Chapter one Overview of industry development
Luxury goods are internationally defined as "a kind of unique, scarce, rare and other characteristics of consumer goods beyond the scope of people's survival and development needs", also known as non-necessities of life. In economics, luxury refers to the product with the highest value/quality ratio. From another perspective, luxury goods refer to the products with the highest ratio of intangible value to tangible value.
Luxury goods cover a wide range of industries, including wine, fashion fashion, fashion accessories, jewelry, household goods, perfume, expensive watches and so on.
Luxury brands were born in the 17th century. From the 17th century to the first half of the 19th century, luxury goods mainly served the aristocracy and were an instrument of power. The second half of the 19th century saw a gradual democratisation of luxury. The Industrial Revolution and colonialism brought great wealth, and entrepreneurs and bankers began to emulate the aristocratic lifestyle. Two industrial revolutions made luxury goods more efficient.
In the middle of the 20th century, after the end of World War II, Western economies began to rise, and luxury goods ushered in a phase of prosperity. In the 1980s, the brand began to expand globally and develop as a group. LVHM and other groups began to go public one after another, towards oligopoly, and the Japanese luxury market developed rapidly. After the 1990s, the rise of new economies has brought a new round of development opportunities for luxury goods, and China has become a key market to expand.
As of July 22, 2022, the number of stocks in the iFinD Luxury Index was 12. The total market value of the enterprise is 73.222 billion yuan, and the total number of employees reaches 90081 people.
Chapter two: Business model and income model
2.1 Industrial chain Value chain
In the luxury goods industry chain, luxury enterprises are mainly the middle and downstream enterprises of the industry. In the jewelry and apparel industries, luxury goods companies mainly purchase raw materials from upstream raw material suppliers and sell them through design and manufacturing.
At present, luxury brands have acquired skilled and responsive manufacturing plants to ensure the business needs and development of brands. Not only that, luxury brands' control over the supply chain even extends upstream to raw material suppliers and farmers. Hermes has set up cattle farms in several countries and even announced in 2009 that it had started breeding crocodiles on farms in Australia. The integration of the luxury goods industry chain helps the development of luxury goods enterprises, reduces the production cost of luxury goods, and also reduces the possible middleman difference. The control of upstream resources has become a moat for luxury brands to maintain a high market share, and the integration of the entire industry chain has become an industry trend.
2.2 Business model
In the past, the business model of luxury brands was mainly based on offline sales. However, with the popularity of online sales and the rise of e-commerce in recent years, luxury brands have also begun to turn to online sales business models. Luxury shoppers spent 4.3 billion euros online in 2010; In 2019, that figure rose to 33.3 billion euros.
At present, China is the world's fastest growing luxury consumption market. Over the past five years, the global second-hand goods market has reached 30 billion euros per year, with an average annual growth rate of 12%. The new business model meets the expectations of new consumer groups, prioritizes luxury experiences, incorporates partnerships, and adopts product circulation practices in pursuit of greater sustainability.
2.3 Technological Development
The rise of e-commerce and online sales has led to a digital transformation of the luxury industry. Luxury companies provide virtual exhibition halls to customers for virtual visual marketing to improve consumers' luxury consumption experience. In addition, luxury companies are also building highly automated factories to improve the production efficiency of luxury goods.
2.4 Policy and regulation
In order to promote the development of China's luxury industry, in recent years, the government has introduced a number of policies to reduce tariffs on luxury goods.
Chapter III Industry valuation and global leading enterprises
3.1 Industry comprehensive financial analysis and valuation methods
The valuation methods of the luxury industry can choose the price/earnings valuation method, PEG valuation method, price-to-book valuation method, market capitalization ratio, P/S market sales ratio valuation method, EV / Sales valuation method, RNAV revaluation net asset valuation method, EV/EBITDA valuation method, DDM valuation method, DCF discounted cash flow valuation method, NAV net asset value valuation method, etc.
3.2 Industry development and price driving mechanism
(1) Technological development
In addition, improvements in technology have helped luxury factories produce their products more efficiently. Automated factories help the luxury goods industry reduce labor costs.
(2) Continuous integration of the industrial chain
The leader of the luxury industry is gradually extending its business to the upstream and downstream of the industrial chain and integrating the entire industrial chain. By ensuring the supply of upstream raw materials, the production cost and production efficiency of luxury goods are increased.
(3) Policy support
China's luxury market is one of the most important luxury markets in the world. In recent years, the Chinese government has put forward a number of policies to reduce tariffs on luxury goods to promote the development of the luxury goods market in China and the overall development of the luxury goods industry.
