BaselWorld 2013: The Old, The New and The Revolutionary

Analyst Insight by Sulabh Madhwal, Personal Accessories and Eyewear Analyst, Euromonitor International

The latest edition of BaselWorld came to a close on 2 May, thus ending an 8-day event which attracts the highest number of watch players from around the world. Several global groups such as Swatch, Fossil, Richemont and LVMH use the event to generate new and cultivate existing partnerships with retailers, suppliers and the media. Although value growth for watches in 2013 is expected to be lower than in 2012, the annual event saw the total number of attendees rise by more than 15% to 122,000 visitors. A closer examination of new launches reveals three approaches adopted by the major watch brands.

Acquisitions Fast Becoming the Buzzword for 2013

Analyst Insight by Sulabh Madhwal, Personal Accessories and Eyewear Analyst, Euromonitor International

The Swatch Group acquired luxury jewellery brand Harry Winston in January 2013. Several global players operating across personal accessories and eyewear have also intensified acquisition efforts in early 2013, targeting specific markets rather than globally recognisable brands.

PPR SA

Global accessories revenues for PPR, one of the largest luxury players, were heavily reliant on bags and luggage in 2012. Boucheron and Girard-Perregaux were the only two jewellery or watch brands with notable sales in the calendar year. The company has started to address this situation as it acquired Hong Kong’s jewellery brand Qeelin in December 2012. Focused on two markets, in the form of China and Hong Kong, the luxury jewellery brand is likely to be followed by more jewellery and watch brands entering PPR’s portfolio in 2013. Another regional player acquired in January 2013 was Christopher Kane, catering to apparel and bags in the UK.

Luxury Goods Landscape: China

Benefitting from a fast-growing middle class and a fast-developing distribution network, sales of luxury goods in China have consistently outperformed the global market. Sales of luxury goods in China tripled in value in the 5 years to 2012 and by 2017 the country’s luxury market is set to double in value again. By 2017 it is set to overtake France, the UK, Italy and Japan, making China the second biggest luxury market in the world after the US.

China’s Luxury Gift Culture: Dead or Alive?

Analyst Insight by Rob Walker, Contributing Analyst, Euromonitor International

This time last year, there were more Chinese government officials and company executives sporting Cartier or Rolex timepieces than you could shake a stick at. Today, many of those same luxury timepieces are locked up in drawers at home or are on sale at second-hand stores such as Brand Off in Shanghai. Most government officials wouldn’t be seen dead wearing one.

This reflects a crackdown on shows of wealth in government circles, which has filtered into the business environment too. China’s political leaders have watched nervously as popular discontent in the Middle East and Africa has led to the overthrow of governments. Some view these events as a window into China’s future, and are keen to rein in any visible signs of venality. In a key sign of a tougher and more conservative approach in China, new leader Xi Jinping has made the fight against corruption his number one mission.

Who is Buying Fountain Pens?

With the growth of electronic devices such as computers and smartphones and with the younger generations preferring ball point pens, fountain pens have had to re-define itself as a luxury product endowed with jewels and precious metals, rather than as a utilitarian tool. Luxury brands such as Parker and Montblanc, thus, are successful in persuading appreciators cutting across both developed and emerging markets to fork out a higher sum per unit purchase.

Jewellery in 2013: Interpreting the Latest Financial Results

Analyst Insight by Sulabh Madhwal, Personal Accessories and Eyewear Analyst, Euromonitor International

Jewellery is not only the largest personal accessories category by value sales, but also the fastest growing. As such, events affecting the jewellery competitive landscape attract great attention from accessories manufacturers and retailers. Some financial results documented over January and February 2013 are set to influence the biggest jewellery brands worldwide.

Asia Pacific losing its influence?

On the evidence of several companies’ quarterly results for the period ending December 2012, Asia Pacific did not perform as well as expected. Buoyed by retail expansion and increasing brand recognition, both Richemont (owner of Cartier) and Chow Tai Fook saw their Asia Pacific revenues grow in excess of 40% over the calendar year 2010/2011, a feat which was unlikely to be repeated. One reason for this is simply a return to pragmatic growth rates as the companies in question pursue strategies to expand in second and third-tier cities in key markets such as Japan and China. In the last quarter of the 2012 calendar year, Chow Tai Fook reported regional sales growth of 4%, while Richemont’s revenues increased by 6%.

Luxury Goods Growth Fueled by an Expanding Global Middle Class Forming an Increasingly Sophisticated Consumer Base

The middle class in 85 major economies, which together make up over 90% of total global luxury goods spending, totalled 444 million households by the end of 2011. This represents an increase of 24.2% over 2006, and is set to continue its growth. Middle class expansion is particularly robust in emerging economies on the back of rising incomes. Middle class consumers form an increasingly sophisticated consumer base with rising spending power, driving growth in many luxury goods categories.

Conglomerates Strive for Vertical and Horizontal Integration Amidst Stiff Competition

Analyst Insight by Gek Tan, Personal Accessories and Eyewear Analyst at Euromonitor International

The personal accessories market is forecast to reach US$484 billion in 2013, and is currently led by luxury conglomerate groups LVMH, Richemont and Swatch. Despite the European crisis, the market is supported by demand in the emerging BRIC markets. With rising demand, conglomerates are looking to reduce the risk of overreliance on a limited number of raw material suppliers or business divisions. Euromonitor International looks at the recent trends of conglomerates, expanding business divisions simply by acquiring parts of the supply chain.

VF Corp Adds Spark to Non-Luxury Bags and Luggage

Commanding appreciable market shares across nearly all bags and luggage categories in 2011, VF Corp is one of the few non-luxury players to break into the top ten global players. It is particularly strong within backpacks, where brand JanSport is a universally recognised name. As the apparel company’s Outdoor And Action Sports division receives more focus in the forecast period, bags and luggage is set to see increased investment from the manufacturer.

Self-Operated Retail Making Its Mark in Personal Accessories

Analyst Insight by Sulabh Madhwal, Personal Accessories and Eyewear Analyst at Euromonitor International

Personal accessories companies dealing in bags, jewellery and watches often enjoy a close relationship with retail partners in order to appeal to specific consumers. They also depend on these retail partners for guiding category growth. As consumer spending for these listed categories was highly constrained in 2012, profit margins for major players are expected to be negatively affected in the calendar year. This in turn encouraged several companies to expand their supply chain in order to include the retail end, evaluating pros and cons in the process.