INDUSTRIES & MARKETS
Luxury goods: in-depth
market analysis
Market Insights report
June 2023
Management summary (1/3)
The global luxury goods market is expected to increase from US$354.8 billion in
The luxury industry has been associated with excessive consumerism and a general
2023 to US$418.9 billion in 2028, at a CAGR of 3.4%. Even though cutbacks on
lack of respect for the environment. However, with the growing influence of
discretionary spending and an uncertain economic climate triggered by events such
Millennials and Generation Z who deeply consider the social impact of their luxury
as the COVID-19 pandemic, Brexit, U.S.-China trade war, and the Russia-Ukraine
purchases, the industry is gradually moving towards ethical and sustainable
war, resulted in a fall in demand, the resurgence in Chinese and American
products and experiences.
spending, the increasing dominance of millennials and Generation Z and the
consistent strength of the online channel, have led to a strong revival in the market
which is expected to continue over the medium to long-term as well. Asia is
expected to witness the highest spending, riding the crest of China’s resurgence,
followed by Europe, North America, Australia and Oceania, Africa and South
America.
Even though luxury online sales are gaining market share worldwide, the
importance of the physical store continues to increase. Companies follow different
strategies to augment their retail experience in the days of eCommerce.
Interestingly, digital-born luxury companies are now opening physical stores to
increase traffic to their eCommerce stores, enhance brand legitimacy, provide the
touch and feel lacking in an online store, and improve local community
engagement.
2
Casualization of apparel, the growing demand for experiential luxury, rentals, and
the rising share of online sales and accessories are other important market trends.
Spending by millennials from China, both at home and overseas, is one of the main
drivers of the global luxury market. China currently has around 400 million
millennials, five times more than the U.S. International tourism is another driver
with a 2017 Deloitte study showing global tourists to account for almost 47% of
luxury goods purchases. The recent rise of luxury menswear has resulted in brands
such as Prada, Gucci, and Dolce & Gabbana, which traditionally have not been
known for their menswear lines, to open stores focused only on men.
Management summary (2/3)
Demand for mass-customization of luxury products has forced the leading brands
In addition, the Russia-Ukraine war has prompted many luxury brands including
to revisit their existing manufacturing process. Although, luxury manufacturers
Hermès, LVMH, Chanel, Kering, Prada, Richemont, Net-a-Porter and MyTheresa to
have historically been technology laggards, they are now integrating advanced
suspend their operations in the country indefinitely that eventually hurting the
digital technologies such as additive manufacturing, analytics, material science,
overall market.
augmented reality and AI, into their manufacturing processes.
Resale of luxury products, NFTs and social gaming present growth opportunities for
so, luxury brands have been wary of selling online, relying instead on their brick-
the luxury manufacturers. Historically, luxury brands have been averse to reselling
and-mortar stores. This was mainly to maintain their exclusivity, craftsmanship and
their products in order to protect their brand identities and margins. However, the
authenticity. However, COVID-19 has changed the scenario drastically, driving
last few years have witnessed a surge in the sales of pre-owned luxury products,
luxury online sales past the tipping point. Pure-play multi-brand retailers such as
thanks mainly to specialized digital trading platforms and fast-changing consumer
Farfetch, Tmall Luxury and JD.com Luxury, that offer both multi-brand
behavior. Licensing has started to present growth opportunities for brands in terms
marketplaces and mono brand eCommerce websites, have been the biggest
of increased product and geographical reach, while maintaining product quality
winners in terms of revenues and number of users.
control and brand exclusivity.
3
Although eCommerce has permeated almost every industry over the last decade or
Chinese and Indian cities such as Guangzhou, Beijing, Shanghai, Hong Kong, Delhi
Even though Chinese spending on luxury products has been one of the key drivers
and Mumbai, have been luxury hotspots in the two countries for many years.
of the industry’s post-pandemic recovery, challenges including unfavorable
However, their saturation along with the COVID-19-induced migration of a large
demographics, nationalistic sentiments, indigenous brands and geopolitical
part of the working population to a work-from-home model and the sharp increase
tensions threatens to slow down the global market.
in online shopping, has put the spotlight on tier-2 and tier-3 cities.
Management summary (3/3)
Brands are now adopting digital technologies to not only mimic the in-store
France leads in the number of leading luxury goods companies globally. Specifically,
shopping experience on their eCommerce platforms but to also enhance the
most of the prominent French luxury goods companies are located in Paris. We
physical store experience. Artificial intelligence (AI) is currently the most sought-
have a closer look at some of those prominent French companies: LVMH, L'Oréal,
after technology, as it enhances customer experience and helps brands reach a
Kering, and Hermès along with other global leaders including Burberry, Swatch,
wider audience.
Estée Lauder, and Coty.
Immersive technologies such as virtual and augmented reality (VR/AR) are also
Most of the luxury goods companies followed inorganic growth path by acquiring
experiencing increasing use due to their ability to enhance the overall shopping
competitor companies to increase their business presence. A few of them opted for
experience and create high-quality content for digital marketing. 3D printing is used
licensing and distribution arrangements to support their bottom line.
mainly in luxury fashion as it enables the creation of shapes without molds, thus
resulting in elements with extreme intricacy.
The U.S., China, and Japan are projected to be the three biggest markets for luxury
goods in 2023 with a market size of US$75.7bn, US$53.6bn and US$30.5bn
respectively. These markets are projected to account for 43% of the global luxury
market in 2023. Even though the U.S. retains the leading position for luxury goods
globally, factors such as economic and political uncertainty, cutbacks on
discretionary spending, and low sales to international tourists are affecting market
growth.
4
Table of contents (1/2)
Management summary
Luxury online shopping
Table of contents
36
03 Trends
01 Global luxury goods market
64
Gen Z and luxury goods
65
Chinese millennials
66
Sustainable luxury
43
HENRYs (High-Earners-Not–Rich-Yet)
68
Mass-customization
46
International tourism
70
Luxury men’s wear
72
Overview
08
Casual clothing
48
Luxury fashion
13
Experiential luxury
50
Luxury leather goods
16
Democratization of luxury
53
05 Opportunities
Luxury watches & jewelry
19
Rentals and subscription models
55
Manufacturing
75
Prestige cosmetics & fragrances
22
Online sales
57
New revenue streams
76
Luxury eyewear
25
Importance of accessories
58
Licensing
77
Luxury goods as investments
28
Metaverse
60
Digital fashion houses
61
02 Deep dive: Luxury retail & online shopping
5
Best performing influencers 2022
Luxury retail shopping
31
04 Drivers
Omnichannel strategy
34
Influencer marketing
63
06 Challenges
China
79
Russia-Ukraine war
80
Table of contents (2/2)
Legacy technology infrastructure
81
U.S.
Global uncertainties
82
07 COVID-19 impact
98
Hermès
162
China
102
Burberry
166
Japan
106
France
110
Leading eCommerce luxury fashion brands
profiles
171
Pure-play multi-brand retailers
84
UK
113
Demand from small cities
85
Hong Kong SAR
117
Discounting strategies
86
Singapore
121
Sustainability
87
10 Competitive landscape
08 Technological impact
127
Use of AI
89
LVMH
128
Use of AR
91
L’Oréal
134
3D Printing
92
Kering
141
Tech start-ups
94
Estée Lauder
147
Coty
154
Swatch Group
159
09 Country analysis
6
Company comparison
11 Appendix
Authors
173
Glossary
174
Statista Market Insights
175
Statista Company Insights
176
CHAPTER 1
Global luxury goods market
The global luxury goods market is expected to increase US$354.8 billion in 2023 to US$418.9 billion by
2028, at a CAGR of 3.4%. Even though cutbacks on discretionary spending and an uncertain economic
climate triggered by events such as the COVID-19 pandemic, Brexit, U.S.-China trade war, and the RussiaUkraine war, resulted in a fall in demand, the resurgence in Chinese and American spending, the
increasing predominance of Millennials and Generation Z, and the consistent resilience of the online
sales channel have led to a strong revival in the market, which is expected to continue over the medium
to long-term as well. Asia is expected to witness the highest spending, riding the crest of China’s
resurgence, followed by Europe, North America, Australia and Oceania, Africa and South America.
COVID-19 pandemic resulted in a sharp fall in demand in 2020
Overview (1/5)
The global luxury market covers many topic-specific markets but for the purpose of
Asia will likely witness the highest spending, with total predicted sales of US$136.2
this report we have:
billion in 2023, followed by Europe (US$110.5 billion), North America (US$85.7
• Included: Personal luxury goods such as watches and jewelry, apparel and
footwear, eyewear, cosmetics, and fragrances
• Excluded: Wine and spirits, food, designer furniture, hospitality and travel, luxury
cars (this is available in Statista Market Insights under the mobility topic),
artisanal, and small-scale production
According to Statista Market Insights, cutbacks on discretionary spending and an
uncertain economic climate triggered by the COVID-19 pandemic resulted in a
sharp fall in demand in 2020. However, the resurgence in Chinese and American
spending, the increasing predominance of Millennials and Generation Z, and the
consistent resilience of the online sales channel have led to a strong revival in the
market, which is expected to continue over the medium to long-term as well. The
global luxury goods market is expected to increase from US$354.8 billion in 2023 to
US$418.9 billion by 2028, at a CAGR(1) of 3.4%.
8
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
billion), Australia and Oceania (US$8.3 billion), Africa (US$5.7 billion), and South
America (US$5.2 billion). The U.S. (US$75.7 billion) is expected to become the
largest market, followed by China (US$53.6 billion), Japan (US$30.5 billion), France
(US$18.3 billion), and the UK (US$16.4 billion).
The online sales channel will likely continue to gain ground as the boundaries with
the traditional physical channels are blurred, accounting for 20.8% and 26% of total
sales in 2022 and 2025, respectively.
Luxury goods market is estimated to exceed US$400bn by 2027
Overview (2/5)
Luxury goods market in billion US$
3%(1)
354.80
286.10
305.50
294.20
369.00
382.20
394.90
406.60
418.90
312.60
259.10
2018
9
Notes:
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2020
2021
2022
2023
2024
2025
2026
2027
2028
Luxury fashion to bring in the highest revenues globally in 2023
Overview (3/5)
Statista Market Insights has categorized the global luxury goods market into five
However, in terms of the cumulative average growth over the period from 2023 to
categories:
2028, prestige cosmetics & fragrances and leather goods lead with 4% each,
• Luxury leather goods: includes handbags, suitcases and briefcases as well as
small leather goods such as wallets.
• Luxury watches and jewelry: includes only sales of luxury brands; trend watches
and fashion jewelry are excluded.
• Luxury fashion: includes only apparel and footwear made by luxury brands;
mass-market products are excluded.
• Luxury eyewear: includes only luxury eyewear frames and sunglasses; lenses and
contact lenses are excluded.
• Prestige cosmetics and fragrances: includes only prestige skin care, fragrances,
and decorative cosmetic; haircare, oral care, personal hygiene, and professional
products produced for hair salons or cosmetic parlors are not included.
According to the Market Insights, luxury fashion continues to dominate the market
in terms of revenues, followed by leather goods, watches and jewelry, prestige
cosmetics & fragrances and eyewear.
10
Sources: Statista Market Insights 2023
followed by fashion (3.4%), watches and jewelry (2.5%), and eyewear (1.9%).
Luxury fashion accounts for more than 30% of the global revenue in 2023
Overview (4/5)
Luxury goods market shares in 2023
6%
31%
20%
21%
21%
Fashion
Watches & Jewelry
Leather Goods
Cosmetics & Fragrances
11
Sources: Statista Market Insights 2023
Eyewear
Luxury goods average revenue per capita to register a moderate growth
Overview (5/5)
Luxury goods market: average revenue per capita in US$
Luxury goods average revenue per capita by top 5 countries in US$
784
3%(1)
46
41
39
39
48
49
50
51
53
726
679
662
603
41
536
562 559
477 469
455
35
695
448
381
274
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2018
Singapore
12
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2023
Luxembourg
Switzerland
2028
Iceland
Qatar
Luxury fashion market to surpass US$130 billion by 2028
Luxury fashion (1/3)
The total luxury fashion market, which includes apparel and footwear, is expected
to increase from US$111.5 billion in 2023 to US$131.7 billion by 2028, at a
CAGR(1)
of 3.4%. The U.S. is expected to have the largest market in this category, with
cumulative sales of US$170.4 billion from 2023 to 2028, followed by China (US$71.5
billion), Japan (US$58.4 billion), Italy (US$48.9 billion), the UK (US$47.3 billion),
France (US$43.3 billion), and Germany (US$37.5 billion).
However, the luxury fashion market in Thailand is expected to have the highest
growth rate of 5.7% over 2023 to 2028, followed by Switzerland and Estonia (5.5%
each), Georgia, Togo and Chad (5.2% each), and Ireland, Serbia and Cameroon with
5.1% each. The U.S. and Italy are expected to lose market share from 2018-2028,
while China gains ground.
Even though the luxury fashion market is still driven by high-end brands such as
Gucci, Versace, Chanel, and Christian Dior, premium brands such as Diesel, Guess,
Tommy Hilfiger, and Calvin Klein are beginning to cannibalize their market share
and are expected to be the new engines of market growth. According to a study by
consulting firm Ernst & Young, the casualization of luxury fashion, and growing
instances of millennials opting to mix and match high-end products with premium
13
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
products, are the two main factors responsible for this.
Another important trend in this market is the rapid emergence of accessories and
shoes as the new driving forces, replacing ready-to-wear clothes, the previously
dominant category. In fact, a study conducted by French bank BNP Paribas and the
fashion consultancy company VR Fashion Luxury Expertise found that ready-towear collections now make up only up to 10% of the business for most fashion
houses.
Luxury fashion market to grow at a CAGR of 3% between 2023 and 2028
Luxury fashion (2/3)
Luxury fashion goods market in billion US$
3%(1)
111.50
90.58
2018
14
Notes:
95.82
85.56
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2020
92.69
2021
115.90
120.10
124.10
127.80
131.70
97.23
2022
2023
2024
2025
2026
2027
2028
The U.S. and China lead the luxury fashion market
Luxury fashion (3/3)
Luxury fashion market in top 5 countries in billion US$
Luxury fashion market share by top 5 countries
29.74
27.15
44%
46%
45%
6%
8%
6%
7%
7%
8%
8%
8%
8%
9%
10%
26%
24%
23%
2018
2023
2028
23.11
13.31
10.72
10.54
8.67
7.41 7.01 6.97
7.56
8.60 8.67
7.04
5.40
2018
2023
U.S.
15
Sources: Statista Market Insights 2023
China
Japan
2028
Italy
UK
U.S.
China
Japan
7%
Italy
UK
Others
Luxury leather goods is the second largest market
Luxury leather goods (1/3)
The global market for luxury leather goods is expected to grow from US$75.8 billion
in 2023 to US$92.4 billion by 2028, at a
CAGR(1)
of 4%. With a cumulative spending
acquiring leather suppliers. For example, LVMH has partnered with Tannerie
of US$505.1 billion, it is expected to become the second largest category after
Masure in Belgium and acquired crocodile skin supplier Heng Long (Singapore) and
fashion.
Les Tanneries Roux (France). Other acquisitions include Tanneries d’Annonay
The U.S. is by far the largest market for luxury leather goods in the world, with an
expected cumulative spending of US$121.4 billion from 2023 to 2028, followed by
China (US$62.3 billion), Japan (US$46.5 billion), France (US$31.8 billion), and the UK
(US$21.1 billion). With a CAGR(1) of 6%, Chad is the fastest-growing market from
2023 to 2028, followed by Togo (5.9%), Cameroon, Ivory Coast and Switzerland
(5.8% each), and Thailand, Estonia and Mauritius (5.7% each).
One of the main challenges facing the market is the lack of adequate quality
leather. There are only a few animals that can be used to produce the high-quality
leather that is required by luxury brands to produce items such as handbags, watch
straps, wallets, shows, and apparel. Moreover, many brands that historically did not
produce any leather items are now doing so due to high growth prospects, thereby
adding to the shortage of supply.
16
In order to meet this growing demand, brands are either partnering with or
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
(France) by Hermès, France Coco by Kering, and Bodin Joyeux by Chanel.
Luxury leather goods market to exceed US$90 billion by 2028
Luxury leather goods (2/3)
Luxury leather goods market in billion US$
4%(1)
75.79
56.67
2018
17
Notes:
62.73
62.15
79.36
82.72
85.93
88.94
92.36
66.21
51.96
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2020
2021
2022
2023
2024
2025
2026
2027
2028
Despite its increase in market size, the share of the U.S. to decline
Luxury leather goods (3/3)
Luxury leather goods market in top 5 countries in billion US$
Luxury leather goods market share by top 5 countries
21.67
18.85
43%
44%
44%
4%
7%
4%
6%
4%
6%
8%
9%
10%
11%
12%
13%
27%
25%
24%
2018
2023
2028
15.12
11.64
9.14
8.77
6.70
6.22
4.74
5.85
4.72
3.77
3.87
3.12
2.26
2018
2023
U.S.
18
Sources: Statista Market Insights 2023
China
Japan
2028
France
UK
U.S.
China
Japan
France
UK
Others
Market for luxury watches & jewelry to value US$85 billion by 2028
Luxury watches & jewelry (1/3)
The global luxury watches and jewelry market is expected to increase from US$75
billion in 2023 to US$84.8 billion by 2028, at a
CAGR(1)
of 2.5%. China is the
dominant market in this category with a market size of US$24.5 billion in 2023,
which is estimated to increase to US$28 billion by 2028, at a CAGR(1) of 2.7%. One of
the main reasons for this growth is the market’s strong recovery driven majorly by
the Chinese millennials. To put the increasing influence of millennials in
perspective, they number around 400 million in China, which is more than the
entire population of the U.S.
The U.S. is another important market for luxury watches and jewelry, with the
second-highest cumulative spending of US$52.6 billion over the period from 2023
to 2028, following China (US$157.8 billion). The growth is expected to be slow
mainly due to cutbacks on discretionary spending by U.S. consumers in the face of
an uncertain political and economic climate and changing consumer preferences
towards smart watches. In fact, according to Apple’s CEO Tim Cook, the sales of
Apple Watches in the U.S. have surpassed the combined sales of the entire luxury
Swiss watch industry.
With a cumulative spending of US$27.9 billion over the period from 2023 to 2028,
19
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Japan is the third-largest market. The market is expected to be worth US$5.1 billion
in 2028, increasing at a CAGR(1) of 4.2% from 2023 to 2028.
Germany is expected to become the fourth-largest market, with a total spend of
US$18.1 billion from 2023 to 2028. Interestingly, Romania and Serbia will likely
witness the highest growth in this market, with a CAGR(1) of 5.4% each from 2023 to
2028, followed by Bulgaria and Estonia (5.3% each), and Luxembourg, with 5% each.
Luxury watches & jewelry to grow at a CAGR of 2% between 2023 and 2028
Luxury watches & jewelry (2/3)
Luxury watches & jewelry market in billion US$
2%(1)
74.97
62.57
66.82
64.07
77.28
81.32
83.13
84.82
79.36
2025
2026
2027
2028
67.97
55.23
2018
20
Notes:
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2020
2021
2022
2023
2024
China leads the luxury watches & jewelry market
Luxury watches & jewelry (3/3)
Luxury watches & jewelry market in top 5 countries in billion US$
Luxury watches & jewelry market share by top 5 countries
27.96
24.50
43%
43%
43%
20.45
3%
4%
5%
3.27
4.16
2.34 1.96
2018
China
5.11
21
Sources: Statista Market Insights 2023
6%
4%
6%
12%
11%
11%
33%
33%
33%
2018
2023
2028
Japan
3.20 2.91
2.78 2.53
2023
United States
3%
4%
9.04
8.50
7.26
3%
2028
Germany
United Kingdom
China
Japan
United Kingdom
United States
Germany
Others
Prestige cosmetics & fragrances to value US$87 billion by 2028
Prestige cosmetics & fragrances (1/3)
The global prestige cosmetics and fragrances market is expected to be the fourth-
products in their category. They are now instead operating a pick-and-mix
largest market in terms of cumulative spending from 2023 to 2028, growing from
approach towards products, brands, and categories.
US$71.3 billion in 2023 to US$86.7 billion by 2028, at a
CAGR(1)
of 4%. Top line
growth in prestige beauty has outperformed mass-market, beauty, and other
consumer categories for many years now.
The U.S. is predicted to have the largest market in the world in terms of cumulative
spending from 2023 to 2028 (US$81.5 billion), followed by Japan (US$72.8 billion),
China (US$60 billion), France (US$23 billion), and the UK (US$22.8 billion). With a
CAGR(1) of 6.4%, Brunei Darussalam is expected to be the fastest-growing market
from 2023 to 2028, followed by Thailand (6.3%), China (6.1%), South Korea (5.8%),
Taiwan (5.7%), Japan and Switzerland (5.5% each) and Malaysia and Singapore (5.4%
each).
The prestige cosmetics and fragrances has traditionally been a consolidated
industry with the top two brands, Estée Lauder and L'Oréal, making up about 55%
of the market. However, digital channels have now lowered the barriers to entry
which is driving the rapid emergence of new brands. This has made the market
more fragmented and is breaking down the long-established model, where brands
focused on maximum category presence, producing all
22
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Sustainability is currently one of the biggest challenges facing the market. Even
though Western consumers have started rejecting beauty products that are tested
on animals, China, which is one of the major markets in this category, continues to
use animal testing, which poses a challenge for global brands.
Prestige cosmetics & fragrances is the fourth largest market
Prestige cosmetics & fragrances (2/3)
Prestige cosmetics & fragrances market in billion US$
4%(1)
71.31
57.32
61.11
57.10
74.69
77.90
81.00
83.90
86.74
62.31
50.76
2018
23
Notes:
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2020
2021
2022
2023
2024
2025
2026
2027
2028
Top 5 countries account for over half of the global market
Prestige cosmetics & fragrances (3/3)
Prestige cosmetics & fragrances market in top 5 countries in billion US$
14.37
Prestige cosmetics & fragrances market share by top 5 countries
13.71
12.70
45%
44%
5%
5%
5%
5%
9%
12%
13%
14%
15%
16%
19%
18%
17%
2018
2023
2028
11.48
10.82
49%
10.48
8.52
8.00
4%
5%
5.10
2.89
4.19 4.26
3.45 3.31
2.32
2018
2023
U.S.
24
Sources: Statista Market Insights 2023
Japan
China
2028
France
UK
U.S.
Japan
China
France
UK
Others
Luxury eyewear market is the smallest among all categories
Luxury eyewear (1/3)
The luxury eyewear market is the smallest among all categories in terms of
In fact, EssilorLuxottica is so dominant that it accounted for 90% of all luxury
revenues, with an expected cumulative spending of US$133.9 billion from 2023 to
eyewear sales in the U.S., followed by Safilo with a paltry market share of 5%,
2028. The market is estimated to increase from US$21.2 billion in 2023 to US$23.3
according to Statista Market Insights 2023. In addition to owning brands like Oakley,
billion by 2028, at a CAGR(1) of 1.9%.
Ray-Ban, and Persol, EssilorLuxottica is also the parent company of major
The U.S. is by far the largest market for luxury eyewear, accounting for nearly 38%
of total estimated spending from 2023 to 2028, followed by Germany, France, China
and Italy. At 6.9% each, Spain, Serbia and Albania are expected to be the fastestgrowing markets from 2023 to 2028, followed by Sweden (6.2%), Taiwan (6%),
Poland and Thailand (5.9% each), and Switzerland, Senegal and Burkina Faso (5.7%
each).
