Displaying items by tag: Kering

Friday, 16 October 2020 12:21

Can Raf Kickstart Prada to Growth?

can raf simons kickstart Prada to growth

When designer Raf Simons was announced as the new ‘co-creative director’, working alongside Miuccia Prada, at Prada, it was welcomed as a meeting of two intellectual fashion minds. His first show, SS21, shown last week in Milan, in a digital format, was a return to Prada’s minimalist carpeted and matching curtained 1990s aesthetic. It was the most anticipated show of the new womenswear season.

Left - Prada SS21

Prada has had a growth problem in recent years, so, will this new creative impetus make a difference to a luxury group that is in danger of being left behind within the luxury segment?

The Prada S.p.A. group owns the Prada, Miu Miu, Church’s and Car Shoe brands and produces and distributes luxury leather goods, footwear and apparel, benefitting from a supply chain which includes 22 owned industrial sites. It also operates in the food sector with Marchesi 1824 and in the eyewear and fragrance industries under licensing agreements. The group employs nearly 14,000 people and its products are sold in 70 countries worldwide through 641 directly operated stores as of December 31, 2019.

Prada has been trying to inject growth in recent years by reducing wholesale and discounting, but it is trailing its rivals. For example, Prada and Gucci were once neck and neck as brands, both creatively and financially. They were the juggernaut fashion phoenixes of the 1990s. When one was name checked, the other wasn’t far behind. What changed?

In the 12 months ended Dec. 31, 2019 revenues at Prada S.p.A. totalled €3.22 billion, up +2.7% compared with €3.14 billion in the same period a year earlier. Retail sales grew +4.1% to 2.63 billion euros. This is for the entire Prada Spa group which also includes Miu Miu, Church’s and Car Shoe.

amber valletta 1997 prada glen luchfordFor the same year, 2019, Gucci revenue was €9.63 billion, revenue climbed by +13.3% on a like-for-like basis (+16.2% reported) and operating income leapt by +19.8%. The brand now accounts for over 60% of it owner Kering's revenues.

Right - Prada 1997

All of Gucci’s growth stems from 2016 when it was comparable in size to Prada in terms of revenue. Over the past 4 years, Gucci has grown its revenues to be three times that of Prada. Admittedly, Gucci has had unusually meteoric growth, but the Prada brand has been pretty much flat over these past 4 years.

While the Prada share price, listed in Hong Kong, has increased recently, it has bobbed along the 24HKD- 35HKD range over the past 5 years. Its highs were back in 2013, when the stock hit around 75HKD. During the five years over which the share price declined, Prada’s earnings per share (EPS) dropped by 18% each year. The TSR (Total Shareholder Return) gives a more comprehensive picture of the return generated by a stock. In the case of Prada, it has a TSR of -23% for the last 5 years. While the Prada share price has struggled to rise, Kering’s and LVMH’s has soared.

can raf simons kickstart Prada to growth adidas

Prada is in that predicament where it is big, but isn’t quite big enough. It’s luxurious, but not luxurious enough and, while it was once a leader, it hasn’t produced much that has stuck in recent years. It felt like Miuccia Prada had checked out, creatively, of the brand years ago. The last show by Miuccia Prada, AW20, before Simons arrived, put the signature triangular logo centre stage and was its most commercial for years.

Above -  A sign of things to come? adidas Consortium + Prada Superstar 450 Leather Sneakers - £400 from MRPORTER.COM

In a statement up to June 30th 2020, Prada CEO, Patrizio Bertelli talks of ‘growth trajectory temporarily interrupted’ due to COVID 19. He said, “The first half of 2020 saw a temporary interruption of our growth trajectory which, in a situation of progressive control of the pandemic, we are confident will gradually resume from the second half of 2020, when our store network will again be fully operational. The excellent response of local consumers after the re-openings, confirms the desirability of our products and the strong relationship with our customers, which has been further strengthened by our continued focus on digital technology. The recent positive trends in all markets, combined with our solid balance sheet and financial position, allow us to look to the future with confidence today.”

On average, 40% of Prada’s retail network was closed from February to May 2020, reaching a peak of 70% in April. Its wholesale channel was heavily reduced, following the strategic decision taken in 2019 to strictly control all distribution channels to protect brand positioning and discounting. Prada said e-commerce had delivered triple-digit sales growth during and after the global lockdowns, while retail sales were down 32% and wholesale sales were down 71%.

Prada has seen double-digit sales growth since April in Mainland China, while South Korea and Taiwan, which didn’t experience store closures, showed a consistent double-digit trend throughout the period. Thanks to the contribution of these markets, the entire Asia Pacific region reported double-digit growth in June. The rest of the world was negative. In April 2020, Prada’s Board of Directors withdrew its recommendation to pay a dividend for 2019.

Prada’s difficulties during the COVID lockdowns aren’t unusual and will have been replicated by other luxury brands, but it doesn’t help its desirability and also the inability for Raf Simons’ new show to make an impact during this difficult time. According to the Business of Fashion, just 10,000 viewers tuned into the Prada Instagram live feed of the SS21 show and, according to analytics firm Tribe Dynamics, the show’s earned media value in the first 48 hours, an industry measure of third-party social media engagement, was 59 percent lower than the Spring/Summer 2020 show a year ago.

Many people have switched off from fashion, currently, and this will not have helped Prada make a splash with Simons’ collection. His first collection received warm reviews in a season without much competition. But, his return to the pared pack 90s Prada doesn’t answer the problem of growth. One good shoe is not enough, you need hundreds, and they need to roll over many seasons like the Gucci model. Gucci’s lack of seasons and huge choice of product shows how maximalism in fashion increases venues. Looks that have more accessories than a Christmas tree are going to generate more sales. More choice is the answer for growth. It also appeals to more customers.

can raf simons kickstart Prada to growth

Prada has followed this model too, previously. Prada only really started to make money and get bigger when it moved from mink trimmed nylon to colourful striped fox fur scarves and crystal embellished dresses in the noughties. When the ‘Pradasphere’ exhibit opened in Harrods in 2014 it illustrated what really sold to the contemporary Prada customer and it wasn’t minimalism. Minimalism hasn’t really made big money for any fashion business. Less isn’t more revenue.

Unfortunately for the brand, the planned Design Museum exhibition in London, planned for 2020, has been cancelled, which would have given it a boost. Details of a new collaboration between the Design Museum and Prada will be revealed in 2021.

Simons is a good designer and an influence, but his track record at Dior and Calvin Klein shows a limited understanding of what is commercial. When commercial, as illustrated with the collab with adidas above, it verges on the repetitive and boring.

