ML00030 032 PDF

Luxury Goods
The biggest trends currently shaping the

market
MarketLine Case Study
Report Code: ML00030-032

Published: June 2019
Luxury Goods: The biggest trends currently shaping the market
Published: June 2019 ML00030-032 Case Studies
1. Overview
1.1. Catalyst
The global luxury goods market has performed well in recent years, which has presented exciting opportunities for luxury
brands. This case study explores the biggest trends which are currently impacting the market and identifies the key ways in
which brands are utilizing these trends to drive growth. The study also takes a look at some of the growing threats and
challenges which lie ahead for players within the market.
1.2. Summary
Despite a slowdown in economic growth in multiple markets, the global luxury goods market has remained in healthy growth
in recent years. Chinese buyers are now one of the most important groups in the global luxury market, in fact the Asia Pacific
region as a whole is the fastest growing market globally and will play an increasingly important role in the coming years. A
number of brands have reported positive results in 2017-2018 and as a result of this there has been a period of significant
merger and acquisition activity, with a number of high value deals taking place.
As a new generation of consumers comes to fore, a number of trends have swept across the global luxury goods market.
Millennial and Generation Z consumers are becoming increasingly affluent and attracting this demographic is the key to
ensuring current and future growth for luxury brands, however these consumers have completely differing demands and
bridging the gap between old and new is both a challenge and opportunity. There is a growing demand for sustainable luxury
amongst consumers, and now more than ever, social media and omni-channel retailing is a key way for companies to drive
sales.
Despite the luxury goods market having a positive outlook globally, there are a number of threats and challenges which lie
ahead for companies. Counterfeiting is becoming increasingly sophisticated which has led to the rise of ‘super fakes’, this
alongside the growth of online retail is presenting a new challenge for companies, as products are unknowingly being bought
as fakes. The negative implications of the overreliance on Chinese consumers will also become evident in the coming years,
as spending decelerates both at home and abroad as the country’s economy begins to slow.
© MarketLine 2019. This product is licensed and is not to be photocopied.

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Table of Contents
1. OVERVIEW 1
1.1. Catalyst 1
1.2. Summary 1
2. CURRENT STATE OF THE GLOBAL LUXURY GOODS MARKET 1
2.1. US and European markets have stabilized 1
2.2. Asia Pacific remains the fastest growing market globally 2
2.3. Multiple brands have registered a strong performance 3
2.4. A period of significant M&A activity 3
3. BIGGEST TRENDS IMPACTING THE MARKET 5
3.1. The demand for sustainable luxury is growing 5
3.2. Generational shift is bringing new prospects 6

3.2.1. Rebranding can capture the consumers attention 8
3.3. Omni-channel approach is increasingly effective 9
3.4. Leveraging social media as a marketing strategy is crucial 10
3.5. Personalization of products 11
4. POTENTIAL THREATS AND CHALLENGES THAT LAY AHEAD 12
4.1. Counterfeiting has become increasingly sophisticated 12
4.2. Slowing Chinese consumption 13
4.3. Luxury rental market is growing 13
5. APPENDIX 15
5.1. Sources 15
5.2. Further reading 15
6. ASK THE ANALYST 15
7. ABOUT MARKETLINE 15

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List of Figures
Figure 1: Global luxury goods market geography segmentation: % share, by value, 2017 1
Figure 2: China luxury goods market value: $ billion, 2013–17 2

Figure 4: Companies have come under pressure to change their practises 6
Figure 5: Have purchased any of 17 top luxury brands in last 2 years (%) 7
Figure 6: Burberry LGBTQ+ collection “The Rainbow Check” 8

Figure 7: Burberry changed its logo and monogram in 2018 9
Figure 8: Number of Instagram followers (millions) 10
Figure 9: Louis Vuitton provides hot stamping free of charge 11

Figure 10: Counterfeit products have become more sophisticated 13

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List of Tables
Table 1: Fastest-growing luxury goods companies 3

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2. Current state of the global luxury goods market

Despite a slowdown in economic growth in multiple markets, the global luxury goods market has remained in healthy growth
in recent years. Chinese buyers are now one of the most important groups in the global luxury market, in fact the Asia Pacific
region as a whole is the fastest growing market globally and will play an increasingly important role in the coming years. A
number of brands have reported positive results in 2017-2018 and as a result of this there has been a period of significant
merger and acquisition activity, with a number of high value deals taking place.
2.1. US and European markets have stabilized

The US is hugely dominant in the global market, and made up 28.5% of market value in 2017, however, the market relies on
Chinese consumers purchasing US goods, therefore when confidence is down in China; this market suffers to some degree as
a result. However, a more positive economic climate in the US, as a result of tax cuts and spending increases has caused a
period of temporary growth in 2018, as the demand for luxury goods has increased. Despite the current positive outlook, the
full impact of the protectionist policies implemented by the current US government is yet to be seen, but is likely to have a
negative impact in the long term.
Like the US, the European market also relies heavily on Chinese tourists purchasing luxury goods. An uncertain global
economy, terrorist attacks, currency fluctuations and dwindling international tourists, have all led to a challenging
environment for the European luxury market over the past five years, however the market is now recovering. In the coming
years the market is expected to achieve moderate growth as a result of an improving global economy, and an increasing
number of international tourists, particularly Chinese tourists. Additionally, new store openings, renovation of existing stores,
online expansion and innovations in product offerings by major luxury retailers are the key growth drivers for the European
luxury market.
Figure 1: Global luxury goods market geography segmentation: % share, by value, 2017
6.2%
33%
28.3% Americas
Europe
Asia-Pacific
Rest of the World
32.5%
© MarketLine
Source: MarketLine