Unlike apparel, shoes and bags which are usually manufactured in-house, luxury
eyewear is licensed by companies that specialize in manufacturing and marketing.
The main companies in this market are EssilorLuxottica, Safilo, and Marcolin
Eyewear, which have monopolized the market, representing brands such as Fendi,
Dolce & Gabbana, Cartier, and Gucci, among others.
25
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
distributors like Sunglass Hut, LensCrafters, Pearle Vision, and Sears Optical.
Luxury eyewear market to grow at a CAGR of 2% between 2023 and 2028
Luxury eyewear (2/3)
Luxury eyewear market in billion US$
2%(1)
18.97
19.56
17.59
21.24
21.74
22.16
2023
2024
2025
22.56
22.89
23.31
2026
2027
2028
18.91
15.63
2018
26
Notes:
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2020
2021
2022
The U.S. occupied 40% of the total market in 2023
Luxury eyewear (3/3)
Luxury eyewear market in top 5 countries in billion US$
8.51
8.50
Luxury eyewear market share by top 5 countries
40%
8.03
41%
42%
1.60
1.44
1.24
0.93
0.83 0.80
0.93
2018
United States
27
Sources: Statista Market Insights 2023
4%
1.13
1.02
0.90 0.90
2023
Germany
2028
France
China
Italy
0.92
5%
4%
4%
5%
4%
4%
4%
6%
6%
7%
42%
40%
37%
2018
2023
2028
5%
U.S.
Germany
France
China
Italy
Others
The luxury assets are soaring in value
Luxury goods as investments (1/2)
Demand for luxurious items has been rising steadily in line with dramatic growth in
Wine (162%), watches (147%), art (91%), and handbags (74%) have also gained value
the number of extremely wealthy individuals worldwide. Even though millionaires
steadily.
and billionaires love splurging on mega purchases such as yachts, private jets, and
property, they also splash the cash on a long list of other "investments of passion."
The 2023 Global Wealth Report from Knight Frank sheds light on some of the luxury
items that have gained the most value over the past ten years.
Rare bottles of whisky are a hot property, particularly older varieties of single-malt
Scotch. 2018 saw a record when a bottle of Scotch fetched US$0.9 million at an
auction in October, and this was then swiftly beaten in November, when another
bottle went for a mind-blowing US$1.5 million. Moreover, in February 2021, a
private whiskey collection of 3,900 bottles of mostly single-malt Scotch created
history, fetching just over US$9 million at an online auction. Over the past decade,
the value of rare whiskey has soared 373%.
The relationship between the super rich and luxury cars needs no introduction.
Their value has gone up by 185% over the past ten years. The best-selling car in
2022 was the Mercedes-Benz 300 SLR Uhlenhaut Coupé with a value of just over
US$140 million, setting a new record for the most expensive car ever sold.
28
Sources: Knight Frank; Classic Car; The Spirit Business
Value of rare whiskeys and cars have grown considerably over the last decade
Luxury goods as investments (2/2)
Change in value of selected luxury assets from 2012-2022
373%
185%
162%
147%
91%
Rare Whisky
29
Sources: Knight Frank
Cars
Wine
Watches
Art
74%
Handbags
59%
Coins
44%
Jewellery
34%
Furniture
16%
Coloured
diamonds
CHAPTER 2
Deep dive: Luxury retail & online shopping
Even though luxury online sales are gaining market share worldwide, the importance of the physical
store continues to increase. Companies follow different strategies to augment their retail experience in
the days of eCommerce. Interestingly, digital-born luxury companies are now opening physical stores to
increase traffic to their eCommerce stores, enhance brand legitimacy, provide the touch and feel lacking
in an online store, and improve local community engagement.
An overall Luxury 4.0 model is emerging, which is characterized not only by the growth of the online sales
channel but by the digitalization of a consumer’s entire luxury shopping journey.
Store closures are a result of changing industry dynamics
Luxury retail shopping (1/3)
According to a report by the investment research and management company
Bernstein, which tracked 7,000 stores for 36 luxury brands across the world, the
number of net store openings for the one year starting July 2016, was in the
negative. But even though there is an existing trend of luxury eCommerce sales
cannibalizing the brick-and-mortar share worldwide, it does not quite spell the end
of physical luxury retail. In fact, according to a Google-Ipsos survey, 87% of affluent
consumers in Japan and Western Europe preferred in-store purchases of luxury
goods because they want to see or touch the product (65%) or are afraid of buying
counterfeit goods (22%).
Store closures are either the result of some brands increasing their eCommerce
presence in favorable markets such as China, or simply changing their brick-andmortar strategies to cater to evolving preferences of the modern luxury customers.
There are yet others who are readjusting their channel strategies on account of
being overstored in the past and are thus switching from many small stores to
fewer larger stores in prime areas. This enables them to showcase their full product
range, thereby allowing consumers to have a fully immersive shopping experience.
A few examples are mentioned below.
31
Sources: Burberry; Harvard Business Review; RWTH Aachen University
Burberry
Despite posting an increase in sales and earnings, Burberry announced the closure
of its physical stores in many markets in 2017. This was part of the company’s
strategy to remove focus from markets it considered ‘luxurious’ such as the U.S.
and Europe and instead focus on the ultra-high-end markets dominated by luxury
consumers mainly in the Asia-Pacific region. In 2019, Burberry also announced the
closure of 10% of its stores around the world in order to make the brand more
exclusive and upmarket.
Louis Vuitton
In 2015, the company shut several stores in China amidst a slowdown in the
country’s luxury market. This was followed by the closure of two more stores in
Shanghai and Shanxi in 2016. However, this was not as much a strategy for Louis
Vuitton to shift its focus from China, as it was to focus on online retailing owing to
the growing dominance of tech-savvy Chinese millennial consumers. The company
also permanently closed its last store in Hong Kong in March 2021 due to the
COVID-19 pandemic and a series of anti-government protests that started in June
2019.
Top brands are restructuring their sales channel networks
Luxury retail shopping (2/3)
Hermès
The brand restructured its retail network all over the world in 2017, closing 2
boutiques in France in Avignon and Rouen. Hermès also closed its store in
Charlotte, North Carolina as well as its concession outlet dedicated to watches and
jewelry at Harrods in London. However, these closures have been followed by new
openings in growth markets such as Istanbul, Sao Paulo, and Changsha (China).
According to its CEO Axel Dumas, the brand is closing small airport concessions but
is focusing on department stores, where its growth lies.
Prada
In 2016 Prada announced that it would offset new shop openings with selective
closures in 2016 and 2017, to shield profit margins from weaker demand in a few
countries.
Overall, brands are increasingly reinventing the purposes of their brick-and-mortar
stores by studying the success of their monoband platforms and marketplaces. By
primarily adopting an omnichannel strategy which offers a seamless click-andmortar experience for consumers, new opportunities exist for bridging the gap
between physical and digital luxury shopping.
32
Sources: Burberry; Harvard Business Review; RWTH Aachen University
Comparison of luxury stores in different countries
Luxury retail shopping (3/3)
Region
U.S.
UK
China
Swatch
LVMH
Burberry
L'Oréal
Kering
33
Sources: Company website
Region
Lorem Ipsum
Lorem Ipsum
Estée Lauder
Hermès
U.S.
UK
China
Digital luxury eCommerce brands are opening physical stores
Omnichannel strategy
Even as the global luxury goods market gradually moves towards online retailing
• Brand legitimacy: Legitimacy and consumer trust are probably the most
with digital revenues quickly outpacing brick-and-mortar, digital-born luxury
important reasons for digital-born luxury companies to open physical store
companies such as Warby Parker, Bonobos, and Glossier are now opening physical
fronts. This is especially true in today’s time when anybody can start a
stores of their own. Interestingly, these stores are not only temporary pop-ups but
professional looking eCommerce website at a negligible cost, regardless of where
also permanent showrooms. Even though this move may seem to be
they are present in the world. Having a physical presence is therefore
counterintuitive at first, there are many complementary benefits to be derived from
increasingly being considered a clear metric of brand legitimacy. According to a
it.
survey of U.S. adults conducted by the Pew Research Center, even though
• Touch and feel: Even though online shopping offers convenience for luxury
shoppers; it doesn’t satiate their need to touch and feel a high-end product
before buying. The stores provide a platform for consumers to have a more
immersive brand experience than what is possible online, thereby enabling the
eCommerce companies to have control over the entire customer journey.
• Increased eCommerce traffic: While online shopping remains highly
transactional, it is the brick-and-mortar stores that are leveraging the
interpersonal interaction to drive conversion rates and enhance average
purchase values. According to an L2 Intelligence study, physical stores result in
an increase in brand mentions and searches online, thereby driving greater
organic traffic for their eCommerce site.
34
Sources: Forbes; Luxe Digital; Pew Research Center
around 80% of them were online shoppers, 64% cited their preference to shop in
a physical store as opposed to an online one, with all things being equal. Over
33% also said that they don’t like to wait for items to ship, and 90% said they are
more likely to make a purchase if they receive assistance from a shop assistant.
• Local community engagement: A storefront is also one of the best ways to
engage with the local community and build brand awareness, whether through
personal events, social media channels, CRM content or partnerships with other
brands. It also helps in building out an influencer program and getting more
media coverage by hosting press briefings.
“Beyond mere consumption, we’ll go to these spaces for entertainment,
education, connection and community. This is not to suggest that there will
be no products for sale in these physical spaces, only that the emphasis will
not be sales but rather on catalyzing a relationship with the consumer that
transcends the store.”
Doug Stephens, Founder & President
Retail Prophet
35
The luxury 4.0 model is digitalizing the entire shopping journey
Luxury online shopping (1/6)
Even though luxury brands have historically been reluctant to sell their products
online, factors such as the growth of tech-savvy millennials as the focal luxury
consumer, success of digital marketplaces such as Net-A-Porter and Farfetch and
Luxury goods market sales channel shares
13%
13%
14%
18%
19%
21%
22%
24%
26%
82%
81%
79%
78%
76%
74%
2020
2021
2022
2023
2024
2025
an overall shift to an omnichannel business environment are driving the global
online luxury goods market. In fact, Farfetch raised US$885 million, stamping a
valuation of US$6.2 billion on the first day at the stock market on September 20,
2018.
According to the Statista Market Insights, the share of online sales of luxury
products is expected to increase from 21% in 2022 to 26% by 2025.
According to a McKinsey study, an overall Luxury 4.0 model is emerging which is
87%
87%
86%
characterized not only by the growth of the online sales channel but by the
digitalization of a consumer’s entire luxury shopping journey. Therefore, brands
and retailers are now increasingly using digital technologies to not only capture
emerging customer preferences and enhance the customer relationship but also to
create new products.
2017
2018
2019
Offline
36
Sources: Statista Market Insights 2023; CNBC; McKinsey
Online
Around 80% of total luxury sales are digitally influenced
Luxury online shopping (2/6)
In addition to the increased penetration of the online channel for consumer
with Google to create The Burberry Booth, where shoppers are filmed dancing to
purchases, digital is also having a huge influence on how luxury shoppers choose
the T-Rex song Cosmic Dancer, as in the company’s TV ad. Upon completion, the
brands and products. The shopping journey of a typical luxury consumer today is
clip is sent to the consumer for sharing on social media or email. In another
usually a mix of the online and offline channel. In fact, a 2018 study by McKinsey
initiative Burberry also teamed up with DreamWorks Animation to create an
estimates that nearly 80% of all luxury sales are influenced by one or more digital
interactive marketing campaign using 3D technology on Piccadilly Circus corner
touchpoints, meaning shoppers either researched online and bought at the store,
screens. In this, pedestrians can use the interactive system to design their own
shopped in the store but bought online, or purchased online outright. Perhaps the
scarves and up to five people at a time can interact and manipulate the movement
most interesting finding of the study was the gradual disappearance of the purely
of the on-screen scarf on the big screen.
offline luxury shopper, who now represents only 22% of the total market.
Brands such as LVMH, Burberry, Chanel, Gucci, and Fendi have responded to this
change by not only launching their online portals but also increasing their social
media presence with high-quality content. In fact, after Hugo Boss’s online sales fell
by 6% in 2016, its CEO Mark Langer admitted that it was primarily because the
brand had ignored social media for too long.
In order to keep pace with this digital growth, luxury brands have begun forming
strategic partnerships with technology companies to complement in-house
competencies and enhance customer experiences. For example, Burberry tied up
37
Sources: Cartonomy; McKinsey
70% of shoppers are driven by digital medium
Luxury online shopping (3/6)
Pure offline shopper (22%(1))
Pure online shopper (8%(1))
Reference
Social
from friends
media
& family
reference
Previous
experience
Trusted
bloggers
Shopper
Visits
different
shops
38
Notes:
(1) Estimates as of 2016
Sources: Cartonomy; McKinsey
Offline Store
Visits
company
website
Online influenced shopper (70%(1))
Reference
from
friends &
family
Social Media
Reference
Trusted
bloggers
Shopper
Online Store
Visits
company
website /
stores
Shopper
Offline Store
Luxury brands partner with marketplaces to achieve rapid scale
Luxury online shopping (4/6)
As luxury fashion houses increase their online presence, they are beginning to
their own currencies. Farfetch handles the customer service and arranges for
realize that they yet don’t have the digital expertise to replicate the white-glove
express global delivery, including a same-day service in London, New York, Paris,
experience online that luxury consumers have become accustomed to in their
and other major cities. In the U.S. it also offers free shipping and returns.
physical stores. This is why brands such as Louis Vuitton, Gucci, and Chanel have
started partnering with specialized multi-brand portals such as Farfetch, Yoox NetA-Porter, and MatchesFashion.
including Bottega Veneta, Burberry, Cartier, Dolce & Gabbana, Emilio Pucci, Fendi,
Gucci, and Givenchy. However, it doesn’t yet have partnership agreements with
According to Denise Dahlhoff, research director at Wharton’s Baker Retailing
some of the big brands such as Chanel and Louis Vuitton. Among its unique
Center, these online marketplaces not only have a global reach, thereby allowing
offerings are a two-hour delivery window, fashion consultants who are available all
brands to scale their online operations quickly, but also a thorough understanding
day and night, and a premier service called “You Try, We Wait” for its special
of how to replicate the physical luxury shopping experience online. Luxury brands
customers. Swiss-based Richemont – which owns high-end brands such as Cartier,
are also more comfortable with these platforms as opposed to Amazon or eBay as
Montblanc, and Dunhill London acquired Yoox Net-a-Porter (YNAP) in May 2018.
they are careful to maintain an upscale image and not sell counterfeit products.
The company’s revenues totaled US$17.5 billion(1) in 2020, up 2% from 2019.
The three main players in this field are:
39
Yoox Net-a-Porter: Provides an online platform for over 350 fashion designers
MatchesFashion: has partnered with over 450 luxury brands such as Gucci, Saint
Farfetch: Provides an online marketplace for 500 independent luxury boutiques
Laurent, Valentino, Prada, Balenciaga, Acne Studios, and Balmain. The company
and 200 brands including Burberry, Chanel, Louis Vuitton, Dior, Paul Smith, and
delivers its products to over 170 countries around the world and offers special
Alexander McQueen, among others. It also allows consumers all over the world to
services such as its 24/7 stylist. The company reported US$576.2 million in
shop in
revenues in 2021, up from US$562 million in the previous year.
Notes:
(1) Converted from EUR to US$, exchange rate: EUR-US$ 1 22840 as of 31st Dec 2020 (Oanda)
Sources: BusinessofFashion; CNBC; Digital Commerce 360; Wharton; FashionUnited UK
Beauty products have the highest online sales penetration
Luxury online shopping (5/6)
The top three luxury categories for online sales are beauty products, apparel
month. In 2018, beauty-related content generated more than 169 billion views on
(ready-to-wear), and accessories (handbags, small leather goods etc.), with watches,
the video platform, compared to 104 billion in 2017. Yuya, Jeffree Star, Musas,
and jewelry following them only because of their higher price points. According to
Nikkie Tutorials, and Zoella have been the most popular beauty and style channels
an A.T. Kearney study on 800 American online beauty shoppers, luxury beauty
on YouTube since March 2021.
products have almost twice the internet penetration as compared to mass-market
cosmetics, suggesting that luxury consumers are more willing to embrace
eCommerce. This is surprising for a product that usually requires detailed testing
and inspection to ensure that the desired colors and shades are indeed being
purchased.
One of the main reasons for this, according to a McKinsey study, is the influence of
digital marketing and social media which has been more profound in the luxury
beauty industry that any other FMCG category. Beauty consumers overall, have
higher digital engagement all through their purchase cycle than any other industry.
According to a survey by the WaR Agency, a London-based marketing firm, 70% of
the respondents wanted to learn about beauty products through quality content
rather than simple advertising. Beauty is, in fact, one of the most frequently
searched topics on Google. YouTube is already the world’s leading beauty platform,
with over 1.5 million beauty videos (accounting for 4.6 billion views) uploaded each
40
Sources:
Mckinsey; L'Oréal
This is why luxury beauty brands are investing heavily in digital media and
influencer marketing and are working to foster engaging user-generated online
content. For instance, since 2010, L’Oréal has hired 1,600 digital experts including a
Chief Digital Officer. Moreover, it has also increased its digital marketing budget,
from 50% pre-pandemic to 70%.
Lóreal’s eCommerce share reached nearly 30% in 2022
Luxury online shopping (6/6)
Consolidated eCommerce shares of L'Oréal total sales worldwide
29%
27%
28%
16%
11%
5%
2015
41
Sources: L'Oréal
7%
2016
8%
2017
2018
2019
2020
2021
2022
CHAPTER 3
Trends
The luxury industry has been associated with excessive consumerism and a general lack of respect for
the environment. However, with the growing influence of Millennials and Generation Z who deeply
consider the social impact of their luxury purchases, the industry is gradually moving towards ethical and
sustainable products and experiences.
Casualization of apparel, the growing demand for experiential luxury, rentals, and the rising share of
online sales and accessories are other important market trends.
Brands moving towards sustainable luxury to woo millennials
Sustainable luxury (1/2)
In July 2017, BSR, a global non-profit organization, hosted a conference consisting
of a group of luxury brands to discuss the current state of sustainability in the
luxury market. The brands reported that luxury customers were now starting to
focus more on topics such as the origin of ingredients and raw materials, animal
welfare, and social and environmental impacts of products. Another study by IFOP,
a market research company and Nelly Rodi, a trend forecasting agency, of 1000
global luxury consumers, showed that they no longer found traditional brands
desirable, instead identifying more with new age brands such as Apple and
Amazon.
purchase.
Luxury brands have responded to this changing mindset by adopting stronger
environmental and social practices. One such example is jewelry company Tiffany,
which came under fire for purchasing conflict diamonds from Africa. In order to
change public perception, the company now not only has a zero-tolerance policy
for such diamonds but also actively supports the elimination of coral from its
jewelry while working to protect special places such as Bristol Bay in Alaska.
Cosmetic company Guerlain has pledged to reduce consumption of its iconic raw
materials such as orchids, vetiver, sandalwood, and lavender.
In the past, the luxury industry has been associated with excessive consumerism
and a general lack of respect for the environment. However, with the growing
influence of Millennials(1) and Generation Z who deeply consider the social impact
of their luxury purchase, the industry is gradually moving towards ethical and
sustainable products and experiences. People are now less keen on simply
possessing goods, instead wanting their luxury purchases to speak about their
increasing education levels and cultural awareness. In fact, according to a 2020
McKinsey U.S. cohort survey, around 66% of the total respondents and 75% of the
millennial respondents agreed to considering sustainability before making a luxury
43
Notes:
(1) A Nielsen study showed that 73% of Millennial respondents would spend more on a product if it comes from a sustainable or socially conscious brand
Sources: BSR; The Luxonomist; The Upsider; Vogue
“Our customers are very conscious of the importance of sustainability, and
unlike many people, they can afford to choose products that, while perhaps
initially more expensive, will last for years. Increasingly, all consumers are
aware of the impact on the environment of the production of fashion and are
concerned. The younger the customer, the more this is a consideration for
them.”
Stella McCartney, Fashion Designer
44
Luxury brands focus towards changing public perception
Sustainable luxury (2/2)
Stella McCartney, a staunch vegan and animal advocate, has been using leather
substitutes for her clothes and accessories for quite some time now. In October
2017, Gucci announced that it was going to stop using fur to make its clothes, while
Burberry and Diane von Furstenberg now put both real and faux fur in their
collections. LVHM has announced its own commitments, including an animal based
Raw Materials Sourcing Charter, under which it will source 70% of its leather from
Leather Working Group (LWG) certified tanneries. In fact, in December 2020, the
company stated that they purchased 100% Mink, Fox, and Finnraccoon pelts from
certified tanneries. Dolce & Gabbana is the latest luxury brand to announce fur free
collections from 2022 onward. Even Tom Ford, who’s been unapologetic in the past
about his use of fur and other glamorous materials, is now taking great pains to
find rare mills and craftsmen whose techniques have little negative impact on the
ecosystem.
What is most interesting though, is that these luxury brands are not adopting
sustainable methods of production while impacting their bottom line. In fact, the
change in public perception, combined with innovative high value products such as
mushroom skin bags or organic cork shoes, is expected to be one of the primary
drivers of industry growth in the medium to long-term.
45
Sources: BSR; The Luxonomist; The Upsider; Vogue; LVMH
Brands use technology to provide personalized products
Mass-customization
Historically, customization in luxury products meant not only long delivery times
due to constant interaction between the consumer and the artisan but also higher
prices, putting the product beyond the reach of many. However, the advent of
digital technologies, the rise of eCommerce and the overall increase in the number
of people consuming luxury products, is changing all that.
allowed customers to personalize their trench coats.
Since then, Louis Vuitton has launched the Haute Maroquinerie service in 2013
which allows clients to work closely with in-house experts to customize the style,
color, leather and finish of their bags. Other brands such as Brioni, Tod’s, Alexander
McQueen, Gucci, Fred, Bottega Veneta, and Salvatore Ferragamo have also
Luxury companies are now not only using technologies such as data analytics to
launched mass-customization programs for men’s shoes, watches, jewelry, shirts,
measure exactly what each individual wants but are also developing capabilities
and suits, at relatively low prices.
through automated production methods to provide it. This is especially important
in today’s times when fast fashion and eCommerce are gradually eroding the
consumer’s relationship with the luxury brand, thereby creating a detached
shopping experience.
Interestingly, mass-customization is not only restricted to products but is also
making its way into a consumer’s overall shopping experience. Luxury brands are
increasingly using data analytics and artificial intelligence (AI) to ensure that when a
customer walks into a store, he/she is immediately recognized not just physically
One of the first attempts at mass-customization by a luxury brand was in 1998
but also with respect to other aspects such as their size and product or shopping
when BMW launched its Customer Oriented Sales and Production (COSP) online
preferences. A good example of this is Sephora, which uses an AI-powered
ordering system. This allowed personalized cars to be delivered only after 12 days
algorithm to make customized recommendations to each customer. AI-powered
of the order being placed and has been responsible for much of the company’s
chatbots to enhance customer interaction are another burgeoning trend with
success over the last decade. In 2011, British luxury company Burberry made its
companies such as Burberry, Tommy Hilfiger, and Dior, having already
first attempt at mass-customization by launching Burberry Bespoke, a program that
incorporated it into their existing processes.
46
Sources: Burberry; Harvard Business Review; RWTH Aachen University
“Consumers – and not just Gen-X and Millennials, although they are
certainly helping to drive it – want 360 degree, fun, unique brand
experiences. Their focus is not just on buying something, but on being part
of something, while still being treated as an individual.”
