The luxury goods industry has undoubtedly been one of the fastest-growing sectors since the 1970s, and one in which Europe has managed to strengthen its competitiveness within the world market. According to the consulting firm Bain & Company, global sales in the luxury industry (including fashion, jewellery, watches, and cosmetics) shot up from 73 billion euros in 1994 to 253 billion euros in 2015 (Bain & Company 2015).
The second characteristic of this industry is that luxury business is based on relatively new firms, although they hold and manage brands with a history going back to the nineteenth century and even earlier for few of them. In 2013, most of the top 25 largest luxury groups (see Table 1.1) were indeed founded during the 1980s and the 1990s, or are older firms whose growth was based principally on the acquisition of other brands and companies since the 1980s. Hence, one can argue that the luxury business is a new industry, if one considers its organizational structure and largest actors. Yet the contemporary success of luxury goods throughout the world results essentially from their brand identity, which emphasizes both their timeless nature and their embodiment of heritage , craftsmanship, and history. Overcoming the contradiction between the modern organization of luxury companies and the traditional image of their product is one of the key challenges faced by this industry (Donzé and Wubs 2017).
Table 1.1
Top 25 largest luxury groups of the world, 2013
Rank | Company name | Most important brands | Country (headquarters) | Year of foundation | FY13 luxury goods sales (US$mil.) | FY13 total revenue (US$mil.) | FY13 net profit margin (%) |
|---|---|---|---|---|---|---|---|
1 | LVMH Moët Hennessy-Louis Vuitton SA | Louis Vuitton, Fendi, Bulgari, Loro Piana, Emilio Pucci, Acqua di Parma, Donna Karan, Loewe, Marc Jacobs, TAG Heuer, Benefit Cosmetics | France | 1987 | 21,761 | 38,717 | 13.5 |
2 | Compagnie Financiere Richemont SA | Cartier, Van Cleef & Arpels, Montblanc, Jaeger-LeCoultre, Vacheron Constantin, IWC, Piaget, Chloé | Switzerland | 1988 | 13,429 | 14,275 | 19.4 |
3 | The Estée Lauder Companies Inc. | Estée Lauder, M.A.C., Aramis, Clinique, Aveda, Jo Malone | United States | 1946 | 10,969 | 10,969 | 11.0 |
4 | Chow Tai Fook Jewellery Group Ltd. | Chow Tai Fook | Hong Kong | 1929 | 9979 | 9979 | 9.6 |
5 | Luxottica Group SpA | Ray-Ban, Oakley, Vogue Eyewear, Persol, Oliver Peoples | Italy | 1961 | 9713 | 9713 | 7.5 |
6 | The Swatch Group Ltd. | Breguet, Harry Winston, Blancpain, Longines, Omega, Rado, Swatch | Switzerland | 1983 | 8822 | 9128 | 22.8 |
7 | Kering SA | Gucci, Bottega Veneta, Saint Laurent, Balenciaga, Brioni, Sergio Rossi, Pomellato, Girard-Perregaux | France | 1992 | 8594 | 12,948 | 0.4 |
8 | L’Oréal Luxe | Lancôme, Biotherm, Helena Rubinstein, Urban Decay, Kiehl’s | France | 1909 | 7791 | 7791 | 14.7 |
9 | Ralph Lauren Co. | Ralph Lauren, Polo Ralph Lauren, Purple Label, Blue Label, Black Label, RLX Ralph Lauren | United States | 1967 | 7450 | 7450 | 10.4 |
10 | PVH Corp. | Calvin Klein, Tommy Hilfiger | United States | 1881 | 6200 | 8186 | 1.8 |
11 | Shiseido Co. Ltd. | SHISEIDO, clé de peau BEAUTÉ, bareMinerals, NARS, ISSEY MIYAKE, ELIXIR, Benefique | Japan | 1872 | 5404 | 7659 | 3.8 |
12 | Rolex SA | Rolex, Tudor | Switzerland | 1905 | 5398 | 5398 | n/a |
13 | Hermès International SCA | Hermès, John Lobb | France | 1837 | 4975 | 4975 | 21.3 |
14 | Coach , Inc. | Coach | United States | 1941 | 4806 | 4806 | 16.3 |
15 | Prada Group | Prada, Church’s, Car Shoe | Italy | 1913 | 4776 | 4776 | 17.8 |
16 | Lao Feng Xiang Co., Ltd. | Lao Feng Xiang | China | 1848 | 4175 | 5329 | 2.7 |
17 | Tiffany & Co. | Tiffany & Co., Tiffany | United States | 1837 | 4031 | 4031 | 4.5 |
18 | Burberry Group plc | Burberry, Burberry Brit, Burberry London, Burberry Prorsum | United Kingdom | 1856 | 3704 | 3704 | 14.3 |
19 | Michael Kors Holdings Limited | Michael Kors, MICHAEL Michael Kors | UK | 1981 | 3311 | 3311 | 20.0 |
20 | Hugo Boss AG | BOSS, HUGO, BOSS Green, BOSS Orange | Germany | 1924 | 3231 | 3231 | 13.7 |
21 | Coty Inc. | Lancaster, Calvin Klein fragrance; Licensed fragrance brands: Marc Jacobs, Chloé | United States | 1904 | 3186 | 4552 | −1.4 |
22 | Swarovski Crystal Business | Swarovski | Austria | 1895 | 3095 | 3894 | n/a |
23 | Giorgio Armani SpA | Giorgio Armani, Emporio Armani, Armani, A/X Armani Exchange | Italy | 1975 | 2904 | 2904 | 1.1 |
24 | Chow Sang Sang Holdings International Ltd. | Chow Sang Sang | Hong Kong | 1948 | 2571 | 3242 | 4.9 |
25 | Luk Fook Holdings (International) Ltd. | Luk Fook | Hong Kong | 1991 | 2420 | 2477 | 9.7 |
Finally, another major characteristic of the luxury business is its high profitability. In 2013, companies such as Swatch Group , Hermès and Michael Kors had a net profit margin of 20% or more, while nine other enterprises of the top 25 had figure between 10% and 20%. Only one (Coty Inc.) was in deficit that year (see Table 1.1). Consequently, these companies attract the attention of investors and present usually a long-term growth largely superior of other blue chips in worldwide stock exchanges. Such a profitability results from the new management strategy implemented in the 1970s and 1980s which aimed at creating more economic value through building brands and controlling distribution .
1 Understanding the Dynamics of the Luxury Industry
The luxury industry has not always been the big business which it is today. Therefore, it is important to understand the dynamics of this sector in order to have a proper view over the conditions of its historical evolution, the way it was transformed into a fast-growing activity, and the reasons for its present-day success. Scholars in history, business history and management have focused on various aspects and issues of the luxury industry (Donzé and Fujioka 2017). Academic works can be roughly classified into two major fields, each of which adopts a different focus on “luxury”, making it to integrate these two perspectives.
Firstly, there are researches published by management scholars, notably in marketing (e.g. Okonkwo 2007; Chevalier and Mazzalovo 2008; Chevalier and Xiao 2009; Kapferer and Bastien 2009; Tungate 2009; Berghaus et al. 2014). Most of these works provide useful knowledge on luxury companies. They focus on luxury brands and analyze how these brands are built and managed, and h...