The fashion and luxury goods industry faces significant global challenges in terms of sustainability, digitization and consumption patterns, all factors that will lead to a “radical transformation” in the coming years, according to the 2022 Global Powers of Luxury report. Goods by Deloitte. Despite such challenges, the consultancy found that during fiscal year 2021, luxury goods companies rebounded from the COVID-19 pandemic, with the top 100 luxury goods companies generating compound sales of $305 billion, a 21.5 percent year-over-year increase that outpaces pre-pandemic companies. Fiscal year 2019 levels of $281 billion.

The importance of the top luxury goods companies is “clear,” according to Deloitte, with the 15 companies with luxury goods sales of more than $5 billion contributing more than two-thirds of total goods sales. luxury Top 100, while the 45 companies with sales of $1 billion or less contributed just 6.7 percent of the total. Drill down into the top 100 companies: those operating in the luxury market (i.e., luxury for personal use, including ready-to-wear, handbags and accessories (including eyewear), luxury jewelry and watches, and luxury beauty and prestige), and which have a minimum revenue threshold of $240 million), Deloitte found that 73 of the top 100 companies reported growth in luxury goods sales in fiscal 2021, compared to just twenty in fiscal year 2021. fiscal 2020.

LVMH, Chanel, Chow Tai Seng, Inter Parfums and the new Soma Fashion Group saw luxury goods sales increase by more than 50 percent.

Net profit margins also rebounded in fiscal 2021, according to Deloitte, with nearly 80 percent of the Top 100 reporting profitability in fiscal 2021, up from 61 percent in the prior year. Twenty-three companies reported double-digit net profit margins. Still, 18 companies in the Top 100 reported double-digit luxury goods sales growth and double-digit net profit margins in FY2021. These included half of the top 10 luxury giants, as well as Moncler of Italy. LVMH, Kering, Chanel and Moncler reported double-digit sales growth and net profit margins in each of the past five years (excluding fiscal 2020 due to the pandemic). Deloitte notes that Hermès, which was ranked No. 7 on the Top 100 list, “is also a consistently high performer in both sales growth and profitability.”

Targeting the Top 10 (companies with a sales threshold of more than $7.8 billion), Deloitte claims that these ten companies “increased their share of total luxury goods sales of the Top 100 companies by 4.8 percentage points”, contributing 81.4 percent. of the year-over-year growth in sales of the Top 100 companies, and 84.7 percent of the combined net profit of the Top 100 companies.

“Chanel overtook Richemont and L’Oréal Luxe to take fourth place in the ranking. Hermès International and Chow Tai Fook moved up two places. Rolex returned to the Top 10 for the first time since Global Powers of Luxury Goods 2014, in ninth place. China National Gold Group Jewelery Co was another new entry into the Top 10, coming in at tenth place. EssilorLuxottica disappeared from the Top 10; it had to be excluded because the company’s luxury goods sales could not be estimated following a change in its financial reports. PVH Corp dropped out of the Top 10 as its luxury brands Tommy Hilfiger and Calvin Klein saw sales decline due to the impact of the COVID-19 pandemic.

Key issues for 2023

As well as diving into the top 100 companies’ revenue and profit figures, Deloitte reflects on key themes/opportunities in fashion/luxury, including facets of ESG/sustainability and web3 for the coming year (and beyond)…

First, Deloitte states that “as we have seen in previous editions of this report, sustainability in particular has become a top priority for luxury goods companies.” As the fashion and luxury industry has been “long criticized for the environmental impact of its production processes and consumption practices”, an increasing number of companies are “including sustainability principles in their core strategies, turning it into a new paradigm of conceiving luxury following ESG Criteria (Environmental, Social and Governance) and applying the concept of being ‘sustainable by design’”.

This is taking a variety of forms, including efforts focused on the secondary market, with Deloitte noting that “to embrace circularity, luxury companies would need to disrupt their traditional linear “take-make-use-waste” model and work in new strategies, with the aim of: (1) Fostering new business models that increase the use of products (second-hand, resale, renting); (2) Create safe and renewable raw materials (biomaterials, biochemicals, etc.); and (3) Implement alternative solutions that allow used products to be converted into new ones (repair, recycling, etc.).”

Looking specifically at resale, Deloitte claims that consumers are changing the way they buy, wear and sell luxury goods and are “showing more and more interest in the second-hand market”. Due to increasing demand in this market segment, luxury goods companies are “discovering how the used goods category can help extend the life of their products and increase brand relevance among new consumers, and mostly young. Some companies are already investing in and joining forces with reselling platforms as an alternative distribution channel, according to Deloitte. (And as we pointed out not too long ago, big-name brands are testing the reselling waters, but even the biggest names have been unapologetic about their unwillingness to actively participate in the reselling market—they come to mind. Louis Vuitton, Chanel and Hermès. )

The rise of the resale market and the widespread adoption of e-commerce by brands across the fashion and luxury spectrum has increased the risk of a proliferation of counterfeit products, according to Deloitte, which states that “counterfeit products they are one of the most serious problems for the luxury industry”. In this context, companies are turning their attention to effective solutions to the problem. One of them is the digital passport, a digital tool (often based on blockchain technology) that verifies the origin of luxury goods such as designer items or works of art.

Blockchain, a technology commonly associated with cryptocurrency, has gained a role in the luxury goods market, according to Deloitte, “as it helps verify and authenticate the origin of an item.” Whether it’s a new or second-hand item, a purchase can be immediately verified by scanning your digital passport which can communicate its provenance and prove that the item is authentic. Luxury companies are beginning to use this new technology more intensively, as indicated by a partnership between LVMH, Richemont-owned Cartier, and the Aura Blockchain Consortium created by Prada Group and the Fashion Working Group of the Sustainable Markets, the latter of which was created by His Royal Highness King Charles III, is chaired by former YNAP founder and chairman Federico Marchetti and features members including executives from Brunello Cucinelli, Burberry, Chloé and Giorgio Armani, among others.

As for the metaverse, which garnered quite a bit of attention in 2022, Deloitte says that right now it is “primarily used to bolster the brand equity of luxury companies and drive traffic to their websites and stores.” While “there are many other potential uses of the metaverse,” to activate any of them, companies “need to embrace the foundational technologies that underpin the metaverse (such as NFTs and blockchain) while simultaneously adapting to the fast pace.” of technological change.”

Ultimately, Deloitte states that “no one knows what the metaverse could become, but the momentum for progress is unlikely to abate or regress,” stating that “by taking advantage of the many opportunities the metaverse offers, well-prepared fashion and luxury companies could help shape an exciting future.”