Anant Sharma, CEO
Matter of Form
47
Casual clothing dominates the collections of many luxury brands
Casual clothing
The Autumn-Winter 17-18 collection at the Paris Fashion Week was dominated by
A changing demographic is another factor behind this shift. According to Bain
trainers, puffer jackets, and jogging shorts. Two of the biggest fashion houses in the
forecasts, Millennials and Generation Z who prefer casual clothing will account for
world, Balenciaga and Louis Vuitton hired Demna and
Virgil (1),
as their head
designers and their collections were heavily inspired by casual clothing and street
research firm YouGov titled “Affluent Global Perspective Study” found that 56% of
wear. These are just a couple of examples of casualization, one of the most
millennials around the world were spending more money on luxury items, as
pronounced trends in the luxury goods market currently, especially in categories
compared to other consumer segments.
such as apparel and shoes. In fact, according to a 2018 Boston Consulting Group
(BCG) survey(2), 73% of the respondents preferred casual luxury wear instead of
formal clothes.
One of the main drivers of this change is the growth of luxury menswear which,
according to Bain, has grown nearly twice as fast as luxury womenswear over the
past few years. Brands such as Prada, Gucci, and Dolce & Gabbana, which
traditionally have not been known for their menswear lines, have opened stores
focused only on men. Many modern high net-worth (HNW) men of all ages such as
the late Steve Jobs, Mark Zuckerberg, and most of the technology entrepreneurs,
are famous for their casual dressing sensibilities. This is contributing to the gradual
domination of street wear and athleisure in the emerging product categories of
many luxury brands.
48
45% of the global personal luxury goods market by 2025. Another study by
Notes:
(1) Virgil Abloh has since passed away in 2021 (2) Over 12,000 respondents in 10 countries focusing on millennials and Chinese consumers
Sources: BCG; L'Oréal; Retail Dive
Work clothing is another category which is witnessing increasing demand of relaxed
casual wear with established brands such as Luca Faloni, Brunello Cucinelli, and
Moncler and newcomers such as Mr & Mrs Italy offering a wide range of casual
apparel.
The casualization trend has risen from the ground up over the last few years
starting with the growth of luxury sneakers. Once seen only in the gym or on
teenagers, sneakers are now a dominant product category in brands such as
Bottega Veneta, Chanel, Dior, Louis Vuitton, Prada, and Valentino. Moreover, digitalborn brands such as Net-a-Porter and Farfetch and luxury department stores such
as Harrods, have also made significant advancements in their women’s sneaker
offerings since 2016.
“Amidst a crisis in formal wear, brands such as Moncler and Golden Goose
quickly carved out a place with luxury down jackets, jeans and sneakers.
Even established brands like Dior and Gucci have launched down-to-earth
streetwear-inspired lifestyle collections.”
Olivier Abtan, Associate Director
Boston Consulting Group
49
Experiential luxury is increasingly driven by millennials
Experiential luxury (1/2)
Spending on luxurious experiences such as hotels, food and travel, comprises a
Interestingly, even though luxury brands have been creating special experiences for
large portion of the global luxury market, with the share expected to increase over
their customers for many years now, they were often passed off as mere marketing
the short to medium term. In fact, according to a 2022 BCG study, even though
gimmicks to support the main business centered around luxury products. However,
COVID-19 caused a loss of around 50% for the global experiential luxury market in
their magnitude has increased to an extent that they are now shaping the
2020, it is expected to bounce back in 2022 and record an increase of as much as
experience economy and increasingly being considered as whole and independent
70% as compared to 2020. The rise of experiential luxury is one of the most
businesses. A few key areas of luxury experiences are listed below:
significant trends in the industry as it represents a fundamental shift in consumer
behavior from owning to being, with emotional fulfilment taking precedence over
just owning products. Affluent consumers are now increasingly seeking
personalized and unique experiences that are in sync with their ethical values
This trend is driven majorly by the growing dominance of millennials in the global
luxury market. A 2017 study by Royal Bank of Canada estimates that millennials in
North America and the UK will inherit US$4 trillion in a generation. Another study
conducted by Deloitte pegs this value at US$24 trillion over the next 15 years. We
are currently witnessing one of the biggest wealth transfers in history, which when
combined with all the self-made millennials in Asia and other fast-growing markets,
sets the tone for further dominance in the years to come.
50
Sources: Forbes; Luxury Society; Luxuo
Food
Even though Richemont owned Purdey and Alfred Dunhill have been operating
dining rooms in London for a while now, major luxury brands such as Armani,
Prada, and Cartier are now venturing into this space with the acquisition of existing
restaurants. Prada acquired 80% of the 190-year-old Marchesi pastry shop in Milan
in 2014, while LVMH acquired the iconic Milanese cafe, Caffe Cova, just a year
earlier. Armani has over 20 standalone restaurants around the world and Gucci has
hired three-starred Michelin chef Massimo Bottura to run its restaurant called the
Gucci Osteria.
To woo millennials, luxury brands focus on the hospitality sector
Experiential luxury (2/2)
Wellness
Millennials are well-known all over the world for their indulgences in different areas
of wellness such as spas, gyms, and health products and luxury brands are now
tapping into this opportunity. Chanel, Dior, Elemis, and Espa – all run spas at
various locations in North America and Europe. Luxury department stores such as
Harrods and Saks Fifth Avenue have also opened ‘wellness clinics’ which provide
services such as DNA analysis for skincare and diet, LED facials, cryotherapy, and
vitamin and nutrient injections.
Hospitality
The pioneers of luxury hotels were Versace and Giorgio Armani who opened their
properties in Gold Coast, Australia – Palazzo (2000) and Dubai - Burj Khalifa (2010).
Since then, LVMH has launched its hospitality spin off under the Bulgari brand and
Roberto Cavalli has partnered with Saudi real estate developer Dar Al-Arkan to
develop a hotel called Mirabilia in the gulf state.
51
Sources: Forbes; Luxury Society; Luxuo
“In the modern world where three out of four millennials will spend their
money on experiences over branded goods, the luxury brands of today have
needed to revisit their strategies; repositioning their brands as ‘the gateways
to experiences’ in order to attain a deeper and more relevant connection
with their target audience.”
Neil Stanhope, Founder
Underscore
52
Modern consumers prefer authentic luxury brands
Democratization of luxury
Bernard Arnault, the head of LVMH, once remarked that the Louis Vuitton brand
endorsement, which takes away from their authenticity. Furthermore, the
reflected the elegance and nobility of France’s Ancien Régime and the Palace of
progressive democratization of luxury and the increasing imitation of a luxury-
Versailles. In doing so he was trying to create an air of mystique, romance and
specific strategy by mass product manufacturers is slowly blurring the boundaries
opulence around the brand. His son Antoine on the other hand believes in creating
between luxury and non-luxury.
brand value through transparency in communication. These two different
ideologies are reflective of the changing values of today’s luxury consumer.
This can prove to be counter productive as today’s luxury consumers, most of
whom are millennials, consider themselves to be leaders and influencers who won’t
Modern culture is starting to value authenticity above all else, probably because it
use a luxury product simply because a celebrity is endorsing it. In fact, they are now
has become more and more elusive. In fact, a study conducted by social content
inspired more by their peers and like to be associated with real and authentic
marketing platform Stackla found that 86% of consumers across multiple industries
stories. A good example of this trend is L'Oréal’s acquisition of IT Cosmetics, a
considered brand authenticity to be important when deciding which brands to
brand made by Jamie Kern, a woman with real beauty issues such as Rosacea.
support. These findings were validated by another study by Cohn & Wolfe in which
91% of the respondents said that they would reward a brand for its authenticity by
either making a purchase or investment or through endorsement.
The luxury industry is probably the most scrutinized by consumers for levels of
authenticity primarily because of the premium price its products command. In
today’s business environment some of the luxury brands have become too fixated
with the bottom line and resort to aggressive marketing strategies such as celebrity
53
Sources: Technologyreview; Scmp; CB Insights
“We started authenticity. We trot it out all the time but if we have a
relationship with this generation it’s because we haven’t actively gone out
and targeted them. We don’t fake it, we don’t pay people. The design process
is so heartfelt at Stella McCartney. I don’t have to try too hard, I think people
believe when its honest and know when its not.”
Stella McCartney, Fashion Designer
54
Rentals and subscription models gain traction in the luxury business
Rentals and subscription models
Digitalization is disrupting the luxury industry much like Spotify and iTunes did the
Having already bought a few luxury products, these consumers are willing to give in
music industry. The success of companies such as Rent the Runway and
to the yearning of trying out other products, which are now more easily available
InstantLuxe is signaling a change in consumption modes from owning luxury
through the renting or subscription models. Another driver is that apparel has
apparel and accessories to simply renting them out. For example, consumers can
gradually become a fast-moving industry with many people changing their
now rent luxury handbags for as little as US$12 per day, with a higher end product
wardrobes more often than before. These consumers are beginning to realize the
such as the US$5,000 classic Chanel black shoulder bag, on offer for just US$29 a
cost-efficiencies derived from renting, while at the same time keeping up
day (plus insurance). Among the disruptors, Rent the Runway is the most well
appearances.
funded with US$546.2 million and is now valued at over US$1 billion.
Luxury brands who were earlier skeptical about letting third parties rent out their
According to InstantLuxe CEO Yann Le Floc’h, this trend first caught on in the
clothes for fear of their image getting tarnished, are also beginning to open up to
vintage clothes industry where people didn’t seem to mind wearing clothes
the idea as it helps them not only to tap into new consumer segments but also
previously worn by others. Now other companies such as Dressing Avenue and Les
offers outlets for showcasing some of their extravagant items. In fact, Kering has
Cachotières (renting among private consumers), Le Closet (clothes-box renting),
gone as far as testing its own in-house rental service based on a subscription
L'Habibliothèque (targeting the young), Sac de Luxe (for leather goods), and 1 Robe
model. However, going forward, renting is expected to be limited to fashion
pour 1 Soir (event-based clothing), have also joined the bandwagon.
accessories and apparel and not extend to high luxury, according to Julie El
One of the major drivers of this trend is the democratization of luxury products.
Over the last decade, increasing incomes and changing life values have encouraged
middle-income consumers to buy products that previously seemed unattainable.
55
Sources: Fashion Network; McKinsey
Ghouzzi, Director of the Centre du Luxe et de la Création, a strategy consulting firm
in Paris.
“When we launched [the site], many people were suspicious of this solution.
Nowadays, it's regarded as a smart, contemporary one. We also observed
that some customers rent a product to test it, and eventually buy it. In 2008,
luxury products were chiefly bought with the idea of handing them down.
Now, the purchase is seen more as an investment. Renting shows exactly
how the concept of 'possession' is disappearing, in favour of 'usage”
Yann Le Floc’h, Founder & CEO
InstantLuxe
56
Online sales eat into the brick-and-mortar share
Online sales
In the past, most luxury companies were reluctant to sell their products online, as
they believed it took away from their exclusivity and high status. There was a
general belief In the industry that only the low and middle range products were
sold online, with luxury consumers preferring the personalized and tactile shopping
experience of mono brand brick-and-mortar stores. That thinking has changed over
the last decade as is evident from the success of Net-A-Porter(1) and Farfetch, which
sell luxury items at undiscounted prices. In fact, according to Statista’s estimates,
the share of luxury online sales increased from 12.6% in 2017 to 19.4% in 2021 and
will likely reach 26% by 2025.
According to a 2017 study conducted by IE Premium and Prestige Business
Observatory(2) in association with Mastercard and Condé Nast(3), almost 30% of
luxury consumers used the online channel in 2016, up from 24% in 2012. Digital is
also making a significant impact in the decision-making process of the consumers
with nearly 80% of luxury sales today being ‘digitally influenced’, according to a
McKinsey study. What is particularly interesting in this is that the digitalization of
luxury is not only a result of the tech-savvy millennials but almost all luxury
shoppers.
57
Notes:
Digitalization is mostly affecting three aspects of the industry’s value chain
Manufacturing: technologies such as big data, IoT and additive manufacturing have
enabled manufacturers across industries to not only respond quickly to changes in
consumer demand, but also to reduce cost and create new business models. PVH
Corporation and Xcel Brands, which own labels like Isaac Mizrahi, are already using
3D software to decrease their production windows. Gucci also launched its ArtLab
in the beginning of 2018, which makes use of in-house prototyping and sampling of
leather goods.
Retail: According to a McKinsey study, the contribution of online sales to the global
luxury market will increase by over 300% by 2025. This is why many luxury goods
companies are increasing their eCommerce exposure. In June 2017, LVMH
launched its own multi-brand eCommerce portal, 24 Sèvres that features not only
its own portfolio of brands but also curates fashion, accessories and beauty
products outside of the group. Even the notoriously digitally-averse companies
Celine and Chanel launched their eCommerce sites in December 2017 and July
2018, respectively.
(1) Net-A-Porter has since been acquired by Richemont, a Swiss luxury company (2) an initiative launched by IE Business School located in Madrid, Spain (3) an American mass media company
Sources: Luxe Digital; McKinsey; Vogue; Statista Market Insights 2023
Accessories assume more importance among luxury brands
Importance of accessories
Historically, fashion houses such as Chanel, Prada, and Gucci, single handedly
Instead, brands are now focusing more on selling accessories. Chanel with its
controlled how most of the wealthy people across the world dressed. It was not
tennis racquet (US$1,754), a set of four tennis balls (US$445), a set of beach
uncommon to see women dressed from head to toe in either of these brands.
racquets and balls (US$3,755) and a boomerang (US$1,484) and Versace with its
Moreover, fashion shows held by luxury fashion companies have for long been
own line of bath towels (US$546), ashtrays (US$424) and a porcelain dog bowl
famous for their outlandish opulence. For example, for Chanel’s 2017 catwalk show
(US$768), are examples of this trend catching on with the luxury companies
in Paris, designer Karl Lagerfeld created a huge replica of the Eiffel Tower inside
increasing their line of accessories.
Paris's Grand Palais, where models wore clothes with very expensive jewelry.
Meanwhile, Louis Vuitton showcased its collection on a hundred-meter-long ramp
suspended in the sky.
Instead of spending thousands of dollars on designer clothes that are not even
worn regularly, consumers are willing to satiate their desire for luxury products by
buying these relatively cheaper accessories which carry an unmistakable brand.
Yet, despite this past dominance and current opulence, the share of ready-to-wear
Therefore, it is not surprising that accessories were the largest personal luxury
clothing in a company’s revenues has been falling quite dramatically. In fact,
goods category in 2021, as was found in a study by Bain & Co.
according to a study by Business of Fashion and McKinsey, some of the top fashion
houses have scaled down their collections so significantly, that it now makes up
only 10% of their overall business. Among the factors driving this change include
cutbacks on discretionary spending due to an uncertain economic environment, the
exorbitant price of luxury fashion, falling spending power in major luxury
consuming countries such as Russia and China and the growth of the luxury
fashion renting industry.
58
Sources: Luxe Digital; McKinsey; Vogue; Bain
“A pair of designer shoes that once would have set you back between £250
and £300 now hit the £600 to £700 mark. Unless you belong to the richest
0.01 per cent of the world's elite, how on earth do you begin to justify parting
with that sort of cash?”
Fiona Mcintosh, Fashion Editor
The Daily Mail
59
The luxury Metaverse market to value US$56 billion by 2030
Metaverse
Metaverse refers to a virtual world in which people can interact with each other
using technologies such as virtual reality and augmented reality (VR/AR).
Interestingly, rapid advancements in these technologies over the past few years
have blurred the lines between interactions in the real world and the Metaverse,
thereby creating revenue-generating opportunities for brands across sectors. These
unique digital-only products, also called Non-Fungible Tokens (NFTs), are beginning
to shape a new immersive landscape.
The luxury sector is at the forefront of this disruption, with Morgan Stanley pegging
the luxury Metaverse market’s value at US$56 billion by 2030. Brands such as Louis
Vuitton, Gucci, Burberry, Overpriced, and Balenciaga have already launched
multiple NFTs that are selling at a premium.
For example, Gucci released an exclusive fashion film called “PROOF OF
SOVEREIGNTY: A Curated NFT Sale by Lady PheOnix” as an NFT, which sold for
US$25,000. Italian fashion house Dolce & Gabbana (D&G) launched its first luxury
NFT collection called “Collezione Genesi” that fetched over US$6 million for just nine
pieces. Further, collectible brand RTFKT, which was recently acquired by Nike,
launched its Fewo Sneakers NFTs that sold for over US$3 million.
60
Sources: Forbes; Bloomberg
Other examples of NFTs launched by luxury brands are listed below:
• Louis Vuitton: To celebrate its founder’s 200th birthday, Louis Vuitton launched a
game titled “Louis the Game,” which allowed players to not only play as Louis
Vuitton himself but also get access to the 30 NFTs embedded in the game.
However, none of these NFTs were available for sale.
• Burberry partnered with gaming company Mythical Games to launch Blankos
Block Party, a game that housed 2,250 exclusive Burberry NFTs. These were sold
out in just 30 seconds for a total of US$375,000.
• Overpriced designed and sold a black hoodie as an NFT for as much as
US$26,000 through the digital art marketplace Blockparty.co.
• Prada partnered with Adidas to create the Adidas for Prada re-source NFT
collection that was sold for 30 Eurotheum, which translates to around
US$100,000.
• Jacob & Co turned its SF24 Tourbillon watch into an NFT, which sold for
US$100,000 at an auction on the ArtGrails NFT platform.
Digital-only facilitators set to be the biggest disruptors of the luxury Metaverse
industry
Digital fashion houses
The rapid growth in the popularity of NFTs in the luxury industry has created a
DressX is another example of a company disrupting this field. Launched in August
need for companies that specialize not only in the creation of those NFTs but also
2020, DressX is a fashion marketplace that houses digital-only collections made by
in making them compatible with the Metaverse. This is where digital-only
contemporary luxury brands. It is not a part of the Metaverse yet, as its garments
companies, such as Internet Made, DressX, MetaDojo, UNXD, and Tribute come in,
are not NFTs but custom-fit digital looks, mainly for Instagram. However, the
offering luxury brands the resources that they might not necessarily have.
company established an NFT partnership with Crypto.com in August 2021 and
While most of these companies offer products and services in the form of NFTs,
others act as industry facilitators. A good example of such companies is MetaDojo,
which provides virtual spaces for luxury consumers to shop. Their ready-to-use and
customizable 3D buildings can not only be integrated into any Metaverse but also
into different websites and social media channels. Brands can use these buildings
to display products much in the same way that they do in physical shops and to
host events such as fashion shows.
Yet, there are other companies like Internet Made that seek to provide a complete
digital ecosystem for luxury brands and consumers in the form of fashion
communities, virtual settings to display and sell goods, related software, and
avenues for funding. The company has grown rapidly since its launch in late 2021
and already has over 15,000 followers on Twitter.
61
Sources: Forbes; The Tech Fashionista
launched its own NFT marketplace in March 2022. XR couture is yet another
example of such a company.
CHAPTER 4
Drivers
Spending by millennials from China, both at home and overseas, is one of the main drivers of the global
luxury market. China currently has around 400 million millennials, five times more than the U.S.
International tourism is another driver with a 2021 BCG study showing as many as 62% of luxury
travelers wanting to make shopping a part of their experience.
The recent rise of luxury menswear has resulted in brands such as Prada, Gucci, and Dolce & Gabbana,
which traditionally have not been known for their menswear lines, to open stores focused only on men.
Mid-tier influencers are essential to the luxury brand marketing strategy
Influencer marketing
Influencer marketing has proven to be essential to the luxury brands’ marketing
strategies. As a matter of fact, more potential consumers can be reached by
collaborating with influencers.
Luxury brands are, by definition, aspirational, and partnering with celebrities allows
them to maintain a sense of exclusivity. However, the lifestyle they present can be
perceived as unobtainable. Mid-tier influencers come across as more authentic:
They have more control over the adopted tone of voice, and they give consumers
the feeling of being a part of a community. Furthermore, niche influencers produce
more targeted content.
Modeling the marketing strategy in this direction allows luxury brands to effectively
increase their brand awareness.
Instagram has carved a niche for inspirational fashion and trend-led content. The
platform generated a revenue of US$26 billion in 2021, and its influencer marketing
business is predicted to reach US$15 billion in 2022, proving that it is more effective
at engaging audiences than traditional advertising.
63
Sources: Launch metrics 2021; Vogue Business 2021; Daily Social 2022
Top influencers driving the luxury fashion and beauty industry
Best performing influencers 2022
64
Huda Kattan
Chiara Ferragni
Leonie Hanne
Lena Mahfouf
MIV(1) – 50.1 million US$
MIV(1) – 43.8 million US$
MIV(1) – 32.2 million US$
MIV(1) – 30.9 million US$
Jeremy Fragrance
Mariale Marrero
Karen Bachini
Sanna El Mahalli
MIV(1) – 26.5 million US$
MIV(1) – 10.2 million US$
MIV(1) – 8.3 million US$
MIV(1) – 8.3 million US$
Notes:
(1) Media Impact Value generated (Total)
Sources: Launch Metrics 2022; Instagram 2023
Gen Z is most influenced by social media when buying a product or choosing a
brand
Gen Z and luxury goods
Gen Z is the generation born online, with a strong belief in being unique and
Influences on buying a product or brand in %
socially conscious. And contrary to popular belief, Gen Z does consume luxury
goods and services.
Gen Z loves vintage and second-hand shopping. For them, this means buying a
15%
35%
product from a luxury brand whose name they have probably heard throughout
their entire lives and that produces high-quality items, combined with the added
bonus of being more sustainable by extending the item’s life span. When choosing
26%
17%
When deciding on a product or a brand, Gen Zers between the ages of 18 and 23
10%
8%
8%
10%
Gen Zer,
Gen Zer,
age 13-17
age 18-23
consumers and nearly two-thirds of Millennials say they follow luxury brands on
social media platforms. 75% of Gen Z consumers say they have made a purchase
25%
13%
6%
28%
Authenticity is an important value for Gen Z.
about the influencers: Both go hand in hand. More than eight out of ten Gen Z
28%
33%
39%
a vintage item, they are buying unique pieces that reflect their personal style.
mostly rely on social media recommendations. This brings us to the first finding
23%
32%
6%
10%
Millennial
32%
30%
14%
16%
8%
Gen Xer
4%
Baby boomer
after discovering a product on a social network, with YouTube and TikTok in the
Experts, celebrities, or influencers
Social media
lead.
Traditional media
Friends or family
Online reviews, blogs, or websites
65
Sources: Velocitize 2021; McKinsey 2019; Fashion Network 2022
Millennials from China drive the market
Chinese millennials
China’s rapid economic expansion over the last two decades has created many
frequently than those in any other country. In fact, when Global Times, an English
wealthy consumers who are keen to flaunt their newfound status. Statista pegs the
language Chinese daily, interviewed local millennial shoppers, it found that some of
value of China’s luxury market at US$48.9 billion in 2022, the second largest in the
them started as young as 12. The Bain study also found Chinese millennials capable
world after the U.S. However, its not the value of the market that is as important as
of buying an average of eight luxury products a year, which is three more than its
the number of Chinese people buying luxury products.
baby-boomers.
