Luxury Goods Sector (Global Market)

2024: Luxury market slump

By September 2024, the luxury market has long experienced a recession:

• The Subdial Watch Index, which tracks prices for the 50 most sought-after watch models over the past 2 years, is down 17.2%.

• Liv-ex 50 Index, which tracks the prices of 50 of the most expensive wines (Great Castles of Bordeaux) over the past 2 years decreased by 21.7%.

• Fine Art Index from, Bloomberg which tracks the prices of the art of the top 100 authors, has lost 32% since its peak and approached the lows of 2011.

• The Diamond Standard Index, which tracks diamond prices, has fallen 45% since March 2022 and hit a global low.

In part, this picture reflects a change in consumer habits, as well as a cooling of insane Chinese demand in the early 2000s, but it is already clear that wealthy people around the world are squeezing in their spending.

2019: LVMH buys Tiffany for $16.2 billion

In November 2019, Moet Hennessy Louis Vuitton (LVMH), the world's largest luxury goods company, announced it would acquire Tiffany & Co. for $16.2 billion.

The acquisition will be M&A's biggest luxury market deal by this time.

2018:5% market growth to €1.2tn

In 2018, the luxury goods market expanded by 5% (to 1.2 trillion euros) - such a positive trend, according to Coface analysts, is primarily due to an increase in the share of the middle class in the structure of society in China. At this time, China accounts for 33% of global sales in the luxury segment, and by 2025, experts predict, this figure will reach 46%.

Such a rapid shift of the focus of status consumption from the segment of the wealthiest consumers to the middle class opens up new horizons for business, but potential opportunities, as is usually the case, are associated with certain risks for entrepreneurs. In particular, the middle class always reacts much more sharply to any market instability and uncertainty, and therefore can sharply reduce its spending on status goods when the market is in recession, which will make the luxury goods segment vulnerable to a worsening economic climate on a par with all other industries.

Among the problems of the market is counterfeit. Fakes cause business not only purely financial damage, but also hit the most valuable intangible asset for this segment - the brand image. Thus, a study conducted in the UK showed that 66% of consumers who were deceived into selling a fake instead of the original product completely lost confidence in the brand, and 44% of such consumers completely refused the intention to purchase products of such a brand in the future for fear of running into counterfeit again.

In 2018, online sales accounted for only 10% of total sales of luxury goods, but by 2025, experts say, this share will increase to 25%. Many exclusive brands are in no hurry to go online, because they do not want to contribute to the spread of fakes: if buyers know that the company fundamentally does not sell its products online, it is always clear to them that any of its products sold via the Internet are knowingly fakes. If the line between online and offline is erased, the risk for customers to run into counterfeit at the price of the original when buying through an unofficial online store will increase significantly. This, however, is not the main reason why luxury brands are unwilling to switch to digital sales. The highest level of service in the store, a personalized approach to each visitor, the atmosphere of the boutique - all these are important components of the value proposition of elite brands, forcing customers to return again and again, and transferring them to the network, unfortunately, is not yet possible.

2017: Sales growth of 100 largest companies by 10.8% to $247 billion. Vendor Ranking

Full Study Text, PDF

According to Deloitte, in fiscal 2017, the world's 100 largest manufacturers of luxury goods received total revenue of $247 billion (which is $30 billion). US more total revenue for 2016). - its cumulative growth was 10.8%. The annual growth rate of revenue in terms of foreign exchange differences also increased significantly and amounted to 10.8%, compared to 1% in 2016.

The global luxury market continues to show positive momentum despite slowing global economic growth in major markets, including China and the eurozone.

76% of companies reported growth in luxury sales, with nearly half recording double-digit year-over-year growth. The threshold for entering the top 100 manufacturers of luxury goods (by revenue) in fiscal 2017 amounted to $218 million. US, which is $7 million. The United States is larger than in fiscal 2016. At the same time, the average annual revenue of a luxury goods manufacturer from the first hundred is $2.47 billion. UNITED STATES.

The 10 largest companies account for almost half (48.2%) of the total sales of luxury goods in companies from the top 100. While the first three companies among them retained their positions, the rest moved one position up or down.

The largest player in the industry remains the French LVMH.

Top 10 companies in the global luxury goods sector

The top 10 companies are also ahead of the top 100 companies in terms of revenue growth, which amounted to 14.2% and 10.8%, respectively. The total rate of net profit of companies from the top 10 also increased - to 11.6%.

The largest growth in sales in fiscal 2017 (16.1%) was recorded in the segment of cosmetics and perfumes. This was mainly the result of double-digit growth compared to last year, 7 out of 11 companies in this segment.

88 of the top 100 luxury manufacturers are located in nine countries. In general, in terms of sales in the top 100, these companies account for 93.4%. The largest companies are located in France - their average sales of luxury goods is $8.3 billion. USA (in the top 100 companies - $2.5 billion UNITED STATES). France has the best performance in the segment. The combined sales of luxury goods for the 2017 fiscal year here was 18.7%. France also accounts for the largest share of sales of the top 100 luxury manufacturers. The lowest sales growth rates are demonstrated by Italy, despite having the largest number of companies (24).

