Top 100 luxury goods companies see sales revenues grow 7% to $212 billion

The top 100 luxury goods companies saw their sales revenues grow 7% last year to $212 billion, a new study has found. Consumers remain inclined to buy luxury goods, with those travelling to European markets rewarded by lower costs. Digital channels are increasingly leveraged by millennials, with quality and brand feel key attributes to buying behaviour.

The 2017 edition of ‘Global Power of Luxury Goods’ report released by Deloitte considers the performance of the top 100 luxury brands over the past years as well as key market conditions, from consumer behaviour to globalisation. The study also included a consumer study, which involved 1,300 participants across 11 major luxury goods markets around the world.

The headline results shows that average revenues for the industry stood at $2.1 billion last year, with composite year-on-year sales growth of 6.8%. Sales of luxury goods last year beat the most recent period average, which stood at 5.2% between 2013 and 2015. The composite net profit margin for the top 100 came in at 9.7%, while return on assets reached 7.9%. The research notes that the economic concentration is largely in the hands of the top ten businesses, which account for 48.1% of total sales. Conversely, a similar recent report on consumer spending in leisure products, which was also carried out by Deloitte, suggested that UK consumers were preparing to tighten their belts amid political and economic uncertainty.

The study asked consumer respondents about their inclination towards purchasing luxury products in the last five year. Emerging market inclination has increased considerably, up by 70% in emerging markets and 53% in mature markets. The number of respondents saying that their inclination has decreased is marginal, at 3% in emerging markets and 5% in mature markets.

The number of respondents that said their inclination for luxury goods has increased in the past 12 months is somewhat below the five-year average, at 62% in emerging markets and 49% in mature markets. A similar number note a decrease in inclination in the past 12 months to the past five years.

The research also considered the pricing strategy of luxury goods across different markets, in terms of US$ equivalent prices and like-for-like products.

China, Japan the US and Russia, the paper found, proportionally pay the most for luxury goods. The differences in pricing are influenced by a number of factors, one key aspect of which is the home-market advantage for luxury goods – many of the key companies creating luxury goods are European. The low prices in France and Italy for certain items, creates an incentive for Chinese buyers to travel to the countries, with home prices sometimes 50% higher than European markets. The considerable differences provide room for brands to manoeuvre with pricing in offshore markets.

“Travel and tourism is still a great growth opportunity for the luxury sector,” said Patrizia Arienti, EMEA Region Fashion & Luxury Leader, Deloitte Global. “Almost half of luxury purchases are made by consumers who are travelling, either 31% in a foreign market or 16% while at the airport. This rises to 60% among consumers from emerging markets, who typically do not have access to the same range of products and brands that can be found in more mature markets.”

The firm further asked respondents about changes to their shopping channel behaviour around the acquisition of luxury goods, finding some variation between various age groups and markets when it comes to the purchase process.

In total, physical stores remain the key channel through which luxury products are acquired, as cited by 63% of all respondents. 15% purchase online via a mobile device while a further 22% use a computer/laptop. In mature markets, 65% of respondents buy through a physical store, while in emerging markets this stands at 60%.

Millennials, generation X and baby boomers have different shopping preferences for luxury goods, with 58% buying in physical stores compared to 66% for generation X and 72% for baby boomers.

Survey respondents were also asked to respond to various statements about their relation to luxury products. The largest number of respondents (88%) said that they buy luxury products because they are premium quality products, while 82% say that they feel happy/confident from buying such products. 75% say that they like to buy luxury products which are hand-made.

At 56%, over half of the respondents likes to buy luxury products because they like to show off, while 57% said that they tend to wear only luxury products. A large number of respondents (57%) say that they buy luxury products impulsively.

“The essence of luxury is changing from an emphasis on the physical to a focus on the experiential and how luxury makes you feel”, said Vicky Eng, Retail Sector Leader at Deloitte. “However premium quality remains a ‘must have’ and consumers retain a keen eye for craftsmanship and hand-made products”.

Top 100 luxury goods producers

According to the report's data, LVMH, Richemont and Estée Lauder are the globe's largest luxury goods producers. LVMH is known for brands as Louis Vuitton, Bulgari, Donna Karan, Loewe, Marc Jacobs and TAG Heuer, Richemont is the parent of among others Cartier, Montblanc, Van Cleef & Arpels and Piaget, while Estée Lauder owns brands including Estée Laude, Clinique and Aveda, as well as the licenses for several best selling fragrances.

Other companies that belong to the top 10 luxury companies of the world are Luxottica Group (Ray-Ban, Oakley, etc), Kering (Gucci, Saint Lauren, etc), Swatch (Omega, Swatch, etc), L'Oréal (Lancome, Biotherm, etc), Ralph Lauren, Choi Tak Fook and PVG (Calvin Klein and Tommy Hilfiger).

The majority of the companies in the top 10 managed to book growth last year, with LVMH and L'Oréal the best performers. The volatility of exchange rates however had significant different impacts on the top 10 companies, depending on their reporting currency and geographic spread. Swatch for instance was hit by the 2015 decision to unpeg the Swiss Franc/Euro fixed exchange rate – the firm's 3% decline in sales in Swiss Francs would have been growth of 10.3% if reported in Euro's.