.Thamrin,Central Jakarta Sarinah, JI. M.H. Thamrin 11,Menteng 1962 First shopping mall build in Jakarta with an escalator. Includes: handicrafts - puppets - batiks - carvings - weaving - silver - jewelry - basketry - leather goods - a range of interior design items from all over the archipelago The Goods Dept Pacific Place Jakarta, Pondok Indah Mall 2, Jakarta Lotte Shopping Avenue, Jakarta 1st Floor est. (Pacific 1,000 m 2 Place) July 2012 (Pacific Place) The Goods Dept concept started with the Brightspot Market a pop-up market which highlights new Indonesian and independent fashion and lifestyle products {http://thegoodsdept.com/brands} Centro Tozy Sentosa, pt Sentosa Building Bintaro Jaya Central Business District Jl. Prof. Dr. Satrio, Blok A3 No. 5 2003 It is the first shopping mall build in Jakarta - Historical landmark Hush Puppies - Playboy - Guess - Anna Sui - Clarins 19

Indonesia Market Focus Foreign Brand Presence Overview Name Store Store type Operating model Location (selection) ADIDAS 20+ BOSSINI 21 Stand alone, shop-inshop & Mall Stand alone, shop-inshop & Mall Adidas Group including Franchisees Bossini BURBERRY 4 Shop-in-shop & Mall Dun Ang CELINE 1 Concept store FJ Benjamin CARTIER 20+ CHANEL Fashion and Sun glasses 1 Mall Stand alone, shop-inshop & Mall FJ Benjamin DKNY 1 Shop-in-shop MAP Indonesia ERMENEGILDO ZEGNA 3 Stand alone & Mall ESPRIT 11 Shop-in-shop & Mall Distributor GAP 6 Concept store FJ Benjamin GUCCI 6 Mall, shop-in-shop GUESS 15+ Stand alone, shop-inshop & Mall FJ Benjamin Check on adidas Store lcoatior http://discover. adidas.com/com/storefinder/#/storeid/id1146_ix- Ary_EqjnolZEaadqQ/ Bossini Centro Margo City Depok Bossini Sogo Kasablanka Bossini Sogo Kasablanka Jakarta-Senayan City Mall Jakarta-Grand Indonesia Plaza Senayan Ground Floor, 130 B 132 B;Jl. Asia Afrika No. 8, Jakarta, Phone: +62-21 572 5213 Plaza Indonesia Level 1 No. 139, Jakarta Dfs Bali Galleria, P.T. Intl Dufree Promosindo Grand Indonesia Shopping Town in Jakarta Jakarta MH Thamrin Kav.1 M Pacific Place Level 1 Scbd, Jl Jendral Sudirman Kav 52-53 Pacific Place Plaza Indonesia Plaza Senayan Mal Pondok Indah 1, Level 2 Mal Taman Anggrek Level 2 - Ladies Jl. Hos Cokroaminoto No. 87-89 Gap Pondok Indah Mall Pondok Indah Mall 2, Ground Floor, #G-42-46, Jl. Metro Pondok Indah, Pondok Indah 12310, Tel.: 021-75920533, Fax: 021-75920532, gap.pim@gmail.com Gap Senayan City Senayan City, 1st Floor, #1-50,1-52 & 1-58, Jl. Asia Afrika Lot 19, Jakarta Selatan 10270, Tel.: 021-72781145, Fax: 021-72781147, gap.scity@gmail. com Gap Grand Indonesia Grand Indonesia, East Mall, 1st Floor, #1-37, Jl. MH Thamrin No. 1, Menteng 10310, Tel.: 021-23580554, Fax: 021-23580540, gap.grandindo@gmail.com Gap Pacific Place Pacific Place, 3rd Floor, #3-67 - #3-69, SCBD, Jl. Jend Sudirman Kav. 52-53, Tel.: 021-57973516, Fax: 021-57973346, gapkids.pp@gmail.com GAP Tunjungan Plaza 4 Tunjungan Plaza 4, 1st Floor, #1-51-55, Jl. Basuki Rahmat No. 8-12, Surabaya 60261, Tel.: 031-5482185, Fax: 031-5482186, gap.tp4@gmail.com Gap Kuta Beach Walk Kuta Beach Walk Bali, LT. 1 #A-15B, #B-1-2, Jl. Raya Pantai, Kuta Bali 80361 Tel.: 0361-8464832, gap.kutabeach@gmail.com Senayan City, Unit G96-G100,Ground Floor,Senayan City Plaza Senayan, 1st Level, No. 138c-140c,Plaza Senayan Grand Indonesia Gc Store Grand Indonesia Shopping Center Sogo Department Store 20

