Call Patrizio di Marco the designated optimist of the luxury goods world.
In the face of the current banking and housing crises, weakening retail sales and ebbing consumer confi dence, the Bottega Veneta president and chief executive officer has a confidently sunny forecast for the Gucci Group-owned brand.
“I’m not concerned at all, honestly,” he said of the outlook for 2009, noting Bottega Veneta has been healthy in the U.S. and growing in Japan, despite the contracting luxury market there.
Di Marco’s optimistic attitude is bolstered by the success he’s achieved over the past seven years, during which he’s transformed the Bottega Veneta brand. That track record has earned him a new gig: president and ceo of Gucci Group’s crown jewel, Gucci, which di Marco will join on Jan. 1, succeeding Mark Lee, who is leaving the company.
Di Marco’s formula for success at Bottega Veneta? A clear vision for the brand, along with leadership that allowed his team to seamlessly execute that vision. Di Marco emphasized the two themes of vision and leadership during his presentation, using Bottega Veneta’s turnaround as a case study to highlight his points.
“Broadly speaking, the challenges the luxury industry has experienced in the past year have been important lessons to everyone,” noted di Marco. “Companies are learning that they can achieve improvements in every field. Thus, I believe that today, in general, the luxury industry is better prepared to deal with challenges than in the past. I do not want to be overconfi dent or bullish, but at Bottega we already had to face a great deal of challenges back in 2001. The future will be tough, but we believe that in the past seven years, we have laid down a strong foundation for brand growth and profitability.”
Since 2001, Bottega Veneta sales have grown more than tenfold — from 35.2 million euros, or $31.6 million, in the year Gucci Group acquired the brand, to 366.1 million euros, or $499 million, in 2007. (Currency conversions are at average exchange rates; the growth multiple is higher in U.S. dollars since the euro gained strength during this period.) Perhaps even more impressive has been the growth of earnings before interest and taxes — from 14 million euros, or $12.6 million, and an operating margin of 9 percent in 2001 to 92 million euros, or $125.4 million, and an operating margin of 25 percent in 2007.
In February 2001, Gucci Group acquired Bottega Veneta, a company founded by two artisans in 1966 and known for its signature “intrecciato” leather bags. In May of that year, di Marco was recruited from Celine, where he was president of U.S. operations, to join Bottega Veneta as chief operating officer. The following month, he was promoted to ceo, while at the same time, Tomas Maier was tapped as the brand’s creative director, thereby setting up Bottega Veneta for its reinvention.
“Seven years ago, we were given the mission to bring Bottega Veneta back into the luxury world,” recalled di Marco. “It was a brand that had achieved success in the Sixties and Seventies as an expression of high quality, discreet elegance and craftsmanship. A brand that had opened its fi rst store in 1972 on Madison Avenue in New York. That brand had to become synonymous with exclusivity and quality and position itself at the top of the luxury market. That was a tough call.”
Why tough? Because when di Marco assumed leadership of the company, Bottega Veneta had strayed from its roots and diluted its brand DNA by embracing a flashier, less luxurious identity. “By 2001, Bottega Veneta was a discouraging expression of logos all over; the opposite of the discreet elegance it used to stand for,” he explained. “A total lack of class. Somewhat fashionable, but absolutely vulgar. Back in 2001 we had very little to work on. Nothing was left of the old archives. The brand was seriously compromised and the company virtually bankrupt.”
Di Marco and Maier set out to create a “clear vision on how to reposition Bottega” and “take it to the top of the craftsmanship axis.” The duo emphasized the highest quality production values, product innovation and no logos in Bottega Veneta’s collections. The execution of the new vision focused on leather goods, and the company pumped resources and life into the headquarters in Vicenca, Italy, after years of neglect. “We created the conditions to let creative talent flourish throughout the organization, sustained by a solid business model,” said di Marco.
Apart from product, the ceo decided that focusing on owned retail was the best way to convey the values of the brand and offer the highest level of service to customers. Since 2001, Bottega Veneta has expanded its network of freestanding stores from 21 to 127 expected by the end of this year. Leather goods remain the core of the business, but the brand has expanded to encompass men’s and women’s ready-to-wear, shoes, fashion jewelry, fine jewelry and more.
