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The Rising Potential of Premium and Entry-to-Luxury Segments

by

Laurent Bludzien

|

This is the featured image caption
Credit: This is the featured image credit

We are in the middle of the most disruptive revolution the luxury sector has ever seen and there’s more complexity: consumers play the “mix and match” game across products, markets and distribution channels. EY’s Laurent Bludzien explains.

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

We are in the middle of the most disruptive revolution the luxury sector has ever seen and there’s more complexity: consumers play the “mix and match” game across products, markets and distribution channels. EY’s Laurent Bludzien explains.

The luxury industry is rapidly evolving. Consumers and trends are changing; client attitudes toward consumer products are bringing new perspectives around brand values and company behaviors; technology, digital and social media are reshaping consumers’ approach to luxury purchases as well as luxury brands’ approach to distribution channels. We are in the middle of the most disruptive revolution the luxury sector has ever seen.

There’s more complexity. No longer are there clear trends, but instead different trends for different markets, product segments and levels of positioning in the value pyramid of products. Consumers play the “mix and match” game across products, markets and distribution channels, and companies have to stay close to the client, as we wrote in the 2016 factbook edition, “Keep calm and care about your consumer.”

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Likewise, the 2017 factbook has been adapted to include more focused and detailed analyses. The luxury market for both fashion and cosmetics cannot be seen any more as a whole and single place, but must be deeply analyzed for its different components and segments to show the different trends and the pace of growth. In this edition, we have included a specific focus on the premium and entry-to-luxury segments.

The luxury segment drove growth in the past, but the premium and entry-to-luxury segments are showing the highest potential in the coming years, with accessories driving growth in both segments.

Here are some snapshots from the 2017 edition:

  • From the high-end luxury segment driving growth in the past decade, to the premium and entry-to-luxury segments’ momentum.
  • Accessories (bags, shoes and small leather goods) will continue to drive the growth, both in high-end luxury and the premium and entry-to-luxury segments, but at a different pace.
  • There’s a change in the way luxury is targeting its consumer from countries to nationalities and leading cities around the world.
  • The high-end personal luxury market was worth €318b globally in 2016, reflecting a growth slowdown trend. Why are high-end luxury sales slowing?
  • The fashion premium and entry-to-luxury markets were worth €101b in 2016 and show strong dynamism. What is boosting the growth in the premium and entry-to-luxury segments?
  • Consumers reward innovative companies with increased market share and ask for very specific products; they always want seamless, innovative, and customized services both pre and post-sale.

From a financial perspective, luxury companies outperformed the market, attracting investors’ interest in increasing valuations again, both from a trading multiple and an M&A; transaction perspective.

The M&A; market is still hot in terms of the number of deals, in line with a booming 2016, although the average deal size is decreasing. In fact, the interest of buyers is more in middle-market companies, more active in the entry-to-luxury segment or in certain product categories (bags, accessories etc.). There are promising opportunities in companies “born digital” and small accessible luxury brands with high-growth potential.

Download the complete report

The report combines publicly available data with input from leaders who work with the world’s leading companies in the sector. It looks at current trends, the evolution of operating aggregates, key financial parameters and valuation ratios. Also in the 2017 edition of the factbook, you will find contributions from sector leaders about selected topics of interest for the luxury industry such as blockchain and counterfeit goods, impact of transfer pricing developments in China, customer centricity through digitalization.

Cover image credit: Ernst & Young

Laurent Bludzien
Laurent Bludzien

Partner and Vice-Chairman of the Board of Directors, EY Switzerland

Laurent is a Regional Managing Partner and Vice-Chairman of the Board of directors of EY Switzerland. For more than 20 years he has been helping companies to protect their financial reputation, with a particular expertise in the luxury industry.

RETAIL

The Rising Potential of Premium and Entry-to-Luxury Segments

by

Laurent Bludzien

|

This is the featured image caption
Credit : This is the featured image credit

We are in the middle of the most disruptive revolution the luxury sector has ever seen and there’s more complexity: consumers play the “mix and match” game across products, markets and distribution channels. EY’s Laurent Bludzien explains.

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

We are in the middle of the most disruptive revolution the luxury sector has ever seen and there’s more complexity: consumers play the “mix and match” game across products, markets and distribution channels. EY’s Laurent Bludzien explains.

The luxury industry is rapidly evolving. Consumers and trends are changing; client attitudes toward consumer products are bringing new perspectives around brand values and company behaviors; technology, digital and social media are reshaping consumers’ approach to luxury purchases as well as luxury brands’ approach to distribution channels. We are in the middle of the most disruptive revolution the luxury sector has ever seen.

There’s more complexity. No longer are there clear trends, but instead different trends for different markets, product segments and levels of positioning in the value pyramid of products. Consumers play the “mix and match” game across products, markets and distribution channels, and companies have to stay close to the client, as we wrote in the 2016 factbook edition, “Keep calm and care about your consumer.”

Join Luxury Society to have more articles like this delivered directly to your inbox

Likewise, the 2017 factbook has been adapted to include more focused and detailed analyses. The luxury market for both fashion and cosmetics cannot be seen any more as a whole and single place, but must be deeply analyzed for its different components and segments to show the different trends and the pace of growth. In this edition, we have included a specific focus on the premium and entry-to-luxury segments.

The luxury segment drove growth in the past, but the premium and entry-to-luxury segments are showing the highest potential in the coming years, with accessories driving growth in both segments.

Here are some snapshots from the 2017 edition:

  • From the high-end luxury segment driving growth in the past decade, to the premium and entry-to-luxury segments’ momentum.
  • Accessories (bags, shoes and small leather goods) will continue to drive the growth, both in high-end luxury and the premium and entry-to-luxury segments, but at a different pace.
  • There’s a change in the way luxury is targeting its consumer from countries to nationalities and leading cities around the world.
  • The high-end personal luxury market was worth €318b globally in 2016, reflecting a growth slowdown trend. Why are high-end luxury sales slowing?
  • The fashion premium and entry-to-luxury markets were worth €101b in 2016 and show strong dynamism. What is boosting the growth in the premium and entry-to-luxury segments?
  • Consumers reward innovative companies with increased market share and ask for very specific products; they always want seamless, innovative, and customized services both pre and post-sale.

From a financial perspective, luxury companies outperformed the market, attracting investors’ interest in increasing valuations again, both from a trading multiple and an M&A; transaction perspective.

The M&A; market is still hot in terms of the number of deals, in line with a booming 2016, although the average deal size is decreasing. In fact, the interest of buyers is more in middle-market companies, more active in the entry-to-luxury segment or in certain product categories (bags, accessories etc.). There are promising opportunities in companies “born digital” and small accessible luxury brands with high-growth potential.

Download the complete report

The report combines publicly available data with input from leaders who work with the world’s leading companies in the sector. It looks at current trends, the evolution of operating aggregates, key financial parameters and valuation ratios. Also in the 2017 edition of the factbook, you will find contributions from sector leaders about selected topics of interest for the luxury industry such as blockchain and counterfeit goods, impact of transfer pricing developments in China, customer centricity through digitalization.

Cover image credit: Ernst & Young

Laurent Bludzien
Laurent Bludzien

Partner and Vice-Chairman of the Board of Directors, EY Switzerland

Laurent is a Regional Managing Partner and Vice-Chairman of the Board of directors of EY Switzerland. For more than 20 years he has been helping companies to protect their financial reputation, with a particular expertise in the luxury industry.

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