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2.2. Asia Pacific remains the fastest growing market globally

The Asia Pacific region remains the third largest globally, accounting for 28.3% of the markets total value in 2017 according to
in-house data, it is also the fastest growing, recording a compound annual growth rate (CAGR) of 4.7% between 2013 and
2017. Due to the high growth in local economies, the region has become one of the most attractive markets for international
luxury brands, which are launching initiatives to connect with shoppers through both physical and digital platforms to
generate sales. China is the stand-out performer of the region, with luxury goods sales continuing to grow significantly,
despite its economy slowing for the first time in 28 years in 2018. The Chinese economy has transformed significantly in the
past decade, economic prosperity has vastly improved the standard of living in the country and led to rising incomes, which
has led to a surge in consumption both at home and in other countries, driving spending across the whole region. Chinese
luxury consumers represent a fast increasing proportion of the global luxury goods market, due to the expansion of the
affluent and fashion-savvy middle class, which is bolstering luxury consumption.
Japan remains a valuable market globally and the market is beginning to grow steadily again, following a long period of
shrinkage as a result of the 2011 financial crisis and the disasters in Tōhoku and Fukushima. An overall continual rise in wages
and increase in employment levels has led to increased consumer spending within the country, which has driven the
purchase of luxury goods once again. Inbound travelers have also increased as a result of the favorably weak JPY, particularly
from China; this trend is expected to continue in the coming years in anticipation of the 2020 Tokyo Olympics, which will
attract high volumes of tourists.
The luxury goods market in India continues to benefit from rising disposable incomes and greater accessibility to different
retail channels, particularly online retail facilitated by improved technology. Like China, India has a swelling middle class with
higher disposable incomes, meaning that the potential for growth in this market is only set to improve, making the country
an attractive destination for existing brands or potentially new entrants.
Figure 2: China luxury goods market value: $ billion, 2013–17
$ billion % Growth
25 25.0%
20.0%
20
15.0%
% Growth
15
$ Billion
10.0%
5.0%
10
0.0%
5
-5.0%
0 -10.0%
2013 2014 2015 2016 2017
© MarketLine
Source: MarketLine

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2.3. Multiple brands have registered a strong performance

The four leading players within the luxury goods market are LVMH, Richemont, Chanel and Kering and have all fared well
recently amid the recovery of the global market. LVMH is the largest luxury goods group and recorded revenue of EUR46.8bn
($55.2bn) in 2018, an increase of 10% over the previous year, with profits from recurring operations amounting to EUR10bn
($11.7bn) in the same period, up 21% when compared to the previous year. Kering was the strongest performer of the four
leading players. The company reported revenues of EUR13.6bn ($16bn) for the fiscal year ended December 2018, an increase
of 26.3% over FY2017, primarily driven by the exceptional growth of the Gucci brand. Additionally, the company’s operating
margin was 27.2%, compared to an operating margin of 23.4% in FY2017.
In the current market, a number of players have made notable gains and experienced very strong growth in terms of sales.
Canada Goose has registered the most significant rates of growth in recent years, the company’s luxury goods sales have
grown with a CAGR of 42.6% between FY2015-2017. Despite being in business for over six decades, the rise of Canada Goose
came seemingly out of nowhere and rapid growth over the past few years has seen the company go from relatively unknown
beyond niche groups, to being worn by high profile celebrities and the wealthy. The company reported that its total revenue
increased by 46.4% to $591.2m in the fiscal year 2018 from $403.8m the previous year. Gross profit increased to $347.6m
from $212.1m and the company had an operating margin of 23.4% in 2018, a significant increase from 10.0% in 2017. Other
fast growing companies included Coty Luxury and Shiseido, both of which operate in the cosmetics and fragrance segment,
which accounted for 20.6% of the global markets total value in 2017. The success of Shiseido is attributed to a large young
population, rapid urbanization, and increasing disposable income. Moreover, rising consciousness about appearance among
consumers in the Asia Pacific region is helping manufacturers to introduce products based on the latest fashion trend.
Table 1: Fastest-growing luxury goods companies
Company FY2017 sales $ million FY2015-2017 sales CAGR FY2017 Net profit margin
Canada Goose Holdings Inc. 461 42.6% 16.3
Coty Luxury 3,211 32.2% n/a
Furla SpA 574 21.5% 6.8%
Titan Company Limited 2,449 19.7% 6.8%
Shiseido Prestige & Fragrance 4,748e 19.3% n/a
© MarketLine
Source: Deloitte Touche Tohmatsu Limited. Global Powers of Luxury Goods 2019
2.4. A period of significant M&A activity