Name Store Store type Operating model Location (selection) H&M 2 Mall HERMES 3 Mall H&M partner with PT Hindo L OCCITANE 22 Shop-in-shop & Mall L Occitane Group LOEWE 3 Mall MAP Indonesia LOUIS VUITTON 4 Stand alone & Mall Louis Vuiton MARC JACOBS 2 Stand alone & Mall Imagine X MAXMARA 1 Mall MAP Indonesia MICHAEL KORS 1 Concept store FJ Benjamin MONTBLANC 5 Stand alone & Mall NIKE 5 SALVATORE FERRAGAMO Concept stores *Excluding franchisees Nike Group 5 Stand alone & Mall Imagine X SWAROVSKI 10 Mall & Shop-in-shop MAP Indonesia TOPSHOP 8 Stand alone & Mall MAP Indonesia UNIQLO 3 Mall Joint Venture with Mitsubishi Corporation ZARA 20+ Stand alone & Mall MAP Indonesia Gandaria City Mall (Unit G-41 & UG-02) Jl. Sultan Iskandar Pondok Indah Mall 1 (Unit G-007) JI. Pacific Place, JAKARTA Kuta Plaza Bali Duty Free,BALI Seibu Grand Indonesia Pacific Place Mall Plaza Indonesia Shop Grand Indonesia Gc Store Grand Indonesia Shopping Center Sogo Department Store Plaza Indonesia Plaza Senayan Sheraton Surabaya Jalan M. H. Thamrin Kav. 28-30, Unit L1 #84, 85, 88A, 88D, Jakarta Pacific Place Level 1 SCBD, Jalan Jenderal Sudirman Kav 52-53, Jakarta Plaza Indonesia, Level 1 Unit 181 Mh Thamrin Kav 28-29 PLAZA SENAYAN Plaza Senayan Unit 150A, Jl. Asia Afrika 8, Jakarta, 10270 Pacific Place Mall, GF 27-28 Plaza Indonesia, Level One # 50-51 Plaza Senayan, Level One Nike Store - ISTANA PLAZA Bandung,Istana Plaza, Jl. Pasir Kaliki No.121, Sukajadi Nike Store - PARIS VAN JAVA Bandung,Paris Van Java, Jl. Sukajadi 137-139, Nike Store - SUN PLAZA MEDAN Medan,Sun Plaza Medan, Jl. Diponegoro Nike Store - PONDOK INDAH MAL 2 South Jakarta,Pondok Indah Mal 2, Jl. Metro Pondok Indah Nike Store - TUNJUNGAN PLAZA Surabaya,Tunjungan Plaza, Jl. Basuki Rahmat No.8-12 Jakarta Grand Indonesia Senayan City Plaza Indonesia Sogo Plaza Senayan In Jakarta Kelapa Gading Mall In Jakarta Seibu Departmental In Jakarta Beachwalk, Ji. Pantai Kuta - Kuta,Sahid Kuta Lifestyle Resort Central Park, Ground Floor, Unit G, 216-216 Discovery Shopping Mall, Jl. Kartika Plaza Mal Kelapa Gading Store Mal Taman Anggrek Store Lotte Shopping Avenue Store Kota Kasablanka, Jalan Casablanca Raya Kav, 88 Grand Indonesia Shopping Town Plaza Indonesia Indonesia Market Focus 21

