luxury goods market in 2016

LUXURY GOODS MARKET IN 2016

SHIFTING LANDSCAPES AND THE IMPACT OF DIGITAL INNOVATION

INDUSTRY OVERVIEW

LUXURY GOODS MARKET OVERVIEW

DEMOGRAPHIC SHIFTS

INNOVATION

ABOUT OUR RESEARCH

© Euromonitor International

3

Luxury Goods Industry Overview

INDUSTRY OVERVIEW


4

Luxury Goods Forecast Growth

INDUSTRY OVERVIEW


5

Top 10 Company Ranking

1. LVMH Moët Hennessy Louis Vuitton SA

2. Richemont SA, Cie Financière

3. Kering SA

4. Ralph Lauren Corp

5. Swatch Group Ltd, The

6. Chanel SA

7. Michael Kors Holdings Ltd

8. Hugo Boss AG

9. Prada SpA

10. Rolex SA

Top 10 Brand Ranking

1. Louis Vuitton

2. Ralph Lauren

3. Cartier

4. Chanel

5. Gucci

6. Michael Kors

7. Hugo Boss

8. Coach

9. Tiffany & Co

10. Burberry

Top Global Players Ranking by Value Sales (rsp) in 2014

INDUSTRY OVERVIEW

INDUSTRY OVERVIEW

LUXURY GOODS INDUSTRY OVERVIEW

DEMOGRAPHIC SHIFTS

INNOVATION

ABOUT OUR RESEARCH


7

Luxury Goods Sales in Excess of US$317 Billion and Growing


0

1

2

3

4

5

6

-

50

100

150

200

250

300

350

400

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Rea

l Gro

wth

%

Rea

l val

ue

sale

s U

S$ B

n

Global Luxury Good Sales and Real Growth 2010-2020 US$ Billion

Real value sales US$ (fixed exchange rate) Real growth %

2015 was another challenging year for the personal luxury goods industry

Deflation, geopolitical instability, fluctuating currencies and mixed results from some of the world’s

leading luxury goods brands and retailers were just few of the hurdles to overcome

Sales of luxury goods nevertheless managed to exceed US$317 billion worldwide

Moving forward we expect the next five years to pose further challenges creating more risks but

opportunities are aplenty


8

Luxury Goods to Witness more Geographic Shifts


0

5

10

15

20

25

30

35

40

0

20

40

60

80

100

120

140

Val

ue

sale

s U

S$ b

n

Luxury Goods Sales by Region Real US$ billion 2015/2020 and % Growth

2015 2020 % real growth 2015-20

Europe- Western Europe remains the largest region but growth is dwarfed by Middle East and Africa- Eurozone holding back regional performance- Political instability is similarly taking its toll on Eastern Europe

Asia Pacific- Asia Pacific performance held back by lacklustre sales in China and Hong Kong- Fluctuating currencies, political instability and slowing economies are shifting spend to the West

The Americas- North America’s outlook remains positive as consumers continue to spend- There'll be a notable rise in luxury spending in Latin America despite Brazil’s economic slowdown


9

India 8

Malaysia 12

Indonesia 9

Thailand 7

Canada* 6

South Korea 6

UAE 6

Mexico 6

Turkey * 5

Poland 5

Ukraine** -24

Russia -5

Hong Kong** 3.4

Argentina** 0.9

Switzerland 0.9

China** 1.1

Singapore 1.3

Italy 1.6

Germany 1.6

Brazil 1.7

To

p 1

0 G

row

th M

ark

ets

Bo

ttom

10

Gro

wth

Ma

rke

ts

China Focus of Luxury Goods Investment, but for How Much Longer?


Winners and Losers 2015Luxury Goods Sales Contribution by Leading Markets 2015

USA

Japan

China

France

Italy

Rest of World

The luxury goods industry remains highly concentrated with top 5 markets making up over 50% of all

global sales.

Although the world’s major developed markets have all been key engines of demand, mainland China has

rapidly become the focus of investment. China is now the world’s 3rd biggest market after US and Japan.

However, cracks have started to appear in China’s growth story - which in turn is opening up many

opportunities for geographic expansion with brands increasingly looking for new growth markets.

China was on course to overtake Japan to be world’s 2nd biggest market by 2019 but its slowing growth

trajectory means it will now remain at number 3.