The luxury goods market has seen significant M&A activity in 2017 and 2018, with a number of major high value deals taking
place. In April 2017, LVMH the global leading player in the market acquired competitor Christian Dior for US$13.1 billion. The
deal has provided LVMH the ownership of Christian Dior haute couture, leather, men’s and women’s ready-to wear, and shoe
businesses, which has further diversified the company’s offerings. The deal has united two of the most iconic luxury goods
brands under one roof and serves to simplify the previously complicated ownership structure, marking the biggest
consolidator in the business. The same year, the company also bought a majority stake in Maison Francis Kurkdjian as part of
its strategy to strengthen its position in the niche perfume market segment. The global perfume segment produced steady
growth while the niche perfume market produced strong growth; therefore the move has further strengthened LVMH’s
position in the lucrative niche perfume market.

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Swiss based Richemont Luxury Group has also made significant investments in recent years to consolidate its position as a
leading player. In January 2018, the company made a bid to acquire a 100% stake in online luxury retailer Yoox Net-aPorter, a
conglomerate between Richemont, Yoox, and Net-a-Porter. The acquisition deal was a direct response to the growing
influence of Amazon in online retail and was completed in May 2018. The acquisition was valued at EUR5.3bn ($6.2bn) and in
May 2019 Richemont reported that sales grew by 27% during in FY2018, bolstered by its purchase of Yoox Net-aPorter.
Moreover, the acquisition has given Richemont the ability to combat growing competition from seasonal, value price, and
online retailers. The company also acquired a 100% stake in the Italian leather goods house Serapian in November 2017 for
an undisclosed price. Serapian is known for its expertise in exotic skins, which was the key motivation behind the deal, this
has given Richemont a degree of backward integration, allowing it to use skins across its own portfolio in addition to
supplying other leather goods companies.
On September the 25th 2018, US fashion giant Michael Kors confirmed the purchase of the historic Italian fashion house
Versace, for a sum of $2.1bn. As part of the landmark deal, Michael Kors changed its name to Capri Holdings (after the Italian
island), marking the creation of a new luxury fashion conglomerate. The company has stated that it hopes to grow Versace’s
revenues from approximately $808m to $2bn in the coming years, by expanding its physical presence across the globe,
increasing its footwear and accessory inventory and establishing a stronger online presence.

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3. Biggest trends impacting the market

As a new generation of consumers comes to fore, a number of trends have swept across the global luxury goods market.
Millennial and Generation Z consumers are becoming increasingly affluent and attracting this demographic is the key to
ensuring current and future success for luxury brands, however these consumers have completely differing demands and
bridging the gap between old and new is both a challenge and opportunity. There is a growing demand for sustainable luxury
amongst consumers, and now more than ever, social media and omni-channel retailing is a key way for companies to drive
sales.
3.1. The demand for sustainable luxury is growing

Sustainability is a growing trend across almost every market and industry across the globe and the luxury goods market is no
exception. While the market has traditionally been associated with excessive consumerism and high price tags, the new
generation of luxury consumers are much more conscious of the environmental and social implications of their purchases
and are more likely to purchase products from a brand which aligns with their own personal values. Millennials and
Generation Z consumers, who are having a growing impact on luxury market dynamics, consider luxury to be something that
defines their ideology, unlike their predecessors who are more likely to consider the price of products as a defining factor.
These modern consumers demonstrate a preference to buying products from luxury brands that embrace sustainable
manufacturing methods and utilize ethical business standards; therefore luxury brands are using this behavioral change as an
opportunity to attract this demographic and drive growth. A survey commissioned by the MSL group saw that globally 69% of
millennials want businesses to better facilitate customers getting involved in social issues and the issues millennials are most
concerned about include equal rights, the environment, and healthcare access.
There are a number of drivers behind this shift in attitude; perhaps the most important is the growing awareness of the
impact of consumerism. Due to advances in technology, unlike previous generations consumers now have continuous access
to information, news, and media outlets, which has driven a greater awareness of the issues that have arisen as a result of
this. Additionally, this advancement has also resulted in brand practices and values being highly exposed, therefore
consumers are more aware than ever of the values and operations of a business and demand a certain level of transparency.
As a result of a better understanding of the implications of consumerism, another motivation behind the growing demand for
sustainable products is that consumers wish to abstain from feelings of guilt in their purchasing decisions. By purchasing
luxury goods which are more sustainable, consumers can allay positive feelings and even a sense of pride as they indulge in
something, which is not usually a feature of high value purchases. Purchasing luxury items also fulfills the desire to ‘do good’
and garners feelings of participation. Purchasing products which are both ethical and premium can be perceived as a more
sophisticated form of luxury, therefore acting as a way to stand out amongst competitors.
There are numerous luxury goods brands which have already begun to adapt to this trend, taking different approaches to
ways they can become more sustainable. In September 2018, Burberry announced that it would stop the practice of burning
unsold good with immediate effect. The move came after the company faced huge backlash from environmental groups and
the public in response to its July 2018 earnings report, in which it reported it had destroyed unsold clothes, accessories and
perfume worth £28.6m (£38.1m) in 2017 to protect its brand image. Burberry has since partnered with sustainable luxury
company Elvis & Kresse that will see 120 tons of leather off-cuts transformed into new products over the next five years in a
bid to tackle waste within the market. Additionally, English fashion designer Stella McCartney resumed a partnership with
Parley for the Oceans, an environment organization, launching a limited edition Parley Falabella Go backpack in June 2017,
which uses recycled polyester fabric made from ocean plastic. Moreover, Matt & Nat, a Canadian luxury brand, sells shoes,
bags, and other products made from 100% recycled plastic bottles and free from animal material. The use of animal fur has
also been a contentious issue in recent years, which has already led a number of brands to ban its use in recent years. Prada
is the latest luxury goods brand to respond to this pressure, announcing in May 2019 that animal fur will not be used in its
designs or new products, but items already made will continue to be sold.

