MILAN — For the first time, Moncler SpA reported on Monday a loss in the first half of the year, impacted by the COVID-19 pandemic — but the company is setting the foundations for a digital transformation that aims to double the share of its online business in three years.
The online business now accounts for 10 percent of revenues, said Remo Ruffini, chairman and chief executive officer of the company, admitting this was “a super ambitious challenge.”
In an interview with WWD, Ruffini underscored that the challenge in being digitally native is “to create a strong digital culture within the company, changing the mind-set and vision of people.”
He drew a comparison with the early days of Moncler, when he shifted the company from a wholesale model to a retail one.
“This is a next step for the company at a time when those that will not become digital first will be downgraded to the B league. I want Moncler to remain in the main championship, modern and ready for the future.”
The luxury company is bringing its e-commerce platform in-house, upon the expiration date of its contract with the Yoox Net-a-porter Group after nine years.
Moncler paid tribute to the YNAP collaboration, describing it as “fruitful” and instrumental in helping to grow the brand’s sales online “well beyond expectations.” Bringing its e-commerce in-house will begin with the U.S. and Canada in October and be completed in 2021.
In addition, Moncler will launch a fully integrated omnichannel e-commerce platform in 2021. The new platform will be inspired by the world of entertainment, and will be focused on ease of navigation, customized content and product personalization features.
Moncler’s digital strategy predates the months of lockdown, and Ruffini pinpointed the launch of Moncler Genius in 2018 as “a turning point” for the company. He noted however, that the pandemic had accelerated the use of technology, also in Italy, becoming “inevitable.”
The digital platform must be employed not only for communication but also commercially. “We must know how to communicate and sell, but even more create a physical experience beyond the simple transaction. Retail must be transformed as a site where you create the brand and the experience,” he explained. Accordingly, while believing in quality wholesale, he sees problems ahead for this channel, if customers are no longer fascinated by the transactional experience and he pointed to past points of reference such as Barneys.
The digital channel must be kept in mind when designing the product, he contended. “I always say to my team, you can’t have a number of black jackets on the web. Tell me, how can a consumer differentiate them? You can’t touch the fabrics. The design must be digital first so that when you see it on mobile it gives an emotion.”
Ruffini admitted the company had “a good digital structure before, but it was a division. Now it must be part of the company, which must become digital, also throughout the supply chain, production, and processes. You can buy technology but the true difficulty is to change the culture and convince everyone.”
Asked if this new strategy will alter the stance on Moncler’s retail distribution, Ruffini said: “In terms of doors, we are fortunate compared with our competitors because we started later, and our 213 doors are strategically right, I believe. The physical experience is always important but we must change it and we must talk to our sales associates to create the right culture. It’s no longer only about the number of pieces sold, it’s more complicated. Omnichannel is the foundation, but unfortunately there is no help-book that you can write and send to stores, it’s a cultural change and we must transfer it to our regions and sales associates.”
He underscored that Europe and the U.S. should mirror China’s single platform, WeChat, integrating all the different platforms used now, from Facebook to Instagram. “We must learn from them, China represents around 15 percent of our sales, but at a cultural level we can only learn from them.”
Moncler Genius launches its new project once a year, in February, and Ruffini said it was too early to have a point of view on the presentation format. “We must be flexible.” He complimented how brands had recently shown their men’s or resort collections, either digitally or physically. “They respected the moment and consumers perceived it. Digital will be fundamental to consolidate the perception of the brand. Of course a collection must be beautiful, but it’s no longer only about that. It’s the creative project and the communication that count. Consumers expect something more and they have a different attitude. I don’t think we’ll see the crowds waiting for shows outside anymore. The values have changed.”
Ruffini noted that this “new approach requires a rapid organizational, cultural and technological revolution — not evolution — and opens us up to a future full of creativity and experimentation as well as interactions with our consumers on all social channels.”
To support this plan, Moncler has created a new “Digital, Engagement and Transformation” function, which will help implement the brand’s strategy across all digital channels, to create new services and experiences for consumers.
The strategy requires Moncler to be more in tune with local cultural details and to be able to execute in a timely manner. In China, for example, the company is strengthening its local digital team with specialist roles dedicated to the definition of a targeted strategy and to digital innovation and experimentation.