As per a McKinsey study in 2016, 7.6 million Chinese households purchased luxury
They are also showing an increased willingness to spend on luxury items even if
goods. To put this number in perspective, this was more than the total number of
they cannot afford it, according to Veronica Wang, associate partner of OC&C
households in Malaysia and the Netherlands. Further, each of these 7.6 million
Strategy Consultants. This is mainly because they believe that the use of luxury
households spend on average RMB71,000 on luxury goods per year, which is
items can reflect one’s financial and social status. Another reason for their
double of what they do in either France or Italy. Also, a 2020 study by Bain &
dominance is that Chinese millennials are part of the country’s one-child generation
Company found that Chinese consumers make up about 35% of the market in
in which families made financial sacrifices to ensure a better life for their children.
terms of both domestic and international purchases and accounted for 90% of
Therefore, compared to their western counterparts, millennials in China do not
global growth in 2019. This growing dominance of Chinese luxury spending, both at
have as many financial burdens which leaves them with more disposable income to
home and abroad is driven majorly by the country’s millennials. China currently has
spend on luxury products.
around 400 million millennials which is five times more than the U.S..
One of main differentiating characteristics of Chinese millennials according to Bain
is that they start buying luxury products at a much younger age and do so more
66
Sources: Statista Market Insights 2023; Bain & Co.; BCG, Jing Daily; Luxion Media; McKinsey
“In 2008, when China hosted the Olympics in Beijing, Chinese consumers
accounted for only 12% of global luxury spending. In the eight years that
followed, we estimate that more than 75% of the total growth in global
luxury spending, over $65 billion, could be attributed to purchases made by
Chinese consumers, either at home or abroad.”
Lambert Bu et al., authors of the McKinsey study titled Chinese Luxury
Consumers: The 1 trillion renminbi opportunity
67
Growth in HENRY population provides future opportunities
HENRYs (High-Earners-Not–Rich-Yet)
According to a report published by Deloitte titled Global Powers of Luxury Goods
#GucciGram initiative of collaborating with Instagram artists to rework the brand’s
(2019 edition), HENRYs (High-Earners-Not–Rich-Yet) are individuals who earn an
patterns as per the styles of the artists; and through the #24HourAce initiative in
amount between US$100,000 and US$250,000, and their average age is 43 years.
2016 where artists participated in Gucci’s video project and took over the
Equifax states that HENRYs own less than US$1 million of investable assets. 13% of
company’s Snapchat account for an hour, engaged with HENRYs through the digital
US households are HENRYs as suggested by IXI Services (a division of Equifax) with
platform.
an average of US$214,000 in assets and an income of US$136,000.
There are age differences in the HENRY consumer segment which can be
categorized based on average annual spending per household into Millennial
HENRYs with US$ 86,000, Gen-X HENRYs with US$ 67,000 and Baby Boomer
HENRYs with US$60,000. These demographics mainly undertake cashless
transactions and use mobile devices as payment methods. Credit/debit cards with
rewards such as cash back, airline miles, etc. are preferred along with an enormous
appetite for spending on car loans and mortgages.
HENRYs have the assured potential to amass vast wealth and become increasingly
relevant in the future. Their purchasing decisions are greatly influenced by social
media, and they prefer to shop online. Luxury companies have started to secure
longstanding relationships with this growing consumer segment. In 2015, Gucci,
through its
68
Sources: Deloitte Global Powers of Luxury Goods 2019: Bridging the gap between the old and the new; Equifax; Digiday
In India, a rise in this customer segment is one of the reasons for a high growth
rate of the luxury segment in the country.
“It’s more than a buzz. It’s a deeper trend. There’s strong demand across the
men’s fashion industry, in all its shapes and forms, and which comes in part
from a younger clientele. We see it very clearly in the sales”
Sidney Toledano, Chairman and CEO
LVMH
69
International tourism drives global luxury sales
International tourism (1/2)
Despite the current slowdown in international tourism due to the COVID-19
The highest price difference of around 55% is seen in the watches and jewelry
pandemic, it remains one of the major drivers of global luxury sales. The growing
market, while the lowest is for bags (40%).
global travel and tourism market, especially in China, is increasingly blurring the
lines between domestic and international purchases.
Therefore, it is no surprise that China is again at the forefront of this trend with its
tourists accounting for the highest share of luxury shopping while travelling
According to a 2017 Deloitte study, global tourists account for almost 47% of luxury
internationally. In fact, Chinese travelers are the main catalyst for growth for the
goods purchases, with 31% doing so in foreign countries and 16% when they pass
Japanese and South Korean luxury goods market. While budget-conscious middle
through an airport. This figure rises to as much as 60% if only consumers from
class Chinese consumers shop abroad to take advantage of price differences and
emerging markets such as China and the UAE are considered. Citing the reasons,
tax exemptions, the wealthy class enjoys the better customer service and wider
65% said that the ability to buy products not available in the home market was the
product range.
main benefit associated with luxury shopping abroad, while 43% mentioned greater
affordability.
A 2021 BCG study of 12,000 people across 10 countries globally, including the U.S.
and China, found that as many as 62% of them traveled to make luxury shopping a
part of their experience.
Data from BenchMarque, Deloitte’s luxury pricing analytics suite clearly shows that
despite increased internationalization, U.S. dollar–adjusted prices for equivalent
items are on average over 50% higher in China than in Italy or France.
70
Sources: Deloitte luxury multicounty survey for Global Powers of Luxury Goods 2017
Duty free travel and retail sales increased in 2021
International tourism (2/2)
Duty free and travel retail sales worldwide in billion US$
86.40
78.96
69.95
56.00
60.00
63.00
62.00
64.00
55.33
51.00
45.51
43.00
2010
71
Sources: Generation research
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Luxury menswear grows twice as fast as womenswear
Luxury men’s wear
Historically, luxury fashion for men has played second fiddle to womenswear,
provide men with a more user-friendly option with access to a lot more variety that
which received most of the attention from brands and media alike. However, the
was previously available in print publications.
past few years have signaled a shift in the way men dress and experiment with new
styles. In fact, a 2021 survey by Statista comprising over 1,000 luxury shoppers each
in the U.S., UK, and Germany revealed that the number of male luxury shoppers
outweigh the number of female luxury shoppers. Another study by Bain & Co. has
pegged this market to be growing nearly twice as fast as luxury womenswear over
the past few years.
This increased activity has resulted in brands such as Prada, Gucci, and Dolce &
Gabbana, which traditionally have not been known for their menswear lines, to
open stores focused only on men, with Stella McCartney debuting her first men’s
styles in November 2016. Louis Vuitton showcased its men’s line designed by its
new designer Virgil Abloh in June 2018 which consisted of casual anoraks, holsterstyle accessories, and trench coats. Even though LVMH hasn’t released any
According to Tammy Smulders, global managing director of LuxHub, a division of
information, an article in Reuters points out that menswear accounts for about 7%
Havas Media Group, this change in consumer behavior can be attributed mainly to
of Louis Vuitton’s revenues. Balenciaga also considers men's fashion to be among
the role played by social media in building visibility around men’s luxury fashion.
its top growth drivers according to the company’s CEO Cedric Charbit.
With more and more men now becoming interested in new fashion trends, social
media influencers are now creating an ‘always on’ environment, thereby driving
men to focus more on their looks.
Alexa Tonner, co-founder of influencer network Collectively, brings up an important
point when she says that even though fashion magazines have been highlighting
men’s fashion for quite some time now, social media platforms such as Instagram
72
Sources: Bain & Co.; Deloitte
“It’s more than a buzz. It’s a deeper trend. There’s strong demand across the
men’s fashion industry, in all its shapes and forms, and which comes in part
from a younger clientele. We see it very clearly in the sales.”
Sidney Toledano, Chairman and CEO
LVMH
73
CHAPTER 5
Opportunities
Demand for mass-customization of luxury products has forced the leading brands to revisit their existing
manufacturing processes. Although luxury manufacturers have historically been technology laggards,
they are now integrating advanced digital technologies such as additive manufacturing, analytics,
material science, augmented reality, and AI into their manufacturing processes.
Resale of luxury products, NFTs, and social gaming present growth opportunities for luxury brands.
Historically, they have been averse to reselling their products in order to protect their brand identities
and margins. However, the last few years have witnessed a surge in the sales of pre-owned luxury
products, mainly because of specialized digital trading platforms and fast-changing consumer behavior.
Licensing has started to present growth opportunities for brands in terms of increased product and
geographical reach, while maintaining their product quality control and brand exclusivity.
Mass-customization of luxury products is ushering in the era of Luxury 4.0
Manufacturing
In May 2020, Karin Tracy, head of fashion, luxury, and beauty products at Facebook,
emphasized the ever-growing importance of speed in the luxury industry. She said:
“For luxury brands, whoever is the fastest right now, will have competitive
advantage, full stop.” In the ensuing period, rapidly changing industry dynamics,
including the COVID-19 pandemic and most importantly the need to customize
luxury products at scale, have brought the importance of digitalization in the
manufacturing process to the fore.
Luxury brands have historically been technology laggards, often being associated
with expert craftsmanship requiring much human involvement. However, brands
are now integrating advanced digital technologies such as additive manufacturing,
analytics, material science, augmented reality, and AI into their manufacturing
processes. This has enabled the digitalization and integration of vertical and
horizontal value chains, thereby enabling brands to not only respond quickly to
changes in demand patterns but also to reduce costs, customize goods, create new
business models and products, and manufacture at scale. Over the past few years,
Gucci, Ralph Lauren, Coach, Helmut Lang, and Burberry have set up digital
production facilities to improve their manufacturing speeds.
75
Sources: McKinsey; Ruggtek
Resale of luxury products, NFTs and social gaming present growth opportunities
New revenue streams
Resale
Historically, luxury brands have been averse to reselling their products in order to
protect their brand identities and margins. However, the last few years have seen a
surge in the sales of pre-owned luxury products, mainly because of specialized
digital trading platforms and fast-changing consumer behavior. According to
McKinsey, the value of the luxury resale market was between US$25-US$30 billion
in 2020, with other industry experts predicting an annual growth rate of 10-15%
over the next decade. Moreover, the market is still in the early stages of maturity,
thereby presenting an opportunity for brands and retailers to not only capture
market share but to also proactively devise strategies to shape demand.
Metaverse
According to a study by Morgan Stanley, the market for digital fashion and luxury
brands is expected to reach US$50 billion by 2030, with most of the growth coming
from NFTs and social gaming. In fact, these two areas are expected to expand the
industry’s total addressable market and EBIT by more than 10% and 25%,
respectively, over the next eight years. Soft luxury products, such as ready-to-wear,
leather goods, and shoes, are expected to be the major growth markets.
76
Sources: McKinsey; BCG
Licensing enables luxury brands to expand product and geographical reach
Licensing
Luxury licensing got a bad reputation in the 20th century because of overuse and
being linked to sub-standard products. This also led to ubiquity, as a result of which
brands often ended up in incompatible retail spaces, thereby threatening their
exclusivity. However, as the market matured and became global, licensing started
to present growth opportunities for brands in terms of increased product and
geographical reach, while maintaining distribution leverage, product quality control,
and brand exclusivity.
Today, many luxury brands around the world use licensing as their primary growth
strategy and to reach aspirational consumers, once the market for their primary
products saturates. One of the best examples is Burberry, Gucci, and Hugo Boss
licensing their fragrance and/or cosmetics business to Coty, one of the largest
beauty companies globally. Similarly, Bulgari, Ferragamo, Prada, and Versace
license their eyewear business to Luxottica, the largest eyewear company in the
world. Other brands use this strategy to enter niche and unexplored markets and
to reach the influential Millennials and Generation Z consumers who prefer
experiences to possessions. In November 2021, Flora Growth Corp. licensed luxury
brand Tonino Lamborghini to sell cannabidiol-infused drinks in North America and
Colombia.
77
Sources: Harvard; Jing Daily
CHAPTER 6
Challenges
Even though Chinese spending on luxury products has been one of the key drivers of the industry’s postpandemic recovery, challenges including unfavorable demographics, nationalistic sentiments,
indigenous-owned brands, and geopolitical tensions threaten to slow down the global market.
In addition, the Russia-Ukraine war has prompted many luxury brands, including Hermès, LVMH, Chanel,
Kering, Prada, Richemont, Net-a-Porter, and MyTheresa to suspend their operations in Russia indefinitely,
which might eventually hurt the overall market.
China faces a slew of challenges that threaten to slow down the global market
China
Even though Chinese spending on luxury products has been one of the key drivers
• Indigenous-owned brands: According to a 2022 survey by Daxue Consulting, over
of the industry’s post-pandemic recovery, the country faces a slew of challenges
64% of the respondents claimed to have purchased Chinese luxury products and
that threaten to slow down the global market. The key ones are listed below.
90% of those who hadn’t were willing to do so in the future. These findings
• Unfavorable demographics: China is currently facing an unprecedented
demographic crisis in the form of an aging population, a declining birth rate, and
as a result, a sharp decrease in the working-age population. These challenges are
the result of the country’s one-child policy that was abolished in 2016 but which
continues to affect the nation’s fertility rate. Global economists have likened this
to Japan’s demographic transition that not only had a detrimental impact on the
country’s luxury market but also on its overall economic growth.
• Nationalistic sentiments: According to a 2021 survey by the Global Times, 41.7%
of the respondents “looked down on the West” as compared to 18.4% in 2016.
The sharp rise in Chinese nationalism over the last few years due to events such
as the U.S.-China trade war and sanctions against Huawei threaten to impact the
demand for foreign products. In fact, H&M already experienced a 23% fall in
exports to China during 2Q2021, and Burberry and Nike faced a widespread
boycott, owing to their concerns regarding cotton production in the Xinjiang
territory.
79
Sources: Harvard; Jing Daily
highlight a growing popularity of indigenous luxury brands such as Duanmu
Liangjin among Chinese consumers, which is expected to eat into the share of
foreign legacy brands. Greater use of Guochao (national trend) elements and
increased consumer support for national businesses are the main drivers of this
trend.
• Geopolitical tensions: Over the last few years, China’s geopolitical relations with
the Western countries have taken a downturn due to events such as the trade
war with the U.S. and sanctions against Huawei, souring relations between the
two countries. In retaliation, China has upped the import duties on foreign
products, making it difficult for them to run a profitable enterprise in the country.
The 218% tariffs on Australian wines, which forced the companies to look for
buyers in other countries, provide a good example of this.
Many luxury brands have suspended their operations in Russia
Russia-Ukraine war
Many luxury brands have been prompt in their response to Russia’s invasion of
Ukraine, having suspended operations in the country indefinitely. These include
Hermès, LVMH, Chanel, Kering, Prada, Richemont, Net-a-Porter, and MyTheresa, in
addition to Western consumer brands such as Apple, Nike, and McDonalds.
Additionally, Uniqlo, which initially announced that it would stay in Russia,
eventually buckled in the face of mounting global criticism and changed its course.
Even though Russia accounts for only a small share of the global luxury market, the
country’s oligarchs have been a major customer segment over many years,
spending mainly on yachts, watches, and luxury food and drink. Economic
sanctions and asset forfeitures have diminished the buying power of rich Russians
all over the world, thereby impacting the luxury market.
Moreover, the current situation is likely to have a ripple effect not only in terms of
falling local spending, but also declining consumer confidence throughout Europe
and North America. This is mainly due to rising energy prices, stock market
volatility, lack of tourism, and other external variables. According to Luca Solca,
analyst at Bernstein Research, the Russia-Ukraine war could decrease luxury
spending by around €8 billion.
80
Sources: Barrons; Financial Review; Bernstein Research
Most of the luxury brands lack digital capabilities
Legacy technological infrastructure
The luxury industry is currently experiencing a big technological disruption, with the
Metaverse at the center of this change. Data generation, data analytics, and datadriven actions, such as automated customer support, have emerged as key success
factors for luxury brands and are vital for a seamless and fluid Metaverse
experience.
However, most of these brands have legacy platforms that lack the digital
capabilities to support new technologies. In fact, when Daniel Langer, CEO of luxury
brand Équité, audited the experiences of a “leading global luxury” fashion brand at
various locations and touchpoints, he had a disjointed experience, with each
interaction feeling like a different brand.
Moreover, countries such as China are making it harder for brands to access
relevant data. In fact, the country has enforced tough regulations, including CSL
(critical information), DSL (regulating data as a national security issue), and PIPL
(privatizing personal data), that have made data breaches a national security
concern. With most luxury consumers living cosmopolitan lifestyles, this has made
it harder for brands to access and utilize consumer data globally and therefore
create consistent brand experiences.
81
Sources: Barrons; Financial Review; Bernstein Research
Global uncertainties could make the current luxury rebound short-lived
Global uncertainties
The demand for luxury goods was expected to wane due to various global
However, many industry experts view this surge with skepticism and warn that it
uncertainties, such as the COVID-19 pandemic, the Russia-Ukraine war, the
could be short-lived due to the various economic and geopolitical pressures. This
aftermath of Brexit, the U.S.-China trade war, and the current inflationary
presents a challenge for luxury brands in terms of forward planning and
environment. However, the reality has been starkly different from the luxury
production targets. If they produce too little, they run the risk of not meeting the
market’s sharp rebound uptick in most of the major global markets after a dip in
demand, and if they produce too much, the product surplus could damage brand
2020.
equity. Therefore, meeting and balancing demand has emerged as one of the
In fact, brands such as Hermès and Louis Vuitton have recently announced plans to
expand their production capabilities, just to keep up with this surge in demand.
Hermès is building two new workshops for leather goods in France, in addition to
three other sites already being built in the country. Similarly, Louis Vuitton has
announced the opening of two new workshops in 2022.
Moreover, according to a study by Luxury Society, global consumer interest in
expensive iconic products such as the Cartier Love Bracelet and the Louis Vuitton
Neverfull bag is at an all time high. Another study by the Digital Luxury Group (DLG)
found that interest in the Hermès Birkin and Kelly bags has jumped by over 37%
and 86%, respectively, in terms of Google searches between the periods of March
2019 to February 2020 and March 2021 to February 2022.
82
Sources: Luxury Society
biggest challenges luxury companies are facing today.
CHAPTER 7
COVID-19 impact
Even though eCommerce has permeated almost every industry over the last decade or so, luxury brands
have been wary of selling online, relying instead on their brick-and-mortar stores, with the aim of
maintaining their exclusivity, craftsmanship, and authenticity. However, COVID-19 has changed the
scenario drastically, driving luxury online sales past the tipping point. Pure-play multi-brand retailers,
such as Farfetch, Tmall Luxury, and JD.com Luxury, that offer both multi-brand marketplaces and monobrand eCommerce websites, have been the biggest winners in terms of revenues and number of users.
Chinese and Indian cities such as Guangzhou, Beijing, Shanghai, Hong Kong, Delhi, and Mumbai have
been the luxury hotspots of both countries for many years. However, their saturation along with the
COVID-19-induced migration of a large part of the working-age population to a work-from-home model
and the sharp increase in online shopping have put the spotlight on tier-2 and tier-3 cities.
Pure-play multi-brand retailers have broken away from the rest of the pack
Pure-play multi-brand retailers
Even though eCommerce has permeated almost every industry over the last
decade or so, luxury brands have been wary of selling online, relying instead on
their brick-and-mortar stores, with the aim of maintaining their exclusivity,
craftsmanship, and authenticity.
However, COVID-19 has changed this scenario drastically, driving luxury online
sales past the tipping point. Pure-play multi-brand retailers, such as Farfetch, Tmall
Luxury, and JD.com Luxury, that offer both multi-brand marketplaces and monobrand eCommerce websites, have been the biggest winners in terms of revenues
and number of users. One of the reasons for their success is that they not only
provide an online platform to purchase luxury goods but also other services, such
as fulfilment, technology, logistics, payment, and customer analytics. Some of them
even stock inventory.
While Farfetch announced a record GMV of US$4.2 billion in 2021, which was up
33% year-on-year and 98% as compared to 2019, Tmall Luxury experienced a 159%
increase in year-on-year sales during the period from January through March 2021.
Moreover, JD. com’s high-profile partnerships with leading luxury brands such as
LVMH, Bulgari, and Berluti helped the company gain over 32 million customers
during 2Q2021.
84
Sources: Deloitte
Growth in demand from second and third tier cities in India and China
Demand from small cities
Chinese and Indian cities such as Guangzhou, Beijing, Shanghai, Hong Kong, Delhi,
and Mumbai have been the luxury hotspots of both countries for many years.
However, their saturation along with the COVID-19-induced migration of a large
part of the working population to a work-from-home model and the sharp increase
in online shopping have put the spotlight well and truly on tier-2 and tier-3 cities.
Luxury brands are quickly turning to these cities for their next wave of growth. In
fact, according to a 2020 study by Luxse Digital, as many as 45% of Chinese middleclass consumers were eager to purchase luxury products in tier-2 and tier-3 cities
as compared to 37% in tier-1 cities. Even though this difference may not seem like
much, it signals a gradual change of guard in the country’s demand centers. The
main categories were fashion, shoes, and beauty.
In India, which is often considered the ultimate eCommerce frontier, Italian luxury
car maker Maserati is now targeting tier-2 and tier-3 cities, such as Lucknow,
Kanpur, Indore, Bhopal, Mangalore, Chandigarh, and Goa, after a strong spike in
demand. Additionally, a more recent study from 2021 by consulting firm Bain & Co.
found that 25% of global luxury purchases in 2020 were indeed made by new
consumers, further signaling a growing interest from smaller and emerging
markets.
85
Sources: Deloitte
Luxury brands started offering discounts during the pandemic
Discounting strategies
The COVID-19 pandemic has affected demand across sectors, with most brands
Even though this strategy was endorsed by some experts who considered
lowering their prices to boost consumption. Interestingly, the luxury sector, which
markdowns to be a better option than destroying excess inventory, especially
has historically avoided a discounting strategy to preserve its elite status, also
during times of economic volatility, consulting firm McKinsey had a contrarian view.
buckled under the pressure of growing market uncertainties, especially in the early
They gave the example of Burberry, which experienced a 45% drop in year-on-year
part of 2020.
global sales during April and June 2020. Since then, most luxury brands have
In fact, retail giant Neiman Marcus began offering Tom Ford glasses at a discount of
as much as 50% during that time while Nordstrom lowered the price of Salvatore
Ferragamo sandals by 40%. Moreover, Burberry decided to get ahead of retailers by
directly selling its products at a discount of 50% in China and Australia.
Online sales were also not immune to these pressures, with Yoox Net-A-Porter
marking down prices on brands such as Alexander McQueen, Balmain, Dolce &
Gabbana, and Prada by as much as 70%.
Even Louis Vuitton, that never sells their products at a discount, could not avoid the
markdown pressure, with 33% of its bags being offered at discounts on the Farfetch
marketplace between July and December 2020.
86
Sources: Luxury Tribune; Forbes
reverted to their old policy of not allowing discounts.
COVID-19 has prompted brands to revisit their sustainability goals
Sustainability
Historically, sustainability has not been high on the priority list of many luxury
brands, simply because they involve additional costs that affect the bottom line. In
fact, even brands like Christy Dawn, that have been very vocal about their
sustainability initiatives in the past, were forced to scale back due to high costs.
of the COVID-19 pandemic include:
• Mark Cross: The company has been working with Positive Luxury, a consultancy
that advises luxury brands on how to improve their sustainability to ensure that
its manufacturing processes and product choices conform to the highest
However, the COVID-19 pandemic has emerged as an opportunity and a driving
environmental standards. Consequently, the brand’s collections have become
force for brands to rethink their sustainability strategies. A sharp reduction in the
smaller and now only focus on its iconic shapes instead of having new designs
carbon footprint due to limited travel, the need for brands to use and re-use as
every three months.
much raw material as possible due to supply chain issues, and an overall change in
consumer mindset, brought about by the universal suffering caused by the
pandemic, are all contributing factors.
In fact, according to Erwan Rambourg, global head of consumer and retail research
at HSBC, the pandemic has increased the awareness of consumers, especially in the
Western countries, and this is expected to make environmental, social, and
governance (ESG) matters mainstream at a faster pace than before. Brands can
expect increased scrutiny from both investors and consumers, most of whom are
now Millennials and Gen Zers.
