Luxury companies still growing profitably – disciplined innovation key to longer-term success
Richemont and Swatch Group remain in the Global Top 10 of the Deloitte report
Zurich, 31 May 2016
Global luxury brands need to respond smartly to new key market forces and raise their game when serving the evolving expectations of the luxury consumer, according to the third 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 global luxury goods industry and especially in the watch industry.
The world’s 100 largest luxury goods companies globally generated sales of $222 billion in the financial year 2014 (which is defined as companies’ financial years ending within the 12 months to 30 June 2015) – a 3.6% increase compared to a year before.
China, France, Italy, Spain, Switzerland, the UK and the US together are represented by 84% of the Top 100 luxury goods companies and 90% of Top 100 global luxury goods sales in 2014. Last year's leading country, China/Hong Kong, experienced a decline in sales of 6.8% in 2014, compared to 33.4% growth in 2013. This was due to the ending of the ‘gold rush’ effect that had boosted jewellers’ sales in the years before.
“The global luxury goods sector is expected to grow more slowly in 2016, at a rate many retailers may find disappointing,” said Karine Szegedi, Head of Fashion and Luxury for Deloitte in Switzerland. “The growth rate is slowing in important markets such as China and Russia, although some markets continue to perform well and there are pockets of opportunity across the globe. India and Mexico for example are growing quickly, and the Middle East offers further growth potential.”
Switzerland ranking high thanks to luxury watches
Switzerland's luxury good sales are dominated by their top three players: Richemont, Swatch Group, and Rolex, which together account for the large majority of Swiss luxury goods. Richemont retained its #2 position, Swatch regained the #5 position, and Rolex went up one position to #11. Sales growth in luxury goods in Switzerland in 2014 was in line with the global average of the Top 100, at 3.6%, down from 5.4% the year before.
Switzerland remains second to none in luxury watch-making. Nine out of the eleven Swiss companies in the global Top 100 are watchmakers. “The strength of the Swiss brands can be seen in their presence in jewellers and other distribution outlets for luxury watches around the world, as well as in their own growing store networks,” said Karine Szegedi.
She added, “The brand heritage of Swiss luxury watchmakers as well as their technical and design excellence are still top-of-class. As such, the barriers to entry for foreign brands remain high in the Swiss watch industry. Which in turn makes smaller Swiss luxury watchmakers to interesting takeover targets. Foreign companies such as LVMH, Ralph Lauren and Kering – the latter having acquired luxury watchmaker Ulysse Nardin in the financial year 2014 – all have well-known Swiss watch brands in their portfolios.”
Decade of change
The luxury goods sector has now passed the mid-point of the ‘decade of change’. The first half was characterized by the Chinese consumer and the explosion in the use of digital technology. The second half of the decade is expected to be characterised by discipline. The external environment is likely to change in a number of crucial areas: an evolution in consumer buying behaviors; the merging of channels and business model complexity; an increase in international travel; the growing importance of the millennial consumer; and the continued impact of the global economy. All of these factors create opportunities for the luxury goods sector.
Karine Szegedi explained, “There is a shift in the luxury path-to-purchase. Empowered by social networks and digital devices, luxury goods consumers are dictating increasingly when, where and how they engage with luxury brands. They have become both critics and creators, demanding a more personalized luxury experience, and expect to be given the opportunity to shape the products and services they consume.”
About the Global Powers of Luxury Goods report
The 3rd annual Global Powers of Luxury Goods report identifies the world’s top 100 largest luxury goods companies based on publicly available data for the fiscal year 2014 (encompassing companies’ fiscal years ended through June 2015) and analyses them from multiple perspectives. It also examines industry trends, M&A activity, and global economic conditions.
Full details on Deloitte’s Global Powers of Luxury Goods are available on our website.
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 more than 1,400 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 over 225,000 employees in more than 150 countries.
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