Prada CEO, Bertelli’s relationships with past designers, such as Helmut Lang and Jil Sander, once owned by the Prada Group, was turbulent and Simons won’t hang around if the going gets tough (again).

Prada was once one of the world's coolest brands, but it didn’t innovate when the likes of Michael Kors started copying its famous saffiano leather. Simons is undoubtedly cool, but will he be enough for Prada to catch up with its rivals?

Buy TheChicGeek's new book FashionWankers - HERE

Published in News
Tuesday, 29 September 2020 15:18

Can Raf Kickstart Prada to Growth?

can raf simons kickstart Prada to growth

When designer Raf Simons was announced as the new ‘co-creative director’, working alongside Miuccia Prada, at Prada, it was welcomed as a meeting of two intellectual fashion minds. His first show, SS21, shown last week in Milan, in a digital format, was a return to Prada’s minimalist carpeted and matching curtained 1990s aesthetic. It was the most anticipated show of the new womenswear season.

Left - Prada SS21

Prada has had a growth problem in recent years, so, will this new creative impetus make a difference to a luxury group that is in danger of being left behind within the luxury segment?

The Prada S.p.A. group owns the Prada, Miu Miu, Church’s and Car Shoe brands and produces and distributes luxury leather goods, footwear and apparel, benefitting from a supply chain which includes 22 owned industrial sites. It also operates in the food sector with Marchesi 1824 and in the eyewear and fragrance industries under licensing agreements. The group employs nearly 14,000 people and its products are sold in 70 countries worldwide through 641 directly operated stores as of December 31, 2019.

Prada has been trying to inject growth in recent years by reducing wholesale and discounting, but it is trailing its rivals. For example, Prada and Gucci were once neck and neck as brands, both creatively and financially. They were the juggernaut fashion phoenixes of the 1990s. When one was name checked, the other wasn’t far behind. What changed?

In the 12 months ended Dec. 31, 2019 revenues at Prada S.p.A. totalled €3.22 billion, up +2.7% compared with €3.14 billion in the same period a year earlier. Retail sales grew +4.1% to 2.63 billion euros. This is for the entire Prada Spa group which also includes Miu Miu, Church’s and Car Shoe.

amber valletta 1997 prada glen luchfordFor the same year, 2019, Gucci revenue was €9.63 billion, revenue climbed by +13.3% on a like-for-like basis (+16.2% reported) and operating income leapt by +19.8%. The brand now accounts for over 60% of it owner Kering's revenues.

Right - Prada 1997

All of Gucci’s growth stems from 2016 when it was comparable in size to Prada in terms of revenue. Over the past 4 years, Gucci has grown its revenues to be three times that of Prada. Admittedly, Gucci has had unusually meteoric growth, but the Prada brand has been pretty much flat over these past 4 years.

While the Prada share price, listed in Hong Kong, has increased recently, it has bobbed along the 24HKD- 35HKD range over the past 5 years. Its highs were back in 2013, when the stock hit around 75HKD. During the five years over which the share price declined, Prada’s earnings per share (EPS) dropped by 18% each year. The TSR (Total Shareholder Return) gives a more comprehensive picture of the return generated by a stock. In the case of Prada, it has a TSR of -23% for the last 5 years. While the Prada share price has struggled to rise, Kering’s and LVMH’s has soared.

can raf simons kickstart Prada to growth adidas

Prada is in that predicament where it is big, but isn’t quite big enough. It’s luxurious, but not luxurious enough and, while it was once a leader, it hasn’t produced much that has stuck in recent years. It felt like Miuccia Prada had checked out, creatively, of the brand years ago. The last show by Miuccia Prada, AW20, before Simons arrived, put the signature triangular logo centre stage and was its most commercial for years.

Above -  A sign of things to come? adidas Consortium + Prada Superstar 450 Leather Sneakers - £400 from MRPORTER.COM

In a statement up to June 30th 2020, Prada CEO, Patrizio Bertelli talks of ‘growth trajectory temporarily interrupted’ due to COVID 19. He said, “The first half of 2020 saw a temporary interruption of our growth trajectory which, in a situation of progressive control of the pandemic, we are confident will gradually resume from the second half of 2020, when our store network will again be fully operational. The excellent response of local consumers after the re-openings, confirms the desirability of our products and the strong relationship with our customers, which has been further strengthened by our continued focus on digital technology. The recent positive trends in all markets, combined with our solid balance sheet and financial position, allow us to look to the future with confidence today.”

On average, 40% of Prada’s retail network was closed from February to May 2020, reaching a peak of 70% in April. Its wholesale channel was heavily reduced, following the strategic decision taken in 2019 to strictly control all distribution channels to protect brand positioning and discounting. Prada said e-commerce had delivered triple-digit sales growth during and after the global lockdowns, while retail sales were down 32% and wholesale sales were down 71%.

Prada has seen double-digit sales growth since April in Mainland China, while South Korea and Taiwan, which didn’t experience store closures, showed a consistent double-digit trend throughout the period. Thanks to the contribution of these markets, the entire Asia Pacific region reported double-digit growth in June. The rest of the world was negative. In April 2020, Prada’s Board of Directors withdrew its recommendation to pay a dividend for 2019.

Prada’s difficulties during the COVID lockdowns aren’t unusual and will have been replicated by other luxury brands, but it doesn’t help its desirability and also the inability for Raf Simons’ new show to make an impact during this difficult time. According to the Business of Fashion, just 10,000 viewers tuned into the Prada Instagram live feed of the SS21 show and, according to analytics firm Tribe Dynamics, the show’s earned media value in the first 48 hours, an industry measure of third-party social media engagement, was 59 percent lower than the Spring/Summer 2020 show a year ago.

Many people have switched off from fashion, currently, and this will not have helped Prada make a splash with Simons’ collection. His first collection received warm reviews in a season without much competition. But, his return to the pared pack 90s Prada doesn’t answer the problem of growth. One good shoe is not enough, you need hundreds, and they need to roll over many seasons like the Gucci model. Gucci’s lack of seasons and huge choice of product shows how maximalism in fashion increases venues. Looks that have more accessories than a Christmas tree are going to generate more sales. More choice is the answer for growth. It also appeals to more customers.

can raf simons kickstart Prada to growth

Prada has followed this model too, previously. Prada only really started to make money and get bigger when it moved from mink trimmed nylon to colourful striped fox fur scarves and crystal embellished dresses in the noughties. When the ‘Pradasphere’ exhibit opened in Harrods in 2014 it illustrated what really sold to the contemporary Prada customer and it wasn’t minimalism. Minimalism hasn’t really made big money for any fashion business. Less isn’t more revenue.

Unfortunately for the brand, the planned Design Museum exhibition in London, planned for 2020, has been cancelled, which would have given it a boost. Details of a new collaboration between the Design Museum and Prada will be revealed in 2021.

