“The global luxury market continues to grow steadily, rising by 10.4% to €142 billion in 2015. The shift from wholesale to retail among leading brands has provided a boost to the value of the market and this strategy offers an opportunity for luxury players to strengthen their high-end positioning through greater control over distribution, discounting and the in-store experience. Uncertainties overhang the market, yet the underlying demand for luxury goods remains strong.”
– Alice Goody, Retail Analyst
This report examines the following issues:
- What is driving growth in the luxury market?
- The downward pressure on pricing in luxury
- Strengthening the high-end positioning through luxury store experiences
Most people have an idea of what constitutes a luxury item, but it is actually very difficult to quantify it. But one can say that a luxury good is branded and it is the goods that are luxury, not the retailer. It is up to the retailer to merchandise the goods in a way that sets them off to their best advantage.
One key trend in recent years has been for luxury brands to take greater control of their own distribution through directly-operated stores, though that is only really possible for the biggest brands.
In general, wholesaling and licensing is in decline.
Since it is the brands that are luxury and not the retailer, Mintel has calculated the size of the market from the aggregated turnover of brands that we think are viewed as luxury brands, adjusted where necessary to add a retail margin and the sales of smaller players.
The concept of luxury goods is still highly subjective. It is usually obvious where a product is luxury and equally obvious where it isn’t, but there is a grey area that is more subjective. Take the Swatch group, for example. The Swatch brand itself is mass market and, while they are more upmarket, we think that Longines and Tissot are too. But Omega is a luxury brand, and one of the more desirable as well. Or look at Net-a-Porter, in which Richemont has just sold a controlling interest to Yoox. Some of the brands are most definitely luxury brands (eg those from the Kering and Prada stables), but others are not. J Crew is a US mass market brand.
“Luxury” goods are undoubtedly priced high, though that is often justified by a very high level of craftsmanship. They must have an element of exclusivity and be out of the reach of most mass market buyers certainly in terms of regular purchasing. However, defining the market can be difficult because perception of luxury can be highly subjective.
In our analysis there are three main categories of luxury goods to which we add a miscellaneous group of smaller products:
Fashion & leather goods
Fragrances & cosmetics
Jewellery & watches
Other – writing instruments, eyewear, furniture and other home goods and other miscellaneous items. It may also include a small element from hotels (eg Bulgari), spas and bars.
Food, beverages, tobacco, electronic/electrical goods, automobiles and services such as travel are all excluded.