EVIAN, France — If keynote speaker Francesco Trapani could sum up his growth strategy in one word, it would likely be "diversification."
Diversification in all areas of his company has been a goal of Trapani’s for years. As chief executive officer of Bulgari SpA since 1984, he has directed one of the most significant growth periods in the company’s history by following that mandate. In 1995, he oversaw the company’s listing on the Milan Stock Exchange and the International SEAQ in London. Since then, the stock has increasedin value by more than 300 percent.
Trapani has also made it a point to move the company in new directions, in an effort to broaden its market presence. Among these directions: adding financial-planning mechanisms, a long-term strategy of expansion based on product diversification, global distribution and professional organization. During his keynote address at the WWD Beauty CEO Summit here,Trapani explained the opportunities and risks that he sees in his fragrance business.
"In the early Eighties, the company was a tiny company with only one family of watches," he said. "At that time, we were selling these products only through one distribution system, the monobrand Bulgari stores. And at that time, we had only five stores. In the second part of the Eighties, we started developing the business a bit more aggressively than in the first part."
That still meant maintaining a very conservative marketing approach, he said — offering the same marketing mix, the same assortment of products and the same system of distribution, but expanding the business in the areas in which it was not present. "The company was growing fast in terms of sales and profits. Then, in the beginning of the Nineties, with the economic crisis in America and the rest of the world and with the Gulf War, the luxury business started suffering." As a result, executives took a hard look at the company’s structure and brand awareness, he noted.
That examination proved that the company had a great deal of opportunity in improving its brand awareness. "We decided to change drastically our strategy in order to become much more aggressive. In 1991 and 1992, we started implementing the new strategy, which was calling for three main things." They wereproduct diversification, enlargement of the distribution network — both in terms of more retail stores and the creation of a wholesale distribution network —?and significant investment in advertising and communication in order to increase awareness of the brand.Then, Trapani decided to enter the fragrance business, spurred on by two goals. "We wanted on one side to increase our sales, and hopefully, the profit — but on the other side we were looking for an increasing awareness of the brand. Things were going well; in following years, we were able to develop the business, continue opening stores, enlarge our product portfolio and go into other businesses including eyewear and leather goods. We listed the company in 1995, and it was a great success."
To put that success in perspective, he said, in 1992 before implementing the new strategy, the company was doing about $80 million in turnover. Today, he said, it is doing $800 million.
Turning back to fragrance, Trapani said, "We went into the perfume business because we wanted to enlarge our awareness, but at the same time we knew that this was an industry in which you need to invest huge amounts of money in order to create the demand, and you need to have a large organization, especially in the distribution area, to create the kind of volume you need for a good return on the investment. We didn’t have the money necessary to make big investments in this industry. We decided to follow what we call the push strategy."
That amounted to, he said, starting with a very selective distribution network of between 3,000 and 4,000 doors on a worldwide basis, and giving the retailers a territorial exclusivity. "In this case, they were not discounting our products, because they didn’t have competition from other retailers," he explained. "When the client was coming into the retailer’s store, and he was undecided, the retailer was pushing us more than some others because he was making more money."
The strategy was successful, he said, and the company began seeing added growth and profits in fragrance. "Then, we arrived at the period from 1999 to 2001, when we launched Blu Pour Femme and Blu Pour Homme, which were very successful and gave us the critical mass necessary to change from a push strategy to a pull strategy. At that point, we were investing aggressively in advertising and we expanded our distribution to about 13,000 or 14,000 doors worldwide."Still, the company’s dedicated fragrance division is quite lean, he said. "We have 160 people working in it. Because it is very lean, it is very flexible and able to react quickly to new market needs. We can conceive and launch a new product in 12 to 14 months. And yes, the mother company of the perfume division is a listed company, but the Bulgari family owns 55 percent of the company. We have a stable controlling shareholder, and this gives us the possibility to better balance short-term and long-term perspective."
One important factor, Trapani said, is the cost of doing business. "It is going up and up, for two main reasons," he said. "Each year, we see a huge number of new launches —?I think last year we saw about 150 major launches. That means that to be seen, you have to invest a lot of money, or else you are lost. A second reason for costs going up is that there are more and more large retail companies, and they are looking for more profit. They want a larger margin, and this gives a pressure to our margin."
The way to counter this problem, he said, is to have "a strong concept and an outstanding execution. We cannot afford to launch banal products. This is something that maybe a huge multinational company can afford, because they have huge means. This is not true in our case."
Trapani believes that the strategy is working. "Last year the perfume division’s profits were up 31 percent; this year we are up 15 percent and it is not the year of a major launch."
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye