European Commission

Competitiveness of the European High-End Industries

Brussels, 26 September 2012
European Commission staff working document.
Europe is a global leader in the sector of high-end products and services with a world market share of 70 %. Being part of the creative economy, European high-end products are exported world-wide and act as ambassadors of European manufacturing, heritage and culture. Merging traditional craftsmanship and quality manufacturing with high-end technologies, design and innovation, as well as modern marketing and consumer communication, the European highend industry promotes European values, culture, art, creativity and know-how in the world. Although broader in scope than the cultural and creative sectors, the high-end industries rely on a strong cultural and creative input.

Thierry MuglerThese industries are made up of the high-end segments of several products and services markets, such as fashion, jewellery and watches, perfumes and cosmetics, accessories; leather goods; furniture and furnishing, household equipment; and in a wider sense they can even include gastronomy, wines and spirits, cars, boats, hotels and leisure experience, retail and auction houses and publishing.

The companies in these industries follow a specific business model, focused on creativity, design, high-quality manufacturing and authenticity. Based on these features, they have been developing a successful branding strategy.

A recent study ( ‘The value of the cultural and creative industries to the European economy’, Frontier Economics, May 2012) estimates that the industry’s contribution to the European economy and growth should not be underestimated: it corresponds to 3 % of EU (non-financial) GDP with an annual turnover of above € 400 billion. Some 990 000 people are directly employed in this sector in Europe. This figure does not include the indirect employment generated by the supply and distribution of products or in related sectors, such as promotion and marketing, education, media and communication.

The European high-end industries have proven remarkably resilient to the economic and
financial crisis. Over the past decade they showed stable growth, but in 2010 and 2011 they
noted yearly growth of over 10 %. Further growth at the level of between 7% and 9% is
expected in 2012 and in the coming years (Altagamma Monitor Update, May 2012).

From a successful business model...

The business model of the high-end is based on the importance of branding and symbolic
value, which convey a certain status to the consumers. This status allows the company to
charge a premium price as compared to unbranded products.

High-end products are generally associated with certain success factors, such as high quality, style and design, and craftsmanship, multiplied by emotional appeal. These aspects are present at all stages of the supply chain to match the product characteristics with consumers’ requirements.

The sourcing of materials — mainly textiles, leather and fur, but also other inputs — must
comply with strict quality requirements to ensure high quality of the final products. A high
design content is also common to high-end goods.

The manufacturing process is often based on craftsmanship and traditional skills coupled with new technologies; in addition, it must be efficient in producing relatively small volumes of products and flexible in order to follow changes in demand. It is crucial for high-end brands to align their distribution channels with the success factors, so they pay special attention to the display of products, their availability, the service offered, and the location of their shops, in order to create a unique shopping experience.

…to a significant contribution to employment and skills development …

Although there is a strong presence of large companies and multi-national brand groups
among high-end industries, companies are generally small to medium-sized enterprises.

The high-end brands have also created a whole ecosystem of suppliers, sub-contractors,
distributors and service providers, in which SMEs, small manufactures, craftsmen and artisans play a very important role. They are often located in rural or economically disadvantaged areas, employ female or older workers and therefore contribute in an important way to the local economy.

Clusters and hubs of artisan skills, which are the legacy of the high-end industry, can be seen across the EU. They bolster local communities, support employment, education and tourism and contribute to the identity and culture of those areas.

Through continuous investment in training and developing a skilled workforce, the high-end
industries help to maintain certain unique expertise, skills for European crafts and know-how, passing on the knowledge to younger generations and preventing them from disappearing.
Brands not only invest in employment in their own businesses but also in their suppliers, thus helping to create stable employment and the continuation of traditional skills and know-how.

In addition, the high-end industries stimulate constant innovation in these skills to develop
new production methods, to work with new materials and to incorporate new technologies.

… and investment in technological and non-technological innovation

The high-end industries are growing because of their creativity and innovation, and because
they are using the possibilities offered by new technologies. Traditional indicators used to
measure the innovative performance of companies, such as R&D spending, number of
patents, and use of ICT do not fully reflect the potential of the high-end industries. These
indicators do not take into account the rapid pace of innovation that is necessary to market
several collections per year, the high design and creativity content, or the continuous
innovation in marketing and services. These and other factors are key to the competitiveness of the high-end industries and confirm them as knowledge-based and innovative industries.

One of the unique characteristics of the high-end industries is that they are able to combine
different types of innovation, both technological and non-technological, such as innovation driven by science; innovation resulting from artistic creativity and aesthetics; or open, userdriven innovation.
Based often on long-term strategies, the high-end brands invest heavily in increasing their
intangible assets and hence in training, research and know-how. They incorporate new
technologies and apply scientific knowledge to create unique tools. Digitalisation in particular offers new possibilities, including live streaming in 3D of fashion shows, applications enabling consumers to purchase items shown on the catwalk or simply creating interactive, content-rich websites to attract more consumers and to engage with and connect them globally. Brands also use social media to reinforce their web presence and create communities of interest.

More and more brands offer bespoke services to their customers, both at the point of sale and online. Brands also use online retail platforms and sophisticated customer relationship
management (CRM) technologies to improve their knowledge of customers’ preferences and
thus personalise their products and services.

Despite the economic downturn, the high-end goods industry continues to invest in
technology and innovation. Moreover, spill-over effects of the creativity from high-end
industry can be seen in many sectors, e.g. innovative solutions and creations in the fashion or car industries are gradually being adopted by mass-market producers. European high-end designers set influential styles and trends which become an inspiration for designers all over the world. Consumers also benefit from the innovation in the high-end sector as they are offered more choice and often better quality at affordable prices.

Considering the significant impact of the high-end industries on the EU economy and their
contribution to EU employment and innovation, it is important to ensure that adequate
policies are in place at EU level that take into account the high-end business model and help the sector to continue to grow and create jobs.

In order to achieve the long-term vision for the high-end industries, as knowledge-based
industries that rely on unique skills, cultural heritage and creativity to strengthen their position as leaders in the global market, particular importance can be given to the following areas:
  • Protecting the creative efforts of high-end companies and facilitating growth in the digital market
  • Ensuring favourable conditions to maintain export growth
  • Stimulating the spill-over effects to other sectors, such as tourism
For more information, download the European Commission staff working document.