Simons is a good designer and an influence, but his track record at Dior and Calvin Klein shows a limited understanding of what is commercial. When commercial, as illustrated with the collab with adidas above, it verges on the repetitive and boring.

Prada CEO, Bertelli’s relationships with past designers, such as Helmut Lang and Jil Sander, once owned by the Prada Group, was turbulent and Simons won’t hang around if the going gets tough (again).

Prada was once one of the world's coolest brands, but it didn’t innovate when the likes of Michael Kors started copying its famous saffiano leather. Simons is undoubtedly cool, but will he be enough for Prada to catch up with its rivals?

Buy TheChicGeek's new book FashionWankers - HERE

Published in Fashion
Tuesday, 18 February 2020 10:10

ChicGeek Comment The Coronavirus COVID-19 Effect

Coronavirus covid 19 effect on luxury brands fendi maskWhen China sneezes, the world catches a cold. So, when China caught the new coronavirus, or COVID-19 virus, there was going to be major economic repercussions. With the world’s second largest economy on virtual lockdown, its effect on both domestic and international sales for fashion companies will be seismic.

While there is no way to predict how long it will take to runs its course, companies have already started to make tentative statements about how it is affecting their bottom line. Those companies heavily reliant on the Chinese market and high spending Chinese tourists will be particularly affected and be crossing their fingers that this is over quickly.

Left - Fendi - FF Silk Face Mask - £170 from Luisa Via Roma 

While it is hard to predict the length of the outbreak and its impact, we can look back at the last major virus outbreak, SARS, which originated in China in 2002. It's thought that this strain of the coronavirus usually only found in small mammals mutated, enabling it to infect humans in the same way as COVID-19 has. By the end of the nine-month long SARS outbreak, the virus had spread to several other Asian countries as well as the UK and Canada, killing 775 and infecting more than 8,000 people.

The current stats for COVID-19 are 71,499 confirmed cases and 1,776 deaths, that’s a 1 in 40 death rate compared to over 1 in 10 for SARS. In terms of stats it looks less serious, with many people being carriers and displaying no symptoms. The under reporting of Chinese authorities has been questioned and how they are trying to minimise the severity of the outbreak, but they seem to be taking swift action to prevent contagion. 

The world in 2020 is very different from 2002. The Chinese are travelling much more and have become some of the world’s highest spending tourists. In 2005, there were 95,000 Chinese visitors to the UK, in 2018 that number had reached 391,000 and was continuing to grow. Chinese tourists make up the largest share of visitors to the UK (32%) and they have one of the highest average spends of any national group. In 2018, the latest set of statistics, the average spend of a Chinese tourist in the UK amounted to £1,373. They were only surpassed by visitors from Qatar and UAE.

In London’s West End, accounting for a quarter of all non-EU tax-free spend in 2018, on average, Chinese customers spent £1,630 per shopping trip, making them 59% more valuable than other international shoppers.

Hong Kong-based airline, Cathay Pacific, has already cut 90% of its capacity into mainland China and announced that overall capacity would be slashed by 30% as a result of falling demand related to the outbreak. British Airways announced that it would temporarily suspend its flights to mainland China, following the UK Foreign Office’s advice against all but essential travel to the country.

The most visited country in Europe was France with 2.2 million Chinese nationals visiting in 2018. Paris was already having to contend with transport strikes and gilet jaunes protests and now one of its most valuable visitors is staying away. The same could be said about Hong Kong; months of riots now followed by COVID-19 will have taken its toll on this important luxury retail location. The majority of the world’s major cities will be affected by the lack of Chinese tourists.

For British luxury giant, Burberry, Chinese consumers account for 40 per cent of revenues worldwide. Burberry Group plc released a statement at the beginning of February saying, “The outbreak of the coronavirus in Mainland China is having a material negative effect on luxury demand. While we cannot currently predict how long this situation will last, we remain confident in our strategy.” said Marco Gobbetti, Chief Executive Officer.

Currently 24 of Burberry’s 64 stores in Mainland China are closed with remaining stores operating with reduced hours and seeing significant footfall declines. This is impacting retail sales in both Mainland China and Hong Kong “The spending patterns of Chinese customers in Europe and other tourist destinations have been less impacted to date but given widening travel restrictions, we anticipate these to worsen over the coming weeks.” the statement said. Burberry was planning to hold a fashion show in Shanghai in March but that has been put on indefinite hold, while Chanel has cancelled its May Métiers d’Art show scheduled for Beijing. 

Coronavirus covid 19 effect on luxury brands off white mask

Estée Lauder gave a recent update to the markets saying it it expects adjusted earnings of $5.60 to $5.70 per share in 2020, down from a previous estimate of $5.85 to $5.93 citing the coronavirus. Fabrizo Freda, Estee Lauder president and chief executive, said: “The global situation will also affect our financial results in the near term, so we are updating our fiscal year outlook. We will be ready to return to our growth momentum as the global coronavirus is resolved.”

Other brands who have focussed on growth in China will feel the effects. Luxury outerwear brand, Moncler, warned that footfall at its stores in China had plunged 80% since the coronavirus outbreak and it earns 43% of its total revenues from Asia. Michael Kors and Versace owner Capri Holdings saying it would take a $100m hit from coronavirus in China, where it was forced to close more than 150 stores.

Right - Off-White - Logo Print Face Mask - £65 from Farfetch

Kering makes 34% of its sales in Asia Pacific, excluding Japan. Kering’s chief executive officer, François-Henri Pinault, said - on the 12th February - the group - Gucci, Saint Laurent, Balenciaga, Bottega Veneta - had experienced a strong drop in sales over the past 10 days. Many of the group’s stores in China are closed or running reduced hours. The company said it will halt advertising spend and postpone new openings in China in the near-term in a bid to limit the damage caused by the virus. Pinault said that planned product launches might also be reconsidered and is also shifting inventory to other regions to make sure stocks don't pile up in China. Without giving an estimate for any impact from the virus on earnings, he said online shopping was not really making up for the decline in store footfall. "The warehouses are shut. People can place orders but there are no deliveries," he said.

While being strong in China and in the Chinese market has been a boon for many years, this outbreak shows the danger of having all your eggs in the Chinese basket. Once a high growth area, this is a double whammy for brands; you have the domestic market closed and the free spending tourists are no longer shopping. 

China’s growth was already slowing, but it was just about to come out of the trade wars with America. Even if this outbreak is over in a relatively short window of time, it’s the momentum it has lost that will take the longest time to get back. Getting those Chinese tourists to rebook their flights and travel plans, brands reworking expansion plans and product and consumers getting that feel good factor to spend will take months to correct. Many brands are downplaying the current impact to protect their share price. Hopefully, the epidemic will be over shortly, but the repercussions of COVID-19 will be felt by the fashion industry well into 2020.

