The world’s 100 largest luxury goods companies generated revenues of $ 252 billion in 2020, up from $ 281 billion the year before, but the net profit margins of the 81 largest companies fell only 5.1% . The data was released by Deloitte’s Global Powers of Luxury Goods 2021 annual report, which indicates the pandemic has been the catalyst for change as luxury goods companies embraced new paradigms of value creation but generally stayed behind. resilient.
“As they seek new ways to connect with their customers, they are changing their approach and mindset by integrating sustainability and digitization into their long-term strategies, to align with consumer demands and new regulatory requirements, “said the report’s introduction.
The top ten generated 51.4% of revenue from the top 100 sales of luxury goods. These include LVMH, Kering, EstÃ©e Lauder, Richemont, L’OrÃ©al, Chanel, EssilotLuxottica, PVH, Hermes and Chow Tai Fook Jewelery Group. The top 10 increased their share of the total luxury goods sales of the top 100 companies by 0.2 percentage points, according to the report, although all the top 10 companies except PVH reported a drop in prices. sales in fiscal 2020, they remained profitable, together generating more profit than the total for the top 100 companies (as many small businesses reported losses).
Revolutionary luxury, three take-out dishes:
Header 2 Digitization and sustainability goals in the luxury industry
The world of fashion and luxury is changing. What were once the product design choices of a few courageous and environmentally conscious innovators, are now drawing closer to the mainstream, involving almost every company in the industry. Increasingly, luxury goods companies are changing their approach and mindset, integrating sustainability and digitization into their long-term strategies, to align with consumer demands and new regulatory requirements.
Adopting the circular economy: Innovating with biomaterials in luxury products
Given the changes that have taken place in the luxury industry over the past few years, it is clear that sustainable luxury â promoting the environment and social responsibility â is here to stay. More and more luxury products are labeled “sustainable”, and the industry is now accustomed to concepts such as ethical fashion (production methods, working conditions and fair trade); circular mode (recycling, upcycling and thrift store); slow fashion (sharing, rental); and conscious mode (ecological and green mode).
Luxury companies are setting environmental goals for the future, with carbon offsetting as a priority. An imperative is to find new ways to be more sustainable, in design, production, distribution and communication. Luxury goods companies seek to use technology to develop new environmentally friendly materials, and with technological development comes material innovation.
A new frontier of luxury: NFTs and fashion games
The luxury industry typically takes a conservative stance against anything that could put its heritage at risk, but the pandemic has changed everything and has prompted companies to take bold action in creating and growing their digital strategies. NFT represents multiple opportunities for luxury companies. Firstly, they are a tool for verifying the authenticity and ownership of an item: counterfeit products are a problem for the industry and the blockchain makes it possible to trace the origin of an item, its history and its previous owners, which makes it easy to transfer ownership of a product and to trace and resell. This feature is also very useful in the second-hand market, allowing consumers to verify their purchases. Another important aspect of “virtual luxury” is its viability and accessibility: even those who cannot afford a luxury bag or pair of shoes can own and use a virtual branded item and display it repeatedly. Luxury skins could be compared to real-world diffusion lines.
Gen Alpha: Consumers of the Future are on the Way
The Gen Alphas are expected to become a generation of consumers with great purchasing power and the key to the future success of luxury brands may lie in loyalty from an early age. As future consumers born into the digital age, Gen Alpha will be exposed to luxury brands from an early age through social media, through their peers and through the habits of their millennial parents.
Academic research shows that children begin to recognize brands, associate with them, and even express their preferences as early as age three. So, although we are still in uncharted territory, luxury brands must learn to develop a relationship with this emerging clientele.
Source of the article: Deloitte Global Powers of Luxury Goods 2021 report