* In bottom 10 in 2010 **In top 10 in 2010


10

Asia Pacific no Longer a Safe Haven of Growth for Luxury Goods


-20

-10

0

10

20

30

40

50

China Hong Kong Japan India

% v

alu

e gr

ow

th

Asia Pacific Growth in Key Affected Markets Luxury Goods 2010-12 vs. 2013-15

Value growth 2010-12 Value growth 2013-15

• Hong Kong protest and social unrest affects footfall

• Luxury real estate unaffordable

• Japan tax-rise further dampens consumer confidence

• Short-lived spend from Chinese

• Government-led ban on luxury gifting

• Weakening economy• Currency devaluation

External Factors Impacting Asia Pacific Luxury Goods Market


11

Wealthy Chinese tourists in particular have been key

drivers of global luxury goods spend for more than

a decade.

While China has been instrumental in driving this

trend, the same can be said for the wealthy tourist

from Russia and the Middle East shopping for luxury

goods in Western Europe or, indeed, the wealthy

Brazilian shopping for luxury in North America.

The tide is turning, however, thanks to currency

fluctuations, economic headwinds and political unrest,

with the future of the wealthy tourist looking rocky.

The implications of a cull on tourist spend could be

hugely detrimental for key developed markets such

as the US, France, Italy, Spain and Switzerland, where

sales of foreign luxury spend is estimated at upwards

of 40%.

The impact on the luxury industry’s geographical sales

mix will most certainly be felt in the short to medium

term - potentially triggering another shift in global

revenue power in the short to medium term.

13

Reliance on Well-Heeled Tourists in Developed Markets Continue

0% 20% 40% 60% 80% 100%

France

Germany

Italy

Netherlands

Spain

Switzerland

Turkey

UK

US

Domestic vs Foreign Spend Key Luxury Goods Markets % 2015

Domestic Foreign



12

Revenue Shifts for Key Luxury Categories Thanks to Currency Wars

World Top 5 Luxury Categories 2015 and Real CAGR 2010-15

39%

1st

20%

2nd

15%

3rd

11%

4th

10%

5th

Luxury Jewellery &TimepiecesUS$64 bn+4%

Luxury Leather GoodsUS$48 bn+8%

Luxury BeautyUS$35 bn+3%

Designer ApparelUS$123 bn+3%

Luxury Alcoholic DrinksUS$31 bn+4%

Designer apparel and footwear is by far the biggest

category accounts for almost 39%

However, luxury leather goods are by far the most

dynamic in terms of growth with a CAGR of 8% over

the last 5 years. Demand for products such as luxury

bags continues to be particularly robust, as they

represent a symbol of status and wealth

Much inline with the latest results from companies

like LVMH sales of fine wine/Champagne and

spirits have also performed well. This has been on the

back of resurgent growth for fine spirits like Cognac

However at the same time our latest data also reveals

some dramatic revenue shifts for some key luxury

categories thanks to currency wars and commodity

prices

These currency pressures continue to force some of

the world’s leading brands to revisit their pricing

strategies. In some markets, prices are going up,

while, in others, they are going down - it is arguably

one of the biggest challenges facing the luxury

goods industry today.



13

Luxury Watches Feel Full Blow of Currency War and Economic HeadwindsOne such category which has fallen prey to the global currency war is luxury jewellery and time pieces

thanks to the floating Swiss franc impacting sales of Swiss luxury watches

What was once heralded as one of the world’s fastest-growing categories is now dwindling in sales.

Our new research indicates that global sales of luxury watches declined by a real -0.5% in 2014 and will

just reach just over 1% for 2015.

However, the biggest drop in sales was witnessed in Asia Pacific on the back of issues in China and

Hong Kong. Similarly Eastern Europe also took a hit, where the market decreased by -2.2% in 2015, on

the back of the slide in Russia and Ukraine.

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

World Asia Pacific China Hong Kong,China

EasternEurope

Russia Ukraine

% V

alu

e s

ale

s g

row

th

Luxury Timepieces Sales Growth 2003-14 and 2014-15

2013-14 2014-15



14

Real Impact of Currency Headwinds on Market Size and Growth

-6

-4

-2

0

2

4

6

8

10

12

14

-

50

100

150

200

250

300

350

400

450

500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Gro

wth

%

Rea

l val

ue

sale

s U

S$ B

n

Global Luxury Good Sales and Current Growth 2010-2020 US$ Billion

Current value sales US$ (fixed exchange rate) Current growth %


INDUSTRY OVERVIEW


DEMOGRAPHIC SHIFTS

INNOVATION

ABOUT OUR RESEARCH


16

The number of affluent households is expected to grow over 2015-2030. Although North America will

continue to have the wealthiest number of households, Asia Pacific is still expected to see the fastest

increase despite the economic slowdown, posting a 113% growth between 2015 and 2030.

The ever-rising disposable income of middle-class and high-income consumers is changing the attitudes

and purchasing habits of Chinese consumers, which is helping to boost demand for luxury goods

worldwide.