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Figure 3: Companies have come under pressure to change their practises
© MarketLine
Source: www.peta.org
3.2. Generational shift is bringing new prospects

The global demographic shift from baby boomers (born 1946–1965) to millennials (1981– 1999) and (to a lesser degree)
generation Z (Gen Z) (1995-2005) in the luxury goods market is changing the market dynamics and appealing to this new
demographic is a challenging but lucrative opportunity for brands. Although the majority of millennials and Gen Z consumers
are not currently affluent enough to purchase luxury goods, it is estimated that the earnings of these demographics will
increase significantly in the next three to four years, therefore luxury brands must tap into this emerging market. There are a
number of reasons that the younger population is splashing out luxury products, despite rising university debt, high house
prices and lower job prospects. Millennials are the first generation to enter adult life in less favourable conditions than that
of their parents, meaning that they have a completely different approach to spending. Due to the general trend of ongoing
economic stability in multiple countries globally, the prospect of success coming from sustained work is much less certain
than for previous generations, meaning that when millennials have money, they are more inclined to spend it. Luxury fashion
designer Veronica Wang has stated that millennials also have a different work ethic and set of values to their parents and are
more open to enjoying life, additionally a ‘living in the moment’ attitude has led to spending habits that produce a sense of
immediate gratification. Changes in financing and credit also means that luxury products can be obtained anytime, and
therefore erodes their position as achievement markers, consumers are now able to fulfil their desires instantly, further
increasing the availability of luxury good.

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Figure 4: Have purchased any of 17 top luxury brands in last 2 years (%)
10.4
8.5
7.9
Affluent Millennials Affluent 35-54s Affluent 55-64s
© MarketLine
Source: www.thewalpole.co.uk
The influence of millennials is rapidly increasing in the global luxury market, leading luxury brands to come up with
innovations, youthful designs, and customer engagement initiatives. Millennials are not only young but also tech-savvy and
well acquainted with global brands and trends, often seeking innovation and preferring products that define their ideologies
and beliefs. As the luxury industry shifts more towards digital, social, and experiential so do luxury millennial shoppers.
Established and emerging luxury brands are working on strategies to reinvent themselves and trying to connect with
millennial luxury shoppers socially. One example of this is Louis Vuitton, which boldly decided to collaborate with Supreme,
an American skateboarding shop and clothing brand, in February 2017 to attract millennials, with the hope of gaining the
millennial demographics attention. While some critiqued the collaboration as cheapening Louis Vuitton as a brand, the
collection was a resounding success and pieces included in the range became highly sought after and developed a cult
following. Evidence of the huge global success of the luxury brands collaboration with Supreme was proven in a 2017 trading
update from the Louis Vuitton’s parent company LVMH, when it reported a 21% year-on-year revenue growth for “fashion
and leather goods”. The collaboration captured the growing demand for streetwear amongst millennials, with tracksuits and
trainers being the new suits and brogues, with oversized hoodies and graphic T-shirts also gaining popularity.
Burberry is another luxury brand to spot the millennial potential and recently revived its brand by launching initiatives that
kept millennials at the center of its strategy. Approximately two-thirds of the brand’s staff are under the age of 30, and they
use social media to connect with their customers. Burberry worked on a project with fashion celebrities and street wear
designers, with the aim of giving street wear a luxurious makeover and influencing millennial shoppers. It launched its
exclusive DK88 bag collection on social media in 2017 and ran a successful campaign to celebrate the young LGBTQ
community in February 2018. GLAADS’s Accelerating Acceptance 2017 survey showed that Millennials (people ages 18-34)
are significantly more likely to openly identify as LGBTQ than generations before them. Specifically, Millennials are more than
twice as likely (20% vs. 7%) to identify as LGBTQ than the Boomer generation (people ages 52-71) and two-thirds (20% vs.
12%) more likely than Generation X (people ages 35-51). Therefore, brands which align with both the aesthetic and cultural
preferences of the new generations of luxury consumers, will drive their popularity which is a lucrative opportunity going
forward.

