Kering

PARISKering sees a major opportunity in Asia as it prepares to wind down its joint venture with the Yoox Net-a-porter Group (YNAP) and bring its e-commerce activities back in-house in the second quarter of 2020.

As it builds up its capabilities ahead of the switch, the French luxury group is focusing on growing the share of online sales done through its own brand web sites and virtual concessions, said Grégory Boutté, chief client and digital officer.

“We recognize that e-commerce is going to grow really, really fast. It’s a critical part of the customer journey and engagement with our brands, and we want to make sure we control that experience, so we’re going to focus on expanding our online retail,” he told reporters ahead of a group investor day on Friday.

In 2018, online retail revenue – which excludes wholesale business with e-tailers – totaled 626 million euros, or 4.7 percent of total revenues, at Kering, the owner of brands including Gucci, Saint Laurent, Bottega Veneta and Balenciaga.

While Boutté declined to provide a target for increasing the proportion of online retail sales, he said the brand was working to convert its wholesale accounts to a concession model, in a move that should boost its profit margins once the initial investment phase is over.

“Each time we move the wholesale business to a concession, we see our topline growth increasing in a very material way, because we have more control of the experience,” he said.

“The strategy is going to vary on a brand-by-brand basis. It doesn’t necessarily mean that we’re going to end relationships that we have with wholesalers right now,” Boutté added.

In China, it has rolled out local e-commerce sites for its brands, including Gucci, as it seeks to increase penetration in a market that is still lagging the United States and Europe in terms of online luxury sales.

Boutté noted that the Asia Pacific region represented 32 percent of Kering’s revenues last year, but only 15 percent of online sales. By contrast, the U.S. accounts for 20 percent of overall revenues, but 40 percent of e-commerce sales.

“E-commerce in China as a whole is probably the biggest and the fastest-growing and the most highly penetrated in the world, but luxury e-commerce has not really kicked off in China yet,” said Boutté. “It represents a big opportunity for us to grow going forward.”

In absolute terms, Kering’s online sales rose by 71.3 percent last year. E-commerce is forecast to account for a quarter of all personal luxury sales by 2025, compared with an industry average of 10 percent in 2018, according to management consulting firm Bain & Co.

Boutté is spearheading a range of digital initiatives, including using artificial intelligence to improve stock replenishment, piloting a blockchain for its eyewear business, and rolling out its new customer service platform to South Korea, Japan and China in the next year.

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