What’s the secret sauce behind the rise of Paris-based SMCP, with its troika of fashion labels?
It’s a business model blending elements of luxury and fast fashion to provide accessible luxury, aggressive retail development, rapid replenishment of product, a focus on full-price selling, and maintaining the distinct identities of SMCP’s three brands — Sandro, Maje and Claudie Pierlot.
“They share a vision we call ‘spreading Parisian chic across the world,'” said Daniel Lalonde, president and chief executive officer of SMCP.
Lalonde said the company had been doubling in size every three years. “I’m not saying we still have a plan to double every three years but we have a pretty ambitious growth plan.”
“We are big believers in retail,” he added, indicating the company opens 125 stores a year, currently has 1,200, and also operates concessions in top department stores around the world. It only requires two months lead time to build a store, he said, and on average there is a one-year payback on stores, he noted.
Growth will also be fueled by SMCP’s new owner, the Shandong Ruyi Group which bought a majority stake, while SMCP ’s founders and management and KKR retained a minority interest in the group. The deal was announced in early October. Shandong Ruyi Group said it intends to maintain the DNA of SMCP’s brands and the design and creative teams in the Paris headquarters.
While Lalonde didn’t discuss the acquisitions, he did outline what makes SMCP distinctive and why the company, tracking at $800 million in sales over the last 12 months, is positioned for sustained growth. He characterized accessible luxury as “a sweet spot” and said research by the Boston Consulting Group indicates that market is “purported to grow faster than the luxury and mass markets over the next five years.”
He also said there have been three major milestones in the history of the company, first when Sandro was formed in 1984 by two sisters, Evelyne Chetrite and Judith Milgrom, who relocated from Rabat, Morocco, to Paris; second, when the company shifted from a wholesale to a retail orientation involving concessions as well as freestanding stores, and third, taking the brands global. SMCP is sold in 35 countries.
“We are trying to be global leaders in accessible luxury. That’s the phase we are in today. We believe we have a long way to go,” Lalonde said.
The company is experiencing annual topline compound growth of 26 percent, with France representing 49.6 percent of the business, though there’s a “strategic initiative” to build the business outside France, but continue to grow in the home country, Lalonde said. “We don’t take on too many initiatives. We have a strong focus on key strategies.”
Sandro, SMCP’s largest volume label, has a chic, urban, Parisian appeal and is the only one of the three brands that sells men’s wear as well as women’s.
Maje has more of a feminine, Bohemian and understated look with a touch of quirkiness, while Claudie Pierlot takes a preppy, timeless approach for customers who seek style over trend.
Lalonde posed the question: “What is accessible luxury? How do we define it? And why is it a sweet spot?”
Then he answered himself, saying that with many luxury brands elevating their entry position price level, there’s an opening for less expensive accessible luxury. “It’s a nice gap for us. The space is larger. We think it’s a big driver.”
He also cited an emerging urban middle class which will grow to three billion by 2020. “There’s a whole bunch of new consumers stepping into the market.”
Moreover, global tourism is growing roughly 4 percent per year, and “mix and matching” is growing, said Lalonde, explaining that women are increasingly pairing luxury pieces with less expensive pieces to create outfits. As examples, he said women might pair a Maje cardigan with a Hermès Birkin bag, or a Sandro jacket with Chloé top.
Accessible luxury has a higher “value equation” when it comes to ready-to-wear, he said, meaning women pay less for accessible luxury rtw and wear it more often than luxury rtw.
For much of the world, SMCP’s “brand awareness is still low, but when they know us, we quickly become their favorite brands,” Lalonde said.
“We blend the codes of luxury and fast fashion,” Lalonde said. “That’s a very, very strong idea for us. Imagine blending the codes of Saint Laurent and Zara and taking the best from both.”
SMCP, he said, has a creative process resembling a luxury house, including artistic directors involved in all the photography, stylists, pattern-makers and stores offering personalized service. “We don’t believe in self-service.” To help maintain brand integrity, SMCP has “a limited footprint in outlets….We’re very happy with that. Six percent of our business is in outlets. It’s not a channel we are growing.”
On the fast-fashion side, SMCP, requires just three months from product development to store delivery and is able to replenish best-selling items in five to nine weeks. Each week, 25 new products are delivered to all stores.The company has global systems in all o of its stores, takes about 3.5 months from design to display in the stores, and can replenish best-sellers in five to nine weeks. In addition, “We drop 25 new products in all our stores around the world every week.”
“Having the agility to bring newness drives productivity,” Lalonde said.
More from the WWD CEO Summit: