The personal luxury goods industry is worth $268.55 billion annually, with accessories, apparel, and hard luxury making up the majority. Key players include Louis Vuitton, Hermes, and Gucci. Younger generations now outspend baby boomers. The largest customer bases are Chinese, American, and European shoppers. Future trends may include increasing sales in emerging markets and through e-commerce, as well as acquisitions across the industry as companies try to gain market share. Political and economic stability, currency fluctuations, and adapting to changing consumer demands will also impact the industry.

1. Personal Luxury Goods
Industry
Samyukta Vendrathi

2. SCOPE
• Accessories (30%)
• Apparel and fashion (24%)
• Hard luxury (22%)
• Other (24%)
• Includes cosmetics; fragrances etc.

3. Industry Size
• $268.55 billion
• Profit margin – High
• Range – 5% to 25%
• Majority – 10% to 20%

4. Industry Growth
• Current growth rate is 1%-2% in real terms (per annum)
• Growth rate is supported by:
• Chinese consumers
• Loyal consumers in the US
• Japanese shoppers returning to luxury goods

5. Key Players
• Louis Vuitton (LVMH)
• Hermes
• Gucci
• Prada
• Burberry
• Chanel

6. Major Markets
• US
• Japan
• Europe

7. Customers: Based on generation
• Based on generation: Younger generations (generation x and
generation y) outspend baby boomers
• Generation x – changing consumer habits
• Generation y – 50 million new consumers into the market

8. Customers: Based on nationality
• Chinese (31%)
• American (24%)
• Europeans (18%)

9. Potential Customers
• Emerging upper middle class all over the world.
• Customers in countries with no physical access to stores. They are
potential customers because of the increasing trend in using e-
commerce by luxury brands

10. Industry Dynamics: Porter’s Five Forces
Threat of new entrants
(Low)
Bargaining Power of Customers
(Moderate)
Bargaining Power of Suppliers
(Moderate)
Threat of substitutes
(High)
Competition/
Rivalry

11. Industry Dynamics: PESTLE Analysis
Political
• Instability in certain countries (middle east)
• Political relations between countries and its effects on
tourism
Economic
• Currency fluctuations
• Slow increase in the economic health of mature markets
(US, Europe, Japan)
Social
• Cultural variations in terms of brand loyalty (Japan, more
loyal customers)
• Emerging upper middle class population

12. Industry Dynamics: PESTLE Analysis
Technological
• Greater use of e-commerce as a platform for making sales
• Greater demand for an Omni channel experience
Legal
• Stricter regulatory environment – example: Proposition 65
• Difficulty in filing lawsuits against counterfeit products
(tracking the people responsible)
Environmental
• Consumers are becoming more eco-friendly
• Use of animal fur, skin etc, in products

13. Trends Impacting the Future:
Industry
• Chinese consumers
• Increasing upper middle class
• Attitude towards display of wealth
• Availability of luxury goods
• E-commerce
• Convenience
• Increase in transparency – reducing regional price variations
• Acquisitions: Horizontal and Vertical
• Attempts at consolidations by companies in order to make up for stagnating
growth in sales or to gain better control over the value chain (raw materials to
retail) or to gain a greater portion of market share RESULT: greater
concentration of power

14. Trends Impacting the Future:
Politico-economic Scenario
• Global economic health
• Slow increase in economic health (mainly US, Europe, Japan)
• Political instability in the middle east
• US elections
• Uncertainty in policies post US presidential elections
• Trump victory – to further boost dollar. This could affect tourism which
supports about 50% of the personal luxury goods consumption in the US

15. Trends Impacting the Future:
Currency Fluctuation
• Japan has fallen into a recession 3 times since the 2008 global
recession
• But has increasing demand for personal luxury goods
• Result of tourism in Japan which has been attracted by Japan’s weak
yen – mainly consisted of Chinese customers – following loosening of
Visa requirements for Chinese nationals
• Strong US dollar is affecting tourism and driving tourists to alternative
destinations like Japan, Europe etc,.
• Weak Euro is also attracting tourists

16. So What?
• The industry attractiveness is between low and moderate
• Loyalty of customers makes entry into this industry difficult and the
prevalence of counterfeit products makes it risky.
• The industry performance is dependent on factors like economic
health of nations, currency fluctuations etc, making it uncertain
• It is necessary to take steps to adapt to changing needs or mitigate risks
• New trends like e-commerce
• Personal luxury goods firms should adapt to changing consumers’ demands
and identify potential in capturing greater share of the market while
maintaining exclusivity to extents needed

17. Sources
• http://www.mckinsey.com/business-functions/marketing-and-sales/our-
insights/tapping-chinas-luxury-goods-market
• http://www.therichest.com/expensive-lifestyle/fashion/10-most-powerful-
luxury-fashion-brands-in-the-world/
• https://hbr.org/2016/02/luxury-brands-can-no-longer-ignore-sustainability
• https://www2.deloitte.com/content/dam/Deloitte/no/Documents/consum
er-industrial-products/global-powers-of-luxury-goods-2015.pdf
• http://www.bain.com/Images/BAIN_REPORT_Global_Luxury_2015.pdf
• http://blogs.wsj.com/chinarealtime/2016/08/16/luxury-brands-get-tough-
with-counterfeiters/