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Jun 21, 2018

Deloitte’s 5th ‘Global Powers of Luxury Goods’ Report Highlights Changing Market Dynamics

The recently released fifth edition of the Global Powers of Luxury Goods report published by Deloitte notes that the luxury market has bounced back from economic uncertainty and geopolitical crises, edging closer to annual sales of US $1 trillion at the end of 2017.

It also identifies two key trends that are shaping the global marker for luxury goods – the “growing importance of Asia, the Middle East, Latin America and Africa” and the rapidly rising collective share of millennials and Generation Z consumers.

It adds that for example, total sales of clothing and footwear outside of Europe and North America “will rise above50 per cent (in 2018) and continue to increase in subsequent years”, while collectively millennials and Generation Z will “representmore than 40 per cent of the overall luxury goods marketby 2025, compared with around 30 per cent in 2016”.

The report provides an analysis of the 100 largest luxury goods companies globally, based on the consolidated sales of luxury goods in FY2016 (which is define as financial years ending within the 12 months to 30 June 2017).

These companies together generated personal luxury goods sales of US$217 billion in FY2016, Deloitte reports.At constant currency, the growth rate was 1 per cent, 5.8 percentage points lower than the 6.8 per cent currency-adjusted growth achieved by these companies in the previous year. The average luxury goods annual sales for a Top 100 company is now US$2.2 billion.

Three key trends highlighted in the report are:

• Italy is once again the leading luxury goods country in terms of number of companies, while companies based in France have the highest share of sales.

• Cosmetics and fragrances was the top-performing sector in FY2016, and the only sector with improving composite luxury goods sales growth, at 7.6 per cent.

• The eleven multiple luxury goods companies have by far the largest average size among the Top 100. Their average annual luxury goods sales in FY2016 were US$6.3 billion, and together they accounted for 32.2 per cent of the Top 100 luxury goods sales.

In its sectoral analysis, Deloitte states that jewellery and watches companies in FY2016 had the lowest rate of growth in luxury goods sales of all product sectors, losing 4 per cent of sales.

However, the 31 jewellery and watch companies that figure in the list had average annual luxury goods sales of US$1,771 million in FY2016, giving them the second-largest share of total luxury goods sales for the Top 100, at 25.3 per cent.

Significantly, the number of Indian and Chinese jewellery companies included in the Top 100 increased, reflecting improved data and the importance of these two countries within domestic consumption and exports.

The report also states that in India domestically, the jewellery sector has historically been very fragmented and commoditised, but a number of organised vertically integrated jewellery chains with luxury brands are growing rapidly in this large market. The four Indian companies listed in the report, all from the jewellery field, are Titan Co Ltd, Kalyan Jewellers India Pvt Ltd, PC Jeweller Ltd and Joyalukkas India Pvt Ltd.