MILAN — Luxury between innovation and new alliances.
This was the theme of the ninth edition of the Luxury Summit of the Sole 24 Ore daily newspaper held in Milan on Wednesday and inviting Safilo Group, which has been readjusting its strategies in a changing eyewear sector, was spot on. The group’s shares closed up 3.7 percent at 6.95 euros, or $7.80 at current exchange, on Wednesday following upbeat remarks made by Luisa Delgado, chief executive officer of the Italian eyewear maker.
The eyewear industry is going through a moment of major transformation in the wake of the Luxottica Group and Essilor merger revealed in January that will create a $16 billion giant and the announcement of a new joint venture between LVMH Moët Hennessy Louis Vuitton and Marcolin a month later that is expected to further shake up the category. Safilo has been focusing on its 2020 Strategic Plan after Kering said it was assuming control of its eyewear business, which includes the Gucci brand, a longtime Safilo license. Safilo in 2016 registered a 2 percent contraction in full-year sales to 1.25 billion euros, or $1.35 billion, following the loss of licenses, including Gucci, which ended in December, two years earlier than planned and which represented some 15 percent of the group’s revenues from the start of the year through the third quarter.
In addition to its own house brands Carrera, Polaroid, Smith, Oxydo and Safilo, the company produces and distributes eyewear collections for several brands in the LVMH stable, including Dior, Céline, Fendi, Givenchy and Marc Jacobs.
In her spirited talk, Delgado said she had been urging her team to consider the question of identity, leveraging the company’s craftsmanship, which dates back to 1878. “We moved from our core brands to luxury and sun through the licenses, but we make eyewear.” Delgado has been working on differentiating the group’s portfolio as she observed that the company produces proprietary Polaroid glasses, retailing at 53 euros, or a little more than $59, as well as Elie Saab models at 3,200 euros, or $3,593. “We do not want to change by becoming something else, we need to adhere to our history. We are not moving away from licenses, but we had lost our love for the optical business.” Delgado emphasized the importance of licenses, which account for around 60 percent of total business, which she will continue to pursue. “In this world of selfies, who doesn’t want to pose with beautiful glasses?” She said Safilo receives from two to three requests for licensing agreements per week, but she is looking for “the brands of the future that have authenticity and a role for a certain group of people — or tribe.” She characterized the recent agreement with Rag & Bone as “one of the best licenses signed.
“This is a brand of the future and that goes beyond the established luxury world,” she said, comparing this move to the innovative acquisition by Estée Lauder of the Too Faced brand. “I went to American department stores and asked what were the three new hot brands, and Rag & Bone was one of them. We are creating the future in a more eclectic way, and differentiating the portfolio to include brands ranging from Havaianas to Elie Saab as well as Fendi, Dior and Jimmy Choo.”
Delgado is aiming to boost “creativity and the culture that stimulates creativity. There is no punishment for mistakes, which are ways to learn for the future. There may be risks at times,” but experiments are always key. “Our competition is not Luxottica, which has its own market and business, but, say, a [South] Korean start-up of 23-year-olds that have the idea, the bravery, they have a vision and they chance it, and they create a trend. Will they be around in 30 years? Maybe not, but they eat shares in the meantime. I push the idea of having the courage of conviction. The brands that work well are those that have courage. Innovation comes when you have nothing to lose.”
To further stimulate creativity, Delgado has opened design studios in main cities globally — New York; Milan; Portland, Ore. (more focused on sports lines such as proprietary brand Smith), and Hong Kong to flank the existing one in Padova, Italy. “I would like to open one in Eastern Europe,” said Delgado on the sidelines of the conference. Safilo now counts a total of around 100 designers.
Delgado has brought production back into Italy, opened a school to develop new artisans and has been working on Safilo’s distribution center to simplify its structure and increase productivity. She has been building a managerial structure with 120 new managers, and cutting costs.
Asked to comment on the changes in the industry, Delgado said Safilo “does not want to be dependent on luxury groups as they don’t want to be dependent on us.” She said Safilo “would not have done a joint venture with LVMH.” In a smaller scale compared with the Luxottica-Essilor merger, Safilo last year bought lens maker Lenti SpA, based in Bergamo, Italy, which also manufactures visors for Formula 1 racing helmets.
Earlier in the morning, Carlo Capasa, president of the Italian Camera della Moda, said the fashion industry, inclusive of textiles, apparel, accessories, eyewear and fragrances, is growing, with an acceleration in the last quarter of 2016, and is expected to post a 2 percent increase in revenues, reaching sales of 86 billion euros, or $ 96.5 billion, in 2017. He admitted business in the American market was still slow.
Claudio Marenzi, president of Sistema Moda Italia and of Confindustria Moda, also emphasized the slowdown in the American market, which he attributed mainly to the department stores’ “serious difficulties,” more than political uncertainty in the region. Despite a pickup of business in Russia, Europe and Asia, he urged companies to focus on growing local markets, citing Italy, for example, as one area that is still showing lackluster consumer spending.
Presenting the study “From segmentation to hyper-personalization,” Davide Consiglio, principal at The Boston Consulting Group, said fashion companies need to understand customization and noted that segmentation is “crucial.”
“Omnichannel is the real trend,” observed Consiglio, but “luxury brands have not yet matched consumers’ omnichannel expectations, with only 20 percent of customers showing a very high satisfaction.”
Technology and advanced analytics are moving the industry “toward a predictive pull-based model that is data driven,” noted Consiglio, so that brands can “listen and not guess what customers want, with ultra-modern models even predicting when customers will buy.” To better use this kind of information, data governance is key, “otherwise there are more costs than benefits.”
Showing some of the results of the survey used for the study, one slide posed the question: What are the elements of customization that you value the most? In order of importance, the response was: bespoke products in apparel; product configuration in handbags; service in jewelry; made-to-measure in apparel, and initials or writings in handbags. Asked what hyper-personalization meant, customers said they received “a curated, concierge experience.” Other responses were: “This company really knows me; I trust them with my information and they respect my boundaries; messages are seamless across boundaries; I can communicate and they listen.” Consiglio concluded that companies need to deliver on four dimensions to be successful: strategic design; data and analytics; communication and media, and technology.