Luxury brand innovation … driven by changing consumers, digital channels and new business models
June 1, 2016
Luxury brands need to respond smartly to new key market forces and raise their game when serving the evolving expectations of the luxury consumer, says a new report. With two Swiss companies in the Top 10 – Richemont and Swatch Group – and a total of eleven in the Top 100 ranking, Switzerland confirms its leading role in the global luxury goods industry and especially in the watch industry.
The world’s 100 largest luxury goods companies globally generated sales of $222 billion in the financial year 2014, a 3.6% increase compared to a year before. China, France, Italy, Spain, Switzerland, the UK and the US together are represented by 84% of the Top 100 luxury goods companies and 90% of Top 100 global luxury goods sales in 2014. Last year’s leading country, China/Hong Kong, experienced a decline in sales of 6.8% in 2014, compared to 33.4% growth in 2013. This was due to the ending of the ‘gold rush’ effect that had boosted jewellers’ sales in the years before.
Switzerland ranking high thanks to luxury watches
Switzerland’s luxury good sales are dominated by their top three players: Richemont, Swatch Group, and Rolex, which together account for the large majority of Swiss luxury goods. Richemont retained its #2 position, Swatch regained the #5 position, and Rolex went up one position to #11. Sales growth in luxury goods in Switzerland in 2014 was in line with the global average of the Top 100, at 3.6%, down from 5.4% the year before.
Switzerland remains second to none in luxury watch-making. Nine out of the eleven Swiss companies in the global Top 100 are watchmakers. “The strength of the Swiss brands can be seen in their presence in jewellers and other distribution outlets for luxury watches around the world, as well as in their own growing store networks,” said Karine Szeged of Deloitte.
Decade of change in luxury goods
The luxury goods sector has now passed the mid-point of the ‘decade of change’. The first half was characterized by the Chinese consumer and the explosion in the use of digital technology. The second half of the decade is expected to be characterised by discipline. The external environment is likely to change in a number of crucial areas: an evolution in consumer buying behaviors; the merging of channels and business model complexity; an increase in international travel; the growing importance of the millennial consumer; and the continued impact of the global economy. All of these factors create opportunities for the luxury goods sector.
There is a shift in the luxury path-to-purchase. Empowered by social networks and digital devices, luxury goods consumers are dictating increasingly when, where and how they engage with luxury brands. They have become both critics and creators, demanding a more personalized luxury experience, and expect to be given the opportunity to shape the products and services they consume.
This diagram illustrates the new consumer’s “digitalised” path to purchase:
Disciplined innovation of luxury brands, Deloitte 2016
Luxury goods worldwide market study, Bain 2016
Engaging the new luxury consumer, Deloitte 2015