Valentino RTW Fall 2019

MILAN The luxury goods market has the potential to become a 1.3 trillion euro business by 2025, growing by 4.6 percent a year.

As per Boston Consulting Group’s True-Luxury Global Consumer Insight study presented at the Altagamma Consumer and Retail Insight conference here Wednesday, 425 million luxury goods consumers spent around 920 billion euros in 2018.

Between 2018 and 2025, the study estimates that personal luxury goods will grow 3 percent, supported by the accessories and cosmetics categories. Experiential luxury will grow 2 percentage points faster. Millennials will represent 50 percent of the personal luxury market by 2025. Chinese consumers will represent 40 percent of the luxury market by 2025.

Luxury brand Valentino is also showing gains, said chief executive officer Stefano Sassi, revealing that last year revenues rose 3.4 percent to 1.2 billion euros, compared with 1.16 billion euros in 2017. “We continue to grow, even if not at the rate we were used to before,” he said.

And the year has started on an upbeat note, as all markets “were positive in the first quarter,” with Hong Kong and Macao slower than other regions “because the Chinese are traveling less there but buy more in China,” the ceo said. As for the rumors surrounding Valentino about potential changes in its shareholder structure and strategies, Sassi said that was a question for the majority shareholders, the Qatar-based Mayhoola fund.

The executive also provided some insight into the brand’s men’s wear division. “Casualwear is not showing any sign of weakness,” he observed. “At first, when we [entered the men’s business], we were inspired by the brand’s women’s elegance, but it was a flop,” he admitted. That was before Valentino veered into more casual men’s looks and developed its own sneakers, which helped grow its men’s wear. “Formal is only 4 percent of our men’s wear, accessories represents 50 percent and the rest is ready-to-wear and casualwear. We are not going back — formalwear is lost as a concept,” he contended.

Sassi spoke after Nicola Pianon, senior partner and managing director of BCG, presented the True Luxury Global Consumer Insight study, which highlighted that casualwear is a draw for 74 percent of interviewees. The study also noted other trends including: The secondhand market now has a value of 22 billion euros, growing 12 percent on a yearly basis, as consumers are driven by sustainability — which has become a pivotal factor in 60 percent of purchases — and limited-edition or vintage products and collaborations between luxury and artists or streetwear brands are increasingly successful. Pianon underscored that Millennials and Chinese now prefer Made in Italy products to Made in France luxury goods and social media and influencers remain the main leverages at the time of purchases. Online continues to grow, as 20 percent of recent purchases have been made on the Internet.

Sassi added his own three trends to the list: Customers are increasingly less loyal; you must move quickly on trends that are increasingly shorter, and the level of noise in the market through the digital revolution forces brands to invest more in communication to stand out with their own message.

“There is a disintermediation between fashion houses and the market,” Sassi contended. “Communication has become a priority and the level of disturbance obliges brands to have a precise point of view. Identify the pillar and DNA of the brand, but continue to evolve it,” he urged.

Referring to collaborations, Sassi concurred with Pianon, saying they “help to give modernity to the brand. If someone had said that we would team with Birkenstock years ago, I would have been surprised, but it’s trendy and in fashion now.”

Likewise, he cited the partnership with Undercover, but he emphasized that Valentino’s “message is specific, clear and indispensable. Each company calibrates its own message and, if it works, it works everywhere because you capture the world’s attention. The effort is to bring in new consumers, but you also don’t want to demean the brand. That is the art of the creative talent, such as Pierpaolo Piccioli’s, and marketing to put together all the elements.”

Carlo Alberto Beretta, Tod’s brand general manager, agreed with Sassi as the Italian label has been moving away from seasonal collections into capsules and limited-edition projects, including one with Alber Elbaz, revealed earlier this month under the Tod’s Factory moniker. “He is a creative genius and he will enrich the brand, adding value to it without overturning it, since it has a very strong identity,” he said of Elbaz.

Beretta also believes comfort “will remain very strong, consumers will not give that up.” However, he also thinks “neoclassicism” is a trend among young people aged under 30, seeking the “highest level of craftsmanship and refined and elegant style, compared with street style.”

He remarked on the feedback that companies get directly from consumers. “There used to be filters that don’t exist any more. It’s more complex, and more skills and more resources are needed.” To enhance this communication with the customer, a 14,000-square-foot Tod’s Factory will open in Milan’s Via Montenapoleone next month, for a “new lifestyle experience,” he said.

The Altagamma Retail Evolution study presented by Luca Solca, senior research analyst, luxury goods, Bernstein, emphasized that the digital development in luxury creates new distribution and communication channels, paving the way for players such as Amazon and Alibaba. Working to engage new consumers, who are driving most of the growth, brands need to be braver and more innovative, said Solca. “They want to be surprised by new stores and a new way to communicate,” he said of today’s consumer.

At the same time, the competition for more ambitious locations remains high, with “strong pressure on costs, investments and sales, especially on medium-small companies, which have less funds and are more exposed to the gray market and the wholesale channel. Digital magnifies shortcomings in physical distribution, forcing brands to put their house in order and cut wholesale to size,” Solca said.

He also pointed to a chart that showed how return on invested capital compression went hand in hand with footwear exposure. “ROIC trends drive share prices — footwear opened up to escalating new luxury competition.”

The key to success lies in the “high productivity per square meter and in creative and differentiated solutions. Smaller Italian companies must be inventive. They must maniacally focus on productivity of space,” said Solca, citing the Moncler Genius project as a “more powerful way to present the collections,” with 10,000 people attending the brand’s event in February.

Claudio Marenzi, president and ceo of Herno, had a different take on e-commerce, seeing it as a way “to sell at a discount. Fundamentally, [customers] are looking for the best price — the only element is price, but at Herno we try to regulate pricing.”

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