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Figure 5: Burberry LGBTQ+ collection “The Rainbow Check”
© MarketLine
Source: www.herworld.com
3.2.1. Rebranding can capture the consumers attention
Another trend which has swept the market as a result of the generational shift is the move away from traditional heritage
and toward rebranding, something which has not been common amongst luxury brands historically. The most notable
examples of rebranding in recent years and Gucci and Burberry. In 2015, Gucci appointed a new CEO, Marco Bizzarri, who
immediately brought on a new creative director, Alessandro Michele, known for his eccentric maximalist taste. In just four
years, the pair have transformed the direction of Gucci, which recently earned a place on Fast Company’s list of the World’s
50 Most Innovative Companies in 2018. Kering, which owns Gucci, Yves Saint Laurent and Bottega Veneta, saw its group
revenue climb 27.5% to EUR3.4bn in in the three months to the end of September, with a 35% surge in sales of Gucci items
driving the increase. Gucci has stated that half of the brand’s sales now come from millennials, who are propelling revenues
every season and are purchasing accessories rather than more expensive ready-to-wear pieces. Bizzarri has stated that
previously “There was too much emphasis on heritage. I wanted to move the company to be more inclusive, more joyful, full
of more energy.” This move away from heritage and into a new era and ethos of the brand has proven to be resounding
success for the company, which may make other luxury consider this approach in the future. Similarly, Burberry’s redesign of
its iconic monogram marks the first time in 20 years that the company has rebranded, following Fabien Baron’s design in
1999. In a clear indication of the brand’s desire to transition into the digital age, Burberry revealed the polarizing new design
for its monogram, via Instagram, in a number of promotional posts. Burberry Chief Executive Office, Marco Gobbetti stated
that the brand has made excellent progress in the first year of its plans to transform Burberry, while at the same time
delivering financial performance in line with expectations. Riccardo Tisci’s first collections also arrived in stores at the end of
February 2019 and the initial reaction from customers was very encouraging.

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Figure 6: Burberry changed its logo and monogram in 2018
© MarketLine
Source: Burberry Instagram
3.3. Omni-channel approach is increasingly effective

Luxury brands across the globe are adopting omni-channel strategies to provide a seamless shopping experience to their
customers both online and offline. This also ensures that they are able to cater to the growing demand for online retail,
MarketLine data has found that the global online retail sector had total revenues of $929.6bn in 2017, representing a
compound annual growth rate (CAGR) of 16.2% between 2013 and 2017. In comparison, the Asia-Pacific and US sectors grew
with CAGRs of 24.6% and 10.7% respectively, over the same period. With the online retail space showing no signs of slowing
down, it has become increasingly important for retailers to establish a digital presence. Despite the increase in sales through
digital media platforms, some luxury brands have refrained from adopting a completely digital strategy due to the risk of
losing brand value. Given the fact that luxury shoppers prefer the look and feel of the products and rely on online platforms
for research only, retailers are increasingly adopting omni-channel strategies to target luxury shoppers by providing both an
online and offline shopping experience.
A number of luxury goods retailers have significantly expanded their e-commerce offerings in a bid to drive growth. Hermès
is one example of a luxury goods retailer which has invested heavily in expanding its online presence across several high
growth regions. In April 2018, the brand launched its digital flagship store in Europe and unveiled the website in four
languages including English, French, German and Spanish. The increasing demand in the APAC region, particularly amongst
affluent Chinese consumers also offered a lucrative opportunity, in response to this the brand launched its first ever Chinese
e-commerce site in October 2018. Another form of online retail within the luxury goods market is through online retail
players which operate luxury sections, examples include Alibaba and JD.com. Alibaba launched its Luxury Pavilion (a section
of the company’s Tmall website entirely dedicated to high-end brands) in 2017. Since then the site has attracted the
attention of several luxury brands. The latest addition to the site is British fashion house Alexander McQueen, which will join
other luxury heavyweights including Valentino, Burberry, Versace and Givenchy. In fact, at the launch just 17 brands were
available on the Pavilion, by the end of 2018, this number had risen to 82. Luxury retailers are also forming strategic
partnerships with Chinese tech giants. In October 2018, Swiss luxury goods group Richemont partnered with Alibaba to bring
the retail offerings of its YOOX Net-a-Porter Group to Chinese consumers. Online luxury fashion retailer Farfetch followed
suit in February 2019, merging its Chinese business with the e-commerce platform run by internet giant JD.com.

