Kering reviews its luxury strategy with a long-term focus
today Feb 13, 2017
With the explosive growth of its labels, Kering has seen its barycentre move resolutely towards luxury, a sector now accounting for two thirds of its business. Luxury turnover stood at 8.46 billion euros in 2016, compared to 3.88 billion for its sports & lifestyle segments.
"We are an integrated luxury group with a sports business," CEO François-Henri Pinault repeatedly emphasised during the presentation of Kering’s annual results in Paris this Friday, although until recently the luxury titan presented itself as "a luxury and sports-lifestyle group."
The size of the luxury sector has changed not only the brand’s story but their strategy, as evidenced by the recent appointment of Valérie Duport, formerly at Chanel, to head the communication and image of the group.
Faced with a rapidly changing market, the group has had to rethink its strategy. As it became clear that neither the size nor the conquest of new countries and store openings remained sufficient to ensure growth, the company has refocused on design, which is "at the heart of everything," as well as profitability per square meter.
"To grow faster than the market, we have to leverage the ability of our products to create desire and of our brands to create dreams," said the head of Kering, for whom "strong creative content increases product longevity.”
On this basis, the French giant has shaken up its strategy, now focusing on a much longer-term vision with an equally long-term policy which will apply to its diverse portfolio and to its global distribution network. Thanks to the success of its prestige brands such as Gucci and Saint Laurent, the group is able to compensate for the difficulties encountered by other brands, such as Bottega Veneta and Brioni, by taking the time necessary to relaunch them with a long-term plan.
"We now have a vision that goes beyond the season, which did not exist before. Collections are no longer just a stylistic exercise that occurs every six months, but grows and speaks from one season to the next within a coherent creative universe," continued the CEO.
"Luxury is not just an inheritance. An extremely powerful and powerful creative universe can be far superior to a 150-year-old legacy,” he said. “This idea of luxury today is what modern luxury means to me."
It is an idea shared by Gucci’s Alessandro Michele, and inherent to what he has achieved there since taking over the studio in 2015 with increasing success. Through a similar coherent and unique brand image across products, shops, advertising, the website, and so forth, "[Michele] created a global creative universe, which he expresses through ready-to-wear. Clothing represents only 13% of sales, but it reflects on everything else. It is a key element, especially in terms of image, which gives this continuity and resistance to the brand," the CEO emphasised.
Saint Laurent is successfully following the same strategy, intended to be rolled out across the other brands in the group. As such, the digital dimension is becoming increasingly important, with the web not merely a commercial vehicle, but used to convey a precise image, targeting Millennials in particular, a group which already represents 50% of sales at Gucci and Saint Laurent.
"Before, the mainstream idea was that luxury fashion houses had to keep a great distance from customers. Today, everything has changed. Alessandro Michele opened up to his audience, asking them to interact with him. It's a new way of communicating," continued François-Henri Pinault.
The group's online sales soared by 22 percent in 2016, surging to 75 percent at Saint Laurent. Against this backdrop, Kering plans to accelerate its omnichannel strategy and to allocate 40 percent of Bottega Veneta's and Balenciaga's communication budget to digital, due to "the relevance of web-based communication in generating in-store traffic."
The group has tasked Carlo Alberto Beretta with the newly-created position of Director of Marketing and Customer Relations in order to "propose a coherent and exceptional experience on all channels". To implement this new approach, Kering will internalise the customer service management of the e-commerce sites of its brands, managed currently by Yoox.
In this context, the company is working on a major CRM (Customer Relationship Management) project this year, collecting and analysing customer data before returning to sales in order to "create a highly operational customer relationship", the group's deputy general manager, Jean-François Palus, explained.
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