Luxury fashion consultant Alessandro Maria Ferreri provides CPP-LUXURY.COM with his expert insights on the selection of the most important news of the month.
When a brand approaches the Travel retail channel has to have specific competencies and managers as while developing online business: travel retail is in fact not a “simple” retail nor is just another market opportunity: it is a very serious business with complex tecnicalities. This is the reason why even a giant like Vuitton has been so slow in developing this channel.
I know the travel retail business since 15 years and I have to admit that in the period in which I opened more than 80 Etro stand alone stores in the airports, only a very few brands like Zegna, Ferragamo or Bally had already the smart vision to invest in this business. For those who remember airports 10/20 years ago, shops around the departure gates had two main purposes: a last possibility to spend those few coins of a currency that was not exchangeable back to dollars or a way to buy with lower taxes those products like tobaccos and liquors which are usually more expensive in the domestic markets. Soon, luxury brands started to understand the hidden psychology of the airports and the way to handle a boring moment for a passenger waiting to board a flight, moment which has become longer and longer in the recent years due to security controls and connecting times between two flights. So: how to spend this useless time, in which we are in actual facts kidnapped in a restricted area? Let’s do shopping!
The relative implementation was unfortunately far from being easy. Those who knows well the problems of selling a product in an airport as I do, surely agree that travel retail is, often, more a marketing possibility than a real way of generate profits. First we had to put in place the foundations of this business model: many airports were not organized to have a shopping area and an eventual retail development could only be possible after a complete reconfiguration of the whole departures zone; several airport authorities were not allowing a brand to manage directly the business so local operators were needed as middlemen; operators like Heinemann, Nuance, Aelia, Dfs or Dufry (all very well skilled in buying tobacco, chocolates, spirits and fragrances) did not have yet at that time a “luxury section” nor managers skilled for fashion products and had quickly to develop such business units to answer the high demand
Logistics was a huge obstacle for a business in an airport, as not only products had to be X-ray scanned before entering the security restricted areas but also prices and currencies were involved in this process (at that time “duty free” products had to carry a price tag in US dollars, while duty paid products carried the local currency); another big issue was related to the price itself: a “duty free” area makes you think that you are actually saving money, which in most cases is absolutely not true as you pay the same downtown price and only in some limited cases you get a partial refund of the VAT.
Also the selection of the merchandise itself became soon an issue: a traveler does not want to buy bulky things and he is not ready to invest in goods that need alterations or need to be tried on before the purchase; travelers are not ready to spend a huge amount of money (above all when leaving a country after an holiday, where they probably have already spent a fortune): so the merchandising has to be made by quick, cute, well priced but enough appealing goods to attract customer’s attention while waiting for boarding. Travel retail slowly also became (above all within asian airlines) an “on board” business: a limited selection of luxury goods was available on the plane, to be chosen through an in flight catalogue, mainly for those business men who, on the way home, had forgotten a present for the kids or for the wife.
Despite all these problems, travel retail has become in the past ten years a very huge business for any kind of company: from Apple to McDonald, from Chanel to Lego, from Cartier to Victoria Secret, airport shopping became an addition to downtown business to catch the last bills in the travelers pockets.
During the annual Duty Free Fair in Cannes, I often hear the operators saying that this is a bubble that will soon burst: margins are shrinking as airport spaces are limited and are given through official tender; operators are often still necessary, absorbing a % of the sales; retail prices have to be perceived as much as possible close to real “duty free prices” otherwise customers have no interest to buy in the airport; not all the brands are equally performing due to goods selection and price point; retail stores downtown already suffer and travelers instead of buying at the airport, use the waiting time at the gate to browse on the web thanx to the airport free wifi.
All of this said, Vuitton goes on, seriously believing in this channel by opening in Singapore Changi Airport: probably a new era of travel retail is about to start.
Another sleeping beauty: PUCCI
Pucci is my favorite brand! By far! As a top manager, as a luxury expert but also as a fashion consumer, I see in Pucci all the talents to be one of most chic, elegant, timeless fashion houses on the planet. Not to mention a lot of characteristics that would thrill any marketing guru.
Think carefully to it and lets start from its name: Pucci was already a short and easy name from a consumer perception point of view, when Dior still had “Christian”, Prada had “Fratelli”, Versace had “Gianni” (all these brands became then soon as short as possible in order to be easy to remember) not to mention that, as a sound, is just one (out of five) letter away from Gucci, which is probably in this moment as powerful as Mc Donalds in terms of a name. Pucci is also part of those very lucky brands where the label is useless: like an intrecciato of Bottega, a paisley of Etro or check of Burberry, you could recognize a Pucci dress from kilometers, without checking the label. Pucci has also many primacies from a product point of view: Pucci was creating wrap dresses when Mrs Von Furstemberg (Diane, the American queen of the wrap dress) was still in high school;
Pucci is very well known for its jersey, a fabric that not only is the best sold group in any brand but also a material that, except probably for Alaia, a very few brands can really master, without looking old. Pucci is often remembered for its textile accessories: under my opinion, a 90x90cm printed silk twill of Pucci is the only textile accessory alive that can compete (and probably win) against a carré of Hérmes. Pucci is, without doubt, one of the only italian brands today that could generate a sublime Haute Couture, whose wealthy customers might fall in love with it in a minute.