BUY TheChicGeek's new book - FASHIONWANKERS - HERE 

Published in Fashion

boring mono luxury websitesWhen was the last time you felt truly inspired by a luxury brand’s website? Regardless of the cute little illustrations or achingly cool ad campaign flipping past, mono-luxury e-tail hasn’t really moved on over the past decade. It’s as though they still feel the brand is enough. 

People don’t dress like this, and just to replicate the physical store online is to create a glorified warehouse or catalogue, which doesn’t take into account the element of personality, pampering and leisure which makes physical shopping a pleasure for many and the reason most people desire these brands in the first place. It’s not seductive.

Left - Celine.com - Have mono-luxury sites moved on in the last decade?

During this same time period, multi-brand luxury retailers such as matchesfashion.com, Far Fetch and Net-A-Porter have grown their turnovers into the hundreds of millions of dollars thanks to their ability to tap into people’s desires for newness and vast amounts of choice. These retailers are basically online fashion department stores just minus the fridges and toasters. People like to skip between brands and cherry pick items across them in the most efficient use of their time. Going onto individual, mono-brand websites, especially if you don’t know what you want, feels like a blinkered process and like you’re not getting a full view of the fashion landscape. It also feels, on the majority of sites, as though there isn’t much on there. It is just isn’t very satisfying.

Last week, Farfetch Chief Executive, Jose Neves, predicted that brands would pull out of multi-brand retailers online and operate as e-concessions on marketplaces instead, much as they have done in bricks-and-mortar department stores. And, last year, Kering announced it would take some of its biggest e-commerce websites in house, by the first half of 2020, putting an end to a seven-year joint venture with Yoox Net-a-Porter (YNAP).

Kering’s online sales made up just 6% - this is against 18% of UK retail as a whole - of its 6.4 billion euro turnover in the first half of 2018, but it did grow by 80 percent in the third quarter, faster than revenue growth in department stores or its own shops. If these brands want to reflect general online retail sales they will need to double or triple the percentage of sales coming from online.

Taking back control of the Alexander McQueen, Bottega Veneta and Balenciaga websites will allow Kering full access to information such as client data.While this is great for the brands and the back-end, tech side, customers will notice little difference unless they have a radical rethink of how they present their brands on the front-end. Consumers are used to scrolling and discount incentives to drive sales which many of these brands, outside of sales season, won’t offer. It can also feel very clinical.

According to a report by Deloitte “Big data may help luxury brands to provide personalized and superior customer service through consumer segmentation, behaviour and sentiment analysis, and predictive analytics. Several luxury brands, such as Louis Vuitton, Burberry, Tommy Hilfiger, Dior and Estée Lauder, have already started to take advantage of these technologies, using AI-powered technologies, such as machine learning and analytics, to offer more personalized and timely customer services. They implemented their own AI-powered chatbots and now can sell products using targeted marketing, personalization, and timely automation.”

boring mono luxury websites saint laurent

In November 2018, Kering created a data science team at group level to improve the service and shopping experience of its clients. Kering intends to get real-time 360-degree view of its customers to deliver rich and personalised experiences and meet their specific needs. LVMH, doesn’t break out separate online sales information, but they did reveal that the group's online sales rose by more than 30 percent in 2018. Ian Rogers, the first ever chief digital officer of the LVMH group, told Wired, last year, that he doesn’t like the word "digital" and he has the very tricky job of matching the luxury online customer journey with the pampered, indulgent experience IRL.

“It’s not the case that luxury shopping becomes self-serve on the internet: if I do buy something I expect a high level of service, even if I’m remote.” he said “You can see it's definitely strategic for us to invest in remote customer support, and it's directly downstream of our Internet strategy. There's this nonsense land of digital transformation where people wave their hands and they talk in impractical terms. Keep drilling until you have something practical that works and then rinse and repeat. Lose these nonsense words like "digital", like "data", like "social media". You have to get rid of this digital umbrella because it's just too broad. When somebody says, "We're really behind on digital", my response is, "You're behind in every aspect of your business?” he said.

Right - Spot the difference - YSL.com

According to Kering’s Chief Client & Digital Officer, Grégory Boutté, “Digital can be many different things at once - a distribution channel; a platform for offering seamless omni-channel services to clients; a driver of brand image and visibility; and a tool for engaging with customers in a personalized way. Digital technology, data science and innovation provide a way of offering our customers the best possible experience – on every touchpoint” he said.

Online and off-line isn’t separate, most brands now offer services such as check availability, reserve in-store, make store appointment, pick-up in-store, return in-store, exchange in-store, and buy online in-store. Kering said it will continue to develop partnerships with third-party e-commerce platforms "when relevant", but we’re seeing the beginnings of a power struggle between brands and retailers. They both need each other.

Now these luxury groups are focusing on their websites they need to rethink the entire thing. Their rigid ‘aesthetics’ and branding doesn’t allow for personality. Mono-brand luxury sites are restricted by the volume of product and while it changes, it doesn’t change often enough to the levels today’s customers have become used to. 

Brands, such as Prada, Saint Laurent and Celine, also sell a lot of black, which doesn’t shoot well and doesn’t make the most inspiring of online images. Add in ‘collab. fatigue’ and these brands really need to develop a new idea for websites if they want to increase sales and move away from multi-brand sites.

Luxury brands have built themselves a boring digital straight-jacket and need to start thinking differently. They could offer FaceTime with sales associates in people’s local stores, or offer a live view way of browsing in-store and matching to items online. It’s going to be about making the virtual real and vice versa. There are many possibilities, but they need to unthink the “brand”.

BUY TheChicGeek's new book - FASHIONWANKERS - HERE

Published in Fashion
Tuesday, 27 August 2019 13:31

ChicGeek Comment Fashion Pact Mañana

Fashion Pact G7 Pinault FrancoisA large bulk of the fashion industry is feeling pretty smug with itself. The just-gone G7 summit in Biarritz, France, a meeting of the world’s largest economies, saw French President Emmanuel Macron, accompanied by Economy and Finance Minister, Bruno Le Maire, Minister of Labour, Muriel Pénicaud, and Deputy Minister of Ecological and Solidary Transition, Brune Poirson, launch the ‘Fashion Pact’. An initiative to minimise the environmental impact of the fashion industry, the Fashion Pact, signed by various fashion companies and brands, made numerous commitments regarding sustainability, renewable energy and biodiversity.

Left - Tall glass of Pinault?! The 'Fashion Pact' launch at the recent G7 summit

Making plenty of noise, and, while anything in the right direction, particularly while the Amazon rainforest is burning, is welcome, it’s worth looking at some of the detail.