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3.4. Leveraging social media as a marketing strategy is crucial

Historically, luxury brands have abstained from engaging with consumers through social media, instead basing their identity
on prestige, heritage and service. However, to stimulate interest from the increasingly affluent Millennial and Generation Z
consumers, luxury brands must now leverage social media platforms effectively to drive growth, whilst also ensuring that
their brand image remains intact. Rapid digitization and the growing usage of social media platforms has created a new
opportunity for brands to implement new and exciting marketing strategies to drive growth, the most simple of which being
announcing the launch of new product ranges or collections on social media. Retailers are promoting luxury goods and
services on a range of social media platforms including Twitter, Instagram, and Facebook and also on social messaging apps
such as WeChat, WhatsApp, and Line. These social media platforms are helping the luxury brands to engage with their
potential consumers, spread brand awareness, and increase their customer base, at a much lower cost than traditional
marketing. For instance, several luxury brands such as Burberry and Louis Vuitton are now investing heavily in promoting and
demonstrating their products on social media, also featuring product reviews and influencers. Michael Kors uses influencers
as one of the key ways to promote its products on social media; the brand collaborated with several social media celebrities
such as Martha Hunt, Hailee Stanfield, and Hikari Mori, among others, to promote its products on Instagram.
In China, e-commerce is heavily integrated with social media, such as WeChat. WeChat has over 1bn active monthly users,
and companies can sell to consumers directly using its built-in payment system, additionally Weibo had over 462m active
monthly users as of Q2 2019. Brands can "socialize" with consumers, have one-on-one interactive communications with
customers, close sales, and follow through on the entire commerce process. Gucci is an example of brand which has utilized
social media to drive growth. The brand launched its e-commerce site in China in 2017 to accelerate development in the
APAC region through the e-commerce channel and alongside this; it is using social media platforms to attract tech-savvy
luxury customers. For instance, Gucci used shopping facilities on the WeChat to tap into the potential of Chinese consumers.
The brand also focused on launching innovative and new collections, and creatively promoting the brand through social
media platforms will continue to register growth in the APAC region. Additionally, Burberry collaborated with “Mr. Bags-Tao
Liang,” a renowned blogger on Chinese social media, for the exclusive launch of its new bag variant, DK88, on the WeChat
social media channel in China. As part of the campaign, the brand created a new mobile phone game to attract more users,
which resulted in 5% sales growth in Q2 2017. These examples illustrate that the use of social media in a targeted a localized
way, can be an effective way to drive sales.
Figure 7: Number of Instagram followers (millions)
Hermès 8.6
Balenciaga 9.7
Armani 14.4
Burberry 14.7
Versace 18.3
Prada 19.6
Dolce & Gabbana 20.9
Louis Vuitton 32.3
Gucci 34.4
© MarketLine
Source: Instagram

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3.5. Personalization of products

Another trend which has swept across the retail market is personalization, whether that be of products or services. The
behavioural changes exhibited by millennials in particular have resulted in changing marketing strategies to appeal to them
and while traditional methods are less effective, personalization is now a key driver. One of the main things that luxury goods
consumers look for in a product is exclusivity and one way to achieve this is with the addition of personalized aspects, which
make the product more distinguishable. In regard to personalization, multiple luxury brands have explored ways to
implement this into their products. In October 2018, Louis Vuitton launched its first personalization programme ‘Now Yours’,
a selection of three Run Away styles that could be personalized with color, monograms and material. Additionally, the brand
also carries out personalized hot stamping, which allows customers to personalize their luggage tags, bags, small leather
goods with simple initials. There are 18 colors and several sizes to choose from and is applied to leather via a combination of
pressure and heat, the service is available in-store at Louis Vuitton flagship boutiques, larger Vuitton boutiques worldwide
and online. Prior to this, in 2016, Gucci launched a 'Do It Yourself' service, enabling customers to personalize a selection of
products including its iconic Dionysus handbag. Burberry also launched its customized perfume collection in New York during
2017.
Figure 8: Louis Vuitton provides hot stamping free of charge
© MarketLine
Source: Burberry Instagram

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4. Potential threats and challenges that lay ahead

Despite the luxury goods market having a positive outlook globally, there are a number of threats and challenges which lie
ahead for companies. Counterfeiting is becoming increasingly sophisticated which has led to the rise of ‘super fakes’, this
alongside the growth of online retail is presenting a new challenge for companies, as products are unknowingly being bought
as fakes. The negative implications of the overreliance on Chinese consumers will also become evident in the coming years,
as spending slows both at home and abroad as the country’s economy begins to slow.
4.1. Counterfeiting has become increasingly sophisticated