Indonesia Market Focus List of Brands for Pacific Place A ABADI FOOT & JOY REFLEXOL- TEXTILE AMAZONE FISH & CO OGY F ADIDAS ANDROID NATION FITNESS FIRST FUJI IMAGE PLAZA AKSARA ATM ANZ ALTA MODA ARTSOUND LAB G G-STAR RAW GORDON MAX AMANTE GALERIES LAFAYETTE GORJES AMAZING PLACE GAP KIDS & BABY GAP GUESS GNC LIVE WELL GUESS WATCHES B BALLIN BIBIGO GO CURRY! GYU KAKU BANG & OLUFSEN BIYAN BASKIN & ROBINS ATM BJB H HAAGEN DAZS HOUSE OF BUNS BATIK KERIS BLACKBERRY HALLNING ATM HSBC ATM BCA BLITZMEGAPLEX HAN GANG HUGO BOSS BANK BCA ATM BNI HARD ROCK CAFE HUIZE VAN WELY BEAR HOUSE BANK BNI HERMES BEARD PAPA S BOOKS & BEYOND BEBE ATM BRI I IMAE SHABU-SHABU BELL&ROSS ATM BRI INFINITE IROO IWAN TIRTA PRIVATE COL- LECTION BENGAWAN SOLO COF- FEE BANK BRI INVE STORE IWS NOODLE BENTLEY BVLGARI INVIO BEST DENKI J JAGUAR JNE C CAFE SWEETS CLARINS SPA JEWELS OF EDEN CANALI COCO BUBBLE TEA CANTEEN COCOLA WAXING K KAFE BETAWI KIYADON SUSHI CAPOCACCIA COFFEE CLUB KAY COLLECTION KLEO BEAUTY STUDIO CATWALK COME & BUY KEM CHICKS KOPI LUWAK CENTURY HEALTH CARE CONCIERGE KIDZ STATION KYOCHON CHARLES AND KEITH CROCS KIDZANIA CHIROPRACTIC INDO- NESIA CROWN JEWELERY ATM CIMB NIAGA CRYSTAL JADE MY BREAD L L OCCITANE LILY KASOEM OPTICAL CRYSTAL JADE REST & BANK CIMB NIAGA LA FLORET LOEWE TEOCHEW ATM CITI BANK LAND ROVER LOUIS VUITTON LE SALON LUCAFFE D D STORM DIN TAI FUNG LIBERICA LUMINOX DUA SISI MONEY CHANG- ATM DANAMON ER DAPOER PODJOK DAPUR SUNDA DWIDAYA TOUR & TRAVEL E ELC ERHA APOTHECARY ERMENEGILDO ZEGNA ESPRIT WATCHES ESPRIT/EDC EXECUTIVE MUSHOLLA 22

M ATM MANDIRI MELANDAS S S.T. DUPONT SIMMONS MANGO METRO SAMSUNG PLAZA SNACK ZONE MAQUI S MOCHI-MOCHI SAMY S CURRY SOCIETIE MCLAREN MODA CASTELLO SEGAFREDO SOP BUNTUT BOGOR CAFE ATM MEGA MOIE SEMERU EXPRESS SOPRA BANK MEGA MONT BLANC SENOPATI SKIN CENTER SOUR SALLY MEISO BY KENKO MOTHER CARE SERUPUT STARBUCKS COFFEE SIEMATIC (WMF) STOP N GO N NANNY S PAVILLON NIKE T NARUMI NURSERY ROOM T.M. LEWIN THE CLINIC THE COFFEE BEAN & TEA TAG HEUER LEAF O ATM OCBC NISP OPERA BLANC TAKADELI THE GOODS DEPT ODYSSEIA OPTIK MELAWAI TAKIGAWA THE GOODS DEPT CAFE OFFICE 2000 OPTIK SEIS TEH 63 THE TIME PLACE OKE SHOP ORIENTAL PACIFIC MONEY CHANGER TELESINDO SHOP THOMAS SABO OKE SHOP II OSIM TESATE TIFFANY & CO OOTOYA OVER RICE THAI ALLEY TOD S THAI GO GO TONINO LAMBORGHINI P PANCIOUS ATM PERMATA THE BODY SHOP TOTO KITCHEN ATM PANIN PHO 24 THE CHILDREN STORE TWELVE CUPCAKES PANNACOTTA PINK PARLOUR PANORAMA TOURS PLANET SPORTS U U-BOAT UP SCALE DECO UNIQUE WORLD COL- PAPILLON DUO POLO URBAN KITCHEN LECTION PARANG KENCANA PORSCHE DESIGN ATM UOB PART ONE EDWARD HUTABARAT POSE CAR BEAUTIES PATCHI CHOCOLATE POTATO HEAD V VALENTINO PAUL PRAVDA SALON VINOTECA PAXI PRINCESS NAIL PEDRO W WATSONS WENDY S Q QBOX WEDGWOOD AND HOMETHECARY QQ KOPITIAM X XENIA BAKERY R RAFFEL S ROBERTO CAVALLI RAMEN 38 ROCOCO Y YA KUN KAYA TOAST RICE BOWL RUMOURS YAMAHA MUSIC RIUNG SUNDA YOGEN FRUZ & CREPES Indonesia Market Focus 23

