In conversation with Alessandro Maria Ferreri on the future outlook of the global luxury market
CPP-LUXURY.COM has interviewed Alessandro Maria Ferreri, CEO of The Style Gate, a highly experienced long term luxury industry professional.
What are your expectations for the performance of the fashion luxury sector for the rest of 2016?
Unfortunately for many luxury companies, above all in high apparel sector, the rest of 2016 will be still quite slow. The revenues of the second semester will not be enough to counter balance the losses of the first semester in order to achieve the budget of the year. Many brands prepared, last October, very aggressive budgets for 2016, believing in a recovery of Russia and mainland China. On the contrary, not only China is still very low and Hong Kong a ghost town, but also markets like US are experiencing many problems due to dept stores crisis and uncertainty related to November elections.
What is your view on how luxury brand should approach emerging versus mature markets? Are there emerging markets which still present an opportunity for the expansion of luxury brands?
In order to be able to land in a new market, luxury brands need infrastructures and local partners with know how. Many markets like Vietnam, Angola or Colombia, can be considered as new Eldorados for many luxury brands, but even for those ones who usually enter the markets with direct operations (like Kering’s or LVMH’s) it is still very hard to build a stable retail reality. To open a shop and set all the necessary services around, you need first a fluid logistic system, quick custom clearance and well trained local staff. Then it is all about the location: streets, environment, security, parking possibility, real estate papers, construction permissions.
Then it is a matter of adjacencies: nowadays it is not really so important for a luxury brand to have a co tenancy at its level, but sometimes it is just a matter of having a good coffee shop nearby. For me, the first question is not “where is Vuitton” but “where is the closest Food&Beverage point”. The key factor is that shopping makes thirsty and hungry. For all these reasons, emerging markets can still be a great opportunity for luxury brands, but those markets need first to prepare the ground: as an example, one of the reasons of the constant failures of luxury brands in India over the years is definitely logistic&infrastructure.
Prada, Louis Vuitton and Hugo Boss have admitted the closure of stores. Do you think other major brands, which are underperforming, should adopt the same strategy?
Definitely yes. Unfortunately. In the past years, all these brands, that are for the most part stock exchange listed, kept on opening an impressive number of massive locations for the simple equation “more boutiques = more sell in = more turnover = increase of share value”. The point is that now they are all facing the two main catastrophic consequences of this blind approach: stock and personnel. A) stock: Having a two digit increase of turnover does not mean that your net profit will follow the same direction: the only difference is that an over estimation of the sell in now is giving you a positive result quite immediately, while a consequent stock problem, can be postponed to the next year. B) personnel: the bigger the shop is the higher is the number of people you have to hire. This costs money for recruiting, training and probably also higher than normal salaries as retail teams have to be skilled, multilingual, with a well established list of faithful customers and therefore it might be quite expensive to pitch these people from other brands.
What is the consequence of all of this? American department stores like Neiman Marcus or Norstrom are drowning in the stock and are firing hundreds or persons. Brands like Ralph Lauren, Dolce&Gabbana or Armani are cutting 1000 jobs for the same reason. It is not a bright scenario, but unfortunately we are now paying the insane strategies of the past years.
How do you see the future of department stores, as luxury brands are striving to protect their pricing?
The issue, in my opinion, is not really related to department stores only, but in general to all “middle man” structure of the today luxury model. Any multibrand store, specialty store or dept store will never be able to fully satisfy what consumers really want, as customers attitude has become more and more unpredictable. Affluent people mix Zara and Hermes in a very natural way, fall in love with one brand and dismiss it the day after for another. How can a department store predict whatever customer behavior 6 months before and purchase goods and brands accordingly? In addition – it is now an evident scenario- fashion shows calendar seems totally out of whack and collections are delivered to stores in the wrong season.
What is your view on ´see now – buy now´?
The fact is that our customers today live in digital, the fashions shows are made for final consumers and no more for retailers or press, as they are visible immediately in streaming by everybody. Brands like Givenchy or Philip Plein decided to transform fashion shows in public events accessible by everybody. On the other hand, most part of the luxury brands work in analog, with a 20 years old business model: shoppers don’t want this anymore. A “straight to consumer approach”, where product is presented B to C, can have many different advantages: more control on mark downs, carrying a lager inventory and selection than any multibrand could ever do, leaving the correct time to creative teams to think and to work on collections, marketing directly your final consumer, controlling the message you send and creating your personal experience and aesthetic.
There has been a wave of multiple changes regarding the Creative Directors at many brands. Have luxury brands understood how they should manage their creative direction during these turbulent market conditions? What is your view?