A major, withstanding threat to the luxury goods market is the growing prevalence of goods, which are become increasingly
sophisticated. Counterfeit goods sold both online and offline present a major hurdle for the growth of luxury retailers and
according to a new report by the OECD and the EU’s Intellectual Property Office, trade in counterfeit and pirated goods has
risen steadily in the last few years, even as overall trade volumes stagnated, and now stands at 3.3% of global trade. The key
ways which counterfeit goods impact the luxury goods market is that luxury brands have suffered a reduction in demand, the
price of luxury goods is affected due to the availability of cheaper goods as alternatives and it can also be damaging to a
brands image amongst consumers. While increasing internet penetration has brought a number of benefits to luxury brands
and allowed them to capture a broader audience, it has also become another channel where sellers can sell counterfeit
products. It is not only the prevalence of fakes which is a growing issue but also the quality of these products. There has been
an explosion in what some are calling “super fakes”, high-end luxury goods which look exactly like the real thing to the
untrained eye, with Alibaba founder Jack Ma stating that counterfeits “are made in exactly the same factories, with exactly
the same raw materials (as authentic goods)”.
In order to combat this growing issue, both authorities and brands are taking action. In 2017, 8,894 social networking
websites selling counterfeit goods were closed by Dubai’s Department of Economic Development (DED) investigators to crack
down on fake sellers, who were diluting the luxury brand’s image and trust among affluent shoppers. Further, the
Department of Economic Development (DED) in Dubai confiscated 19.9m pieces of counterfeit items with an estimated
market value of AED332m in 2018, as it ramped up its efforts to protect trademarks and intellectual property. Along with
country authorities, it is essential for luxury brands to adopt strategies to protect their intellectual property and to fight
against counterfeit goods. This tends to be a bigger problem in the Far East, where many of the fakes originate, but makes
buying from the brand stores in Europe a real advantage for tourists from Asia-Pacific, as they not only get better prices but
also a guarantee of the product’s origin. Some luxury brands are fighting hard to combat the prevalence of fakes online, for
instance, Chanel sued more than 25 Amazon sellers in 2017, who were selling replica items featuring the Chanel logo.
Online retailers have also made concerted efforts to reduce the threat of counterfeits. One of the major issues inhibiting an
increase in luxury brands on Alibaba was the difficulties it has faced against counterfeit goods. While this may still deter the
wealthiest luxury brands the company’s efforts have been enough to entice multiple other brands. In recent years the
company has vastly improved its standing within the international community after tackling intellectual property protection.
In 2018, criminal investigations led by the Luxury Law Alliance brands and Alibaba resulted in the arrest of 1,277 suspects and
the shutdown of 524 manufacturing and distribution locations, which resulted in counterfeit product seizures totalling
$536.2 million. The company’s efforts to reduce the prevalence of counterfeit products have allowed confidence to return
amongst luxury brands.

12
Figure 9: Counterfeit products have become more sophisticated
© MarketLine
Source: www.new-corner.com
4.2. Slowing Chinese consumption

Multiple luxury goods brands have long relied on Chinese consumption to drive growth, whether that be domestically or
through tourism, as these consumers have been the perfect target thanks to their homeland’s rapid economic growth. As a
result of this, Chinese tourists are often newly wealthy, full of aspiration and have a strong desire to display their elevated
status. Chinese tourists account for some of the highest tourist spending globally, much of this has been centered around
western goods and as such, because prices have for many years been high for luxury goods in China, Chinese consumers have
typically spent more heavily overseas where their money will go further. However, this trend has started to slow due to a
culmination of factors, including China’s slowing economy, the government’s push to spur spending at home and fluctuations
in currency values. Despite averaging 9.5% annual growth over the past two decades, the Chinese economy has started to
slow and the outlook for the coming year is expected to be even worse than last year with only 6.3% growth is forecast for
2019. Although retail sales are still growing, the pace of growth has been slowing for a number of years and the current trade
dispute with the US is only adding pressure on the situation. A number of luxury brands have already started to feel the
effects of a slowdown in Chinese spending. Tiffany stated in its latest earnings report that while it performed better than
expected, it experienced a 25% decline in tourism sales from the prior year, stating that the decline was even sharper among
Chinese tourists. In order to combat this issue, luxury brands have begun to focus on expanding their brands into other
potentially lucrative markets such as India, Russia and the UAE.
4.3. Luxury rental market is growing

Another trend which is a potential threat to the market is the growing prevalence of the rental of luxury goods. The rental
market as a whole has grown due to the rise of the sharing economy, in which individuals rent or share things such as their
cars, homes and personal time to other individuals in a peer-to-peer fashion. This trend has helped drive the growth of
companies such as Couchsurfing, Airbnb, Uber, which have all disrupted their respective markets and have radically changed
consumer habits. A rising middle class population and increasing spending has presented an opportunity for rental luxury
goods and there are an increasing number of companies now offering rental services. Front Row, which is based in London,
was launched officially in 2016 and offers hundreds of styles of clothing and accessories from international designers, straight

13
from the latest runways, which customers can rent for typically five days. Borrowed Time is another player operating in the
luxury watch segment where customers can rent products from brands such as Rolex and Breitling for special events. There
growing demand for rental services aligns with multiple trends which are affecting the luxury goods market as a whole. The
Millennial demographic are more inclined to rent than other generations due to generally having lower disposable income as
a result of higher rental costs and increasing educational fees. The use of social media and popularity of Instagram has also
created pressure to be seen in the latest trends and renting goods allows consumers to do so without investing large sums of
money. Renting products also aligns with the growing demand for sustainability and as the environmental costs of fashion
grow, consumers are looking for ways to reduce their footprint. As the sharing economy continues to grow, the prevalence of
luxury goods rental is likely to increase, which in the long term could pose as a threat to the sales of players in the market.