“The clarity of the vision and its disciplined execution has paid off,” said di Marco, noting that the Luxury Institute in New York has named Bottega Veneta the first or second most prestigious brand in the U.S. for the past three years. “The brand that we have now is the highest expression of timeless elegance and discreet luxury.”
With the benefit of hindsight, di Marco’s strategy for Bottega Veneta seems hard to quibble with, but he pointed out that many of his decisions could have been risky when he made them. “To me, vision is first and foremost the ability to see with absolute clarity where you want to go, and understand the values you can count on to build or rebuild the soul of a brand,” he explained. “Vision is about being brave and sticking to your long-term view. And go, if necessary, without ever compromising your integrity, against the prevailing trends in the market, no matter how difficult the environment is.”
For example, while Bottega Veneta chose to forgo logos and let its product speak for itself, the prevailing trend in 2001 and years following was to have a logo. What’s more, the brand emphasized limited edition, timeless products during an era when competing brands were pushing “It” bags that went in and out of fashion in a single season. Also, while the dominant trend was to offer heavily merchandised collections at different price points, Bottega Veneta instead offered collections of items that were unique. And while the trend was toward industrial production, Bottega Veneta focused on handmade pieces. All of this, moreover, was done without heavy ad spending, with di Marco instead relying on word of mouth and the growing network of stores to relay the brand message.
“Vision is also about having the right intuition and understanding of how consumer behavior may change. A great deal of Bottega’s success is based on understanding the importance of individuality to our consumers,” noted di Marco. “There is a growing sense of individuality in consumers who are more confident in their own taste and less reliant on the brand name. There is also the growing resistance to owning the same product as everyone else, as a reaction to luxury brands having become too accessible.”
This is true even in Japan, pointed out di Marco, explaining the stereotype of the logo-mad Japanese betrays an ignorance of the market. “Yes, the logo has played a fundamental role in the luxury industry in Japan because — it may sound like a paradox — it was something that could identify you as a unique person, but also something that could make you belong to a group. That was fundamentally behind the huge success of Vuitton and Gucci and Chanel. But Japan and Japanese society has changed. You had this horrible term for ‘parasite singles,’ or girls in their early- and mid-20s living at home, with no rent or bills, spending all their money on luxury brands and logos. But they’ve grown up and got married and they have other things in mind. In this context, Bottega was the new kid on the block and speaking a language that none of the other brands was speaking, and explains the success of the company there.”
Di Marco added that reports of Japan’s deteriorating luxury market are overblown. “I understand why we all keep talking about China because we need to have the next star, but we are all talking like Japan is a quasi-dead market,” he noted. “I think this is a capital mistake. Japan is and will stay a fashion leader in the region.”
Still, one of di Marco’s PowerPoint slides emphasized that during a challenging time for luxury brands in today’s economy, emerging markets are expected to drive growth in the global marketplace, particularly the BRIC countries — Brazil, Russia, India and China. In 2007, China’s luxury goods market was 4.5 billion euros, or $6.13 billion, (2.7 percent of the worldwide market); over the next five years, the luxury goods market there is expected to post a 30 percent compound annual growth rate. Russia’s luxury goods market was 3.6 billion euros, or $4.91 billion, in 2007 (2.1 percent of the worldwide market); over the next five years its CAGR is pegged at 20 percent. Brazil’s luxury goods market was 1.3 billion euros, or $1.77 billion, in 2007 (0.8 percent of the worldwide market); its CAGR for the next five years is estimated at 35 percent. India’s luxury market was 600 million euros, or $817.9 million, in 2007 (0.4 percent of the worldwide market); its five-year CAGR should be 25 percent.
Beyond conjuring up a clear vision for a company, a ceo has to execute that vision via his employees. To paraphrase Barbra Streisand, ceo’s are people who need people, was what di Marco seemed to be driving home. “Bottega would not represent a success story if Tomas had not been there and if this talent had not been given the freedom to express itself,” he said. “Bottega would not have represented success if the artisans had not been challenged to express the wonders and magic they are capable of. Ultimately, Bottega is the story of its people, of their work ethic and integrity, and their courage to go against the mainstream.”
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