Thirty two companies representing around 150 brands and roughly 30% of the fashion industry committed to:

“100% renewable energy across own operations with the ambition to incentivise implementation of renewables in all high impact manufacturing processes along the entire supply chain by 2030.”

“Protect the oceans: by reducing the fashion industry’s negative impact on the world’s oceans through practical initiatives, such as gradually removing the usage of single-use plastics.”

“Restore biodiversity: by achieving objectives that use Science-Based Targets to restore natural ecosystems and protect species.”

“Stop global warming: by creating and deploying an action plan for achieving the objective of zero greenhouse gas emissions by 2050, in order to keep global warming below a 1.5°C pathway between now and 2100.”

These all feel like the least they can do. Words like ‘gradually’ and ‘ambition’ make most of this wishful thinking. But, waiting until 2050 to achieve zero greenhouse gas emissions is laughable. Most of the signatories will be dead by then. It’s 31 years away!!! Who’s to say any of these companies will still be in business?

We live in a very stressful and confusing time. Environmental paralysis is understandable amongst consumers not sure exactly what they can do to combat climate change. But, waiting until 2050 to ‘possibly’ make that new handbag zero carbon emissions ain’t one of them. Green lip service is becoming increasingly frustrating and brands are going to have to give definite and distinct decisions while updating consumers on progress and fact based information much faster than this. People want to see something.

The brands involved include adidas, Bestseller, Burberry, Capri Holding Limited, Carrefour, Chanel, Ermenegildo Zegna, Everybody & Everyone, Fashion3, Fung Group, Galeries Lafayette, Gap Inc, Giorgio Armani, H&M Group, Hermès, Inditex, Karl Lagerfeld, Kering, La Redoute, matchesfashion.com, Moncler, Nike, Nordstrom, Prada Group, Puma, PVH Corp., Ralph Lauren, Ruyi, Salvatore Ferragamo, Selfridges Group, Stella McCartney and Tapestry.

In April 2019, ahead of the G7 meeting, Emmanuel Macron gave François-Henri Pinault, Chairman and Chief Executive Officer of Kering, a mission to bring together the leading players in fashion and textile, with the aim of setting practical objectives for reducing the environmental impact of their industry. And the Fashion Pact was born.

This goes someway to explain the most noticable luxury absentee from the list, the LVMH group. LVMH, Kering's main luxury competition, announced in May that it was partnering with Unesco on a five-year deal, allowing the fashion houses in the group access to “a network of experts at the regional level and in different disciplines to drive the development and success of their initiatives to protect biodiversity” and secure transparent supply chains. They’ve also recently cemented a tie-up with British designer Stella McCartney to lead their charge in sustainable luxury.

The majority of these brands don’t know what the eco-future looks like, but they know they need to start making the right noises yet want to continue to generate billions of dollars in yearly turnovers. Signing up to things like the ‘Fashion Pact’ focuses minds, but the time frame makes it a case of we’ll start tomorrow, which goes against the current urgent 'Climate Emergency' feeling felt within the wider population.

Kering issued a statement saying, “Private companies, working alongside nation states, have an essential role to play in protecting the planet. With the Fashion Pact, some leading players in the fashion and textile sector are joining forces for the first time to launch an unprecedented movement. A collective endeavour by its nature, the Fashion Pact is open to any company that wants to help to fundamentally transform the practices of the fashion and textile industry, and to meet the environmental challenges of our century.”

If these luxury companies worked as quickly as they did when chucking money at Notre-Dame, after its fire, then we’d really be getting somewhere. Pinault found €100m (£90m) down the back of the sofa and the Arnault family stumped up €200m within hours of the flames being put out.

Governments will need to bring in legislation much sooner to force these companies to do more. We’re going to look back at this period of history and wonder how we got through it sanely, but what we know is, we have to start today.

Published in Fashion

Gucci quality is rubbish trends menswearGucci has been a fashion phenomenon over the last few years. It’s quirky, geek-chic and eccentric aesthetic has caught the world’s imagination and the sales have reflected that. When creative director, Alessandro Michele, arrived in January 2015 yearly sales were around the €4billion mark. In 2017, they had grown to €6.2billion, and last year it topped €8billion. It is forecast to smash the €10billion threshold in 2020 and is the star amongst Kering’s stable of brands.

But, growth is slowing, and while the Gucci look has been a barn-storming success, the reality of the product and its quality issues could be the reason for turning off many consumers. People talk, especially when things go wrong.

Left - Gucci's sales growth is slowing. Is the quality making consumers get outta here?

Though Gucci’s revenue was still up a healthy 16.3% to €4.61bn in the first half of this year, it is far below the 30%-plus growth levels the market had become used to. Gucci now accounts for 40% of Kering’s revenue and has ambitious aims to overtake Chanel and Louis Vuitton as the world’s number one luxury house in terms of turnover.

This huge growth has seen queues outside stores on streets like Bond Street and GG belts all over social media, but many consumers have been disappointed by the quality of the product and won’t be burnt twice. 

Speak to buyers or sales assistants at luxury stores about their thoughts on Gucci’s quality issues and they simply nod and shrug their shoulders, acknowledging what a growing numbers of consumers are realising. Gucci’s product is complicated and in order to make it at a price they can sell it at, they have, arguably, lowered the quality. Though the margins must also be huge.

When a brand is hot and hyped the quality isn’t questioned as much. But, the minute it starts to peak, these issues quickly become more noticeable and people aren’t afraid to tell their friends. This feels where Gucci is right now. While this isn’t particularly scientific, here are a few examples of Gucci’s quality issues from recent customers which could be slowing their growth.

Richard, 36, from London, says, “Like a mug I purchased the fluffy horsebit slippers when they first came out, they were lovely! Super cool, I was floating around fashion week in Milan like I owned the place! But, I was defo sucked in. 

“After 7 wears, the fur started to fall out, so I took them back to Gucci to get a replacement or repaired and they said they wouldn’t and couldn’t. So, I now have half furry slippers that are just discarded as they look like they have mange…” he says.

These famous ‘Princetown’ loafers were one of Gucci’s first hit products and continues to retail for around £750. “I haven’t shopped there since, not even for the mega tailoring they do now. The quality for price just isn’t there for me. Yes it’s cool, as it’s Gucci, but you have to draw the line somewhere!” says Richard.

Gucci quality is rubbish trends menswear

Jess, 38, from London, says, “The runway pieces and handbags look as good as ever but the high volume, lower entry price point items look and feel cheaper.

