While speaking about the luxury market, the mention of India often comes up as a potentially large market for luxury goods. That discussion has only grown in recent times with markets such as China showing signs of slowing down.

However, when consulting major Deloitte Haskins & Sells released its study on the Global Powers of Luxury Goods 2016 there was a surprise in store as it shifted the discussion from India as a consumer market to the country as a producer of luxury goods.

Three Indian brands, namely Titan (at 32nd rank), Gitanjali Gems (#40) and PC Jewellers (#44) were featured in the top 100. Anil Talreja, Partner, Deloitte Haskins & Sells, says “We are on the verge of entering the second half of the decade of change for the luxury goods sector. We expect remarkable changes by 2020.”

However, the country that dominated the study was Italy, with 29 companies originating from the country finding a place in the top 100.

The study cites that Gitanjali Gems and PC Jewellers achieved sales of more than $ 1 billion. Both the Indian jewellery majors increased luxury goods sales in 2014 by 19.2 per cent. While for PC Jewellers this was a continuation of consistent growth, Gitanjali Gems turned around after a sales slump of 35.4 per cent in 2013.

Pockets of opportunity The study cites that growth rates are slowing in important markets such as China and Russia. However, there are pockets of opportunity across the globe. India and Mexico, for example, are growing quickly, and West Asia offers further growth potential. “We see India as a growing market for luxury goods due to key factors such as improved purchasing power, better consumer buying behaviours, the merging of channels and business model, the growing importance of the millennial consumer; and the continued impact of the global economy,” says Talreja.

Over the next year growth in India is expected to remain strong, although the country still has challenges to overcome before it becomes a major market for luxury brands.

Across the globe, the number of all-round high performers has doubled with 15 companies achieved double-digit growth in luxury goods sales and a double-digit net profit margin in 2014, compared to last year's report. For the 80 reporting companies, asset turnover (the ratio of sales to assets) was stable at 0.8 times, resulting in a composite return on assets of 9 per cent in 2014, compared to 8.6 per cent in 2013. The average luxury goods annual sale for a Top 100 company is now $2.2 billion.

The world’s 100 largest luxury goods companies generated total sales of $222 billion in financial year 2014, 3.6 per cent higher than the previous year. Among the Top 10 companies globally, three are luxury conglomerates participating in multiple sectors of the luxury good market. The top three companies were Louis Vuitton SA (with brands such as Louis Vuitton, Bulgari, Pucci, DonnaKaran, TAGHeuer), Richemont (Cartier, Van Cleef & Arpels, Montblanc, Chloé) and Estée Lauder (Estée Lauder, M.A.C., Aramis, Clinique, Aveda, Jo Malone).

M&A moves Overall, mergers and acquisitions (M&A) have reshaped the luxury goods market. The report states, “Premium and luxury goods companies are continuing to make deals in order to regain control of the design and distribution of existing brands. Private equity firms continue to invest in the sector, with the objective of unlocking value in premium and luxury brands and capturing future growth opportunities.”

The sector is also embracing the new digital reality and the opportunities it presents. Luxury goods companies have acquired cutting-edge technology firms in an effort to turn digital into a competitive advantage.

The luxury sector has also not been immune to the rise of e-commerce. “The original challenge for luxury brands was how to replicate the luxury shopping experience online, but increasingly the more valuable investment is how to use digital technology to enhance the luxury store experience,” states the study. Many luxury brands have chosen to use mobile technology, but with m-commerce, there is the challenge of how to replicate the full luxury experience on a four inch screen.

But it is the last mile, the final delivery to the home, where the true battleground exists.

The luxury consumer now has a larger range of purchase and delivery options than ever before.

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