MILAN — Industry executives gathered in Milan at the Four Seasons Hotel on Thursday at the RLC Fashion Summit.
Titled “The Shape of Influence,” the event set the scene to map the forces reshaping fashion and luxury. And one takeaway was that it is a highly volatile industry.
“One should never have assumptions. Fashion is unpredictable by its very nature. If it were predictable, it wouldn’t be fashion,” said John Hooks, adviser and board member at Armani Group. “You have to constantly reassess everything… Western fashion is always up for reexamination in a world that’s changing incredibly quickly. There is no real recipe for success in fashion, that’s what’s making it an interesting business. It was never predictable, always expect the unexpected.”
The arrival of AI on the scene is clearly top of mind. André Maeder, chief executive officer of Selfridges, said AI “will change almost everything dramatically, and a lot of jobs will go,” but at the same time, “new jobs” will emerge in the future. AI will be beneficial to shoppers, “surfing” a store’s website and there will be “much less paperwork and a better use of data” all around. Maeder, who was bestowed the RLC Honors Luxury Retail Leadership Award the evening before, noted an increased interest in jobs in retail.
A Global Market
The luxury market over the past decade has become truly global, executives contended. Addressing new geographies and catering to the sensibility of those customers is a new challenge the sector faces daily.
Burak Çakmak, CEO of the Saudi Fashion Commission, said Saudi Arabia remains “a black box” to many people, with limited understanding of the region’s lifestyle and culture. For example, he said very few know that the holy Ramadan is “a full month of shopping,” and urged brands to realize it could become a significant moment in terms of business, just as much as Chinese New Year or Singles’ Day.
In fact, in China for example, said Alison Rehill-Erguven, CEO of Cenomi Centers, brands that “actively do research connecting to local culture,” to artisans, designers and festivals, are most successful and “truly resonate with the Chinese.”
Rahul Prasad, managing director Asia-Pacific, Middle East and India at retail strategy and consulting firm Pike Preston Partners, provided a candid snapshot of India, a burgeoning market for the luxury industry.
“India culturally and historically has always been a luxury market. It’s the only country outside of Europe that can boast the [same] longevity and the historic presence [of the sector],” he said.
Despite this, too many brands have drawn comparisons between the country and China, relying on similar playbooks based on the assumption that “[big] population and disposable wealth equate to multiple points of sale. But they don’t. There is the quality of real estate. There are several dynamics in purchasing patterns that follow traveling patterns and linguistic barriers in India that do not exist in other geographies,” he said.
Technology and Customer Attention
Acknowledging that technology is having a seismic impact on the luxury industry, Armani’s Hooks said that the interconnected digital environments will lead to “a sort of new common culture” resolving the long-debated dilemma of balancing the preservation of one brand’s identity and customization.
“As consumers shift to Asia or outside of Europe, obviously it’s very important for [companies to keep] the customer at the center, to understand what the customer wants, anticipate the desires, but as you do that, it’s the consumer that rules the roost… but if you go too far, you lose all your identity,” Hooks said. “I think, in a way, the problem resolved itself, because we’ll go beyond all of that. I think we’re heading towards a great period of disruption. I think heritage and all that will not be as strong [an asset] as we think it is… There’ll be an incredible spurt of modernity.”
Silvio Campara, CEO of Golden Goose, said it was more important “to remain relevant, rather than focusing on the bottom line, on the next CEO or creative director. Do I have people in the store? Are they engaged? Do I have the right value? Am I speaking the right language? Do I see the reason of my success stretching into the future? These are the questions we must ask ourselves.” He touted the importance of a chief emotional officer in a successful business.
Golden Goose co-created sneakers at the new Golden Pescheria pop-up store.
courtesy of Golden Goose
Michael Kliger, CEO and managing director of LuxExperience, took a positive view of the current scenario. “We are in better shape than last year, it may be surprising but there is again an interest in fashion. Several brands have worked on increasing creativity and hired new designers, and I predicted [last year] that half of those new creative directors will work. I won’t say which though,” he said with a chuckle.