Australasia and North America will follow Asia Pacific in terms of growth, posting an increase of 86%

and 80%, respectively, between 2015 and 2030.

Household Wealth Expected to Grow at Different Speeds Globally

DEMOGRAPHIC SHIFTS

0

2

4

6

8

10

12

14

North America Asia Pacific Western Europe Latin America Australasia Eastern Europe

Mill

ion

ho

use

ho

lds

Households with an Annual Disposable Income Over US$300,000 (Constant) 2010/15/30

2010 2015 2030


17

Rising Number of HNWIs has Major Implications for Luxury Goods

USA: 16m 7%

Japan: 2.3m 2%

France: 2.2m 4%

UK: 2.0m 4%

2014 Top 10 Countries Number of HNWI (million) and % Share of Adult Population

Germany: 1.8m 4%

Italy 1.4m3%

Canada 1.1m 3%

China 1.0m 0.1%

Australia 0.9m 2%

Switzerland: 0.6m 9%

Although high net worth individuals (HNWIs) are not ordinary consumers, insights into their expansion can

shed light on drivers of wealth generation.

According to our latest data HNWIs totalled 33 million globally in 2014, of which the US accounts for almost

half of this population with 16 million people.

The growing number of HNWIs can help spur luxury goods spending in both emerging and developed markets,

as the wealthiest of consumers typically account for a significant proportion of luxury travel expenditure.

Whilst developed markets account for the lions share of the global HNWI population, emerging markets play an

important role in driving its growth. China, in particular, has the highest number of HNWIs in all emerging

markets and the eighth highest globally with just over 1 million people. By 2030 however this number for

China is set to rise to 3 million people making it the fifth highest in the world.

DEMOGRAPHIC SHIFTS


18

Future Source Markets Reach Tipping Point for Luxury Goods

Growth in Number of Households with a Disposable Income over U$300k, 2015-2030 Absolute

Top 20: City (Country) ‘000

London (United Kingdom) 568.20

Moscow (Russia) 359.70

Beijing (China) 211.50

Shanghai (China) 200.70

Tokyo (Japan) 169.50

Toronto (Canada) 138.40

Paris (France) 133.40

Tianjin (China) 127.80

Guangzhou (China) 124.10

Shenzhen (China) 116.60

Stockholm (Sweden) 115.90

Calgary (Canada) 112.60

Dongguan (China) 83.00

São Paulo (Brazil) 79.70

Mexico City (Mexico) 73.30

Zurich (Switzerland) 68.30

St Petersburg (Russia) 63.40

Vienna (Austria) 63.00

Ottawa - Gatineau (Canada) 62.40

Foshan (China) 62.20

The highest tipping point for absolute luxury goods is

U$300,000 per household. This can be considered the

point where households reach an income where high-end

luxury goods form part of their standard annual

expenditure.

Asia Pacific will be the main source for many of the

future’s new luxury consumers, with cities in China,

India, Indonesia, Japan and South Korea seeing

significant growth in the number of households able to

afford luxury goods

Outside Asia, cities in other emerging economies, such

as Mexico, Brazil and Russia, will be adding to the

future luxury traveller pool as high income earners grow

and luxury goods becomes more affordable.

London, Tokyo, Toronto and Paris are the cities of the

developed world which are predicted to see the highest

rise in households with a disposable income over

U$300,000 by 2030.

DEMOGRAPHIC SHIFTS


19

Gender Equality vs. Purchasing Potential in Luxury Goods

MaleDisposable Income

67%

FemaleDisposable Income

33%

Global Female Per Capita Annual DisposableIncome as % of Male Total: 2014

0 10 20 30 40

World

Asia-Pacific

M East & Africa

N America

Australasia

Women Men

Sales Growth in Men’s vs. Women’sDesigner Clothing 2000–15

Despite the narrowing income gap between male and female consumers, men still have considerably

higher incomes than women, especially in the emerging regions.

Men's luxury remains relatively undeveloped. Targeting men is still one of the biggest opportunities

The luxury goods market is hugely dependant on the female consumer but thanks to a fusion of fashion

and aspiration men’s luxury goods in key categories is being driven up

DEMOGRAPHIC SHIFTS


20

Targeting the Decision Maker Becomes Key

Mid-Youth&

Mid-Lifers

Young Adults Mothers

Céline

Michael Kors

Bulgari

Pandora

Later-Lifers

DEMOGRAPHIC SHIFTS

INDUSTRY OVERVIEW


DEMOGRAPHIC SHIFTS

INNOVATION

ABOUT OUR RESEARCH


22

Internet Users

• 2.7 billion

Mobile Phone Users

• 3.6 billion

Mobile Internet Subr.