“I bought a scarf about 2 years ago. The print is amazing but it's paper thin - the wool is virtually transparent. Initially, I wanted to purchase a GG logo belt, but I could see the leather wasn't good quality and wouldn't last. I have an Hermes belt that's over 10 years old and going strong - the Gucci one wouldn't last a year in my opinion.” she says. “They seem to be using lower quality materials in some instances, I'm assuming this is to increase profits.” says Jess.

There was a story of a well known London department not being able to add security tags on to those white Gucci logo T-shirts because they were so thin it was putting holes in the fabric. They were retailing for well over £300.

One respondent, wishing to remain anonymous, says, “I mean the quality of their product is pretty much on a level with the high street. They produce those flimsy t-shirts that you can’t actually wash as the fabric is too delicate and you certainly can’t put a security tag or pin in it as it will mark/leave a hole.”

“The embroidery work on those sweatshirts they were pumping out at the start of the resurgence were hit and miss (they looked like a machine had done them to make it look like it was crafted by hand but obviously wasn’t). And threads just looked loose and unkept.” they says.

Right - While the ideas and imagery is fantastic, do the goods live up to expectations?

“But maybe the most disappointing scenario is their loafers. I’ve got a few pairs and all of them, after the first wear, the insoles become loose and started to peel away exposing a sticky glue like substance that you have to stand in if you want to wear them... there is nothing luxury about that at all.”

Lois Spencer-Tracey, 36, blogger, www.bunnipunch.co.uk says, “The quality of Gucci could definitely be better. Some brands that are seen as on par produce products that are quality, but for the same price.”

“I have bought a couple of pieces from Gucci.” she says. “I have bought one of their statement tee’s which was definitely not worth the £375 mark and I decided not to purchase on of their trademark trainers as the quality of the shoe was so bad for £600.

"I opted out of buying some Gucci trainers and bought the Balenciaga Triple S which I love and have worn so much. Lot better quality." she says.

“Gucci has gone down the more fashionable/trend route over the last 5 years and with that I think the quality has sadly taken a backseat. The collection has grown vastly too.” says Lois. “It has definitely made me rethink shopping there in the future.” she says.

While nobody is questioning Gucci’s creativity and design, it is disappointing that their ideas aren’t up to the standards many expect, especially when there is enough margin within the pricing to produce a decent product while keeping margins high. 

Many consumers have been sucked in by the hype, but have been left with a bitter taste in their mouth due to the quality. This is something they could rectify, but could their race to become the number one luxury goods house in the world mean too many quality corners are being cut and is their recent slowing growth a sign of this quality backlash from consumers?

Below - Gucci Pre-Fall 2019

Gucci quality is rubbish trends menswear

Published in Fashion

menswear product of the week stella mccartney beatles coat 2019 badges yellow submarineSince Stella McCartney launched her menswear nearly 3 years ago, it hasn’t exactly set the world alight - See more from TheChicGeek archive here - But, newly independent, she just bought the majority of her company back from Kering, it feels like it has new impetus.

You know I love a Beatle, especially anything psychedelic or related to the Yellow Submarine, and when your father is Paul McCartney, there won’t be any problem with gaining permission to use whatever you like. 

Her new ‘All Together Now’ collection follows the film’s timeless message of peace, love and togetherness. This coat reminds me of something the artist Peter Blake would wear. He loves a badge and was also the designer of The Beatles Sgt. Pepper's Lonely Hearts Club Band album artwork. He is also friends with Stella McCartney. 

While crazy expensive - you could get a similar effect by buying lots of old badges from eBay - I haven’t seen this many since I left the Cub Scouts!

Left & Below - Stella McCartney - Arthur Coat - £ 4550

menswear product of the week stella mccartney beatles coat 2019 badges yellow submarine

Published in Fashion
Tuesday, 18 June 2019 11:23

ChicGeek Comment The Wholesale Power Play

the luxury wholesale model is broken PradaThe idea of paying to have something made, passing it on to someone else to sell, who will then pay you in a few month’s time, sounds like the cashflow diagram from hell. Unless the profit margins are huge, and even then it’s not ideal, wholesaling in fashion is difficult. Small brands, especially, need the constant stream of cash, traditionally have tighter margins, and need the crucial feedback of information with regards to successful products that can inform future decisions and where to put their limited resources. 

The fashion wholesale model is broken and, now, even the big boys are deciding to step back. Luxury brands are also realising, finally, that the true value of selling directly to consumers is growing a database of customers and understanding exactly what they want in a shorter amount of time and being more reactive to those needs. Realising something is or isn’t selling in 3 to 6 month’s time is pointless and is what will suffocate even the biggest of brands. 

Many luxury brands sat back and twiddled their thumbs over the past two decades while huge fashion corporations like YOOX/Net-A-Porter and MatchesFashion.com have grown with enviable customer lists and used huge amounts of information to improve their offer and grow further.

Now, the wholesale middle man is being pushed back to a point where brands want more control, know they will make more money directly and won’t be at the whims of a fashion buyer every season as to whether they’ve made the cut or not. 

Prada announced last month that is would reduce its wholesale network in Italy and Europe in a push to have uniform prices for its products across different outlets and reduce markdowns. Before that, in March, the Milan-based company said it also would stop offering end-of-season promotions at its own shops in a bid to boost margins and protect its brand. They’ve obviously been watching the success of Gucci’s no-sale model and product that continues over seasons and doesn’t seem to quickly date.

In a short filing with the Hong Kong stock exchange, where the company is listed, the company's chairman Carlo Mazzi stated, “The Prada Group considers it essential to ensure greater consistency in pricing policies across retail and digital channels. This strategic review is intended to further strengthen the Prada Group brands with the aim of supporting sustainable long-term growth.”

Prada said it would end relations with some Italian and European wholesale partners and gradually replace them with new digital and e-commerce players. 

While they’ve tried to improve their website, added a broader selection and launched onto sites like Mr Porter, Prada is doing it at a time when the brand has lost momentum and isn’t quite as in demand as it once was. It said the leather goods category will be the most impacted with the changes and this is their biggest segment with the greatest margins.

This DTC (Direct To Consumer) approach is something born from the internet and social media. The brand owns the customer and has a direct relationship. It knows their e-mail and address. It also knows what they have bought before and, most likely, things that may interest them in the future. As personalisation increasingly becomes more sophisticated, this will also help to offer more choices and brands can follow their customers through their actions.

Physical retail third party wholesale accounts allow you less control and inject potential disruption in your cherished luxury supply chain to the customer and, as Prada says, you can keep the prices constant and consistent (probably higher) throughout one geographical region.

