5 minutos de lectura 13 mar 2019
women on balcony watching sunset

11 growth drivers fueling the evolution of the luxury goods industry

Por EY Global

Ernst & Young Global Ltd.

5 minutos de lectura 13 mar 2019

Digitalization, the growth of entry-to-luxury, and emerging markets all fueled growth in the luxury market. Our 2018 factbook explores 11 key trends.

Over the last three years, the luxury goods industry has seen moderate growth (plus 3% to 4% per year) and a greater heterogeneity of performance among major brands across all product categories, from personal luxury goods to high-end wine and experiential luxury goods. 

The EY luxury and cosmetics index (represented by the companies included in The Luxury and Cosmetics Financial Factbook 2018 Edition) has outperformed the market over the last 10 years with a total return of 137%, corresponding to an average yearly significant return of 8.6%. After a poor 2015-16, sales growth rebounded in 2016-17 and 2018E should confirm the positive trend.

  • We believe that this has been driven by:
  • A strong growth in casualization
  • A reduction in the opportunities to use traditional formalwear
  • The extreme attention to the experiential component of purchasing
  • An increasing propensity to mix and match by all types of consumers
  • The growth in digital 

The factbook explains the drivers of the great growth stories, what is fueling this evolution in consumer taste and expectation, and the resulting company performance. 

Our 11 key findings include:

1. Digital media is connecting with the consumer in new and immediate ways 

Communication has shifted from traditional media to digital and includes more immediate ways of connecting that put the consumer and the community at the center. More than 60% of purchases are influenced by digital, and more than 70% of consumers connect to their favorite brands through social platforms. Luxury companies can use digital to amplify their vision and message and develop an intimate connection with the consumer. 

Consumer connections


of consumers connect to their favorite brands through social platforms.

2. Emerging markets are key

Both in the luxury and cosmetics sectors, growth is mainly driven by consumer spending in emerging luxury markets, such as China, Russia and the United Arab Emirates. This is particularly true of the cosmetics market – EY expects emerging markets to be 50% of sales in personal care by 2020. In luxury, year-over-year (YOY) sales growth has been high, ranging from 4.6% to 5.8%, and is expected to register an all-time high YOY in 2017A-18E (6.1%). 

3. Store formats are impacting capex 

The average capex ratio has slightly decreased in recent years due to the slowdown of monobrand store traffic and sales, and the consequential slowdown in retail store openings. In the upcoming years, the mix of store formats will shift toward off-price stores and airport stores, to the detriment of monobrand stores, department stores and specialty stores. Omnichannel strategies, which create an ecosystem where every interaction with the customer has a great impact, are key to increasing and improving customer relationships. 

4. Expansion into developing countries and low levels of debt are seen with stronger market capitalization

Market capitalization of almost all luxury companies has increased. The average increase has been 8% compared with 2017, with the cosmetics companies at 18%. 

5. After a dip in 2016, mergers and acquisitions increased in 2017

In 2017, there was a 20% increase in transactions (vs. 2016) confirming the positive investor expectations of the potential in the luxury market. In fact, M&A activity reached all-time highs with 140 transactions, with accessories and e-commerce being the hottest sectors. Many transactions were led by private equity funds (30% of deals vs. 25% in 2016), with investors showing growing interest in the e-commerce sector. 

6. Premium and entry-to-luxury segments are where growth is

The premium and entry-to-luxury markets are expected to grow by 7.5% CAGR, while the luxury market will decrease its historical fast pace (CAGR 3.0%). We believe this is due to diversification in markets and increasing digitization opening up the market. 

7. The cosmetics industry is developing as a result of new attitudes

A concern with ingredients and provenance, a preoccupation with anti-aging, a new fashion- conscious male, online platforms, digitally conscious customers and growth of emerging markets are all influencing the cosmetics market. Cosmetics companies are expected to register high growth in the next three years (average CAGR between 2017A-2020E of 7.5% vs. 6.2%).

8. Luxury requires a “haute couture” digital approach

Digital is no longer just an option − it is key to survival. Digital distribution channels widen the playing field for luxury brands, allowing them to increase their client base by engaging with customers online in geographies where a brand has no stores. Fears that digital would not evoke the same emotional response as a luxury shop are being allayed as brands see how the physical and digital can merge, with customization and personalization, virtual reality enhancement and multibrand platforms that allow them to remain true to the brand experience. Digital is improving customer relationship management (CRM) through data collection, recruitment, stock management and finances.

Digital is no longer just an option − it is key to survival.

9. Innovation must be innovated, with luxury brands taking cues from startups

Innovation is the driving force behind growth, but global luxury brands have had difficulty bringing innovation to market quickly. Their global scale and high-scale workmanship are less of a competitive advantage than the agility that is required by the modern consumer. Consumers expect a range of on-trend products that respond to their needs, and multichannel, tech-enabled engagement and interaction with brands.

10. Sustainability matters in the fashion industry

In recent years, investors have demonstrated a growing interest in nonfinancial information – including the social and environmental impacts – to evaluate potential investment opportunities and manage risks, and stock exchanges are increasingly using ESG indices (environmental, social and governance).

11. It’s time luxury embraces digital

The digital disruption from machine learning, artificial intelligence, big data, predictive analytics, e-commerce and blockchain is influencing the industry. But the luxury market has historically been slow to action. Better use of data, connected planning, revolutionizing operations and engaging with e-commerce can help.

Contact us

Request a copy of EY's Luxury and Cosmetics Factbook 2018


Premium and entry-to-luxury fueled growth, due to increased casualization and a mix-and-match approach to styling, and the growth of digital-influenced everything, from store formats to marketing. Customers, increasingly from emerging markets, expect an optimum experience, and companies are diversifying their approach to meet this need. The brands that know how to ride this evolution will continue to thrive.

Acerca de este artículo

Por EY Global

Ernst & Young Global Ltd.