Examples of brands that have adopted more sustainable practices after the onset
87
Sources: HSBC; Times of India; Luxe. Digital
• Prada has pledged to recycle all its plastic and to incorporate sustainability into
its very DNA. It has also appointed Pamela Culpepper and Anna Maria Rugarli as
non-executive directors, with both having rich experience in managing
sustainable businesses.
• Stella McCartney: Even though this brand has historically been one of the biggest
advocates for sustainable practices, its recent efforts include launching a 2021
summer collection made of mushroom leather.
• Dolce and Gabbana has discontinued the use of animal fur in all its collections
starting from 2022, opting for eco-fur garments and accessories instead.
CHAPTER 8
Technological impact
Brands are now adopting digital technologies to not only mimic the in-store shopping experience on their
eCommerce platforms but to also enhance the physical store experience. Artificial intelligence (AI) is
currently the most sought-after technology, as it enhances customer experience and helps brands reach
a wider audience.
Immersive technologies such as virtual and augmented reality (VR/AR) are also experiencing increasing
use due to their ability to enhance the overall shopping experience and create high-quality content for
digital marketing.
3D printing is used mainly in luxury fashion as it enables the creation of shapes without molds, thus
resulting in elements with extreme intricacy.
Brands use AI for personalization
Use of AI (1/2)
The last few tears have witnessed increased online penetration in the global luxury
produced. In 2015, Burberry announced that its investment in personalized
market primarily due to the growing dominance of millennials and Generation Z,
customer management programs had resulted in a 50% increase in repeat
who are expected to constitute 45% of global luxury shoppers by 2025, according to
customers. The company also experienced a 100% sales increase for a particular
a Bain & Co. study. Brands are therefore rushing to adopt digital technologies to
bag, simply by changing its picture online, an insight derived from AI-powered
not only mimic the in-store shopping experience on their eCommerce platforms
analytics
but to also enhance the physical store experience. Artificial intelligence (AI) is
currently the most sought-after technology.
One of the main reasons for this is that AI, especially deep learning, not only helps
in enhancing customer experience but also helps brands reach a wider audience
due to its unique ability to create new data and identify novel patterns throughout
the consumer purchase life cycle. AI can be used to track a consumer’s preferences
and apply it to predictive algorithms to create highly personalized online shopping
experiences.
Burberry
It has been one of the pioneers of AI in the luxury goods industry. Products in its
stores are now fitted with RFID tags which can communicate with the consumers’
mobile devices giving information on how the product can be used or how it was
89
Sources: Appear Here; Business Insider; Forbes; WWD; Luxe Digital
Luisa Via Roma (LVR)
A luxury fashion retailer that sells famous brands such as Balmain, Gucci, and Dolce
& Gabbana, partnered with Dynamic Yield, an AI-powered eCommerce
personalization platform, to improve its personalization capabilities. It’s customers
were able to receive personalized search results that were automatically sorted by
price depending on the customer's spending history. This resulted in a significant
increase in its conversion rates.
Cosabella
Another example is luxury lingerie retailer Cosabella, that used AI-powered
marketing campaigns to double its online subscription base and achieve a 60%
increase in email marketing revenue
Customer interaction is another area for brands to use AI
Use of AI (2/2)
Another area where AI is witnessing increasing use is in customer interaction.
Emotion-recognition technologies are beginning to recognize facial responses and
identify emotional states in order to deliver a more personalized shopping
experience.
One example is Dior’s Insider AI tool that is aimed at aspirational buyers who may
never become actual consumers. The tool’s messaging service not only sends out
personalized marketing communication but also shoppable slideshows and links to
the eCommerce site.
Louis Vuitton has also launched an AI-powered chatbot on Facebook Messenger
that communicates with shoppers using natural language processing and offers not
only personalized recommendations on products but also additional services
including information on its stores worldwide and access to product care
instructions.
90
Sources: Appear Here; Business Insider; Forbes; WWD; Luxe Digital
Brands using AR for enhanced customer experience
Use of AR
Immersive technologies such as virtual reality (VR) and augmented reality (AR) are
witnessing increasing use by luxury brands who combine them with their physical
retail stores to enhance the overall shopping experience. Even though, the main
objective of this is to enable customers to get a virtual feel of the product before
making a purchase, many brands are also using it for digital marketing purposes.
In fact, a study by data intelligence company L2 on the Chinese market, found that
traditional content such as images was no longer sufficient to win the attention of
followers of luxury brands on social media platforms such as WeChat. Instead,
consumers were more likely to respond to a marketing message if the content was
dynamic and interactive, as is the case with AR campaigns. Below are a few
Estée Lauder
In July 2017, Estée Lauder launched the conversational AY enhanced lipstick advisor
to help customers select the ideal shade. The chatbot that works on Facebook
Messenger was created in partnership with AR company ModiFace and allows users
to get personal shade recommendations based on a quiz they take.
L'Oréal
The company acquired Modiface in March 2018 and has partnered with Facebook
to create AR powered make up try-on experiences for brands such as Maybelline,
L’Oréal Paris, NYX Professional Make up, Lancôme, Giorgio Armani, Saint Laurent,
examples of the technology’s adoption by luxury brands.
Urban Decay, and Shu Uemura.
Burberry
Gucci
It is using Apple’s AR platform called ARKit to enable the users of its mobile app to
Gucci partnered with Spanish surrealist artist, Ignasi Monreal to create an AR
edit their pictures with Burberry-inspired drawings made by artist Danny Sangra,
before posting them on social media.
91
Sources: Bloomberg; Market Wired
experience -#GucciHallucination, on its app. This was part of a marketing campaign
to support its Spring 2018 collection. More recently, it partnered with Snapchat to
provide a virtual try-on experience for its customers.
3D Printing is being used for production, prototyping, and design
3D Printing
Even though the use of 3D printing to manufacture luxury goods has traditionally
Luxury watches is another industry where 3D printing has made rapid
been frowned upon by purists, the technology is now making rapid progress. Over
advancements with companies such as Parmigiani Fleurier using it to improve
the last few years, it has been used not only for production and prototyping of
efficiency and ergonomics and create innovative designs that were earlier
various luxury products but also in the creative process. According to a 2018
impossible to make using milling machines.
McKinsey survey of 100 luxury managers, 30% of them believed that they would
start offering 3D printed products in their stores in the next three to five years
while another 30% believed it would happen within five to 10 years.
Many parts of the super luxury US$400,000 Parmigiani Bugatti Type 370 watch are
now 3D printed. There are yet other manufacturers that are using the technology
not only for product development but also for production. Panerai’s Pam 578 Lo
The fashion industry is where 3D printing is witnessing extensive use. This is mainly
Scienziato Luminor 1950 Tourbillon GMT Titanio, which was launched in 2017 and
because it makes it possible to create shapes without molds, thus resulting in the
retails for over US$120,000 is one such example. It has a titanium case which is
production of elements with extreme intricacy that could otherwise not be
hollowed out using the direct metal laser sintering technology which builds the case
accomplished. It was in 2011 that 3D printing for fashion began to take off with an
layer by layer with a fiber optic laser using powdered titanium.
Haute Couture runway show at that year’s Materialise World Summit, featuring
collections by Iris van Herpen, Elvis Pompilio, Daniel Widrig, and Niccolo Casas.
Since then, brands such as Balenciaga have used the technology to produce its
seamless jackets for its Autumn/Winter 2018 collection, while Gucci even had its
models carry 3D replicas of their own heads during its Autumn/Winter 2018 show.
92
Sources: Burberry; Harvard Business Review; RWTH Aachen University
“For me, it represents what I love about tailoring and what Balenciaga
stands for in terms of architectural garments. We started quite artisanally,
then worked with 3D scanning body moulding specialists — we worked with
people who aren’t used to working in fashion. I hope it’s the beginning of a
long collaboration.”
Demna Gvasalia, Creative Director
Balenciaga
93
List of tech start-ups disrupting the luxury retail space (1/3)
Tech start-ups (1/3)
Company
Description
Focus areas
Rent the Runway
A platform on which users can rent luxury clothes and accessories such as handbags and jewels
on a monthly basis
Apparel & accessories
Diamond Foundry
A diamond start-up that provides an ethical and eco-friendly alternative to mined diamonds
Jewelry
Modern Meadow
Produces animal-free lab-grown leather
Handbags
183.6
Red Points
Uses artificial intelligence to recognize fake products and to refine searches on marketplaces
All
106.6
Eleven James
A luxury watches subscription platform
Watches
40
Maiyet
Provides artisanal luxury fashion consisting of apparel, accessories and jewelry
Apparel & accessories, jewelry
39
Panoply
Provides a smart cloud data warehouse that automates the collection, modelling, and scaling of
any data
Apparel & accessories
Bag Borrow or Steal
Provides an online boutique where women & men borrow, collect, and share luxury accessories.
Handbags
Unmade
Develops solutions to offer personalized clothing.
Apparel & accessories
94
Sources: CB Insights; Company information; Crunchbase
Funding in million US$
526.1
350
24.3
20
13.2
List of tech start-ups disrupting the luxury retail space (2/3)
Tech start-ups (2/3)
Company
Description
Focus areas
Armarium
An online platform that rents luxury clothes and accessories
Apparel & accessories
Hawthorne Labs
Offers tailored fragrances for men based on the customers’ diet, body temperature, and work
environment, among other parameters
Fragrance
Flont
Develops and operates a jewelry subscription platform
Jewelry
5
Cappasity
Provides an in-store browsing experience to online retailers through interactive 3D images.
Jewelry
7.5
Entrupy
A start-up that uses artificial intelligence to help brands identify fake goods
All
8.7
1Atelier
Allows customers to customize the color and hardware of their leather handbags
Handbags
1.5
Cypheme
Uses artificial intelligence to help brands identify fake goods
All
1.4
Block Verify
Uses blockchain technology to help brands identify fake goods
All
0.053
MemoMi Labs
Develops solutions to integrate new technologies such as AR/VR in luxury stores
Apparel & accessories
95
Sources: CB Insights; Company information; Crunchbase
Funding in million US$
6
5.2
NA
List of tech start-ups disrupting the luxury retail space (3/3)
Tech start-ups (3/3)
Company
Description
Focus areas
Modiface
Offers make up, skin, and hair product visualization services to shoppers
All
Acquired by L'Oréal
Euclid Analytics
Tracks smartphone signals across the store to help its clients understand how customers move
inside the store
NA
Acquired by The We Company
96
Sources: CB Insights; Company information; Crunchbase
Funding in million US$
CHAPTER 9
Country analysis
The U.S., China, and Japan are projected to be the three biggest markets for luxury goods in 2023 with a
market size of US$75.7bn, US$53.6bn and US$30.5bn respectively. These markets are projected to
account for 43% of the global luxury market in 2023.
Even though the U.S. retains the leading position for luxury goods globally, factors such as economic and
political uncertainty, cutbacks on discretionary spending, and low sales to international tourists are
affecting market growth.
The U.S. to lead the global luxury goods market
U.S. (1/4)
According to the Statista Market Insights, the U.S. luxury goods market is expected
to increase from US$75.7 billion in 2023 to US$83.3 billion by 2028, at a
CAGR(1)
of
in 2022, followed by leather goods (US$17.2 billion), cosmetics and fragrances
2%. Even though the U.S. is the number one market for luxury goods globally,
(US$11.6 billion), eyewear (US$ 8 billion), and watches & jewelry (US$7.8 billion). The
factors such as political uncertainty, cutbacks on discretionary spending, especially
U.S. luxury market is likely to witness considerable digital adoption, with online
in response to the COVID-19 pandemic, and low sales to international tourists due
sales expected to increase from 17.9% in 2022 to 26.5% by 2025. In 2021,
to the strong dollar are expected to affect market growth.
EssilorLuxottica, followed by LVMH, Estée Lauder, Kering, L'Oréal, PVH, and
According to Cara David, managing partner at research company YouGov, the
current situation feels a lot like 2007, when the global economic meltdown begun.
Even though people now have more money to buy luxury products, the enthusiasm
to do so is on the wane. According to a global survey conducted by YouGov, even
though the number of affluent U.S. consumers participating in luxury purchases
increased from 64% in 2017 to 68% in 2018, only 25% planned to spend more on
luxury in the future, as compared to 31% in 2016. Additionally, stringent economic
policies, such as high tariffs on luxury cars, perfume, handbags, wine, spirits, and
cheese are expected to impact the import of luxury products, which mainly come
from Europe.
98
Fashion is the largest luxury market in the country, with revenues of US$25 billion
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Tapestry were the top-selling luxury brands in the country.
The U.S. luxury goods market is about to witness sluggish growth
U.S. (2/4)
Luxury goods market in billion US$
2%(1)
64.34
99
Notes:
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
77.28
2023
2024
2025
80.18
81.63
83.32
2026
2027
2028
69.52
68.94
59.11
2018
75.69
78.75
2020
64.12
2021
2022
Luxury Fashion to account for the largest share in 2023
U.S. (3/4)
Luxury goods market shares in 2023
Market share by leading brands in 2021
10%
11%
10%
11%
36%
5%
55%
5%
17%
5%
5%
5%
25%
Fashion
Cosmetics & Fragrances
Leather Goods
Eyewear
100
Sources: Statista Market Insights 2023
Watches & Jewelry
EssilorLuxottica
Estée Lauder
L’Oréal
Tapestry
LVMH
Kering
PVH
Other
Average revenue per capita to register moderate growth
U.S. (4/4)
Luxury goods market: average revenue per capita in US$
Luxury goods market sales channel shares
7%
1%(1)
225
210
197
179
193
228
231
234
237
2019
2020
2021
10%
13%
242
16%
18%
20%
23%
26%
84%
82%
80%
77%
74%
2021
2022
2023
2024
2025
208
93%
2018
9%
2022
2023
2024
2025
2026
2027
2028
2017
91%
2018
90%
2019
87%
2020
Offline
101
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Online
Despite COVID-19, China to grow at a rapid pace
China (1/4)
The Chinese luxury goods market has suffered over the last few years owing
women on products such as designer handbags, perfumes, and other cosmetics.
primarily to President Xi Jinping’s anti-corruption drive which started in 2012.
According to the Federation of the Swiss Watch Industry, watch exports to Hong
However, the market rebounded in 2017 and registered the highest growth in 5
Kong SAR, a favorite destination for Chinese buyers, fell 44% in 2020, as compared
years at 5.5%. The reduction of import duties levied on foreign luxury brands, the
to 2018. Even so, watches & jewelry are the largest category followed by fashion,
rapid rise of a more affluent and fashion-savvy middle class, and the government’s
leather goods, cosmetics & fragrances, and eyewear. In terms of per capita
fight against the parallel market run by the daigu2, are the major factors that
spending, China is one of the leading countries, thanks to the rising purchasing
stimulated industry growth. Although the COVID-19 pandemic led to a sharp dip in
power of young millennials and Generation Z. Luxury online sales are expected to
revenues, from US$44.1 billion in 2019 to US$40.2 billion in 2020, the medium term
increase from 34.8% in 2021 to 35.5% by 2025.
bodes well for the market, mainly supported by the strong spending by the
Millennials who have rapidly emerged as the major consumer segment. According
to Bruno Lannes, a partner at Bain, the average age of the luxury consumer in
China is 35, which is about 10 years younger than luxury consumers in developed
economies. A 2018 Bain study also showed that 93% of these millennials were
expected to purchase more luxury goods over the next three years.
The composition of China’s luxury spending is also changing slowly as a result of
the anti-corruption initiative. Watches, primarily for males, used to account for
most of the market. However, the emphasis is slowly switching to spending by
102
Sources: Statista Market Insights 2023
China’s luxury goods market to reach US$65 bn by 2028
China (2/4)
Luxury goods market in billion US$
4%(1)
53.61
56.08
58.47
60.79
63.09
65.41
48.91
44.09
39.98
2018
103
Notes:
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
40.24
2020
42.70
2021
2022
2023
2024
2025
2026
2027
2028
Watches & Jewelry to account for a 46% market share in 2023
China (3/4)
Luxury goods market shares in 2023
Market share by leading brands in 2021
2%
10%
16%
10%
5%
46%
17%
5%
60%
5%
5%
20%
Watches & Jewelry
Leather Goods
Fashion
Cosmetics & Fragrances
104
Sources: Statista Market Insights 2023
Eyewear
China National Gold Group Gold Jewellery
Richemont
LVMH
Rolex
Kering
Swatch Group
Other
Online share to reach 36% by 2025 in China
China (4/4)
Luxury goods market: average revenue per capita in US$
Luxury goods market sales channel shares
4%(1)
37
31
28
38
40
41
43
45
41%
2019
32%
38%
35%
34%
35%
35%
36%
62%
65%
66%
66%
65%
65%
2020
2021
2022
2023
2024
2025
34
28
29
59%
2018
37%
2020
2021
2022
2023
2024
2025
2026
2027
2028
2017
63%
2018
68%
2019
Offline
105
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Online
Japan is the third-largest luxury goods market globally
Japan (1/4)
With China’s massive consumer appetite for luxury products and South Korea’s
department stores. However, according to the Statista Market Insights, online sales
image as a trendsetting nation, Japan has often been overlooked as a major force in
are expected to grow from 22.8% in 2022 to 29.4% by 2025, which is pointing
the Asian and global luxury goods market. Its falling economic condition probably
toward an increased role for digital touchpoints in the luxury consumer’s buying
had a lot to do with this in the past, but times are now different. Japan’s economy
journey. Japan’s peculiarity lies in the fact that it discriminates against certain
has rebounded after almost two decades of recession mainly due to Prime Minister
clientele, focusing more on domestic consumers. For example, Chanel attempts to
Shinzō Abe’s economic program and monetary policy, which were started in 2013.
keep local customers physically separated from tourists and has gone so far as to
This growth is reflected in the resurgence of the country’s luxury market from both
make a separate cosmetics and perfume section reserved for top Japanese
domestic and foreign consumers. According to the Statista Market Insights, Japan is
customers to keep them away from the nouveau riche crowd.
the third-largest luxury goods market globally, with estimated revenues of US$26.4
billion in 2022, a 2% increase as compared to 2021. Other factors expected to
contribute to the market’s subsequent growth are a devalued yen which is driving
foreign consumption especially from China, an increase in household spending, the
reinforced role of the millennial consumer, and the changing consumption habits of
the country’s female population.
Surprisingly, digital penetration in Japan’s luxury goods market is still quite low as
compared to other countries, reflecting a lack of digital savviness among luxury
consumers and the limited online presence of important local companies such as
106
Sources: Statista Market Insights 2023
Japan’s luxury goods market to grow at a CAGR of 5% during 2023-2028
Japan (2/4)
Luxury goods market in billion US$
5%(1)
30.49
25.89
23.47
2018
107
Notes:
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
24.78
2020
25.98
26.40
2021
2022
2023
32.31
2024
34.02
2025
35.66
2026
37.30
2027
38.81
2028
Cosmetics & Fragrances to lead the luxury market in Japan
Japan (3/4)
Luxury goods market shares in 2023
Market share by leading brands in 2021
2%
15%
14%
34%
10%
50%
22%
5%
5%
5%
5%
28%
Cosmetics & Fragrances
Leather Goods
Fashion
Watches & Jewelry
108
Sources: Statista Market Insights 2023
Eyewear
5%
LVMH
Chanel
Kosé
Pola Orbis
Shiseido
Kering
Onward
Other
The Japanese online share is expected to reach 29% by 2025
Japan (4/4)
Luxury goods market: average revenue per capita in US$
Luxury goods market sales channel shares
10%
5%(1)
244
204
185
196
206
259
274
289
304
2019
2020
2021
13%
15%
316
21%
23%
25%
27%
29%
79%
77%
75%
73%
71%
2021
2022
2023
2024
2025
210
90%
2018
11%
2022
2023
2024
2025
2026
2027
2028
2017
89%
2018
87%
2019
85%
2020
Offline
109
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Online
France has the richest legacy in the global luxury market
France (1/3)
France’s importance as a key market for luxury goods can be gauged from the fact
that nine French
companies,(1)
Luxury goods market in billion US$
including the world’s largest luxury group, LVMH,
have been featured in Deloitte’s 2020 annual list of Top 100 luxury goods
4%(2)
companies. What is more interesting though is that these companies represent
over 28% of the total sales in the sector. Another report by the real estate company
18.32
Savills found that Paris enjoyed the highest share of all luxury store openings
worldwide in 2017 with 5.9%. One of the main drivers of the French luxury goods
industry is the rich legacy of its past, with its products widely regarded as symbols
15.55 15.76
of quality and high status.
19.12
19.87
20.54
21.12
21.76
15.08 14.56
12.99
According to the Statista Market Insights, the French luxury goods market is
expected to increase from US$18.3 billion in 2023 to US$21.8 billion by 2028, at a
CAGR(2) of 4%. Luxury fashion is expected to constitute the largest product
category, with sales reaching US$6.6 billion in 2023, followed by leather goods
(US$4.7 billion), cosmetics and fragrances (US$3.5 billion), watches and jewelry
(US$2.5 billion), and eyewear (US$1.1 billion). In 2021, LVMH was the largest player
in the market with a share of 25%, followed by Kering and Hermès, with 5% each.
Online penetration is expected to increase from 19.6% in 2022 to 27.5% by 2025.
110
Notes:
(1) Clarins, Hermès, Kering, L'Oréal, Longchamp, LVMH, Nuxe, SMCP, Zadig & Voltaire (2) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Fashion dominates the luxury market with a 36% market share
France (2/3)
Luxury goods market shares in 2023
Market share by leading brands in 2021
6%
13%
25%
36%
5%
19%
65%
5%
26%
Fashion
Cosmetics & Fragrances
Leather Goods
Watches & Jewelry
111
Sources: Statista Market Insights 2023
Eyewear
LVMH
Hermès
Kering
Other
Average revenue per capita to reach US$328 by 2028
France (3/3)
Luxury goods market: average revenue per capita in US$
Luxury goods market sales channel shares
9%
3%(1)
279
242
239
230
199
290
301
310
319
2019
2020
2021
12%
15%
328
17%
20%
22%
25%
28%
83%
80%
78%
75%
73%
2021
2022
2023
2024
2025
222
91%
2018
10%
2022
2023
2024
2025
2026
2027
2028
2017
90%
2018
88%
2019
85%
2020
Offline
112
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Online
The UK is a natural hub for luxury products
UK (1/4)
The UK is a natural and structural hub for luxury products owing to its established
Fashion is the largest category, with sales of US$5.9 billion in 2022, followed by
customer base, pool of creative talent, and the legacy and heritage of many British
cosmetics and fragrances (US$2.7 billion each), leather goods (US$2.6 billion),
brands, such as Burberry and Harrods. Other factors such as London’s status as a
watches and jewelry (US$2.1 billion), and eyewear (US$313 million). In 2021, LVMH
global financial center, the importance of London Fashion Week, and a strong and
and Richemont were the two largest brands in terms of sales in the country, with
diversified university system across the arts, fashion and design all contribute to
shares of 10% each.
making the UK one of the most important markets for luxury products in the world.
Additionally, new brands such as Victoria Beckham, Orlebar Brown, and Emilia
Wickstead have emerged over the past few years and are making impressive sales
in both domestic and international markets, in spite of slow GDP growth.
However, Brexit-induced political and economic uncertainty, the devaluation of the
pound, the resultant rise in import prices, and of course disruptions caused by the
COVID-19 pandemic are negatively impacting market growth. The upside, however,
is that many international tourists are likely to travel to the UK due to the weak
pound, which is expected to positively impact luxury sales. Domestic consumers are
also preferring to buy in the home market due to unfavorable exchange rates
overseas. According to the Statista Market Insights, the UK luxury goods market is
expected to grow from US$16.4 billion in 2023 to US$20.2 billion by 2028, at a
CAGR(1) of 4.3%.
