A study conducted jointly by Bain & Company and the Comité Colbert, the French luxury association, quantifies for the first time the technology spending of European luxury groups.
The analysis draws on data collected from executives at houses including Chanel, Hermès, Kering, LVMH, Richemont, Bonpoint, Longchamp, Christian Louboutin, Messika, and Rochas.
European luxury groups spend on average 3.1% of their annual revenue on technology, according to the survey results. This average covers operating costs, capital expenditures, and personnel costs. There are significant variances among companies, ranging from 1.9% to 5.5% of revenue.
The study indicates that 60% of the groups surveyed expect their technology spending to rise by more than 5% over the next two to three years. Of these, 28% foresee an increase exceeding 10%.
Run Costs vs Change Investments
It distinguishes Run costs, associated with maintaining existing systems, from Change investments, devoted to transformation and modernization.
63% of the IT budget is allocated to Run activities, versus 37% to Change initiatives. By comparison, other industries allocate up to 50% of their technology spending to transformation projects.
Regarding Change investments, luxury groups allocate 40% to customer-oriented initiatives and 21% to data and artificial intelligence technologies.
The study reveals that 85% of chief executives consider technology important for implementing their strategy, but only 37% of the surveyed companies believe they largely possess the technological and data capabilities required to execute their strategy. These findings contrast with the 78% of leaders who report satisfaction with the expertise of their technical teams.
Regarding training, only 52% of the CEOs and CIOs surveyed indicate that most of their group’s leaders have received training on key technology topics.
Outsourcing and Talent Management
Luxury groups outsource 68% of their Change expenditures to external providers, far more than in other sectors. This reliance raises questions of agility and cost control, according to the study’s authors.
The study also notes that CIOs in the luxury sector sit on executive committees less frequently than their counterparts in other industries, including mass retail. This observation suggests a lower integration of the technology function into the strategic governance of luxury firms.
In terms of return on investment, 77% of CEOs say their expectations are met for most or all of their technology initiatives. However, ROI measurement often relies on a partial view of the costs and benefits of technology projects rather than a comprehensive perspective.