Indonesia Market Focus List of Brands for Galeries La Fayette A ACCA B BADGLEY C CAMBRIDGE KAPPA ANNA SUI FACONNABLE FLYNOW ADRIANO ARDISTIA F FALKE FREE PEOPLE GOLDCSHMEID AGATHA ARYN K FAME AGENDA FRIEDERICH HER- MAN AGENT PROVOCATEUR ASH FITFLOP ALEXIS BITTAR AVANT PREMIÈRE G ALLEIRA BATIK AMY ATMANTO GERARD DAREL GUERLAIN ALPURE GIAMBATTISTA VALLI GUESS GREYHOUND MISCHKA BNV H BARBARA RIHL BOTKIER HACKETT LONDON HUGO BOSS BCBGENERATION BRAUN BUFFEL HANKY PANKY HUIT BCBGMAXAZRIA BRIC S HUDSON HULTQUIST BEN SHERMAN BRIEFING HÜFTGOLD BERLIN BIANCA NYGARD BRONX BATIK BY BIYAN BROOKS BROTHERS EXCLUSIVE IBLUES I ISABELLA FIORE BLEULAB BRUNO PREMI IKAT INDONESIA ISIS BLINK IMPLICITE IVANKA TRUMP INES DE LA FRESSANGE SATCHEL CHRISTIAN LACROIX J CAMPER CLARINS JACHS JESSICA SIMPSON CAROLEE COACH JACK&JONES JODHPUR WEEKEND CASADEI COCCINELLE JACK RUSSELL MALLETIER JOE S CERRUTI 1881 CODELLO JACQUES BRITT JONAK CHANTELLE COSMO PARIS JAPAN RAGS JOSEPH RIBKOFF CHARLOTTE RONSON CRABTREE & EVELYN JEAN-LOUIS SCHERRER D DECLÉOR D DECLÉOR E EDBE E EDBE K DIRK BIKKEMBERGS KATE SPADE NEW YORK KIEHL S DENIMOCRACY DKNY KNOWLEDGE COT- KENNETH COLE DERHY DL1961 TON APPAREL DES PETITS HAUTS DIRK DR. MARTENS BIKKEMBERGS L DENIMOCRACY DIANE VON DKNY LUCKY BRAND LES NÉRÉIDES FURSTENBERG LIBERTÉ FRENCH DERHY DL1961 L OCCITANE BRASSERIE DES PETITS HAUTS DR. MARTENS L.A.M.B. LINEA DIANE VON ENVIROSAX FURSTENBERG EDSOR EVIL TWIN LAFAYETTE BAGS LIPAULT ELIE TAHARI EVITA PERONI LAFAYETTE LADIES LIU JO COLLECTION ELISABETTA FRANCHI LAFAYETTE MEN S ENVIROSAX LOGAN COLLECTION EDSOR EVIL TWIN LANCÔME LONGCHAMP ELIE TAHARI EVITA PERONI LAVAND LOUIS PION ELISABETTA FRANCHI LE TEMPS DES CERISES LE MIEUX 24