Kering, owner of Gucci, Saint Laurent and Balenciaga, has announced it will take back control of its e-commerce operations, focusing on own branded sites where it can control its image and client data. Excluding Gucci, the YOOX/Net-A-Porter group operated e-commerce websites for most of the brands within the Kering group. The joint venture will now end in the second quarter of 2020. While not completely cutting off their nose to spite their face, Kering wants to turn more of its collaborations with third-party, multi-brand retailers such as Farfetch or Matchesfashion.com into what it calls ‘online concessions’, where it controls everything from the product assortment to their presentation. "Each time we move from wholesale to a concession we see our top line increase in a material way,” said Grégory Boutté, Kering’s Chief Client & Digital Officer, and former vice President of eBay. Kering has stated it was ‘not against wholesale,’ and did not plan to end its relationships with third parties altogether.

This is will be a play of power and something that I think will be difficult especially with the complexities of something like FarFetch coming from multiple retailers in different locations. This sounds like wanting your cake and eating it; we want your database, but in our own way. I’m not sure that many retailers will relinquish that amount of control, especially when you consider how many brands they sell and also the loyalty they now instil in these hard won customers.

Kering's total online sales — when including the business done through third party platforms, calculated at retail and not at lower wholesale prices — came to 9.4 percent of the group's 2018 revenue. Web sales through its own brand websites and online concessions made up 4.7 percent of revenue. This has huge room to grow.

Boutté has built up his digital team from 4 people upon his arrival at Kering in 2017 to over 80 people, today. He has realised the power of data. “The more data we have, the more precise our algorithm is and the better the experience is. The other thing is that it should lead us to excellence in terms of our operations.” he said.

Across the luxury goods industry as a whole, e-commerce accounts for around 10 percent of business today and should reach 25 percent of sales by 2025, consultancy Bain estimates.

This is about information and control. Controlling discount, controlling points of sale and controlling presentation. You can control more online, even with third parties. You can see it from anywhere. It's those pockets of physical wholesale boutiques or department stores in small towns that are harder to police and often unsold stock disappears into the grey market and ends up on discount sites and with other retailers.

Where once luxury retailers didn’t want to get their hands dirty, they are now rolling up their sleeves and have their eyes on the online prize; higher prices, more full price sell-throughs and control of that all important ‘data’. This will get more ferocious as the market becomes more saturated, growth slows and customers get increasingly more expensive to acquire. 

I predict many brands will try to be exclusive to their mono-brand websites if they don’t get what they want with their third party partners, or possibly try the LVMH 24 Sèvres, now rebranded as 24S, route, but it will be hard. And expensive. 

Retailers like FarFetch and MatchesFashion.com are decades ahead and thrive on new and small designers adding that colour and point of difference online. Luxury mono-brand websites often look boring, sterile and empty. People don’t shop in single brands, particularly when they are browsing. While the idea is logical and makes sense to reduce wholesale and take back more control, it will be far more complicated than that and add multiple costs to their business models.

Published in Fashion
Thursday, 16 May 2019 14:33

ChicGeek Comment New Burberry Working?

Is new burberry working? Gigi HadidArguably the finest looking retail street in London, Regent Street’s sweeping thoroughfare is home to the world’s largest Burberry store. The former theatre and cinema is a huge, cavernous stage for the only domestic luxury mega-brand the UK has. What you’ll notice recently, as you walk past, there is never anybody in it. Worryingly, the store always looks empty of customers, and, as is often the case in fashion, you don’t need to see financials or figures to see whether something is instinctively selling or not. 

After two distinctly underwhelming, but vast collections under new Creative Director Riccardo Tisci, the first results are in and it doesn’t bode well. Sales are flat in a market that has seen stellar performances from Kering and LVMH. Burberry’s sales grew by just 2% to £2.7B over the year to March 2019 with an adjusted operating profit of £438m. According to Bain & Company, the luxury goods and experiences market grew by 5% in 2018 and to put this into further context, LVMH was up 10% and Kering was up an incredible 26.3% over the same period.

Left - Gigi Hadid in Burberry's latest campaign. The collection could easily be confused with Fendi

After Burberry’s huge growth under previous Creative Director, Christopher Bailey, the brand’s new strategy is to take the brand more upmarket and completely change the feeling and identity of the brand. Marco Gobbetti, Chief Executive Officer, who hired Tisci, puts a positive spin on it in the brand’s latest financial release, “We made excellent progress in the first year of our plan to transform Burberry, while at the same time delivering financial performance in line with expectations. Riccardo Tisci’s first collections arrived in stores at the end of February and the initial reaction from customers is very encouraging. The implementation of our plan is on track, we are energised by the early results and we confirm our outlook for FY 2020.”

The two stores Burberry had in Knightsbridge have closed and are now a trashy souvenir shop and while they said they are taking a new store above the Tube station, it is a long way off from opening with only the facade currently standing.

The only hope is that they are still selling in China. There was a report in Jing Daily, the leading digital publication on luxury consumer trends in China, in April, that said Burberry had shut down four retail stores in Shanghai since August 2018, with the latest closure occurring on March 31, when the brand ceased the operation of its flagship store at the city’s L’Avenue, which it opened in 2013. The article said “the company had been laying off Chinese staff in preparation for the closure until only seven of them remained”. The publication also said the permanent closure of the L’Avenue store represented a “landmark event” in Burberry’s perceived exit from Shanghai. 

According to the results, in Asia, it’s seen low single digit growth in Asia Pacific, Korea and China, stable in Hong Kong and declining in Japan. Which is worrying. Burberry is also cutting costs to shore up the balance sheet.

The company is pinning all its hopes on the new Tisci product. The statement said “The first deliveries of Riccardo Tisci’s products arrived in stores at the end of February. Although it is currently a small portion of our offer, the initial reaction from customers has been very positive with sales of the new collections delivering strong double-digit percentage growth.” It’s not clear what the growth is in comparison to.

The company says it is currently on a multi-year journey to transform and reposition Burberry. “FY 2019 and FY 2020 are foundational years where we will re-energise the brand, rationalise and invest in our distribution and manage through the creative transition, after which we will accelerate and grow.”

In retail, they say they are focused on refreshing flagship stores, with over 80 retail doors expected to be “aligned” by the end of FY 2020. "To ensure we are focusing our resources on the most impactful locations, we will also be closing 38 smaller, non-strategic retail stores in secondary locations. In wholesale, we stepped up our wholesale rationalisation in the second half of the year, phasing out non-luxury doors.” says the financial statement. In total, Burberry closed a net 18 stores (seven mainline, nine concessions and two outlets) in the year and new openings included the relocation and expansion of the Dubai flagship and openings in Shin Kong Place, Xian (China). Fourteen retail stores had been aligned to the new aesthetic by the end of the period. 