14
5. Appendix
5.1. Sources
Deloitte
https://www2.deloitte.com/global/en/pages/consumer-business/articles/gx-cb-global-powers-of-luxury-goods.html
Yahoo
https://uk.finance.yahoo.com/
Louis Vuitton
https://www.lvmh.com/shareholders/agenda/2018-full-year-results/
Walpole
http://www.thewalpole.co.uk/wp-content/uploads/2018/01/BBC-Reaching-Affluent-Millennials-Luxury-Brands.pdf
5.2. Further reading

MarketLine Industry Profile: Global - Luxury Goods
MarketLine Thematic Analysis: Millennial Consumers: Understanding key trends driving consumer behaviours
MarketLine Value Chain Analysis: Global Luxury Goods Market
MarketLine Analyst Insight: The Kors-Versace Acquisition: A major shake-up in the luxury fashion market
6. Ask the analyst

We hope that the data and analysis in this case study will help you make informed and imaginative business decisions. If you
have any questions or further requirements, MarketLine's research team may be able to help you. The MarketLine Research
team can be contacted at ReachUs@MarketLine.com.
7. About MarketLine
At MarketLine, we deliver accurate, up-to-date insights on over 100,000 companies, 3,500 industries, 215 countries, and
3,000 cities as well as the latest news and financial deal information from within your market and across the globe.
Established in 1997 when the Internet was in its infancy, we recognized the need for a convenient and reliable data service to
help our clients understand local and global markets and the companies operating within them.
In today’s information-rich world, sifting fact from fiction to pick out what’s relevant and what’s up to date has become the
new ‘holy grail’ in business information provision.

15
Hundreds of dedicated research professionals aggregate, analyze, and cross-check facts in line with our strict research
methodology, ensuring a constant stream of new and accurate information is added to MarketLine every day.

16

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Luxury Goods

The biggest trends currently shaping the

MarketLine Case Study

Report Code: ML00030-032

© MarketLine 2019. This product is licensed and is not to be photocopied.

2. CURRENT STATE OF THE GLOBAL LUXURY GOODS MARKET 1

2.1. US and European markets have stabilized 1

2.2. Asia Pacific remains the fastest growing market globally 2

2.3. Multiple brands have registered a strong performance 3

2.4. A period of significant M&A activity 3

3. BIGGEST TRENDS IMPACTING THE MARKET 5

3.1. The demand for sustainable luxury is growing 5

3.2. Generational shift is bringing new prospects 6

3.3. Omni-channel approach is increasingly effective 9

3.4. Leveraging social media as a marketing strategy is crucial 10

3.5. Personalization of products 11

4. POTENTIAL THREATS AND CHALLENGES THAT LAY AHEAD 12

4.1. Counterfeiting has become increasingly sophisticated 12

4.2. Slowing Chinese consumption 13

4.3. Luxury rental market is growing 13

5.2. Further reading 15

6. ASK THE ANALYST 15

© MarketLine 2019. This product is licensed and is not to be photocopied.

Figure 2: China luxury goods market value: $ billion, 2013–17 2

Figure 6: Burberry LGBTQ+ collection “The Rainbow Check” 8

Figure 8: Number of Instagram followers (millions) 10

Figure 9: Louis Vuitton provides hot stamping free of charge 11

© MarketLine 2019. This product is licensed and is not to be photocopied.

© MarketLine 2019. This product is licensed and is not to be photocopied.

2. Current state of the global luxury goods market

2.1. US and European markets have stabilized

© MarketLine 2019. This product is licensed and is not to be photocopied.

2.2. Asia Pacific remains the fastest growing market globally

Figure 2: China luxury goods market value: $ billion, 2013–17

© MarketLine 2019. This product is licensed and is not to be photocopied.

2.3. Multiple brands have registered a strong performance

Table 1: Fastest-growing luxury goods companies

2.4. A period of significant M&A activity

© MarketLine 2019. This product is licensed and is not to be photocopied.

© MarketLine 2019. This product is licensed and is not to be photocopied.

3. Biggest trends impacting the market

3.1. The demand for sustainable luxury is growing

© MarketLine 2019. This product is licensed and is not to be photocopied.

Figure 3: Companies have come under pressure to change their practises

3.2. Generational shift is bringing new prospects

© MarketLine 2019. This product is licensed and is not to be photocopied.

Affluent Millennials Affluent 35-54s Affluent 55-64s

© MarketLine 2019. This product is licensed and is not to be photocopied.

Figure 5: Burberry LGBTQ+ collection “The Rainbow Check”

3.2.1. Rebranding can capture the consumers attention

© MarketLine 2019. This product is licensed and is not to be photocopied.

Figure 6: Burberry changed its logo and monogram in 2018

3.3. Omni-channel approach is increasingly effective

© MarketLine 2019. This product is licensed and is not to be photocopied.

3.4. Leveraging social media as a marketing strategy is crucial

Figure 7: Number of Instagram followers (millions)

Dolce & Gabbana 20.9

Louis Vuitton 32.3

© MarketLine 2019. This product is licensed and is not to be photocopied.

3.5. Personalization of products

Figure 8: Louis Vuitton provides hot stamping free of charge

© MarketLine 2019. This product is licensed and is not to be photocopied.

4. Potential threats and challenges that lay ahead