Pandora_Annual_Report_2018

P A N D O R A A N N U A L R E P O R T 2 0 1 8 C O N T E N T S O U R B U S I N E S S 1 5 Pandora in the Jewellery Industry The total value of the jewellery industry grew by 7% between 2017 and 2018 to EUR 292 billion 1 , and is expected to grow at a similar rate in 2019. Most regions saw single-digit growth, however Asia Pacific (APAC) and the Middle East and Afri- ca stood out, experiencing around 9% and 15% year-on-year growth respectively. The industry remains fragmented with the 10 largest players only making up 12% of the glob- al market and with only 20% of the jewellery market being branded. With the highest brand awareness, Pandora is the world’s biggest jewel- lery brand and has a physical and online store network across all continents with a global market share of 1.5%. A number of other large players have started to explore international op- portunities as well. However, the larger brands from China and Hong Kong still focus on their home markets, opening stores in other parts of the world mainly to target Chinese tourists. The global market China represents 30% of the global jewellery market and almost half of the market in APAC. 1 Fixed 2018 exchange rates. % VALUE SHARE OF FINE JEWELLERY CATEGORIES IN 2018 India, the second-largest market in the region, is on the rise, and the Indian jewellery market is expected to double in size within the next five years. In Europe, growth is expected to continue at a steady rate with the UK remaining the largest market. In the US, growth is expected to slow in the next five years, but should still see single-digit growth. The market in South America is growing but remains small. Europe, Middle East and Afri- ca (EMEA) is Pandora’s largest region in terms of revenue. In the UK, Italy, and Australia, we have market share of around 10%, whereas the share in the US is around 1.5% and in China 0.4%. Jewellery channels Compared with other retail categories, like ap- parel, the percentage of jewellery sold online is relatively small. In most markets, e-commerce represents less than 10% of sales, as consum- ers prefer to touch and feel the jewellery before their purchase. In 2018, 10% of Pandora’s total revenue came from online sales, which is more than many of our competitors. The online share of Pandora’s revenue is expected to increase in the years to come. Jewellery sales categories There are two main jewellery categories, fine jewellery and costume jewellery. Due to its low- er quality, lower price and higher rates of repeat purchase, the costume jewellery category is more penetrated by e-commerce than fine jewel- lery, and online sales of costume jewellery tend to be higher than in the fine jewellery category. Pandora operates in the fine jewellery category. However, compared with other fine jewellery brands, our jewellery is generally more afford- able while retaining high-quality craftsmanship, making fine jewellery accessible to the many. Fine jewellery represents around 85% of the to- tal jewellery industry, but costume jewellery is growing at a faster pace. However, since there is a large difference in price between the two cat- egories, the relative value of the fine jewellery category is only expected to decrease by one per- centage point over the next five years. In addition to costume and fine jewellery, the jewellery market can also be segmented by product catego- ry. Pandora mainly operates within the wrist wear category, but has the capabil- ities to expand in other categories like rings, earrings and neckwear. 10% of our total revenue came from online sales in 2018 Global value share Pandora specific value share 100 80 60 40 20 Other Wristwear Rings Neckwear Earrings 31% 7% 31% 14% 3% 0% 7% 18% 72%* 17% * Charms and Bracelets fall under this category