Luxury brands must navigate a ‘decade of change’ driven by technology and consumer forces to remain competitive

Richemont and Swatch Group in the Global Top 10 of the Deloitte report

Global luxury brands should take advantage of evolving technological and consumer demands to help boost profits and remain competitive, according to the 2nd annual Global Powers of Luxury Goods report issued by Deloitte. With two Swiss companies in the Top 10 – Richemont and Swatch Group – and a total of eleven in the Top 100 ranking, Switzerland confirms its leading role in the luxury goods industry and especially in the watch industry.

The report provides an outlook on the global economy; an analysis of merger and acquisition activity in the luxury sector; and a forward look on the changing nature of the luxury consumer – notably through the impact of technology. The world’s 100 largest luxury goods companies generated sales of $214.2 billion in 2013 (fiscal years ended through June 2014) despite currency headwinds and intense technological disruption.

Eleven Swiss companies in the Top 100

Switzerland’s luxury good sales are dominated by its top three players – Richemont, Swatch, and Rolex – who together make up 86.3% of the sales of the eleven Swiss companies in the Top 100. All three were in the Top 10 last year; Richemont retained its number 2 position, Swatch was pushed down one place to 6th, while Rolex dropped from number 10 to 12.

Karine Szegedi, Head of Fashion and Luxury for Deloitte in Switzerland, commented: “Just as Italy is the global leader in fashion, Switzerland is second to none in luxury watch-making. Ten out of the eleven Swiss companies in the Top 100 are watchmakers, and the strength of their brands can be seen in their presence in jewellers and other luxury distribution channels around the world, as well as in their own growing store networks.”

Further key findings

• Adoption of technology as a competitive advantage – Luxury brands must keep up with evolving technology and refine their products, but without detracting from their unique core product offering and expertise. Industry executives identified reputational risk from social media as one of the highest risks in online marketing and distribution, according to Deloitte’s 2014 Swiss Watch report.¹
  
  “The luxury sector needs to continue to forge a strong relationship with an ever-increasing array of technologies, as it continues to influence the value chain. The legitimate concern about diluting a brand’s exclusivity in the broadly accessible online world requires brands to move carefully to ensure sustainable, long-term value creation,” said Karine Szegedi.
• Engaging the millennial shopper – 58% of millennials currently go online to search for information on luxury items and 31% use social media for gathering information around discounts and promotions, compared with 10% for older luxury consumers.² In order to effectively target millennials (who are already emerging as leaders in technology and other industries and are expected to comprise 75% of the global workforce by 2025³), luxury brands can benefit by fully understanding their buying habits and influencers.
• The global make up of luxury demand is changing – The channels on which luxury consumers shop is constantly evolving, making it critical for companies to understand the changing desires, buying behaviors and channels of luxury consumers. Results from Deloitte’s Luxury Consumption among European High Earners 2014 survey of over 1,000 high-income earners across Europe illustrate that while traditional marketing channels such as magazines and store browsing continue to be relevant for consumers gathering information on new luxury brands, 45% of participants indicated that they search online for information.

Karine Szegedi added: “The global economy in 2015 has provided ups and downs for luxury purveyors. In Switzerland specifically, the removal of the currency floor in January 2015 induced the rise in the value of the Swiss franc, impairing the competitiveness of Swiss export-oriented companies. The strong franc is also synonym of higher prices paid by customers and/or lower profit margins for Swiss companies. It has boosted the competitiveness of companies based in the Eurozone that compete with Swiss businesses. Even if consumers of luxury products are not necessarily price sensitive, we might see an impact on the luxury sales in Switzerland in 2015 and ahead.”

¹Deloitte, The Deloitte Swiss Watch Industry Study 2014 Changing Times
²Deloitte’s Luxury Consumption among European High Earners 2014 survey
³Deloitte’s 2014 third annual Millennial Survey

About the 2nd annual study “Global Powers of Luxury Goods”

This report identifies the 100 largest luxury goods companies around the world based on publicly available data for the fiscal year 2013 (encompassing companies’ fiscal years ended through June 2014). The report also provides an outlook on the global economy; an analysis of market capitalization in the luxury goods industry; a look at merger & acquisition activity in the industry; and a discussion on engaging the future luxury consumer.

Download the full results of the Global Powers of Luxury Goods 2015.

About Deloitte in Switzerland

Deloitte is a leading accounting and consulting company in Switzerland and provides industry-specific services in the areas of audit, tax, consulting and financial advisory. With approximately 1,300 employees at six locations in Basel, Berne, Geneva, Lausanne, Lugano and Zurich (headquarters), Deloitte serves companies and institutions of all legal forms and sizes in all industry sectors. Deloitte AG is a subsidiary of Deloitte LLP, the UK member firm of Deloitte Touche Tohmatsu Limited (DTTL). DTTL member firms comprise of approximately 210,000 employees in more than 150 countries around the world.

Note to editors

In this press release references to Deloitte are references to Deloitte AG, a subsidiary of Deloitte LLP, which is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.com/ch/about for a detailed description of the legal structure of DTTL and its member firms.

Deloitte LLP and its subsidiaries are leading business advisers, providing audit, tax, consulting and corporate finance services through more than 14 000 exceptional people across the UK and Switzerland. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel.

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The information contained in this press release is correct at the time of going to press.