113
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
The UK luxury market is likely to reach US$20 billion by 2028
UK (2/4)
Luxury goods market in billion US$
4%(1)
16.37
12.22
12.91
13.54
13.73
2021
2022
17.20
18.03
18.84
19.51
20.16
10.87
2018
114
Notes:
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2020
2023
2024
2025
2026
2027
2028
Fashion leads the luxury goods market in the UK
UK (3/4)
Luxury goods market shares in 2023
Market share by leading brands in 2021
2%
10%
15%
10%
43%
5%
19%
5%
60%
5%
5%
20%
Fashion
Leather Goods
Cosmetics & Fragrances
Watches & Jewelry
115
Sources: Statista Market Insights 2023
Eyewear
LVMH
Estée Lauder
L’Oréal
Richemont
Kering
TFG London
Others
The online share is expected to increase to 35% in 2025
UK (4/4)
Luxury goods market: average revenue per capita in US$
Luxury goods market sales channel shares
15%
4%(1)
238
199
191
182
249
260
271
280
289
17%
19%
24%
26%
28%
30%
32%
35%
76%
74%
72%
70%
68%
65%
2020
2021
2022
2023
2024
2025
200
160
85%
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2017
83%
2018
81%
2019
Offline
116
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Online
Hong Kong SAR’s luxury market is expected to increase
Hong Kong SAR (1/4)
Historically, Hong Kong SAR has been a hub for luxury products, with the market
International brands have responded accordingly and are decreasing their
increasing at a double digit growth rate every year from 2010 till 2014, according to
presence in Hong Kong SAR. For example, in the famous Pacific Place mall,
Statista Market Insights. This growth was mainly driven by Chinese tourists who
Burberry and Louis Vuitton have reduced the size of their stores, while Coach has
visited Hong Kong SAR in large numbers from 2003 after the government launched
closed down completely. Landlords are thus looking to refresh their tenant mix to
the Individual Visit Scheme(1). In fact, a study by asset management company
cater to new spending habits and have therefore begun to target lifestyle
Schroder found that Hong Kong SAR mall sales to tourists ranged from 30% to 70%,
companies and food outlets.
with the Chinese representing close to 80% of the total. Factors such as
geographical proximity, much lower taxes on luxury goods and a wide selection of
luxury products, made Hong Kong SAR an ideal market for wealthy Chinese
consumers looking for authentic luxury products.
However, after nearly a decade of increasing revenues, Hong Kong SAR’s luxury
goods market fell for the first time in 2015, also because of a decline in the number
of Chinese visitors. Various factors such as the Chinese government’s anticorruption campaign, currency fluctuations, cultural tension between the two
nations, the maturing of the Chinese domestic market and shifting consumer
preferences to luxury experiences, an area where Hong Kong SAR hasn’t developed,
were responsible for this.
117
Notes:
(1) After the scheme, the number of tourists increased from 7 million in 2003 to 44 million in 2013
Sources: South China Morning Post; Schroders; Statista Market Insights 2023
Hong Kong SAR’s luxury market to reach US$16 billion by 2027
Hong Kong SAR (2/4)
Luxury goods market in billion US$
2%(1)
13.99
12.92
11.73
2018
118
Notes:
14.44
14.74
15.04
15.32
2023
2024
2025
2026
15.64
15.98
2027
2028
12.80
11.26
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2020
2021
2022
Watches & Jewelry leads the luxury market
Hong Kong SAR (3/4)
Luxury goods market shares in 2023
14%
Market share by leading brands in 2021
3%
0%
15%
15%
50%
17%
65%
10%
5%
Watches & Jewelry
Leather Goods
Fashion
Cosmetics & Fragrances
119
Sources: Statista Market Insights 2023
Eyewear
5%
Rolex
Richemont
LVMH
Swatch Group
China National Gold Group Gold Jewellery
Other
Hong Kong SAR has one of the lowest rates of digital penetration
Hong Kong SAR (4/4)
Luxury goods market: average revenue per capita in US$
Luxury goods market sales channel shares
1%(1)
14%
19%
19%
20%
22%
25%
28%
81%
81%
80%
78%
75%
72%
2020
2021
2022
2023
2024
2025
1,695
1,502
89%
2018
13%
2,031
1,961 1,988
1,939
1,914
1,840 1,887
1,737
1,591
11%
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2017
87%
2018
86%
2019
Offline
120
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Online
High concentration of HNIs makes Singapore an attractive market
Singapore (1/5)
The luxury goods market in Singapore is expected to increase from US$4.1 billion in
2023 to US$4.8 billion by 2028, at a
CAGR(1)
of 3.5%. One of the main factors driving
the market is that it has one of the highest GDPs in the world resulting in a strong
concentration of high net-worth individuals (HNIs) who spend on luxury products.
Singapore also attracts many foreign tourists with the highest being from China. In
fact, according to the Singapore Tourism Board (STB), Chinese tourists, who are
well-known for their affinity towards luxury goods, were the highest spenders in
Singapore during 2017-2019 with a total spend of over US$3 billion.
Moreover, Singapore’s reputation as one of the best places to live and work globally
makes it a highly sought-after market for investors and businesses looking to tap
into the latest consumer and lifestyle trends, especially in the high-end segment
where spending power is greater. The country also benefits due to its location
which is at the heart of the booming Asian region which is seen as the new growth
frontier for luxury products and experiences.
Luxury watches and jewelry constitutes the largest category, followed by luxury
fashion, leather goods, cosmetics and fragrances, and eyewear.
121
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
In 2021, Swatch Group had the highest market share with 20%, followed by Rolex
(15%), LVMH (10%), Richemont, and Kering (5% each). Online sales are expected to
grow from 21.2% in 2022 to 28.5% by 2025.
Singapore’s luxury market to reach US$4.8 billion by 2028
Singapore (2/5)
Luxury goods market in billion US$
3%(1)
3.57
3.40
3.86
4.07
4.23
4.39
4.54
4.70
4.83
3.08
2.45
2018
122
Notes:
2019
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
2020
2021
2022
2023
2024
2025
2026
2027
2028
Luxury watches are very popular in Singapore
Singapore (3/5)
Luxury watches and jewelry constituted the single largest category in the market in
Strong cultural heritage is another reason. Singapore was home to Timezone.com,
2021, with a total spend of US$2.3 billion, followed by luxury fashion.
the world’s first internet forum on watches which started in 1994. Other renowned
According to a study of 1,000 Singaporean consumers conducted by research
company Kadence Singapore, watch companies Patek Philippe and Rolex figured
among the top five luxury brands in the country that consumers would like to own,
platforms such as The Purist178 which later evolved into Purist Pro and Revolution,
one of the leading print publications on watches globally, have their roots in
Singapore.
with the other three being automotive companies Porsche, Bugatti, and Rolls-
Royce(1). The survey found that the main reason why consumers preferred these
products was due to their perception as status brands. In fact, consumers
mentioned the biggest strength for Patek Philippe to be a brand that one “would be
proud to be seen to own” while for Rolex it was it was the brand’s ability to enhance
one’s status.
Another factor driving the purchase of luxury watches and jewelry is high
disposable incomes for an average wage earner in Singapore. The combination of
high incomes, low taxes and the lower need for more expensive items such as
cars(2), has created an economic environment conducive to spending on luxury
watches.
123
Notes:
(1) Cars are not included in Statista’s luxury market study (2) Import and special duties have made Singapore one of the most expensive places to own a car in the world
Sources: Statista Market Insights 2023; deployant.com; Forbes; Singapore Business Review
Swatch Group dominates the luxury goods market in Singapore
Singapore (4/5)
Luxury goods market shares in 2023
Market share by leading brands in 2021
4% 1%
20%
18%
45%
15%
58%
20%
10%
5%
Watches & Jewelry
Leather Goods
Fashion
Cosmetics & Fragrances
124
Sources: Statista Market Insights 2023
Eyewear
5%
Swatch Group
LVMH
Richemont
Rolex
Kering
Other
Singapore’s online share to reach 28% by 2025
Singapore (5/5)
Luxury goods market: average revenue per capita in US$
Luxury goods market sales channel shares
9%
3%(1)
606
586
536
650
679
701
722
742
764
2019
2020
91%
2021
2022
2023
2024
2025
2026
2027
13%
784
419
2018
11%
2028
2017
89%
2018
87%
2019
17%
19%
21%
23%
26%
28%
83%
81%
79%
77%
74%
72%
2020
2021
2022
2023
2024
2025
Offline
125
Notes:
(1) CAGR: Compound Annual Growth Rate
Sources: Statista Market Insights 2023
Online
CHAPTER 10
Competitive landscape
France leads in the number of leading luxury goods companies globally. Specifically, most of the
prominent French luxury goods companies are located in Paris. We have a closer look at some of those
prominent French companies: LVMH, L'Oréal, Kering, and Hermès along with other global leaders
including Burberry, Swatch, Estée Lauder, and Coty.
Most of the luxury goods companies followed inorganic growth path by acquiring competitor companies
to increase their business presence. A few of them opted for licensing and distribution arrangements to
support their bottom line.
Leading luxury goods companies are mainly located in Paris
Company comparison
Location of leading luxury goods companies
127
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023
Headquarter and revenue of leading luxury goods companies
Company
Headquarter
Revenue in billion US$
LVMH
Paris, France
93.7
L’Oréal
Paris, France
45.3
Kering
Paris, France
24.1
Estée Lauder
New York, U.S.
17.7
Coty
New York, U.S.
5.3
Swatch Group
Biel, Switzerland
8.5
Hermès
Paris, France
13.8
Burberry
London, UK
3.9
LVMH forayed into eCommerce in 2017
LVMH: Overview
The LVMH (Louis Vuitton Moët-Hennessy) group operates as a luxury products
Markets and selected brands
company. The company operates through six major markets including wines and
spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry,
Markets
selective retailing, and other activities. It has over 70 brands including Marc Jacobs,
Sephora, Fendi, DKNY, Hermès, and the most recently acquired Tiffany and Co., in
early 2021.
LVMH forayed into eCommerce in May 2017 with the launch of its website 24
Sèvres. Since then, it has invested over US$60 million in an online fashion search
business Lyst to expand its online presence and capture younger shoppers. The
company was formed in 1987 through the merger of Louis Vuitton and MoëtHennessy and is headquartered in Paris, France.
Wines and Spirits
Fashion & Leather
Goods
Perfumes &
Cosmetics
Watches & Jewelry
Year founded:
1987
Number of Employees:
196,006 (2022)
Number of Stores:
5,664 (31 Dec 2022)
Revenue:
US$93.7 billion (2022)
128
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023; Company information
Selective retailing
Other activities
Key brands
Celebrity endorsement and no-discount strategy catalyzed growth
LVMH: Strategies
LVMH has the most aggressive celebrity endorsement strategy
Luxury brands have for long used celebrity endorsements as the primary marketing
tool. In fact, Charles Worth, the man who invented haute couture, used the services
of Princess Von Metternich who was a high society influencer and close friend of
Napoleon’s wife Empress Eugenie, to promote his fashion house La Maison Worth.
Louis Vuitton is probably the most persistent among all luxury brands when it
CEO of marketing company Spotted, luxury brands such as LVMH need to urgently
address the non-Caucasian segment, otherwise they run the risk of losing out
market share to brands such as Dolce & Gabbana and MCM.
A no-discount strategy helps to maintain exclusivity and enjoy higher
margins
comes to celebrity endorsements – having worked with Diane Kruger (2004), Uma
When steel baron Henri Recamier married into the Vuitton family in the 1970s, he
Thurman (2005), Gisele Bündchen (2006), Pharrell Williams (2006), Scarlett
noticed that retailers were adding a mark up of as much as 100% to the company’s
Johanssen (2007), Kate Moss (2008), Kanye West (2008), Madonna (2009), Angelina
products and keeping the money for themselves. This resulted in him
Jolie (2011), Muhammad Ali (2012), Michelle Williams (2013), Gisele Bündchen
implementing a policy of vertical integration which laid down the rule that the
(2014), Michelle Williams (2016), Emma Stone (2017), and most recently the K-POP
brand would henceforth not only own its factories but also all its stores and any
group BTS, in 2021
other outlets. LVMH has enforced that rule till today and therefore never sells its
In fact, according to an August 2018 Forbes article, LVMH spent 38.4% of its overall
revenue on marketing and selling activities, with this number increasing to 42.9%
for Louis Vuitton alone. By contrast Hermès spent only 5% of its overall revenues
on marketing. However, one area where the brand lacks is multicultural marketing
as a very small percentage of celebrities and models who endorse LVMH products
129
or walk their runway shows, are of African descent. According to Janet Comenos,
Notes:
(1) LVMH has never commented on this practice and hence these reports remain unconfirmed till now
Sources: Forbes; Zapyle
products wholesale to a department store, which means the store in turn cannot
sell the products at a discounted rate. In fact, according to reports in several trade
magazines, the company allegedly destroys products at the end of each season
rather than discount its unsold stock(1). This strategy has not only resulted in higher
margins but has also reinforced the brands exclusivity which in turn allows it to
command a higher price than most other luxury brands.
LVMH relied on acquisitions to fuel growth
LVMH: Timeline (1/4)
1854
l
Louis Vuitton founded in Paris.
1992
l
Louis Vuitton opens its first store in Beijing, China
1885
l
Louis Vuitton expands internationally by opening a store in London
1993
l
Acquired the Kenzo company from SEBP and Financiere Truffaut for
about US$80 million in August
1947
1969
l
l
Christian Dior launches Miss Dior perfumes
Louis Vuitton enters the Asian market with a store in Tokyo
1996
l
Acquired Fred Joaillier, a French jewelry brand in January
1997
l
Invested US$2.6 billion for 61% share in DFS Group Ltd., a specialty
retailer that catered to international travelers
1971
1984
l
l
Moët et Chandon merges with Jas. Hennessy & Company, the
Acquired Sephora, the French retailer of perfumes and beauty
largest cognac producer in France, and is renamed Moët-Hennessy
products, for US$267 million
Louis Vuitton goes public
1998
l
Purchased Le Bon Marché, an exclusive specialty retailer in Paris
Acquired Krug, the premium champagne brand from Rémy
1987
l
Cointreau
Louis Vuitton and Moët-Hennessy merged to create LVMH in a US$4
billion deal
1999
l
Invested in four American beauty products companies: Hard Candy,
Bliss Spa, BeneFit Cosmetics, and Make Up For Ever
130
Sources: Company information
LVMH established its watch and jewelry division in 1999
LVMH: Timeline (2/4)
1999
l
Acquired luxury watch makers Tag Heuer for US$740 million in
2001
l
Acquired Fendi, the Italian fashion house in November
2005
l
The Watches & Jewelry division becomes a member of the
September.
Purchased a majority interest in Thomas Pink, a British shirt maker,
in September
Responsible jewelry Council (RJC)
Sephora launches sephora.com, one of the very first online
shopping sites in October
Partnered with Italian fashion company Prada, to acquire a majority
stake in Italian fashion design house Fendi in October
Established new watch and jewelry division in November
2008
l
Acquired luxury watch maker Hubolt in April
2011
l
Acquired ArteCad, one of its main suppliers of Swiss watch dials in
November
Increased its stake in Inter Parfums Inc., a perfume manufacturer,
from 6.3 percent to 20 percent.
Acquired Swiss watch manufacturer Zenith International S.A. in
November
2000
l
Acquired Urban Decay, an American cosmetics company in February
Acquired 67% interest in Italian fashion house Emilio Pucci in
February
131
Sources: Company information
2013
l
Opened Hélios, its new Perfumes and Cosmetics research center in
France
Acquired 80 percent of Italian luxury cashmere clothing brand Loro
Piana for US$2.57 billion in July
LVMH launched its multi-brand eCommerce website in 2017
LVMH: Timeline (3/4)
2014
l
Launched the Institut des Métiers d'Excellence, a vocational training
2017
l
Launched a multi-brand eCommerce website in May
program to pass on unique skills and savoir-faire to new
Launched Clos19, an experimental online drinks shopping platform
generations
in May
Louis Vuitton introduced upscale smartwatch to compete with Apple
2015
2016
l
l
Inaugurated a new shoes and leather goods manufacturing facility
in July
in Ferrare, in northern Italy in August
Louis Vuitton launched its eCommerce site In China in July
TAG Heuer launched its first luxury smart watch in November
LVMH's Celine launched its eCommerce venture in December
Sold out the loss-making fashion company Donna Karan
2018
l
Invested over US$60 million in an online fashion search business
International to US design and licensing specialist G-III Apparel in
Lyst in May to expand online presence and capture younger
July
shoppers
Acquired suitcase maker Rimowa for US$716 million in October
2019
2017
l
l
Introduced Tambour Horizon connected watch and Horizon wireless
Created a venture fund, LVMH Luxury Ventures, to invest in small,
earphones in February
promising fashion, cosmetics or accessories companies in February
LVMH and Stella McCartney have reached an agreement in July to
Acquired majority stake in perfume maker Maison Francis Kurkdjian
further develop the Stella McCartney House
in March
Announced to acquire the luxury jewelry maker, Tiffany & Co for
Gained full control over Christian Dior for US$13.1 billion in April
US$16.2 billion in November
132
Sources: Company information
LVMH to manufacture hydroalcoholic gel in France
LVMH: Timeline (4/4)
2020
l
Stockholders of Tiffany & Co. approved the acquisition by LVMH in
2021
l
Moët-Hennessy launched the Robert-Jean de Vogüé Research
February
Center to conduct scientific research around sustainability in
Secured an order with a Chinese industrial supplier to deliver
October
around 40 million masks in France in March
Announced that its Perfumes & Cosmetics business would begin
2022
l
LVMH Japan partnered with Softbank to enhance online and offline
manufacturing hydroalcoholic gel to address its shortage in France
customer experience through the use of cutting edge technologies
LVMH plans to walk away from its planned US$16.2 billion deal,
in February
citing the threat of U.S. tariffs on French goods in September
LVMH partnered with Imperial College London to develop a fiber
Agrees on the deal in October, after Tiffany & Co. decides to lower
capable of mimicking a range of luxury materials including fur in
the price of its acquisition, from US$135 per share to US$131.5
April
Moët Hennessy, the wines and spirits division of LVMH, acquired
2021
l
Acquires Tiffany & Co. for US$15.8 billion in January
Joseph Phelps Vineyards in July
Partnered with Prada and Cartier to develop the world’s first global
Acquired Pedemonte Group, a jewelry producer present in Italy and
luxury blockchain called Aura Blockchain Consortium in April
France in November
After 16 years in development, LVMH officially opens its US$890
million flagship shop in Paris in June
Signed an agreement with Virgil Abloh to acquire a majority stake in
Off-White in July
133
Sources: Company information
L'Oréal’s presence in all distribution format drives business growth
L'Oréal: Overview
L'Oréal SA is a personal care company that specializes in the areas of hair color,
skin care, sun protection, make up, perfume, and haircare.
L'Oréal is present across all distribution networks including mass-market,
department stores, pharmacies and drugstores, hair salons, travel retail, branded
retail and eCommerce. The company has a dedicated team of nearly 4000 people
for research and innovation who are working to meet beauty aspirations all over
Business divisions and selected brands
Business
divisions
Luxe(1)
the world.
L'Oréal is headquartered in Clichy, France and is listed on Euronext Paris.
Consumer products
Professional products
134
Year founded:
1909
Number of Employees:
87,369 (2022)
Revenue:
US$45.3 billion (2022)
Revenue (eCommerce):
US$11.5 billion (31st Dec 2022)
Market Capitalization:
US$190.5 billion (31st Dec 2022)
Notes:
(1) Luxe business division deals with skin care, make up and perfume
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023; Company information
Active cosmetics
Key brands
Focus on active cosmetics drives growth
L'Oréal: Strategies
The global active cosmetics or cosmeceuticals market is poised for robust growth
in the cosmeceuticals market. In Latin America, the division achieved double digital
mainly because it is aligned with existing trends such as the desire for health,
growth in 2017, mainly because of the strength of the Lancôme and La Roche-
safety, well-being, authenticity and naturalness. L'Oréal is one of the leading
Posay brands. In 2Q2018 the company’s 6.3% increase in sales was also mainly
companies in this market globally.
attributed to the strong performance of the active cosmetic division which posted
2017 was a landmark year for the company’s business as it crossed €2 billion in
revenues for the first time ever, with a 5.8% increase as compared to 2016. In 2021,
the active cosmetics saw the biggest growth among all markets, up 28.4% year-onyear. It was also the year when L’Oréal Luxe became the company’s largest division,
with active cosmetics doubling in size over the last four years.
One of L'Oréal’s major strengths in this division is that it has a portfolio of
complementary brands from aesthetic medicine (SkinCeuticals) to dermatology (La
Roche-Posay), to accessible skincare (CeraVe), and natural skincare (Vichy).
North America is the fastest-growing market for active cosmetics in the world. The
growth has been bolstered by the acquisition of CeraVe, AcneFree, and Ambi from
Valeant Pharmaceuticals for a sum of US$1.3 billion. These acquisitions were
especially important as they are expected to strengthen the company’s
relationships with health professionals who are vital towards developing products
135
Sources: Trefis
double digit growth driven by the success of its La Roche-Posay and SkinCeuticals
brands and the impetus provided by Vichy and CeraVe. In 2021, the company’s
overall business in Latin America grew 20.6% year-on-year, driven mainly by
Revitalift, La Roche-Posay, and most of all CeraVe, which more than doubled its
sales in the region.
L'Oréal was publicly listed in 1963
L'Oréal: Timeline (1/5)
1909
l
The company was founded
1970
l
Acquired Biotherm, a skincare specialist company to complement its
existing Lancôme and Vichy brand
1928
l
Acquired the company Savons Français
1973
1959
l
l
Expanded business operations to Brazil by forming FAPROCO
Acquired the French pharmaceutical company, Synthelabo to
research on remedial dermatology
(Fábrica Produtos Cosméticos S.A.)