M MOSCHINO N N.TYLER CHEAP AND CHIC MICHAEL KORS SELECTED FEMME STELLA MCCARTNEY MALENE BY MALENE BIRGER MILLY SELECTED HOMME STELLA RISSA MACEOO MIMI HOLLIDAY SEVENTY EIGHT PERCENT STEVE MADDEN MARC BY MARC JACOBS MINELLI SIGNUM STUDIO TANGS MASSIMO BONINI MINK PINK SILVIAN HEACH SWAROVSKI MCQ BY ALEXANDER MCQUEEN MISS ME SELECTED HOMME STEVE MADDEN MELLOW YELLOW MORGAN DE TOI T MERC TRUE RELIGION TFNC T TAHARI THOMAS PINK NOË T-TECH TISSOT NINE WEST NYAI TED BAKER NIXON Indonesia Market Focus U UNGARO O OASIS ONE GREEN ELEPHANT V ODYSSEIA OTTOD AME VANESSA BRUNO VICTORINOX OLIVE NAIL ART VERO MODA VINCE CAMUTO VERSION ORIGINALE VIVIENNE WEST- WOOD P PAIGE ILGRIM VERY VERO MODA VOTUM PANDORA PIQUADRO VICOMTE A PARANG KENCANA PLIÉ PASSIONATA PRAJUDI W WACOAL PAUL PROMOD WAREHOUSE PENNYBLACK PROPERTY OF WEEKEND MAX MARA PETER NYGARD PYLONES R RAFÉ S SANDRO PHILIPPE FERRANDIS Y YVES SAINT LAURENT PIERRE CARDIN Z Z SPOKE BY ZAC POSEN NEW YORK RENOMA ZADIG ET VOLTAIRE RAOUL ROBERT GRAHAM ZARDOZE REBECCA MINKOFF RONALD V GAGHANA REEBOK Other SIMONE PÉRÈLE SOMEDAYS LOVIN SIWY 7 FOR ALL MANKIND SAMSONITE SK II SANTONI SNEAKER BAR SAPTO DJOJOKARTIKO SONIA BY SONIA RYKIEL SCANDALE SPANX SCHUTZ STANDARD DENIM SEBAGO STAPLE THE LABEL 25

Real Estate Happening Store Openings Takashimaya 1438 Hongqiao Lu, Shanghai L Avenue No.99 Xianxia Lu, Shanghai One of the largest department store operators in Japan, Takashimaya, has chosen Shanghai s Gubei district to open its first chain store in China. In over 40,000 square meters, Takashimaya features high-end apparel, cosmetics, home ware, and food/beverage across its eight floors. LVMH Group opened its impressive and aesthetically unique L Avenue in July 2013 in Shanghai s Changning District, featuring a strong contingent of its brands, such as Louis Vuitton, Dior, Bulgari and Fendi, plus other top brands, Zegna, Burberry and Prada, in prime spots. IAPM Mall Huaihai Lu and Shaanxi Nan Lu, Shanghai The long anticipated IAPM Mall opened in August 2013, spreading across six floors with over 200 leading fashion brands. Opening hours are extended by one hour than the average mall to 11.00pm, allowing customers to shop, under the group s concept, from am to pm. 26

10 Corso Como 1717 Nanjing Xi Lu, Shanghai Global Harbor Mega Mall Zhongshan Bei Lu, Shanghai New Store Openings Under the design of Carla Sozzani, a longtime fashion editor of Elle & Vogue Italy, 10 Corso Como has a feeling of entering a gallery of magazine spreads, mixing the world of fashion, art, design and music into a stylish shopping experience. Opening in June 2013, Global Harbor is the largest shopping centre in Shanghai, covering 480,000 square meters. It not only houses a variety of brands, but offers a lifestyle experience with museums, a movie theater, art gallery, ice skating rink and gyms. Karl Lagerfeld in China Charter Shopping Center, Beijing and Jingan Kerry Center, Shanghai Karl Lagerfeld recently opened its first two standalone boutiques in China, with high hopes of opening another 40 stores in the next 5 years. According to CEO Pier Paolo Righi, the brand is targeting the new, younger luxury consumer, looking for something new and fresh that gives access to a luxury world. Shanghai has also featured a number of other top-tier shopping and department store openings in 2013, including: Jingan Kerry Center featuring Michael Kors, Loewe, Hugo Boss, Marc Jacobs and Burberry among its largest tenants, and Shanghai s first Lane Crawford Department Store - hosting over 500 luxury, designer fashion and beauty brands. 27