• 2.4 billion

Social Media Accounts

• 2.3 billion

0

50

100

150

200

250

300

350

2010 2015 2010

mill

ion

un

its

Global Sales Wearables 2010/15/20

2015 started with a bang in terms of wearable's as the Apple Watch was unveiled and according to our

latest data global sales of wearables are expected to grow at a phenomenal speed

However, amongst all the excitement there are concerns over how they can fit into our lifestyles.

The answer in many cases is through social media - which is set to be a major part of the smart age – and

luxury wearables will live and die based on their ability to tap these platforms.

Wearables are Coming and will Drive Up Investment Social Media

INNOVATION

Internet and Social Media Users 2014

+259%Growth 2015 - 20


23

…and Encourage More Luxury Wearable's to Enter the Market

INNOVATION

Hermes Apple Watch. The One

Tory Burch & FitbitTag Heuer Carrera

Wearable 01Ralph Lauren Ricky Bag

Costs from US$1,250 Includes all features of

the apple Watch with Hermes logo on front and Hermes leather strap

Available in 2 sizes, 3 strap variations and 5 colours

Cost: US$38–195 Wide retail reach Available for iOS,

Android and Windows Need to buy the Flex at

additional cost of US$100

Cost: from US$5,000 LED lights that activate

when the bag is opened

An integrated USB port to charge your mobile phone

Cost: US$1,400 Available from

November 2015 Available with Google,

Intel and Android

Despite several brands competing for attention, there are still very few true luxury wearbles on the

market

The most recent being the Tag Heuer smart watch, which will be the first luxury watch of it’s kind, along

with the new partnership between Hermes and Apple to launch The One watch.

Given the projected growth in wearable's, companies way beyond consumer electronics are expected to

jump on this bandwagon and it wont be long before we see more smart luxury on the market

http://www.google.co.uk/url?sa=i&rct=j&q=ricky+bag+with+light&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.nytimes.com/2014/11/30/fashion/do-you-have-a-light-ralph-lauren-does.html&ei=bdFlVdSbDM-y7Qbj2YPoBA&psig=AFQjCNFFnRE8sw_qVNXuCFqFyBtFVBwwbg&ust=1432822473064609


24

Online Luxury Sales are Booming

INNOVATION

Our latest data shows that world sales of online luxury are booming and reached almost US$25 billion

in 2015, accounting for just under 8% of all sales.

While, at first glance, this may seem comparatively small, this figure is up from 3% just 10 years ago,

representing a massive increase of 134% on 2005 numbers.

With such impressive rates of growth, it could only be a matter of time before digital sales catch up with

those of physical stores

3% 5% 8% >10%

97% 95% 93% <80%

2005 2010 2015 2020


25

..but Luxury Retailers need to Drive Up Investment in Digital Technology

INNOVATION

Online Luxury Spend: 10%


Online Luxury Spend:6%



Online Luxury Spend:3%

North America83% Internet

Users

West. Europe74% Internet

Users

Asia Pacific33% Internet

Users

Latin America48% Internet

Users

East. Europe62% Internet

Users

Africa & Mid. East23% Internet

Users

Having access to the internet is paramount for e-commerce, but whether consumers buy online is a much

grater issue and there are still huge disparities across the regions.

In regions such as Latin American around half of the population use the internet just 1% of luxury was

sold online in 2015. Whilst there are plenty of challenges in e-commerce, this disparity also opens up many

opportunities for brands and retailers to drive up investment in digital technology

INDUSTRY OVERVIEW


DEMOGRAPHIC SHIFTS

INNOVATION

ABOUT OUR RESEARCH


27

Euromonitor International is a global market

research company, providing strategic

intelligence on industries, companies, economies

and consumers around the world.

Comprehensive international coverage and

insight across consumer and B2B markets makes

our research an essential resource.

Clients in more than 106 countries rely on

Euromonitor for actionable, unbiased insight

supporting decisions on how, where and when to

grow your business.

Our independent view of the business

environment, competitive landscape and drivers

of industry growth help validate strategic

priorities, redirect assumptions and uncover new

opportunities.

12 Office Locations: London, Chicago,

Singapore, Shanghai, Vilnius, Santiago, Dubai,

Cape Town, Tokyo, Sydney, Bangalore and Sao

Paulo

Local Insight: 1,000+ in-country analysts in

developed, emerging and frontier markets offer

local insight

Global Perspective: Understand the business

landscape in more than 200 countries

About Euromonitor International

ABOUT OUR RESEARCH

luxury goods market in 2016

Business