The Road to Luxury

Chapter 14The Future and Questions to Ponder

Luxury has been a golden business since 1995, with big groups showing double-digit growth year after year. Only the sky seemed to be the limit. In 1996, Hermès was a small company with sales of €600 million; in 2014 it was worth more than €4 billion. Who could have anticipated the stock market success of Prada, LVMH, Kering, and Richemont?

Even during the years of recession in 2010, 2011, and 2012, most luxury companies realized an annual growth between 10 percent and 20 percent, and sometimes even more. However, these figures declined overall in 2013 due to a strong euro and a decrease in real consumption. Some resisted decline more than others.

Is it a new reality for luxury companies? In addition to the situation in Europe, China, one of the key markets, is showing signs of decreasing demand.

Other emerging markets are also suffering: Thailand is in turmoil, the Brazilian economy is not doing as well as expected, the political situation in Ukraine is unstable, and Russia is struggling with a very low ruble. At the same time, the Japanese yen continues to devaluate against the euro and the dollar, losing 20 percent to 30 percent in two years, which is very costly for luxury firms doing business in Japan.

These changes in the economic and political context of 2013–2014 have immediate consequences for the luxury tycoons. The future still remains optimistic, though not as before. Buoyed by a burgeoning middle class in emerging markets ...