“In April and May, consumers are back,” but Kliger believes “we need to give people a reason to come to us and to buy, not simply because we have products.” Customers, he continued, are “looking for a clear direction, relying on clarity. We cater to emotions.” For example, raising the cultural aspect of Yoox, which is operated by LuxExperience with Mytheresa, Net-a-porter and Mr Porter, and “distilling what makes it unique” has been very successful, Kliger said.
Also, he urged to be “very careful with language,” since consumers don’t think in terms of channels.
That said, several speakers touted the continued importance of wholesalers and multibrand stores, “where you can find variety, new brands, and new collections, and some have become our brand ambassadors,” said Brunello Cucinelli CEO Luca Lisandroni. Multibrand retailers “have devoted their life to fashion and can really judge creativity, contemporary appeal and relevance with their own point of view and cultural curation.”
From the Road to Solomeo collection by Brunello Cucinelli for the Neiman Marcus Group.
Courtesy of Brunello Cucinelli
Lana Todorovich, chief global brands officer, Saks Global, also highlighted the relationship with customers and how AI helps “enable these relations,” and build loyalty, citing a 90 percent returning customer.
To fuel this interest, brands need to ramp up creativity.
Serge Brunschwig, senior adviser/luxe, CEO2CEO Consulting, recalled how Karl Lagerfeld would always be thinking of the next show just as the last model walked the Fendi runway. “Make sure every success leads to the next, make sure you deliver value, as everybody wants to make a good deal,” he said, recalling how raising prices after the pandemic brought disaffection to many luxury brands. “Luxus comes from Latin, and the original term meant twist, so surprise is needed.” As an example, he cited Chanel, and how its designer Matthieu Blazy has succeeded in connecting with a new generation.
Luxury’s Draw
Despite global volatility, investors’ appetite for the luxury industry is not waning. Rather it’s shifted, with an ever more diverse portfolio of suitors.
“When it comes to private equity and financial investors there are cycles and points in them where the interest is higher. Luxury remains a very attractive industry where there is structural growth and potential [high] margins,” said Prada Group’s chief financial officer Andrea Bonini.
“I think what makes it also unique, aside from being an attractive industry, is that it’s also a very sort of emotional type of investment, emotionally attractive. The visibility, the noise that surround a luxury deal, even if it’s a small deal, compared to many other sectors, it’s huge, because ultimately, it’s a sector that people find interesting, like and know the product of,” Bonini said.
“In addition to the rational side of things, it also appeals to a more sort of irrational side of things, so there’s pride in owning some of these assets, and that’s why I think we’ve seen waves of unexpected or unusual buyers [over time]… at some point there was the wave from Middle East investors, then there was a wave of Chinese investors,” he said.
“This is one of the oldest sectors that we know of. Egyptian tombs are full of luxury goods and jewelry. It’s an industry that is at least 5,000 years old and I can’t recall any industry that has proven such a durability. So, I think it’s by definition an investable space,” echoed Francesco Pascalizi, partner, co-head of consumer, Permira, which recently exited its investment in Golden Goose. He noted that a good return on investment now takes more care and patience.
Family-owned, Long-term Vision
The long-term business approach is engrained in family-owned companies by nature.
Antonio De Matteis, Kiton’s CEO and men’s creative director, touted his brand’s commitment to quality, innovation and people — the three ingredients he believes make for a successful recipe in future-proofing the business.
These are elements, he said, that increasingly knowledgeable consumers can perceive and are interested in.
“Staying true to yourself while reinventing yourself is the solution,” concurred Stefano Canali, CEO of the namesake company. “Authenticity is the word: you stick to your values and keep evolving the execution of them, which is a pretty difficult task to accomplish.”
That approach is also the foundation of a “quality-to-price” ratio, he contended. “The prices should assess the inherent quality of products. We know the price is influenced also by other factors — currency fluctuations, energy costs, inflation — but if they factor in exceedingly more than the quality, that means one is just getting greedy,” he said.
“Price per se doesn’t mean much. If you deliver the right quality, service and uniqueness you can make customers pay those prices,” De Matteis concurred.