1974
1963
l
The company got listed in Paris Stock Exchange
1964
l
Entered the luxury goods market by acquiring Lancôme, a perfume,
l
markets, particularly Japan
1976
l
l
Acquired the then leading haircare products manufacturer, Garnier
1966
l
Partnered with Guy Laroche, a major French couturier to create a
number of fragrances for luxury market
Acquired the mascara brand Ricils and merged it with Gemey to
expand its offer in all make up segments.
skincare and make up brand
1965
Made an agreement with Nestle to enter certain international
1984
l
Acquired Paloma Picasso’s beauty license to market its products
1985
l
Acquired Ralph Lauren beauty license to market its products
1988
l
L’Oréal acquired Helena Rubinstein, the American brand of skincare
products in October
136
Sources: Company information
L'Oréal adopted an inorganic growth strategy
L'Oréal: Timeline (2/5)
1988
l
Acquired La Roche-Posay
2002
l
In association with Nestle, L'Oréal entered the market for nutritional
supplements for cosmetic purposes with the creation of Innéov in
1993
l
L’Oréal acquires Redken for an undisclosed amount in June
1994
l
Acquired a controlling stake in Cosmair in June
1996
l
Acquired a controlling stake in Maybelline for US$508 million to gain
Oct
2003
l
China to help gain market share for Garnier
Formed alliance with Mr. Shu Uemura, the renowned make up artist
to enter the strategic Japanese market
a greater presence in the American mass-market in December
1998
l
L’Oréal acquires SoftSheen in July
2000
l
Acquired Matrix, Carson, Kiehl’s, Respons and a stake in Shu
2004
l
l
Acquired Biomedical, an American brand of professional corrective
cosmetic products, used and sold by dermatologists
Acquires Yue Sai, an affordable luxury skincare and make up brand
from China to improve its brand presence in the country
2005
l
Acquires Skinceuticals, a premium American beauty care brand for
professionals
Uemura
2001
Acquired Mininurse, the mass-market skincare product company in
2006
l
Acquired the French pharmaceutical company Sanoflore, a
company that produce natural cosmetics by organic farming in
October
137
Sources: Company information
L'Oréal continued to fuel its growth through acquisitions
L'Oréal: Timeline (3/5)
2006
l
Opened L'Oréal Hairdressing Academy, largest hairdresser training
2011
l
Acquired Pacific Bioscience to position itself in the market for sonic
center in the world
devices and technologies in the field of skin care in December
Entered a licensing agreement with Diesel to launch a line of
Opened a new subsidiary in Nairobi, Kenya in December to serve as
fragrances for the 18-35 age group worldwide
the development center for the Group's activities in East Africa
Acquired SkinEthic, one of the major international specialists in
tissue engineering to develop alternative methods to animal testing
2012
l
Launched its World Hair Research Center in Saint-Ouen, Paris to
meet the hair beauty needs of a wide variety of consumers in April
2007
l
Acquired the Cadum company, to enter the hygiene products
Acquired PureOlogy, a high-end American professional haircare
market in April
brand that targets hair colorists and sales through hair salons in
Acquired Colombian Vogue group, the market leader in mass-
May
2008
l
market make up products to strengthen its position in the region in
October
Acquired French luxury brand YSL Beauté for US$1.7 billion in
Acquired Urban Decay, an American specialty make up brand, to
January
2010
l
Acquired Essie Cosmetics, an American brand known for its ultratrendy nail varnishes in April
138
Sources: Company information
increase its market presence in November
2013
l
Acquired Cheryl's Cosmeceuticals, that specializes in skin care
products and treatments in beauty salons across the country
Further growth was achieved through partnerships
L'Oréal: Timeline (4/5)
2013
l
Acquired Decléor and Carita, two emblematic and complementary
2016
l
skincare brands in the U.S. in October
2014
l
Acquired NYX, a leader in the massive color cosmetics industry to
Announced to acquire Atelier Cologne, a company that specialized
in niche perfumery in June
2018
l
Acquired Modiface, a company that expertise in the creation of
provide high-quality, professional make up at accessible prices
custom augmented reality beauty apps in March
Launched digital innovation application called “Make up Genius” to
Acquired Pulp Riot, a professional hair color brand in May
enable consumers to test make up products using their mobile
Signed a worldwide license agreement with Valentino in May to
phone
develop and distribute fine fragrances and luxury beauty
Acquired Korean lifestyle company Nanda Co. Ltd in June
2015
l
Acquired Niely Cosmeticos, the largest independent hair coloration
Collaborated with Facebook in August to provide new AR powered
and haircare company in Brazil in March
make up try-on experience through Facebook camera products
Signed a licensing agreement with Proenza Schouler in June for the
Acquired German natural beauty company Logocos Naturkosmetik
creation and development of fine fragrances
AG in August
Launched “My Skin Track UV”, a wearable sensor to help users track
2016
l
Launched My UV Patch, the first ever stretchable skin sensor
their personalized exposure to UV, pollution, pollen and humidity
designed to monitor UV exposure in January
Partnered with Poietis to conduct an exclusive research on
bioprinting hair follicles
139
Sources: Company information
2019
l
Acquired Mugler brands and Azzaro fragrances brands from Clarins
Group in October
Acquired Japanese company Takami Co. in early 2021
L'Oréal: Timeline (5/5)
2019
l
Signed a long-term license agreement with Prada to develop and
2022
l
distribute luxury beauty products
Partnered with the global neurotech leader Emotiv to launch a new
device, allowing consumers personalize their fragrance choices in
March
2020
2021
2022
l
l
l
Finalized the acquisition of the Mugler brands and Azzaro
Introduced UVMune 400, it’s first sun-filtering technology in May
fragrances from Clarins Group in March
Signed an agreement to acquire the American brand Skinbetter
Signed an agreement to acquire Thayers Natural Remedies, a US-
Science in September
based natural skincare brand from Henry Thayer Company
Announced a multi-brand beauty partnership with Ready Player Me,
Finalized the sale of its Roger & Gallet brand to Impala in June
a cross-game avatar platform for the metaverse in November
Announced the signing of an agreement to acquire the Japanese
Acquired a minority stake in Microphyt, a French biotech firm in
company Takami Co. in December
November
Finalized the acquisition of Takami Co. in February
2023
l
Invested in Digital Village, a US based metaverse-as-a-service
Acquired a minority stake in Swiss start-up Gjosa in March
platform and NFT marketplace in January
Acquired Youth to the People, an American skincare company based
Signed an agreement with Natura & Co to acquire Aesop, the
in California in December
Australian luxury beauty brand in April
Announced strategic partnership with Verily, an Alphabet health
company, to advance precision skin health in January
140
Sources: Company information
Kering entered the luxury market in 1999
Kering: Overview
Kering SA is an international luxury products company that owns brands including
Alexander McQueen, Balenciaga, Bottega Veneta, Boucheron, Brioni, Gucci, and
Yves Saint Laurent. The company was established in 1963 as Pinault S.A. which was
initially into timber trading and entered the luxury market in 1999 with the
Business divisions and selected brands
Business
divisions
acquisition of 42% share in Gucci. The company changed its name to PinaultPrintemps-Redoute in 1994, PPR in 2005 and to Kering in 2013.
Luxury
Kering operates under three business divisions such as Luxury, sports & lifestyle,
and eyewear. The company made a spin off of 70% shares of Puma to its
shareholder in May 2018 to solely focus on luxury brands.
The company is headquartered in Paris, France and is listed on Euronext Paris.
141
Year founded:
1963
Number of Employees:
47,227 (2022)
Number of Stores:
1,659 (2022)
Revenue:
US$24.1 billion (31st Dec 2022)
Notes:
(1) Puma was a part of the division till May 2018
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023; Company information
Sports & lifestyle(1)
Eyewear
Key brands
Michele-Bizzarri’s leadership and social media focus drive growth
Kering: Strategies(1/2)
A millennial-focused social media strategy pivotal to Gucci’s recent success
Gucci makes up over 50% of Kering’s total corporate revenues. What is even more
interesting though is that 50% of the company’s sales are coming from millennials,
partnering with people like photographer, model, artist and filmmaker Petra
Collins, who has designed many of Gucci’s successful campaigns and enjoys a large
following on social media.
and social media and digital marketing have a pivotal role to play in this. In fact,
Gucci was also one of the first brands to engage on Flipboard, a social network and
according to research firm L2 Intelligence, Gucci was been the best performing
social news aggregator. One of Gucci’s meme-inspired campaigns to launch its new
digital fashion brand for two years running in 2016 and 2017, outranking other
collection of luxury watches in collaboration with famous meme artists such as
digital-savvy brands such as Michael Kors, Fendi, Burberry, and Louis Vuitton.
@youvegotmale, and @textsfromyourexistentialist, sparked controversy over
However, the brand has fallen to seventh place, according to Gartner’s 2020 Digital
whether the brand was trying too hard. However, the campaigns resonated with
IQ Index: Luxury. Nevertheless, it has kept its pole position in Luxe Digital’s list of
the brand’s younger and aspirational fan base, making two of the posts the top
top luxury brands online for four years consecutively – from 2018 through 2021.
performing posts of all time.
As of May 2022, at 48.2 million, Gucci had more Instagram followers than Louis
Vuitton, Dior, and Hermès, with only Chanel (50.2 million) ahead of it. It’s Facebook
likes (20 million) are also more than Dior and Hermès.
Gucci’s recent resurgence can be attributed mainly to creative director Alessandro
Michele and CEO Marco Bizzarri, who have laid a strong emphasis on creating
millennial-focused social media content in collaboration with many contemporary
artists of today. The brand has also strengthened its appeal with the millennials by
142
Sources: Forbes; Medium; Raidió Teilifís Éireann
Revamped celebrity endorsement and digitalization driving recent success
Kering: Strategies(2/2)
Changes made by the Michele-Bizzarri team resulted in immediate success
Marco Bizzarri took over as Gucci’s CEO in 2014 when the brand was on the verge
of bankruptcy. He appointed Alessandro Michele as creative director and the two of
storytelling, elevated eCommerce, digital gifting with split payments, and ARpowered try-on features on Snapchat and the Gucci App, to boost its online
business.
them made sweeping changes in terms of the brand’s image, design and digital
Moreover, in order to increase its influence in the massive Chinese eCommerce
adoption.
market, Gucci opened two flagship stores on Tmall, Alibaba’s online luxury
Firstly, they stopped Gucci’s association with past celebrities such as Grace Kelly
and Jacqueline Kennedy Onassis and instead focused on contemporary celebrities
shopping platform, in December 2020, selling fashion and leather goods and
following it up with the Gucci Beauty flagship store in February 2021.
and style icons such as Rhianna, Blake Lively, Brad Pitt, and Rachel McAdams. They
As a result of these efforts, the brand’s eCommerce sales have increased from just
also resurrected the iconic GG logo which had been deemphasized by the previous
US$130 million in 2014 to over US$1.2 billion in 2021 and are poised for a robust
team of Patrizio di Marco (CEO) and Frida Giannini (Creative Director). These
increase over the short to medium term as well.
strategies have paid rich and immediate dividends with six out of seven of Gucci’s
best-selling and high-margin accessories of all time, having been created by the
Michele-Bizzarri team.
Digital adoption is another big area of focus for Gucci. Its boutiques are getting
revamped with around 25-30% of its 550 stores having already been remodeled
under its “New Store Concept,” which integrates the in-store shopping experience
with its digital platform. The company also uses innovative tools such as digital
143
Sources: Forbes; Medium; Raidió Teilifís Éireann
Kering entered the luxury market with the acquisition of Gucci
Kering: Timeline (1/3)
1963
l
The company was established as Pinault S.A.
1999
l
Gucci acquired luxury brands Yves Saint Laurent and YSL Beauté in
November
1988
l
Company got listed in Paris Stock Exchange
2000
1990
l
l
Acquired CFAO, a company that specialized in trading with Africa
Boucheron from Schweizerhall Holding AG for US$145 million in
and in electrical equipment distribution
May
1991
l
The company entered into retail business
1992
l
Acquired the department store group Au Printemps, and owned
2001
l
l
Gucci acquired 91 percent stake in the luxury fashion House,
Balenciaga in July
1999
l
Gucci signed partnership agreements with Stella McCartney and
Alexander McQueen
Group renamed as Pinault-Printemps-Redoute
Acquired Fnac company in June
2003
l
144
Sources: Company information
Sold out Pinault Bois & Matériaux to the British group, Wolseley in
May
Entered the Luxury Goods sector with the acquisition of 42% of
Gucci Group in April
Gucci acquired 66.67 percent interest in Italian leather goods House,
Bottega Veneta for US$60.6 million in February
majority share of the mail order clothing retail chain, La Redoute
1994
Gucci acquired Paris-based luxury watch and jewelry firm
2004
l
Raised its stake Gucci Group to 99.4% in April
It’s name was changed from PPR to Kering in 2013
Kering: Timeline (2/3)
2005
l
The group name changed from Pinault-Printemps-Redoute to PPR
2012
l
Formed a joint venture with Yoox dedicated to eCommerce for
several Luxury brands of the Group in August
2006
2007
l
l
Sold out majority of France Printemps to RREEF and the Borletti
Acquired of a majority stake in Chinese fine jewelry brand, Qeelin in
group in June
December
Acquired 62.1 percent stake in Puma in July (27.1 percent stake in
2013
l
Kane in January
April)
2008
l
Acquired Tannerie de Périers in Normandy, a tannery specialized in
precious skins in March
Sold out YSL Beauté to L’Oréal in June
The group name changed from PPR to Kering in March
Acquired minority stake in luxury watch Manufacture, Girard-
Acquired a majority stake in Italian jewelry brands Pomellato and
Perregaux
2011
l
Sold out the multichannel retailer of discount home furnishings to
Steinhoff International Holdings Ltd. for US$1.65 billion in February
Acquired a majority stake in Girard-Perregaux in July
Acquired luxury Italian menswear House, Brioni in November
145
Sources: Company information
Acquired a majority stake in the luxury designer brand, Christopher
Dodo in April
2014
l
Sold out its multichannel retailer brand La Redoute in June
Kering created a new division for luxury and lifestyle
Kering: Timeline (3/3)
2014
l
Acquired the watch Manufacture Ulysse Nardin in July
2020
l
Created two new divisions, luxury and sports & Lifestyle in May
2015
l
Launched Kering Eyewear, specialized in the high-end eyewear
Kering Eyewear announced partnership with French fashion brand
Chloé in June
2021
l
sector in June
Successfully completed the sale of 5.9% of Puma's share capital in
May
Invested in Cocoon, a handbag rental service, in June
2017
2018
l
l
Kering Eyewear and Cartier signed a strategic agreement to develop,
Announced that the company had gone completely fur free in
make and market Cartier eyewear in March
September
Kering Eyewear acquired Danish Luxury Eyewear brand LINDBERG
Partnered with London College of Fashion, Kering launched world’s
in September
first Massive Open Online Course (MOOC) for luxury fashion in Feb
Kering made a spin off of 70% shares of Puma in May to solely focus
2022
l
on luxury brands
2019
l
Divested its 100% stake in Sowind Group SA, manufacturers of
Girard-Perregaux and Ulysse Nardin, to its current management in
January
Completed the sale of its US sports and lifestyle brand Volcom to
Completed the acquisition of sunglass brand Maui Jim in October
Authentic Brands Group (ABG).
2023
l
Signed an agreement to acquire Usinage & Nouvelles Technologies
(UNT), a French manufacturer of eyewear components in March
146
Sources: Company information
Estée Lauder has a presence in more than 150 countries
Estée Lauder: Overview
The Estée Lauder Companies Inc., established in 1946, manufacturers and markets
skin care, make up, fragrance, and haircare products in more than 150 countries.
The company markets its products under various brand names including Estée
Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, Tommy Hilfiger, M·A·C,
Business divisions and selected brands
Business
divisions
Kiton, La Mer, Bobbi Brown, Donna Karan New York, DKNY, Aveda, Jo Malone
London, Bumble and bumble, Michael Kors, Darphin, and others.
Skincare
The Company launched its first eCommerce sites for Clinique and Bobbi Brown in
1996 and created the ELC Online division for all brands in 1999. It now has nearly
Make up
1500 eCommerce/m-Commerce sites in about 40 countries around the world. The
Estée Lauder Companies Inc. is headquartered in New York and listed on New York
Fragrance
Stock Exchange (NYSE).
Year founded:
1946
Number of Employees:
63,000 (2022)
Revenue:
US$17.7 billion (2022)
Market Capitalization:
US$88.5 billion (2022)
147
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023
Haircare
Key brands
Acquisitions form the cornerstone of the company’s success
Estée Lauder: Strategies (1/2)
Inorganic growth, one of the keys pillars of Estée Lauder’s growth strategy
One of the pillars of Estée Lauder’s success has been its inorganic growth strategy.
For many years now the company has acquired small brands that are popular with
By Kilian helped the company establish itself in the niche fragrances market, which
has been growing rapidly due to customers moving towards unique and
customized products.
the younger generation and then expanded their operations by either doing brand
BECCA Cosmetics helped Estée Lauder break into the Generation Z and non-
extensions or making new products.
Caucasian markets.
The company made its first acquisition in 1995, the same year it went public, when
Deciem helped the company to add high-quality beauty products to its portfolio
it bought Bobbi Brown, a brand that is now sold in over 60 countries around the
available at low prices.
world. Since then, the company’s acquisitions have witnessed a significant uptick
with multiple purchases in the same year. A few of them include skincare brands
RODIN olio lusso and GLAMGLOW (2014), fragrance brand Le Labo (2014),
fragrance house By Killian (2016) and make up brands BECCA Cosmetics and Too
Faced (2016) and Deceim (2017). Below are the rationales of a few of the company’s
acquisitions.
Too faced helped Estée Lauder to capture a greater share of the U.S. color
cosmetics and make up dupe market, along with delivering market share in
prestige make up, multichannel distribution and millennial consumers.
148
Sources: Global Cosmetic Industry magazine; The Motley Fool; Travel Markets Insider
Dr.Jart helped Estée Lauder to further strengthen its position in the skincare
market.
Restructuring programs to optimize various business areas
Estée Lauder: Strategies (2/2)
Reallocating resources as part of the Leading Beauty Forward program
Post-COVID Business Acceleration Program
In May 2016, Estée Lauder launched a multi-year initiative called Leading Beauty
In August 2020, the company initiated the two-year Post-COVID Business
Forward in order to better leverage its cost structure and free resources to fuel
Acceleration (PCBA) Program to realign its business with the changes brought
growth in the future. The initiatives which began in the fourth quarter of 2016, went
about by the pandemic. It is expected to run through 2022 and 2023. The program’s
on till year-end 2021 and include restructuring of certain business functions and
main areas of focus include:
investments in new products, social media, communications, in-store
merchandising, point-of-sale activities, and advertising. The company expects to
spend up to US$700 million on this program in order to realize annual net benefits
of between US$200 million and US$300 million before tax. The key initiatives of
• accelerating the development of the brand’s online offerings by realigning the
distribution network in the form of closing 10-15% of department stores and
freestanding stores in North America, Europe, the Middle East, and Africa,
Leading Beauty Forward include:
• reducing brick-and-mortar point-of-sale employees and related support staff,
• A net reduction of about 2.5% of its workforce, amounting to around 1,200
• redesigning Estee Lauder’s regional branded marketing organizations, and.
positions globally
• Optimizing its supply chain and product development process in order to lower
• exiting the global distribution of BECCA products.
According to initial estimates, the PCBA Program would result in a net reduction of
inventory levels and bring down the time taken for an idea to go to market from
around 1,500-2,000 jobs around the world, including part- and full-time employees.
18 months to 12 months, with small changes taking only five or six months
However, these estimates have since been adjusted to around 2,500 jobs. It is
• Shifting focus from traditional to social and digital marketing strategies and
develop a more robust omnichannel offering
149
Sources: Global Cosmetic Industry magazine; The Motley Fool; Travel Markets Insider; Annual Reports
expected to result in related restructuring and other charges of around US$500
million.
Estée Lauder entered the eCommerce business in 1996
Estée Lauder: Timeline (1/4)
1946
l
The company Estée Lauder Co. was founded
1990
l
Launched 'Origins', the first wellness brand in U.S. department
stores
1956
l
Introduced Re-Nutriv, the first ever luxury skincare collection for
women
1960
l
Opened its first counter outside of the U.S. in Harrods, London
1962
l
Introduced the first make up color collection in the industry
1963
l
Launched Aramis, the first prestige men's fragrance and treatment
brand of grooming products
1968
l
1981
l
l
l
Launched a separate line called 'Skin Supplies for Men'
Started selling products in Russia
150
Sources: Company information
Entered the Chinese market with Estée Lauder and Clinique brands
launch in the Isetan department stores in Shangha
Signed agreement with fashion designer Tommy Hilfiger for global
distribution
1994
l
Acquired a majority stake in Toronto-based M·A·C Cosmetics
1995
l
Acquired Bobbi Brown Cosmetics in October
Acquired La Mer, skincare and cosmetics company
Launched Clinique, a dermatologist-guided, allergy-tested,
fragrance-free cosmetic brand
1976
1993
1996
l
Launched its first eCommerce sites for Clinique and Bobbi Brown.
1997
l
Acquired Sassaby Inc (of Jane brand) in September to enter mass
market for cosmetics
Acquisition and licensing agreements fostered growth
Estée Lauder: Timeline (2/4)
1997
l
Signed a licensing agreement with Donna Karan Intl. in September
2004
l
to manufacture and market beauty-related products
Sold out Jane cosmetics line, responsible for mass-market cosmetics
products of the company in February
Acquired Aveda, an ayurveda based cosmetics company for US$300
million in November
1998
1999
l
l
2005
l
both an exclusive line of fragrances and related products
Acquired the complete stake in M.A.C. cosmetics in February
2006
l
Acquired luxury watch maker Hubolt in April
2010
l
Acquired the privately held make up brand Smashbox Beauty
Launched ELC Online division for all brands under Estée Lauder
Group
Acquired Jo Malone Ltd, a beauty products manufacturer in October
2000
l
Acquired majority stake in Bumble & Bumble L.L.C. hair salon and
products company to expand its beauty-shop network in June
2003
l
Signed an alliance with fashion designer Tom Ford in April, to create
Acquired Laboratoires Darphin, a company which was into
manufacturing and marketing of prestige skin care products in April
Acquired Michael Kors L.L.C., a high-end fragrance company in May
151
Sources: Company information
Cosmetics in May
2011
l
Signed global licensing agreement with Ermenegildo Zenga to
market fragrances under the Ermenegildo Zegna Group’s brands in
March
Signed a multi-year agreement for the exclusive worldwide license
of the Tory Burch fragrance business in October
Estée Lauder continues its acquisition spree
Estée Lauder: Timeline (3/4)
2012
l
Introduced AERIN Beauty, a luxury lifestyle beauty and fragrance
2017
l
brand that develops luxurious make up, fragrance and body
Announced to invest in DECIEM, a vertically integrated multi-brand
skin care cosmetics company to expand its skincare market in June
products
2018
2014
l
l
manufacturing processes and prototyping in November
Acquired RODIN olio lusso, a selective line of premium, sensorial
products company in October
Acquired Le Labo, the high-end fragrance and sensory lifestyle
2019
l
l
Signed an agreement to acquire global skin care company Dr Jart+
in November
brand in October
2015
Started using advanced 3D printing technology to modernize
2020
l
Debuted its products on the omnichannel retailer QVC
2021
l
Acquired majority ownership in DECIEM for US$1 billion in February
Acquired Glamglow, the skin care brand focused on fast-acting
treatment masks in January
Expanded its partnership with QVC, featuring across all of the
2016
l
Acquired By Kilian, the Paris-based prestige fragrance brand in
February
Acquired Becca Cosmetics for about US$200 million in October
Acquired make up brand Too Faced for US$1.45 billion in December
152
Sources: Company information
shopping channel's platforms, including a livestream video launch
Clinique became the first Estee Lauder owned brand to offer an NFT
in October
Completed the acquisition of Tom Ford in 2023
Estée Lauder: Timeline (4/4)
2022
l
Partnered with Farmingdale State College to Support STEM (Science,
Technology, Engineering & Mathematics) Education and Job
Opportunities in February
Partnered with NYKAA to launch the ‘BEAUTY&YOU India’ initiative
for supporting the next generation of Indian beauty entrepreneurs
in July
Entered into a licensed agreement with BALMAIN to launch
‘BALMAIN BEAUTY’, an innovative line of beauty products in
September
2023
l
Launched VMA (Voice-Enabled Makeup Assistant) application, a firstof-it’s-kind AI-powered beauty app for visually impaired users in
January
Completed the acquisition of Tom Ford, a deal worth US$2.8 billion
in April
153
Sources: Company information
Coty is present in both consumer and professional beauty divisions
Coty: Overview
Coty Inc is an international beauty products company that operates in three
Business divisions and selected brands
divisions: Luxury, Consumer Beauty, and Professional Beauty. The Luxury division
offers prestige fragrances, and skincare and cosmetics products, whereas the
Professional Beauty division offers hair and nail care products to nail and hair
Business
divisions
salons, nail and hair professionals, and the Consumer Beauty division offers color
cosmetics, retail hair coloring and styling products, mass fragrance, and mass skin
care, and body care products. The company markets its products under renowned
Luxury
brands including Alexander McQueen, Balenciaga, Burberry, Bottega Veneta, Calvin
Klein, Cavalli, Chloe, Davidoff, Escada, Gucci, Hugo Boss, Jil Sander, Joop!, Lacoste,
Lancaster, Marc Jacobs, Miu, philosophy, Stella McCartney, and Tiffany & Co.
