Top executives of the luxury industry gathered in Milan earlier this month to discuss key insights a series of panels at the Fashion CEO Roundtable. The strategic highlight of the summit was the health of the luxury and fashion industry, intertwined with an uncomfortable feeling regarding a lack of short-term visibility due to political turmoil around the world and a sensation of an incoming soft recession rapidly approaching. Here's an inside look at the key takeaways.
Trends and Figures
Claudia d'Arpizio, Bain & Co. Partner, shared thought-provoking trends during her keynote, "The Future of Luxury: A Look into Tomorrow to Understand Today."
- Personal luxury goods market over-performed other luxury segments in 2018 and is gaining traction with a 6% growth vs. 2017 (industry value 260B euro).
- Luxury cars market is positive but softening, solid growth for high quality design furniture, booming demand for luxury cruises.
- Forecast for 2025 is positive with a growth of 3-5% to 365B euro, but with a less smooth path than in the past.
- Chinese customers will account for 45% of the luxury market in 2025, with 50% of their shopping done in China.
- Mature markets such as the Americas and Europe are expected to decrease their relevance from a 33% to a 25%.
- Europe and Japan continue on a soft trend.
- Online channel will represent 25% of the market value in 2025, with a 100% of luxury shopping influenced by digital interactions.
- Brick and mortar retail will have to be tightened and optimized. Reshape is the key word.
- Market growth will happen thanks to Generation Y and Z, with a heavy influence from the Chinese.
- Brands will have to be dynamic and responsive. Flexibility and evolution will be a must.
- The rediscovery of excellence and the growing power of ideas will be key success factors.
- A key trend will be the MerchanDesign, merging innovative technologies with collections, architecture and creation.
- A new approach to profitability, which is probably going to stabilize in the near future.
The key mantras of the Bain & Co. presentation were: proactivity to conquer customers, distinctivity in terms of creating a unique winning formula, open mindedness to successfully reach the upcoming generations, and an embrace of new technologies as key enablers of a successful strategy.
Armando Branchini, Fondazione Altagamma Vice Chairman, introduced the Altagamma Consensus 2019. The forecast sees a 5% global growth for 2019, with relevant growth on the leather goods side (+7%). Asia is the region with the fastest expected growth of 10%.
Key Insights from Industry Leaders
"Be scared of not evolving." - Martino Scabbia Guerrini, President EMEA VF Corporation.
The executive highlights that key success factors are digital transformation, the evolution of the organization and the company culture to keep the pace with our time and the focus on design and innovation on the brand's side. VF Corporation turnover is 11.8 billion euro, of which 40% is outside the United States. Thanks to this strategic mix of elements, contemporary brands can be successful in growing turnover and reputation.
Introducing a digital culture in a company means driving a deep re-organization, but technology alone cannot make the difference in a very competitive industry. Brand purpose and vision are crucial for a successful development of a brand.
"Brand purpose must come first." - Lorenzo Viglione, CEO Moleskine.
Moleskine's success is due to its positioning: it's all about "a still unwritten book" and also to its distribution in the bookshops chains. The company is growing +18% and it's targeting creative people reaching a huge success in the Silicon Valley. Only a clear purpose and positioning can support the achievement of ambitious goals.
"Moncler's huge success and consecutive oblivion is a great lesson." - Remo Ruffini, Chairman and CEO, Moncler.
Ruffini's contribution at the Pambianco Summit was one of the most inspiring. Moncler turnover in 2017 was around 1.2 billion euro with 34.5% EBITDA. Ruffini's statement was bold and unique: "As a brand, we must be conservative," meaning that a successful brand must be able to interact and engage customers at different levels. Conquering new generations of customers is a must, as well as taking care of the existing, loyal customer. At the end, Moncler's experience is that the duvet bought by the father is not so different by the one bought by the son. Moncler is positioned as "the duvet for all the generations" (thankfully an entrepreneur that is not obsessed by millennials) therefore the choice of working with several designers on specific collections. The genius project represents a learning by doing exercise. A must do in the management of a successful company is to drive a proper and healthy growth, managing with care of th brand. The secret of Moncler is to continue to evolve the brand and nurturing its relevance in the industry.
"There is co-creation in our customization." - Silvio Campara, CEO Golden Goose.
It's amazing to see how much a sneakers brand focuses on craftmanship. Golden Goose sneakers are handmade in Riviera del Brenta, one of the most relevant shoemaking districts in Italy. Golden Goose Deluxe Brand turnover almost doubled in the past three years, reaching 143 million euro in 2017 with a 29% EBITDA. While many self-called luxury brands leave the concept of heritage, craftmanship and DNA behind, the greatest success of Golden Goose is the development of crafted products that are cool with a vintage and used feel that the customers help create by wearing them. The brand has very loyal followers who buy up to five pairs of sneakers per year. Next year the company will develop their Sneakers Academy and they will open the first shop/lab in Milan where customers will be able to collaborate with artisans to develop their customized shoes.
"Brand and creativity must be the core of the company." - Francesca Bellettini, CEO Yves Saint Laurent.
Bellettini manages a fashion brand that reached 1.5 billion euro in 2017 under her guidance. She emphasizes the importance of the Brand DNA before anything else, even before the product itself. Her greatest achievement was to inject in the company clarity and focus on the execution, to simplify the work flows and develop an internal re-organization through the creation of three business units (leather goods, shoes and apparel). She is a believer of a "no fear" culture inside the company and of the deep respect that a CEO should have for the creative director. A CEO should never get involved in depth on collection development and creation, but should be focused on dissolving the key issues to make the management of the company as smoother as possible instead. This a key topic and one of the most difficult tasks to achieve for a brand CEO.
Key takeaways from summits
- The luxury and fashion industry is still growing at an interesting pace and there is cautious positivity that this trend will continue.
- The key target will be China and to develop and nurture a domestic market as well the travel destinations.
- Millennials shouldn't be an obsession because every generation has potential for growth. Incremental growth is given not by new markets, but by the new upcoming generations.
- The most powerful leverage for business growth and brand appreciation is keeping the pace with the times, but always being true to its own, well-defined, strategic uniqueness.
- Lots of opportunities and challenges for the years to come.
Cover image courtesey: Yves Saint Laurent.