Managing uncertainty was the main theme of the 25th edition of the Pambianco summit, which was livestreamed on Wednesday from Milan’s Bourse.
The fashion and luxury industry is definitely facing an unprecedented scenario, where consumers developed new habits, as PWC partner Erika Andreetta explained by showcasing the results of the consulting firm’s “Emerging Stronger: Consumer insights to prepare for tomorrow” study, which combined the data of PWC’s 11th Global Consumer Insight survey, the 5th Millennials and Gen Z Observatory, as well as the 5th U.S. Holiday Outlook.
As the research highlighted, 74 percent of global consumers work, at least partially, from home; 35 percent of them do grocery shopping online or by phone and, in the United States, 48 percent of them avoid leaving their houses. In particular, consumers have big concerns about safety, personal health, work perspectives and income reduction — actually, 57 percent of Italian consumers already saw their incomes decrease due to the pandemic.
While before the coronavirus outbreak only 19 percent of global consumers said they would have spent less in the future, new data highlights that they now represent 36 percent of the population. As a result, if prices still play a key role in the purchasing decision process, in the post-COVID-19 scenario, diversified engagement and increased sensitivity to social and environmental sustainability are becoming essential factors.
Fashion will be the sector heavily impacted by consumers’ discount mind-set — in fact, 51 percent of those reducing their purchases will focus on limiting buying fashion products. However, with the holiday season just around the corner, a positive sign comes from the United States, where 55 percent of the population doesn’t plan to cut their Christmas purchases, even if total sales during the period are expected to decrease 12.4 percent compared to last year, returning to 2016 levels.
Even if 24 percent of consumers still prefer to buy fashion and accessories products at department stores, according to PWC’s research, 61 percent of U.S. shoppers will make their Christmas purchases mainly online this year. And, while 86 percent of global consumers made fashion and accessories purchases online in the past 12 months and 60 percent of them will visit fewer stores during the season, “international shoppers are still keen to live the in-store experience to make targeted purchases,” as Andreetta said. This might lead to a decrease of the overall footfall, but it might help increase conversion rates. In particular, in Italy, 45 percent of Millennials and Gen Z consumers said they choose a particular store for its “trust and reputation,” while 36 percent of them are driven by proximity to the shop.
Definitely, in Italy, the retail scenario is particularly challenging in those cities affected by the lack of international visitors. As Sara Bernabé, Italy’s general manager of payment and tax-free company Planet, highlighted, across the country the overall in-store footfall dropped 68.4 percent in the first 10 months of 2020, especially due to a 92 percent and 89 percent drop in the number of U.S. and Chinese visitors, respectively. While she said that, according to the International Air Transport Association, domestic flights will return to pre-COVID-19 levels from the second half of 2021, but it won’t be until the second quarter of 2023 that there will be the same number of international flights as before the pandemic. However, higher prices of European luxury goods in Asia will push Chinese consumers — who are currently displaying a certain “shopping revenge” domestically — to return to traveling to Europe to make their purchases. And, according to Planet, after the pandemic, 50 percent of Chinese consumers who will travel to Italy and Europe mainly to shop will be so-called “elite spenders” who spend more than 30,000 euros a year on luxury goods.
To engage with those potential consumers in China, Dolce & Gabbana was among the companies that participated with a 6,458-square-foot booth at the Shanghai Expo, which closed on Nov. 10, and where the Italian brand showcased its craftsmanship and creativity across all product categories. According to Dolce & Gabbana chief executive officer Alfonso Dolce, although the brand’s business in China hasn’t returned yet to the numbers registered before its 2018 Chinese fallout — when the firm was accused of racism after releasing a video featuring a Chinese model eating pasta with chopsticks — Dolce & Gabbana is growing again in the market.
While fashion and luxury brands are waiting to welcome back international big spenders in the world’s key destinations, how are they organizing to take up the challenges imposed by pandemic?
As emerged from data provided by Facebook Italy country director Luca Colombo, brands, including small and medium-sized ones, are boosting their online presence and are exploring more online commerce. The social media giant’s advertising revenues increased from 8 million euros to 10 million euros during the pandemic. “During the lockdown, 57 percent of consumers made online purchases from new small and medium-sized labels,” Colombo said.
Lower prices and more accessible technologies are accelerating the growth of digital commerce, according to Paolo Picazio, head of market development at Canadian e-commerce platform Shopify, who said that during the lockdown the domestic total sales of brands using Shopify grew from 25 million to 27 million euros. Italian consumers seem attracted by the competitive prices available online. In fact, according to data provided by Shopify, 84 percent of Italian consumers are keen to make online purchases during the Black Friday weekend and they expect to spend an average of 377 euros.
Posting 200 million euros of online sales a year, accounting for around 10 percent of its revenues, the Calzedonia Group, which in 2010 generated revenues of 2.4 billion euros, is facing the challenges of omnichannel transformation, as founder and president Sandro Veronesi explained. Since the stores of the group, which includes the Intimissimi, Calzedonia, Falconeri and Atelier Aimé brands, are half directly operated by the company and half managed through franchises, Veronesi said that “the company is making important investments to develop an efficient strategy that takes into accounts all the different parts.”
According to Silvio Campara, ceo of Golden Goose, which in June was acquired by Permira from Carlyle for 1.3 billion euros, “the goal of the online today is much wider than just selling products.” According to Campara, companies need to shift their mentality to embrace a strategy that considers four key pillars — “consumers, communities, conversations and consideration,” all boosted by the most important propeller, “people,” as he explained.
In order to update its retail format, Golden Goose, which will open a new store on Milan’s Via Montenapoleone in coming months, will also launch the Golden Goose Digital Broadcast. “We are transforming stores into destinations where we can create content with our consumers,” the executive revealed.
Differently from the majority of brands in the luxury arena, Golden Goose is closing 2020 with revenues in line with last year at 265 million euros. Campara explained that this positive result is also the fruit of hard decisions made during the lockdown, which “were finalized to protect the brand, rather than to making revenues.” In fact, at the outbreak of the pandemic in Italy, Golden Goose decided to cancel all the orders, totaling 36 million euros, collected during the fall 2020 sales campaign. “At the beginning, our international clients were protesting, but when they did go into lockdown, they actually thanked us,” said Campara.
But, there is never one response when it comes to facing a crisis. As ceo Ubaldo Minelli explained, Renzo Rosso’s fashion group OTB adopted a diametrically opposite strategy. In fact, with the kickoff of the lockdowns, the participants to OTB’s “War Room,” as Minelli called a task force of executives that are managing the crisis inside the group, decided to get closer to clients. “We told them ‘not to panic, we will be your bank and your warehouse’,” said Minelli, explaining that if in the short term this had a negative impact on the group’s net financial position, which went from 130 million euros to 25 million euros in three months, it’s actually paying off. “Our transparency has been highly appreciated, we had no cancellations, we are not having stock problems and the net financial position is now back to 100 million euros.”
A lack of strategic planning and of “salable creativity” have slowed the growth of Missoni over the past few years, according to newly appointed ceo Livio Proli, who joined the company last May. According to Proli, Missoni — which in 2019 had total revenues of 110 million euros — can rely on its luxury manufacturing know-how, as well as its lifestyle positioning. With the support of the Fondo Strategico Italiano fund, which acquired 42 percent of the company in 2018, these attributes can enable the brand to grow across different categories, spanning from women’s daywear, beach wear, men’s wear and sports to interior design. The latter, through the Missoni Home range, already accounts for 20 percent of the company’s revenues.