On- and off-line will coexist on Moncler’s omnichannel model built around a customer who follows non-linear purchasing paths and who interacts with the brand in brick-and-mortar stores, as well as online and across social channels.
The new approach will allow Moncler to collaborate with other digital commerce channels.
As reported, the 7 Moncler Fragment Hiroshi Fujiwara collection was released on July 2 and the company developed a hybrid physical and digital strategy running through Japan, China and Europe. The project blended different media, connecting e-tailers, partners and wholesalers, tailoring each activation to the regional culture. On Monday, Moncler revealed that the Weibo livestream for the 7 Moncler Fragment Hiroshi Fujiwara collection generated 32 million views in one day. This is encouraging Moncler to continue to implement and experiment real time, live sales and livestreaming programs, to create customer engagement and develop a community.
In addition, the new “Monclient” application is a tool that helps staff in stores to advise on products available both on location and across all other sales channels, and to manage digital payments and after-sales requests without going through checkout, while also being able to view information relating to the customer and their preferences.
The digitization of the RFID-NFC anti-counterfeiting system, which already allows a customer to identify the garment through a smartphone, is evolving through blockchain technology.
Moncler is also investing in digital intelligence, digital performance and consumer insights tools with a new set of technological platforms to build data and a complete consumer overview. The use of artificial intelligence, already applied to quality control and warehouse management, demand planning and store replenishment, will be extended to new areas such as product recommendations on the e-commerce channel, client service interactions, merchandising and pricing.
Meanwhile, during a call with analysts on Monday, Ruffini acknowledged it was “not easy” for him to comment on the negative figures of the first half saying “there are things that are not planned in life and business,” highlighting the importance of being “agile and flexible, pushing the limits.” Speaking of the digital transformation, he said it was “now or never,” adding on a positive note that “the desire for beauty and uniqueness will never change.”
Moncler reported a net loss of 31.6 million euros in the first six months of the year. This compares with a profit of 70 million euros in the first half of 2019.
Earnings before interests and taxes fell to a loss of 35.5 million euros compared to an operating profit of 102.6 million euros in the same period last year. This includes extraordinary costs related to the COVID-19 pandemic of about 40 million euros, comprising of extraordinary inventory writedowns of about 30 million euros and donations to the city of Milan of about 10 million euros.
In the period ended June 30, consolidated revenues were down 29 percent to 403.3 million euros, compared with 570.2 million euros in the first half of 2019.
Moncler underscored that the second quarter suffered the temporary closure of more than 50 percent of its stores for about two months, along with a significant reduction in traffic in the opened stores, with a revenue decrease equal to 51 percent.
That said, the company noted double-digit growth in Mainland China and in the online business in the second quarter.
Sales in Italy were down 39 percent to 42 million euros, hurt by the lockdown and the lack of tourists, in particular in the second quarter.
In the Europe, Middle East and Africa region, revenues decreased 23 percent to 130 million euros. In particular, in the second quarter, France underperformed compared with the regional average, while Germany and Scandinavia outperformed, benefiting from less stringent measures. Paris, like Milan, was dented by the lack of tourists, said chief marketing and operating officer Roberto Eggs during the call.
In Asia and the Rest of the World, revenues dropped by 27 percent to 181.6 million euros. South Korea outperformed the rest of the region, mitigating the negative performance of Japan, Hong Kong and Macau, the areas most affected by containment measures against the virus. “Mainland China showed a strong pace of recovery in the second quarter, recording double-digit growth rates, and June was very good,” said Eggs.
The company in the period entered new markets with the opening of a store in Kiev, for example. Eggs said 10 openings are planned for the rest of the year, including a banner in Barcelona in December and one in Paris on the Champs Elysées.
The Americas marked a decline of 40 percent to 50 million euros with a similar performance in both channels. In particular, in the second quarter, the results in the U.S. were heavily impacted by the pandemic. The performance in June was “encouraging,” said Eggs, with a faster recovery than in Europe.
“We don’t expect a recovery of travel in 2020, but rather a gradual improvement in early 2021, and believe there will be more opportunities with local travelers,” said Eggs.
Chief corporate and supply officer Luciano Santel said that while the company succeeded in cutting production of the fall collection, 95 percent of the spring 2020 collection had been produced by the time COVID-19 hit, so part of this will be carried over into spring 2021. He added that he did not see additional writedowns in the second half of the year.