Tisci’s first collection ‘Kingdom’ hit stores in February, but it didn’t create the much needed desire within the fashion community which ripples out to consumers. In that period, we’ve seen Givenchy fly, Gucci continue to power on and Bottega Veneta get a new designer and start to make waves. Unless you make positive gains from the energy around a new star creative designer, the energy quickly falls flat and the new Burberry seems to have been striped of identity during its rebrand. 

Riccardo Tisci’s and Christoper Bailey’s Burberrys were always going to be very different. One was incredibly successful and turned the company into a global, billion dollar player, the other, was a fresh start, hoping to equal the growth and appeal of its predecessor but with a new, more street-like aesthetic while trying to elevate the brand. 

Burberry feels like a brand going into reverse and unless new collections start to create some form of excitement people won’t be willing to pay more. The momentum it has built up over the past decade will disappear and it will be a tough job to get that back. This feels like a brand to ‘sell’ before the evidence of the failure of this new strategy becomes even clearer.

Published in Fashion
Wednesday, 24 October 2018 09:56

ChicGeek Comment Only Billion Dollar Brands

Christopher Kane divesting from KeringIt was while watching the Alexander McQueen documentary at the beginning of the summer - Read TheChicGeek Review here -  when I wondered where the subsequent crop of young designer brands were. 

The British based designers who were the generation after McQueen and showed so much promise - Christopher Kane, Jonathan Saunders, Mary Katranzhou, J.W. Anderson etc. - and despite some investment, just haven’t been able to scale up their brands in the same way McQueen and Stella McCartney were able to.

Left - Christopher Kane's only permanent store on London's Mount Street

I realised that this was a signifier of how the luxury market has changed and the days of nurturing fledgling brands into ‘Mega Brands’ are over. It illustrates the saturation in the market and it’s all about making big brands even bigger, today. “If you’re not going to be a billion dollar brand, then it’s probably not worth our time", is the new attitude. It probably explains the reason why Michael Kors recently bought Versace. Read more ChicGeek Comment here

David Watts, Founder, Watts What Magazine, says, “I suspect that this is more to do with the parent company realising that these businesses are not scaleable - or to the extent of other portfolio brands and cutting their losses.”

“In the current very challenging retail market and designer wholesale model not being as robust as it used to be, brands need to shore up cash and also give themselves a buffer,” says Watts.

J W Anderson divesting from Kering

“For the larger groups though, bigger really is better,” says Sandra Halliday, Editor-in-chief (UK), Fashionnetwork.com. “When they take on a brand, they want it to have billion dollar potential, or at least to occupy a strong niche that will guarantee high profit margins. The stakes these days are too high to do anything else,” she says.

When the Gucci Group invested in McQueen, Stella McCartney, Bottega Veneta and Balenciaga in 2001, it signalled the moment the luxury fashion industry was in full expansion mode and opening stores all over the globe. Following that, there was a raft of investment in the generation after, with Kering - formally Gucci Group  -  investing in Christopher Kane in 2013 and LVMH investing in Nicholas Kirkwood and J.W. Anderson in the same year.  Everybody was billed “as the next…” but it just hasn’t materialised. Well, not in consumers’ heads anyway.

Now, brands are going into reverse; fashion’s answer to “Conscious Uncoupling”. Stella McCartney just bought back the 50 per cent she didn’t own from Kering and rumour has it, Christopher Kane, is in talks to buy back the 51 percent stake from the French group after a 5-year partnership.

Right - J.W. Anderson single store in East London

Halliday says, “I think in Stella McCartney’s case there was a genuine desire to run her own show and given the strength of her brand, that’s understandable.”

“For Christopher Kane it’s probably more about Kering focusing its resources and its time on its big winners, and that makes sense with Gucci, Saint Laurent and Balenciaga doing so well and Bottega Veneta needing lots of TLC,” she says.

“It give them a certain freedom and with the knowledge and experience learned (hopefully) as being part of a large group that they know how to be more careful with finances and astute with merchandising and keeping overheads down,” says Watts.

“Staying small, focussed and niche with a direct to consumer model could work for some brands, but it’s also very tough to make serious money at that scale,” says Watts.  “Of course, there are possibly different and extenuating circumstances for why these brands find themselves in their current predicament. What does it tell you that LVMH and Kering cannot make Stella McCartney, Christopher Kane, Edun and Tomas Maier work…..gonna be tough for them as independents however the chips may fall,” he says.

Announced this year, LVMH has severed ties with Edun, Bono’s ethical fashion brand, and Kering has closed Tomas Maier, previously the Creative Director at their other brand, Bottega Veneta. These brands will have to regress back to start-up mode and think small again if they are to survive.

“In many ways, the future prospects of small designers hoping to break into the big time are quite depressing as the barriers to doing that are very high.” says Halliday. “But, on another level, the internet offers opportunities that didn’t exist just 20 years ago. The combination of a well-run e-store and a physical flagship can actually be a very cost-effective way of reaching the maximum number of consumers.” she says.

“Even if smaller labels can build profitable businesses, the chances are that the end result will be a hoped-for takeover by a bigger group, or by private equity investors, as that’s the kind of investment that’s really needed to make the transition into bona fide big-name brand,” says Halliday. “And all of that doesn’t even factor in what might happen if the luxury boom runs out of steam at any point,” she says.

Those brands fitting somewhere between these smaller designers and the giant groups are making their play for their futures too. Versace has already taken shelter in a bigger American group and other Italian family brands are sensing this shift and deciding on which side of the billion dollar divide they aspire to be on. Missoni opened its ownership up to Italian state-backed investment fund FSI for a cash injection of €70 million, in exchange for a 41.5 percent stake and rumours continually circle around Ferragamo suggesting they are looking for investment or a new owner.

Belgian designer, Dries Van Noten, recently sold a majority stake in his eponymous fashion brand to Spanish cosmetics group Puig.

“Dries Van Noten is 60 and after 30 years if he keeps creative control and remains chairman of his brand, then cashing in a huge stake gives him financial security, and also Puig brings cosmetics, beauty and fragrance know-how,” says Watts. “It could be huge for a brand such as Dries Van Noten - it’s a win win for him on paper.”

“Most people who are outside of the fashion (production) industry really have no idea both how complicated it as and how hard it is to make money,” says Watts.  “Fashion wholesale is broken and fashion retail is in freefall,” he says.

Disappointingly, the focus has moved away from talent to bankability. Young designers who were previously given a leg-up with investment look too high a risk and expensive for today’s investors. It seems that only those brands breaking that billon dollar turnover ceiling are worth focussing on. You can increase profit margins by making less, but in larger volumes and become a more dominant force. It is more of a risk having fewer brands, but you can win bigger and Kering is clearly taking pole position right now.

Read more ChicGeek Comments - here

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