38.9 C
Wednesday 23 June 2021
HomeWorldLuxury goods market riding high on ME wave

Luxury goods market riding high on ME wave

The luxury goods sector remains resilient despite the economic challenges, thanks to the support from the Middle East and Africa region along with Asia Pacific and Latin America which will account for 25 per cent of the market by 2025.

The world’s 75 largest luxury goods companies generated luxury goods sales of $171.8 billion through the end of last fiscal year (fiscal years ended through June 2013) despite a slowdown in the global economy, said a report.

The average size of the Top 75 companies was $2.3 billion in luxury goods sales, according to Deloitte’s first Global Powers of Luxury Goods report.

The Deloitte report identifies the largest luxury goods companies around the world. It also provides an outlook for the leading luxury goods economies, insights for mergers and acquisitions (M&A) activity in the sector, and discusses the major trends affecting luxury goods companies including the retail and ecommerce operations of the largest 75 luxury goods companies.

“Despite operating in a troubled economic environment, luxury goods companies fared better than consumer product companies and global economies generally. For the remainder of this year, we expect growth in developed economies to pick up speed while significant risks in emerging markets remain,” explained Antoine de Riedmatten, Deloitte Global Industry Leader.

“Overall performance of the luxury sector will depend not only on economic growth, but on factors such as volume of travel, protection of intellectual property, consumer propensity to save, and changing income distribution,” he stated.

The report focuses on the high concentration of luxury goods companies headquartered in France, Italy, Spain, Switzerland, the UK and the US. These six countries represented nearly 87 per cent of the top 75 luxury goods companies and accounted for more than 90 per cent of global luxury goods sales in 2012.

“As the global economy recovers, the global luxury industry is generally expected to grow but in the Middle East, the luxury sector will remain strong this year as we continue to experience a robust consumer market and economic growth,” remarked Herve Ballantyne, the consumer business and transportation leader in Deloitte Middle East.

“We are set to see a growing number of luxury goods conglomerates seek to boost growth and market share through consolidation in the second half. Luxury goods sales growth and ecommerce growth will remain strong this year in emerging markets in Asia Pacific, Latin America, the Middle East and Africa, with tourists shopping in destinations such as France, Italy, the United Kingdom and the United States a significant contributor,” he added.

The globalization of luxury – Growth of wealthy and upper middle class consumers in emerging markets has been the biggest driver of M&A activity in the luxury and premium goods space in recent years, said the Deloitte report.

The Middle East and Africa, Asia Pacific, and Latin America accounted for a combined 19 per cent of the luxury market in 2013 and the regions are projected to grow to 25 per cent in 2025, according to Euromonitor.

“The appetite for European and American brands remains strong in emerging markets, so these companies are bolstering their presence in these regions,” continued de Riedmatten.

Value chain integration – Luxury goods companies keep tight control over all aspects of business from product design and sourcing of raw materials to manufacturing, marketing, and distribution.

Ownership of all aspects of the value chain for the company’s product(s) helps ensure that quality and service can be maintained, thus protecting brand heritage. As a result, vertical integration has become another important driver of M&A activity in the luxury goods sector.


Please enter your comment!
Please enter your name here

- Advertisement -