"The Russian luxury goods market is also showing growth, and according to forecasts, positive dynamics will continue in 2019-2022. Moscow is the center of luxury goods trade in Russia, it accounts for 70% of the total sales of luxury goods in the country. Among the factors affecting the further development of the Russian market, it is noted that sales in offline stores currently prevail, thereby creating the potential to increase online sales in this sector, "says Oksana Kozhina, Director of the Retail, Wholesale and Distribution Group of Deloitte, CIS.

"In an era of rapidly changing company trends - luxury manufacturers are looking for new approaches to determining the value of the brand's heritage and history and are revising business models, increasingly focused on meeting the individual needs of the next generation consumer, Regardless of the sales channel, "says Patricia Arienti, Deloitte Group's head of fashion and luxury services in the EBBA region. "To achieve this goal, they intend to invest substantial funds in the development of digital technologies."

2013

Despite the slowdown in global economic growth, sales of 75 of the world's largest luxury goods companies amounted to US $171.8 billion at the end of the last financial year (the end of the specified financial year is considered June 2013 inclusive). On average, sales of premium goods of companies from the list of 75 industry leaders amounted to 2.3 billion US dollars. This information is presented in the first report of the World Luxury Goods Sector, published in May 2014 by Deloitte Touche Tomatsu Limited (Deloitte International Network of Companies).

The report provides a list of global companies in the premium goods sector, led by LVMH. It also looks at the largest luxury markets, contains data on mergers and acquisitions transactions in the industry, an overview of the main trends affecting luxury industry players, including information on sales carried out by the 75 largest companies in the industry in retail chains and over the internet.

"Despite the unfavorable economic conditions, companies operating in the luxury industry performed better than companies in the consumer goods sector, as well as the economies of the world as a whole. For the rest of the year, we predict an increase in the growth rates of the economies of developed countries, while the main risks will remain in emerging markets, "said Ira Kalish, chief economist at the Deloitte international network of companies. "The overall results of the luxury industry will depend not only on economic growth, but also on factors such as the number of trips, intellectual property protection, the desire of consumers to save, as well as changes in income distribution

"The growth rate of the Russian luxury goods market remains one of the highest among the BRIC countries. International companies that previously sold goods on the Russian market through distributors and franchising seek to open full-fledged legal entities in order to fully control and develop the entire value chain. Regional development is also on the agenda of international players and cities such as Yekaterinburg, Krasnodar and others have already shown good growth potential in this segment. The demand of Russian consumers for the level of service is also increasing and it does not always keep pace and corresponds to the European one. In the medium term, the growth of the luxury goods segment in Russia will depend on an increase in the middle class layer, "said Yegor Metelkin, Partner, Head of the Group for Servicing Industrial, Trade and Real Estate Enterprises of Deloitte, CIS

Regional trends

The report focuses on the high concentration of premium goods sector companies in countries such as France, Italy, Spain, Switzerland, the United Kingdom and the United States. These six countries represent about 87% of the list of 75 leading luxury industry companies, accounting for more than 90% of international luxury sales in 2012. France, Italy and Switzerland achieved strong combined growth in premium sales in 2012, with France and Switzerland outperforming the combined growth of 75 luxury industry leaders of 12.6%, showing growth rates of 19.4% and 14.8%, respectively. The growth of Italian luxury companies corresponded to the growth rate of the 75 largest companies in this sector. Following the list of leaders are Spain, Great Britain and the United States of America. Growth in the latter is the least significant and is only 5.6%.

"Going forward, we will see an increase in the number of conglomerates in the luxury goods industry looking to accelerate growth and increase market share through consolidation in the second half of 2014," said Antoine de Ridmatten, head of the Deloitte International Group for Consumer Services. - Increased sales of luxury goods and the expansion of Internet trade will continue to move rapidly in developing countries in the Asia-Pacific region, Latin America, the Middle East and Africa. The main income in this area will be brought by tourists who shop in France, Italy, Great Britain and the USA. "

Key Drivers of Mergers and Acquisitions in the Luxury Industry

Globalization. The growth of high and above-average income consumers in developing countries is a major driver of M&A activity in the luxury industry in recent years. Together, in 2013, 19% of the luxury goods market was in the Asia-Pacific region, Latin America, the Middle East and Africa. And in 2025, according to Euromonitor forecasts, the market share of these regions will grow to 25%.

Integration of value chains. Luxury companies strictly control all aspects of their activities: from product design and procurement of raw materials to production, sales organization. Involvement in all stages of product value creation helps the company maintain the level of quality and service, thereby protecting brand traditions. Vertical integration has thus become another important driver of mergers and acquisitions in the luxury industry.

Consolidation as a growth strategy. Consolidation of the industry is another factor driving M&A activity, with mergers taking many forms. The largest conglomerates in the luxury industry operate in various sub-industries. Such unions are built on the basis of extensive experience in the premium goods and services sector, as well as a deep understanding of their consumers. Leading investment companies also take part in the consolidation of luxury brands, forming holding companies and groups. All participants in the consolidation claim scalable brands, including problem companies, or companies with low performance indicators that simply lack the experience, knowledge and resources to manage the ever-expanding activity.