Pucci, despite all challenges (from the suede cuissards of Dundas to the gym sneakers of Giorgetti) still has a charme, a chic perception and brings to mind elegant ladies of the sixities like Grace Kelly, Jacky O’ or Maria Callas.
So why Pucci is still sleeping, above all if we consider that is owned by probably the biggest luxury conglomerate on earth ? It is an hard question and hard is to answer. Turnovers are not clearly known (as LVMH does not release the figures of the single brands) still I believe over there is the EBITDA the real problem and, of course, the inability of developing all the hidden potentials.
The problem might be in the contract between the french owner and Mrs Laudomia, who has free words on product development and strategy, or in the unconventional choice of designers and Ceo’s along the past ten years or in the retail format which has never been successfull. One think is sure: Pucci has all the brand power to come back being as exclusive and chic as a Moynat bag and its impact on the market has the potential to make such a noise to kill many of the existing competitors (and in case Mr Arnauld needs an handsome prince to kiss this sleeping beauty back to life, I rise my hand!).
Despite the market for personal luxury goods reached, by the end of 2017, a record high of €262 billion, boosted by a revival of purchasing by Chinese customers both at home and abroad, still this incredible performance is not equally divided among all luxury categories and surely the niche of lingerie and in general of “lounge wear” is just a minimum part of it.
Still we recently assisted to the process of acquisition of La Perla Group by the Chinese giant luxury conglomerate Fosun, who owns already several brands including the italian Caruso and Club Med. It has not been an easy process: at beginning of 2017 La Perla was first meant to become Indian (through the possible acquisition by Mrs Megha Mittal, queen of the Indian steel industry and owner of Escada) and then, hopefully remain “italian” by becoming part of the Calzedonia Group.
But it was just at the end of the year that Mr Silvio Scaglia (owner of the holding Pacific Global Management and founder of the telecommunication group Fastweb), who had bought the company 4 years ago at an auction for 69mln€, decided to sell La Perla to Fosun.
La Perla annual turnover is estimated to be around 160mln€ , far from the needed breakeven point of 200mln and has 625 employees just in italy, out of 1600 employees in total. The reason why La Perla has been sold, is now quite clear, while it is not clear the interest of Fosun.
In 2016 the creative direction had been surprisingly given by Mr Scaglia to Julia Haart, whose career curiously had spanned from school teacher to designing shoes, and the new product strategy was apparently to direct the lingerie house beyond underwear and beachwear into a full fashion brand with tailoring, accessories and hosiery as well. Unfortunately this strategy did not appear to be a winning one and Mr Scaglia, still fully believing in Mrs Haart’s creativity, in December started the process to sell the company and, upon his official statement, as well started the process of divorce from his wife.
Leaving on the side any speculation behind the scenes, it is clear that a lingerie business is nowadays a very hot potato to handle. Either you are a giant of this field like the Japanese Wacoal (whose engineers are daily involved in creating the top performing bras of the planet) or like Wolford or Agent Provocateur, either you remain a small yet chic business like Bordelle or Carine Gilson. Still, none of these brands ever thought to stretch their product proposal into red carpet dresses, leather jackets, or shoes. All of them remained faithful to their core and origins, as customers need to fully trust a brand, above all when the said product is becoming so intimate. Probably, this is the way La Perla should follow, as its awareness and credibility relies worldwide on sexy yet no vulgar seduction pieces, that a woman buys for herself first and then to enhance her natural beauty in front of her partner.
For sure the new owner of La Perla can be strategic in shaping the product for a new demanding chinese consumer. As Chinese women shed the stereotype of being conservative and reserved, the demand for lingerie has skyrocketed in recent years.
Upon recent studies, the country’s underwear market grew from $15.5 billion in 2010 to $25.5 billion in 2015, while sales of lingerie nearly doubled from $9 billion to $17.9 billion.
Despite this, the chinese market is in the midst of consolidation. On one hand, growing demand for lingerie, especially in the high-end market, has been drawing big international brands to the mainland. On the other hand, the lower-end market has been saturated with domestic products and brands, few of which stand out. The resulting fierce competition has left domestic lingerie companies with falling profits, leaving market space for international high end offer. We look forward to seeing if Fosun, focusing on the still high brand credibility and the free market shares of the lingerie business, will be able to bring back this beautiful house to profit.
Alessandro Maria Ferreri is the CEO of The Style Gate
More from ANALYSIS
In its latest brand annual valuation ranking, Brand Finance focuses on the “world’s most valuable apparel companies,” with Nike taking …
Global fashion shopping platform Lyst and digital fashion house The Fabricant release today the Digital Fashion Report, a window into …
Bain & Co has teamed up with Positive Luxury to offer a vision of sustainable luxury for 2030, highlighting five …