New Store Openings Ralph Lauren Prince s Building, Central, Hong Kong Ralph Lauren opened its first exclusively men s flagship in Asia, with a 10,000 square foot store in Hong Kong s Prince s Building. Spanning across three floors in its British gentlemen club-like interior, it features the brand s top-tier menswear and accessories, Purple Label custom suits and Black Label. In addition to Prince s Building, Ralph Lauren has further expanded into Hong Kong s emerging shopping districts, opening its Children s line in Gough Street and its RRL line in Hollywood Road, Central. Ladurée Gateway Arcade, Harbour City, TST, Hong Kong Hugo Boss Expanding flagship Central Building, Central, Hong Kong Laduree, the French patisserie house quintessentially renowned for its delicate pastries, cakes and macaroons, has established its first store in TST s Harbour City in December 2012. Since then it has opened another 3 establishments, two of which are Ladurée Beauté (its body and beauty product range) in Pacific Place and Landmark. As the fight for prime location continues in Hong Kong, Hugo Boss has secured the 24,000 square foot space in Central Building, which originally was occupied by Hang Seng Bank and other smaller tenants such as Swarovski. The luxury house has already opened its basement floor, with the ground floor under construction. Louis Vuitton Times Square, Causeway Bay, Hong Kong Louis Vuitton recently celebrated its eighth store in Hong Kong in Times Square Causeway Bay. According to General Manager of Hong Kong, Damian Vernet, the spectacular store incorporates several new and exclusive design elements that convey a sense of energy, youth and playfulness. 28

Rolex Departure East Hall, Hong Kong International Airport Topshop Queen s Road, Central, Hong Kong New Store Openings In efforts to improve the shopping experience of Hong Kong s airport, Rolex (along with another luxury house, Chanel) was introduced in August 2013. The airport flagship impressively occupies two floors across 500 square meters, in prime location for departing passengers. British fashion chain, Topshop, opened its first Hong Kong outlet in June 2013, spanning 14,000 square feet. Topshop is among the latest foreign mid-range brands to establish their foothold in one of Hong Kong s highest rental districts, in efforts to also attract and expand into mainland China. Victoria Secret IFC Mall, Central, and New Town Plaza, Sha Tin, Hong Kong Victoria Secret has entered Hong Kong with two glitzy and glamorous boutiques. The two stores are currently focusing on their bestselling beauty products, fragrances and accessories (some exclusive to Hong Kong). Retailers are not perturbed by Hong Kong s soaring prime rental rates, with more boutique and designer brands entering in the city s evolving shopping areas. New brands and store openings across 2013 also included: Caudalie boutique in Gough Street, Timothy Oulton s new flagship store on St Francis Street in Wan Chai and Claudie Pierlot s first Hong Kong flagship store at IFC mall in Central. 29

ACDL REMAINS AT YOUR DISPOSAL FOR ANY INFORMATION. For more information about AuCoeurDuLuxe s consulting and training services, please contact: E: inquiry@acdluxe.com Head Office in China: 7F, 33 Henan South Rd, Huang Pu District, Shanghai CHINA, 200 002 Head Office in Hong Kong: 806, 8/F, The L. Plaza, Nos. 367-375 Queen s Road, Central, Hong Kong Head Office in Singapore: 75 High St, SINGAPORE,179 435 Head Office in Korea: Nonhyeon-dong 13-7, Gangnam-gu, Seoul 30