Unfortunately the most part of the luxury brands still has not understood where the problem is. Not only creative directors changed, but also hundreds of managers changed at all levels, as it is always more simple for a brand to change a front end person, than to conduct a realistic and honest self examination in order to find where real problems are. Luxury world has become to a point where all chickens come home to roost: where best sellers products were ensuring increasing business till yesterday, despite huge mistakes done by greedy and “divas” CEOs, now, due to luxury markets saturation and financial crisis, the game lost its appeal and the same persons are not prepared to react.
Those brands who tried to keep their DNA unchanged, regardless the rotation of the Head of creation, might have now a better chance to survive: what would happen to Celine if Phoebe Philo leaves? Which is the future of Saint Laurent, now that all we know was created and modeled on a very specific creative person? If your name is Louis Vuitton, probably you can still make profits as your well known logo is more powerful that any designer name, but the others? Stella Mc Cartney without Stella? Victoria Bekham without Victoria? Dries Van Noten without Dries? This is what a lawyer would definitely call “intuitu personae”.
Affordable luxury brands such as Tommy Hilfiger, Calvin Klein, Furla and Coach have been reporting positive financials. How do you interpret their performance in comparison with many luxury brands that have been reporting negative or very weak results?
For different reasons, the brands mentioned by you, managed to conduct a very careful “self X-ray”, by individuating which were the problems and worked on how to solve them. Among these brands, Tommy and Furla did really a great job. Tommy Hilfiger learnt how to become appealing for European and Asian people instead of insisting in promoting a boring American way of dressing in which even Americans now do not believe any longer! Creative teams have been moved from NYC to Amsterdam, the whole collection has been lifted by adding a first line capsule and by creating a very interesting fashion show out of it. A huge effort has been put on accessories and shoes, with an impressive creative input to the point that none of us remembers now Tommy Hilfiger as a “polo shirt maker”, like unfortunately it still happens with Ralph Lauren.
On the other hand, Furla is a great example of Italian success and am personally very happy that finally this happened also in Italy. The very wise Eraldo Poletto (now at Ferragamo) understood quickly that too many family members in a company don’t make business healthy, that key positions have to be covered by managers who really know what they are doing and, in a very visionary way, understood with a balanced and realistic approach, what Coccinelle underestimated and what Michael Kors over estimated: the business of affordable luxury accessories. By playing with a divine yet humble creative director (Fabio Fusi), Poletto created for Furla a vision, a style, a luxury retail atmosphere and an It bag at an affordable price: the Metropolis. Short production chain and thousands customization possibilities quickly brought Furla millions of fans off and on line.
Are luxury brands missing out on the full potential potential of social media and the internet?
As I said above, retail has to be nowadays “omnichannel”. This does not mean that all lights have to be on internet or social media: how many brands did not realize yet the potential of “travel retail” for example? How many brands badly manage their discounted outlets, while they could make lot of money out of them? It is too easy to think that the web might save your figures, while you are too blind to see how much your competitors sell in an airport during the time you are obliged, for security reasons, to spend two boring hours in a limited space! This is the secret: enlarge your angle of view, build new channels and create a link among them!
Customers want to shop in the airport and be delivered at home, or what to try on the collection in a brick and mortar store, but then be able to customize it with initials or applications through a web software. Or even the contrary: think about how it could be amazing to buy something on the web and then being invited to collect it in the store, with a dedicated experience, where with a glass of champagne in your hand, you can enjoy a personalized photo shooting wearing your new purchase and your photo being then published on the Instagram account of the brand: I know people ready to spend the triple of the price for this experience!
Tell us more about your current venture The Style Gate
The first question we have for a potential customer during the first meeting with us is always: “Your project is outstanding! But is it standing out? “ this is where everything starts! As said before, we are experts in bringing the brand to naked true and face what is necessary to do to recover and have an healthy business. 19 century psychologists might call it a “REBIRTHING” experience, but it is way more simple than this. Every brand needs a bespoke approach as every case is different. What The Style Gate offers is a different angle of view, a new approach, a good quantity of food for thoughts. Once the new direction is well absorbed and agreed by our customer, then we see together which are the tools and the means necessary to implement it. We are part of small start ups as well as of big brands, with different roles from Strategic Committee Member to Strategic Advisor, as everybody and any level needs, soon or later, a third party vision. Our motto is to bring intelligence to luxury.
About Alessandro Maria Ferreri
Behind the scenes of high fashion’s glamorous landscape are the all-important, yet often unseen decision makers. Highly trained and skilled, analytical management teams are charged with translating creative vision into retail success.
Alessandro Maria Ferreri, with over 20 years of experience in the luxury industry, definitely belongs to this group of management experts who balance style with sales. Sitting at the helm of THE STYLE GATE, Alessandro Maria Ferreri focuses on the global development of different brands and international retailers, offering a tailored service to startups as well as to established names. When it comes to matters of merchandising, commercial strategy, retail and digital, marketing and competition assessment, AMF is at the top of the people who know how to value a luxury product and get results out of it.