Professional beauty
Coty Inc was founded in 1904 and is headquartered in New York city, U.S.
Year founded:
1904
Number of Employees:
11,012 (2022)
Revenue:
US$5.3 billion (2022)
Market Cap:
US$7.3 billion (2022)
154
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023
Consumer beauty
Key brands
Inorganic growth and eCommerce expansion help the business grow
Coty: Strategies
Inorganic growth key to Coty’s push into the beauty market
eCommerce expansion, an integral part of Coty’s digital strategy
Coty has made its transition from a pure-play fragrance maker to the beauty
eCommerce has been a major focus area for Coty, after the appointment of
industry on the back of several strategic acquisitions. The most important among
industry veteran Sean Foster as Global Senior Vice Present of eCommerce, in April
them was that of nearly 40 brands including Clairol, Wella, Max Factor, and
2017. Building out better omnichannel capabilities and expanding to new markets
CoverGirl, from Procter & Gamble in 2017, which then resulted in boosting the
with enhanced investments in digital were the two immediate areas of emphasis.
company’s top line by over 100% in the first quarter of 2018. It also expanded the
Putting the plan to action, Coty acquired peer-to-peer social selling platform
company’s product suite to include the lucrative ‘salon professional’ and hair
Younique in January 2017, and this has paid off with increased revenues and
coloring segments.
sellers.
The company’s other acquisitions include a 60% stake in Younique, an online peer-
In September 2021, the company signed a multichannel agreement with beauty
to-peer social selling platform in beauty and the takeover of international license
technology provider Perfect Corp. to integrate advanced augmented reality and
rights for Burberry’s fragrances and cosmetics business. Younique has been an
virtual reality (AR/VR) solutions to its digital marketing offerings.
important addition to Coty’s portfolio with CEO Camillo Pane crediting the
acquisition to the company’s stellar 2Q2018 results. Younique’s sellers increased
from 80,000 at the time of the acquisition in January 2017 to over 230,000 in
December the same year. It’s deal with Burberry has helped the company to
leverage the brand’s favorable position in many markets across the world.
155
Sources: Company information
Coty also opted to enter the Chinese market through the BC platform Tmall,
instead of opening physical stores.
An inorganic growth strategy enhanced Coty’s market presence
Coty: Timeline (1/3)
1904
l
The company was founded by François Coty
2006
l
Coty Prestige is created to manage Coty’s premium brands
1925
l
Coty Inc became a publicly traded company
2007
l
Acquired Del Laboratories, which makes Sally Hansen nail care
1939
l
The five foreign Coty companies are reorganized in Coty
International Corp
1963
l
products for US$800 million in December
2008
l
Dwight Co for US$380 million
Chas. Pfizer & Co acquired Coty and Coty International for about
Signed a deal with Gemini Cosmetics to distribute Coty Beauty’s
US$26 million
1992
l
Joh. A. Benckiser GmbH, a German company acquired Coty
1999
l
Introduced Adidas Moves, a men's fragrance, to the United States
2002
l
Signed Jennifer Lopez and launched her first fragrance, Glow by JLO
in April
2003
l
Acquired Kenneth Cole and Marc Jacobs
156
Sources: Company information
Sold out Orajel and other over-the-counter drug brands to Church &
prestige brands to department and specialty stores in the U.S.
2009
l
Entered a license agreement with GUESS Inc to develop and market
new GUESS fragrance lines
2010
l
Partnered with Calvin Klein, Inc, to develop and market a make up
line for launch in 2012
Acquired the German cosmetics firm Dr. Scheller Cosmetics AG in
November
Continued acquisitions in the midst of a listing on the NYSE
Coty: Timeline (2/3)
2010
l
Acquired Philosophy, inc., a premier skincare and cosmetics
2016
l
Closed the deal to acquire 41 beauty brands from Procter & Gable
company in November
for US$12.5 billion in July
Acquired OPI Products, a company dealing with skin care and nail
Acquired GHD, manufactures of haircare styling products and
polish in November
accessories from Britain in October
Acquired TJoy Holdings Ltd, a Chinese skin care company for about
US$400 million in December
2017
l
Acquired Younique LLC, a Utah based cosmetic products company
for US$600 million in January
2013
l
Acquired StarAsia, a distributor of beauty products in Southeast
Acquired the exclusive long-term global license rights for Burberry
Asia in May
Beauty luxury fragrances, cosmetics and skincare in October
The company got listed in New York Stock Exchange in June
2018
2015
l
l
Launched digital accelerator start-up program in February focused
Acquired Bourjois cosmetics brand from CHANEL for US$239 million
on Artificial Intelligence companies to allow AI uses in its brands
in April
Introduced virtual reality (VR) based fragrance discovery experience
Acquired Beamly, a digital marketing firm based in New York and
for customers to find their perfect match of scent in December
London in October
Acquired the personal care and beauty business unit of Brazil’s
Hypermarcas SA for about US$1 billion in November
157
Sources: Company information
2019
l
Unveiled augmented reality (AR) enabled Wella Professionals Smart
Mirror to improve hair color selection experience in January
Entered into partnerships to enhance brand presence
Coty: Timeline (3/3)
2019
l
Renewed partnership with Lacoste for fragrances in July
2022
l
Announced that it had started production of the world’s first
Partnered with MARV Studios to launch a new line of Kingsman
globally distributed fragrances made using carbon-captured ethanol
fragrances for men in October
in February
Partnered with Kylie Jenner to jointly build and further develop
Provided expert advice to Kim Kardashian for her new brand ‘SKKN
Kylie’s existing beauty business in November
by Kim, a line of high-performance skincare products in June
Extended its strategic partnership with Cruetly Free International, a
2020
l
Announced a strategic partnership with Kim Kardashian West to
global organization working to end animal testing in September
develop more product lines
Announced the launch of Kylie Skin at Douglas, a brand by Kylie
Jenner, in Europe
2023
l
Announced a two-year partnership with Max Factor UK to support
UNICEF’s Skills4Girls initiative in March
Launched ‘Where My Heart Beats Eau de Parfum’, the world’s first
2021
l
Completed the purchase of a 20% stake in Kim Kardashian West's
globally distributed fragrance, manufactured using 100% carbon-
company for US$200 million in January
captured alcohol in April
Relaunched Kylie Cosmetics with a range of Vegan products in July
Partnered with tech innovator Spatial to develop Coty Campus, an
Signed a definitive agreement to sell 9% stake in beauty company
internal metaverse for it’s 11000 global employees in April
Wella to KKR in October
Signed a licensing agreement with Orveda, a French high-end
skincare brand in November
158
Sources: Company information
Swatch makes luxury watches for all segments of the market
Swatch Group: Overview
Swatch Group AG, founded in 1983, is a Switzerland based manufacturer of luxury
Business divisions and selected brands
watches and jewelry. The company was formed through the merger of Allgemeine
Gesellschaft der Schweizerischen Uhrenindustrie (ASUAG) and Société Suisse pour
l'Industrie Horlogère (SSIH). The company was initially named as SSIH/ASUAG
Divisions
Holding Company and changed it name to SMH in 1986 and to Swatch Group Ltd in
1998.
The Swatch Group markets its products through eighteen watch brands that
Prestige and
luxury range
address all segments of the market. The company also developed a strong vertically
integrated organization, producing the full range of watches and watch
components, including batteries and microprocessors. Swatch Group is
High range
headquartered in Biel, Switzerland and listed on SIX Swiss Exchange, Zurich.
Year founded:
1983
Number of Employees:
32,061 (2022)
Revenue:
US$8.5 billion (2022)
Market Capitalization:
US$14.2 billion (2022)
159
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023
Middle range
Basic range
Key brands
Swatch fueled growth through acquisitions
Swatch Group: Timeline (1/2)
1983
l
The company formed as SSIH/ASUAG Holding Company with the
2002
l
merger of ASUAG and SSIH
1986
l
SSIH/ASUAG Holding Company changed its name to SMH
1992
l
Acquired Blancpain S. A. that manufactures, commercializes, and
and distributes watch dials in April
2006
l
Acquired watch dial manufacturer MOM Le Prélet S.A. in October
2008
l
Acquired the watch components division of Burri SA in July
Acquired the Dubai based lifestyle luxury goods retailer, Rivoli
repairs watches and timepieces for men and women
1998
l
The company changed its name from SMH to the Swatch Group
Acquired Rubattel et Weyermann, a company that manufactures
Group in July
2010
l
Acquired Novi SA, the manufactures of finished watches and
assembling watch movements in December
1999
l
Acquired Groupe Horloger Breguet, one of the oldest luxury watch
manufacturer in the world in September
2012
l
Acquired Simon & Membrez SA, the manufactures high-quality
watch cases for the top price segment in April
2000
l
Acquired watch manufacturer Montres Jaquet Droz in April
Acquired Glashütter Uhrenbetrieb GmbH, a Germany based luxury
mechanical watch manufacturer in October
160
Sources: Company information
2013
l
Acquired HW Holding Inc., a jewelry and luxury watch company
based in New York for US$1 billion in March
In 2020, Swatch launched its online shopping platform in Europe
Swatch Group: Timeline (2/2)
2015
l
Tissot became the first official timekeeper of the National Basketball
2021
l
Association (NBA) in October
Swatch collaborated with The Museum of Modern Art (MoMA) to
launch special edition designs starting March
Launched an NFC-enabled analog payments watch called the
Swatch Bellamy in China in October
2022
l
Launched a line of 11 planetary-themed watches in collaboration
Partnered with Visa Inc to provide tap and pay feature with Swatch’s
with Omega in March
new “pay-by-the-wrist" watch, Swatch Bellamy in November
Rado launched the DiaStar Original 60-Year Anniversary Edition in
September
2016
l
Swatch and Safilo Group announced five-year collaboration
agreement in February to co-design eyewear collections in February
2023
l
Collaborated with Omega to develop the new Speedmaster super
racing edition, having the Spirate precision system in January
2017
l
Swatch Group created the world’s smallest Bluetooth chip in March
OMEGA became the official timekeeper of the Volvo Ocean Race in
September
2020
l
Omega announced the launch of its online shopping platform in
Europe
161
Sources: Company information
Hermès restructured its retail network in 2017
Hermès: Overview
Hermès International, founded in 1837, designs, produces, and distributes personal
Business divisions and selected brands
luxury accessories and apparel. The Company operates a chain of boutiques under
the Hermès name that sells items including leather, scarves, men's clothes, ties,
Business divisions
Product categories
Leather
Bags, luggage, and accessories
Lifestyle accessories
Scarves, silk accessories, shoes, equestrian, ties
Home furnishing
Textiles, tableware, furniture, lighting, wallpaper, gifts
Perfumery
Fragrances, refills
Jewelry
Silver, gold, enamel, leather, lacquered metal, horn jewelry
Watches
Collection for men and women and Apple watches
women's fashions, perfume, watches, stationery, shoes, hats, gloves, and jewelry.
Hermès restructured its retail network all over the world in 2017 closing down two
boutiques in France in Avignon and Rouen, one in Charlotte, North Carolina as well
as its concession outlet dedicated to watches and jewelry at Harrods in London.
However, these closures have been followed by new openings in growth markets
such as Istanbul, Sao Paulo, and Changsha (China). The company is headquartered
in Paris and listed on Euronext, Paris.
Year founded:
1837
Number of Employees:
19,686 (2022)
Number of stores:
300 (as of 31st Dec 2022)
Revenue:
US$13.8 billion (2022)
Market Capitalization:
US$162.3 billion (2022)
162
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023; Company information
Hermès does not follow mass production to retain exclusivity
Hermès: Strategies
Hermès is perceived as one of the most luxurious brands in the world and is known
the brand’s desire to maintain exclusivity. In fact, with Hermès imposing a cap on
for its traditional craftsmanship, brand exclusivity, and superior manufacturing.
the number of products manufactured, there wasn’t even enough stock to cover
One of Hermès’ main USPs is that unlike other luxury brands it has never
demand.
compromised on its traditional values.
Till now, the brand shuns mass production, manufacturing lines, and outsourcing
with each product made by hand in French workshops (Ateliers Hermès). The only
exception to this are the segments for which it lacks expertise such as ready-towear and watches. The company also has a limited online presence and distributes
mainly through its directly operated stores, thereby maintaining total control.
According to Axel Dumas, it is the brand’s desire to maintain its exclusive status and
remain in the ultra-premium luxury category, that is the driving force behind this
strategy.
However, this strategy has not augured well for Hermès after the onset of the
COVID-19 pandemic. In fact, sales of the leather goods and saddlery division, which
constitutes around half of the company’s total sales, decreased by 5.4% year-onyear in 4Q2021. This decline was completely different from what other luxury
brands experienced during the same time period, and a major reason for that was
163
Sources: Company information
Hermès became a public limited company in 1993
Hermès: Timeline (1/2)
1837
l
The company was founded in Paris by Thierry Hermès
1972
l
Introduced first Hermès shoes for women
1922
l
Introduced first line of handbags with patented zipper in its design
1976
l
Acquired the shoemaker company John Lobb
1924
l
Started selling products in the U.S. market
1993
l
The company got listed in Paris Stock Exchange
1929
l
Introduced the first women’s couture apparel collection
1996
l
The company entered the Chinese market with a new store in
Beijing
1937
1950
1951
l
l
l
Introduced its line of silk scarf, the Carré
1997
l
Introduced first Hermès shoes for men
1999
l
Acquired 30% of Jean Paul Gaultier
2001
l
Introduced its eCommerce website to facilitate customers shop
The perfume division of Hermès was established
Launched the first perfume Eau d'Hermès
1956
l
Introduced the iconic Kelly bag
1961
l
Launched the new line of perfume for women, Calèche
online
2007
l
Acquired 28 Rue Faubourg Saint-Honore to expand its flagship store
in Paris
164
Sources: Company information
LVMH acquired 20% stake in Hermès in 2010
Hermès: Timeline (2/2)
2010
l
LVMH acquired 20% stake in the company in October
2020
l
Announced the reopening of its store in Taikoo Hui Guangzhou,
China
2013
2015
l
l
Acquired d’Annonay tannery, one of its key providers of calf leather
Announced the opening of its new store in Kuwait
to ensure uninterrupted supply in January
Opened an exclusive store in Stockholm, Sweden in October
Partnered with Apple to create a collection of new Apple Watches in
2021
l
Opened a new flagship store in Tokyo in February
2022
l
Announced the construction of two new workshops in France, to
September
2016
2017
l
l
Acquired a stake in Maison Pierre Hardy, a French footwear and
open in 2025 and 2026 in March
accessory design company in July
Laid the foundation stone for the ‘Maroquinerie de Riom’, a new
production site that will employ 250 artisans in September
Announced in October to open two new leather goods production
Opened the first store in Pangyo, an advanced technology hub in
facilities in France in the next two years
2018
l
Launched its new European website with integrated online store in
April
Launched new fine jewelry collection in July
Launched its Chinese eCommerce website in October
165
Sources: Company information
South Korea in October
2023
l
Continues to invest in it’s production capacity by announcing the
construction of a new leather goods workshop, to open in 2027 in
April
Burberry sells all its products through a single brand name
Burberry: Overview
Burberry Group plc is a luxury products company that serves men, women, and
Business segments and product categories
children under the Burberry brand name. The company operates in two divisions:
Retail/Wholesale and Licensing.
Business segments
Product categories
Women’s
Clothing, bags, scarves, accessories, shoes, make up, fragrance, gifts
Men’s
Clothing, scarves, accessories, shoes, fragrance, gifts
Children’s
Clothing, shoes, accessories, gifts
It markets its products through Burberry mainline stores, concessions, outlets,
digital commerce, Burberry franchisees, department stores, and multi-brand
specialty accounts, as well as an online platform Burberry.com and third-party
wholesale customers. The company has an established digital presence with
burberry.com which is into 47 countries and available in 11 languages.
Burberry Group plc was founded in 1856 and is headquartered in London, the
United Kingdom.
Year founded:
1856
Number of Employees:
8,979 (31st Mar 2022)
Number of Stores:
418 (31st Mar 2022)
Revenue:
US$3.9 billion (2022)
166
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023; ; Company information
Repositioning as an upmarket brand helped the bottom line
Burberry: Strategies
In November 2017, Burberry’s new CEO Marco Gobbetti announced plans to
reposition the brand as more premium and upmarket, in order to achieve higher
prices and profit margins. This was widely seen by industry experts as a strategy to
define Burberry’s slightly ambiguous position which varies from accessible to
premium luxury. The brand now aims to target more affluent consumers who have
a taste for a distinctive British look.
In order to achieve this, he announced aggressive investment plans to make all its
stores more luxurious, while enhancing the brand’s exclusivity by stopping the sale
of its iconic trench coats and handbags through some department stores in the U.S.
and Europe. Additionally, the company will bring in new fashion ranges each
season and also increase the price of most of its products. Citing an example,
Gobbetti said that the polo shorts which retailed for around £275 each, needed to
be priced at least 50% higher.
167
Sources: Company information
“By re-energizing our product and customer experience to establish our
position firmly in luxury, we will play in the most rewarding, enduring
segment of the market.”
Marco Gobetti, CEO
Burberry
168
Burberry partnered with Farfetch to improve its eCommerce presence
Burberry: Timeline (1/2)
1856
l
Burberry was founded by Thomas Burberry
2001
l
Burberry launched its first children’s wear collection
1888
l
The weatherproof fabric, gabardine was patented by Burberry
2010
l
Bought out its Chinese business partner for £70 million in July to
expand its luxury brand further in China
1891
l
First Burberry store opened in the West End of London at 30
Haymarket
2016
l
Completed acquisition of its Chinese retail business from Sparkle
Roll Holdings Limited in August
1912
l
The iconic trench coat was introduced to the War Office to be worn
by military personnel during the First World War
2017
l
Partnered with Coty in October to accelerate the growth and
development of the Burberry Beauty business
1924
l
Burberry's iconic Haymarket Check is first introduced in the lining of
the trench coat
2018
l
Partnered with Farfetch, a technology platform for the fashion
industry to further strengthen its eCommerce presence in February
1970
l
Opened a New York flagship store at East 57th Street
Entered into an agreement in May to acquire a luxury leather goods
business from CF&P to have greater control over quality and costs
2000
l
Burberry-Touch, the new fragrance for men and women was
Partnered with UN Climate Change to launch the Fashion Industry
launched
Charter for Climate Action in December
169
Sources: Company information
Partnered with Tencent to develop social retail in China
Burberry: Timeline (2/2)
2019
l
Partnered with online marketplace ‘The RealReal’ to increase its
2021
l
Partnered with ELLE Digital Japan to launched an interactive virtual
presence online in October
store, similar to its flagship Ginza store in March
Launched its first online game called B Bounce, bringing the gaming
Partnered with Mythical Games to launch an NFT collection in its
experience to customers globally on Burberry.com in October
flagship title, Blankos Block Party in August
Partnered with Tencent to develop social retail in China in
Partnered with English international footballer and youth advocate
November
Marcus Rashford MBE to help disadvantaged children develop their
Launched a new flagship store at the exclusive Ginza Marronnier
literacy skills in November
building in Tokyo.
2022
2020
l
l
Launched the Lola AR viewer, a new Augmented Reality (AR)
Announced the launch of a curated edit of 26 styles from the
shopping tool on its website in June
Spring/Summer 2020 collection, all made from sustainable materials
Introduced a virtual handbag collection on Roblox, a global online
Launched a new Augmented Reality (AR) shopping tool through
gaming platform in July
Google Search technology.
Launched ‘Burberry: Freedom to Go Beyond’, an immersive in-game
Announced a partnership with Mythical Games, aiming to launch a
adventure, in collaboration with Minecraft in November
limited-edition game known as Blankos Block Party
2023
2021
l
l
Launch of a new book titled ‘Burberry’ in March
Announced its partnership with Team Qhubeka NextHash, a UCI
Entered into an agreement to acquire business from Pattern SpA, a
WorldTeam cycling team based in South Africa
longstanding Italian supplier in March
170
Sources: Company information
The biggest eCommerce brands were already founded in the 2000‘s
Leading eCommerce luxury fashion brands profiles
Farfetch Ltd.
The Net-A-Porter Group Limited
mytheresa.com GmbH
• E-Commerce, ISIC 4791
• Other Non-Specialized Stores, ISIC 4719
• Clothing, footwear, and leather articles, ISIC 4771
• Headquarters: United Kingdom
• Headquarters: United Kingdom
• Headquarters: Germany
• Founding year: 2007
• Founding year: 2000
• Founding year: 2001
• Revenue in 2022 in million US$: 2,317
• Revenue in 2022(1) in million US$: 608
• Revenue in 2020(1) in million US$: 292
• Number of employees 2022: 6,728
• Number of employees 2022(1): 660
• Number of employees 2020(1) : 339
Revenue in million US$
Revenue in million US$
Revenue in million US$
2,257
2,317
1,674
1,021
617
602
2018
171
Notes:
2019
2020
2021
(1) Estimated value
Sources: Market data by Quandl and WBV 2023; Statista Company Insights 2023
2022
2018(1)
610
2019(1)
612
2020(1)
593
2021(1)
608
2022(1)
260
266
292
264
281
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
CHAPTER 11
Appendix
Authors
Leonie Senn-Kalb
Dev Mehta
Team Lead Product Development
Founder and Director, AgileIntel Research
l.senn@statista.com
As Team Lead at Company Insights, Leonie specializes in Product Development.
Dev Mehta has over 12 years of experience working for market research, legal, and
Additionally, she continues to carry out the tasks of her previous role at Statista as
consulting companies. He has worked in various sectors such as defense, digital
Senior Project Manager, leading department-wide projects.
marketing, fintech, insurance, and consumer goods.
Before that, she worked as a consultant at EY for Transaction Advisory Services with
Dev Mehta completed his Postgraduate Diploma, majoring in Business
a focus on large carve-out and integration projects. ​
Management at Massey University, New Zealand, and has a Master of Arts in
Marketing Management from Middlesex University, London.
173
www.statista.com
Glossary
174
Term
Abbreviation
Explanation
Generation Z
Gen Z
Generation Z or Gen Z is the demographic cohort after the Millennials. There is no precise date for when Generation Z begins, but
demographers and researchers typically use the mid-1990s to mid-2000s as starting birth years.
High Net-worth Individuals
HNI
High net-worth individuals are generally those that have a diverse portfolio of assets and would benefit from professional management to
secure and grow future wealth.
Luxury leather
-
Includes handbags, suitcases and briefcases as well as small leather goods such as wallets.
Luxury watches & jewelry
-
Includes only sales of luxury brands; trend watches and fashion jewelry are excluded.
Luxury fashion
-
Includes only apparel and footwear made by luxury brands; mass-market products are excluded.
Luxury eyewear
-
Includes only luxury eyewear frames and sunglasses; lenses and contact lenses are excluded.
Prestige cosmetics and fragrances
-
Includes only prestige skin care, fragrances and decorative cosmetics; haircare, oral care, personal hygiene, and professional products
produced for hair salons or cosmetic parlors are not included.
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