luxury goods

Perspectives

Global Powers of Luxury Goods 2021

Breakthrough luxury

The pandemic was the catalyst for change as luxury goods companies adopted new paradigms of value creation. As they seek new ways to connect with their customers, they are changing their approach and mindset by incorporating sustainability and digitalization into their long-term strategies, to align with consumers’ demands and new regulatory requirements.

Over the past year and a half, consumers and companies have been adapting to a new way of living and their outlook on luxury goods may be undergoing change. There is growing awareness of environmental concerns and the need for sustainability in how goods are produced and used. Luxury goods companies are responding positively by focusing more on sustainability in the design and production of luxury goods, and at the same time are accelerating the adoption of digital solutions to engage with consumers and deliver luxury shopping experiences using technology. Even though the industry is returning to live events and in-store sales, both sustainability and digitalization now feature more prominently in their strategies for the future.

The world’s Top 100 luxury goods companies generated revenues of US$252 billion in FY2020, down from US$281 billion in the previous year (a decrease of US$29 billion) which resulted from falls in all countries and all product sectors. Over 80% of the companies in the Top 100 reported lower luxury goods sales in FY2020, reflecting the adverse impact of the COVID-19 pandemic, with sales down due to store closures, travel bans, shifts in consumer demand, supply chain disruptions, and other factors. Despite the luxury goods sales growth for the Top 100 dropping by more than 20 percentage points year-on-year, the FY2020 composite net profit margin for the 81 Top 100 companies reporting net profits fell by only 5.7 percentage points, to 5.1%.

In addition to exploring the trends impacting the luxury goods market, the report identifies the 100 largest luxury goods companies based on publicly available data for FY2020 (which we define as financial years ending within the 12 months from 1 January to 31 December 2020) and evaluates their performance across geographies and product sectors. A new section in this year's report focuses on luxury e-commerce and looks at the key factors driving changing luxury e-commerce strategies, from business models, key players, partnerships, and notable changes in the business environment.

Switzerland – the land of watches and jewellery

All of the ten Swiss companies appearing in the 2021 Top 100 ranking are jewellery and watch companies. Richemont maintained its fourth place position in the Top 10 with its FY2020 luxury goods revenues falling by just 0.7%. The company’s financial year ended on 31 March, so the pandemic affected only fourth quarter results. For all of the Swiss companies, their composite year-on-year luxury goods sales fell by 15.5% in FY2020 with Swatch Group and Swarovski Crystal Business losing around one-third of their sales. In addition to Richemont, Swatch Group and Swarovski Crystal Business, there are seven privately-owned global luxury watch brands in the ranking including Rolex, Patek Philippe, Breitling, Franck Muller, Chopard, Audemars Piguet and Richard Mille. Richard Mille was second among the 20 fastest growing companies which is based on the compound annual growth rate (CAGR) in luxury goods sales over a three-year period.

Key findings from the report:

  • In FY2020, the minimum revenue threshold required to enter the Top 100 list of luxury goods companies was US$182 million, down US$56 million from FY2019.
  • The importance of the leading luxury goods companies is clear: the 15 companies with luxury goods sales of more than US$5 billion contributed 63% of the total Top 100 luxury goods sales. The 52 companies with sales of US$1 billion or less contributed only 9.4%.
  • During the pandemic companies pivoted to online solutions, with some offering e-commerce for the first time—it is now a vital part of the omnichannel distribution strategy for nearly all the global luxury brands.
  • Luxury goods companies are embracing the circular economy and sustainable luxury is here to stay. They are looking to make use of technology to develop environmentally-friendly new materials and find new ways to be more sustainable—in design, production, distribution, and communication.
  • More than half of the Top 100 companies were profitable in FY2020. All the total Top 100 companies’ FY2020 net profit came from the very resilient Top 10 global luxury companies. The remaining 72 companies which reported profits contributed a small composite net loss.
  • While Italy has the highest number of luxury goods companies, including four new entrants in FY2020; France contributed 28.1%, the largest share to the Top 100 luxury goods sales.
  • The multiple luxury goods sector contributed more than one-third of the total Top 100 luxury goods sales, although sales were down 12.7% year-on-year. Cosmetics and fragrances companies saw the smallest fall in luxury goods sales, down 9.6% year-on-year.
  • M&A activity in 2020 was limited, as most companies concentrated their efforts on managing their business through the pandemic. However, the appeal of resilient high margin, high awareness luxury brands with strong pricing power was reconfirmed in 2021, with a rush of M&A activity for luxury brand growth, increased control of distribution channels and supply chains, and enhanced digital capability.  
Global Powers of Luxury Goods 2021

The leading luxury good companies in the world

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