Appunti Business Lab - Fashion & Luxury

FERRAGAMO

Everything started with Salvatore Ferragamo, this legendary brand was built over 97 years ago. This

is an Italian company, but over the years it became global. The HQ is in Florence, the heart of the

company, they have all the corporate departments. In order to have a presence all over the world, they

are divided in 5 different regions. They are present in EMEA, Asia, Japan, Korea, Central & Latina

America, as well as North America.

Globally, there are 3830 employees, they host more than 90 countries, with more than 65 nationalities

and speak more than 35 languages. Hence, they are a very diversified company. In Florence there is

also the museum.

Since its construction in the 1289, Palazzo Spini Feroni is part of the life and image of the city. The

offices in Milan, in Corso Matteotti, host part of the Group Marketing & Communication Department

as well as their showrooms where the collections are presented and sold during the sale campaigns.

The HQ is in Osmannoro, the north area of Florence, hosts the merchandising department (crucial for

this industry) and a very big warehouse very automated. From the corporate departments, you can

breathe the strategy which will be deployed in each region. For every of them, there will be a focus

more on the retail.

Their new people values are:

▪ Think customer

▪ Innovation smartly & sustainably

▪ Own it

▪ Empower everyone

▪ Win together with passion

These are very connected to the success. They have just launched them some days ago, not yet

externally.

Their strategy: Global Retail Excellence

The strategy is built on strong and timeless brand values:

• Innovation

• Creativity

• Craftmanship (extreme care, search for the most luxurious materials)

• Italian style (they value the italianess)

• Authenticity

• Sustainability (even before becoming a hot topic, it was always looked for by Ferragamo)

Their main assets are:

• Exceptional & unique brand heritage

• Contemporary-classic product offer

• Strong brand identity & visibility (working closely with celebrities and putting closer to artists

who represent well the brand)

• Global store network

Maximilian Davis was appointed Creative Director of Ferragamo on 16 March 2022, marking a new

era for the brand. His Trinidadian-Jamaican origins are essential. He was named GQ Men of the Year

for “Best Men’s Collection”. The logo has evolved, the founder’s handwriting leaves space for

change. The category mix is made:

- shoes 46%

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- Leather goods 40%

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- Rtw 7%

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- Silk and other 7%

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The 2022 strategic plan is based on 4 pillars:

1. Re-energize the brand

2. Product at the heart

3. Customer experience enhancement

4. ESGs and people empowerment as key enablers

The family is deeply connected to the company, as well as vice versa. That is why, the brand is

independent and wants to stay as this.

Retail Excellence Mission

To promote a service excellence mindset and to enhance the performance of the global retail network,

by providing a sophisticated, distinctive and consistent luxury experience, determined to leave a

lasting impression in our clients.

Consistency in retail is the key word, it must be very linked to the mission of the company.

✓ Retail Elevation by re-designing their in-store experience, in consistency with new brand

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vision and identity;

✓ Retail Execution by implementing a consistent operating model, focusing on excellence

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to accelerate their transformation.

Every project that they do, start from the HQ and then it is spread. They are managing today a direct

network of 375 stores, which is huge in luxury industry. Retail is made by people, you can have the

best strategy in the world but nothing will happen like you except if there are not aligned people.

Key actors to manage global complexity

• →

Global retail excellence define the strategic retail model, in alignment with company’s

vision and brand values. Key roles: retail performance, operations and training;

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Regional retail ensure adoption and seamless execution of the strategy in the markets. Key

roles: regional retail director and area manager;

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Store teams is the ambassador of the brand with customers, manage the day to day business

in the store. Key roles: store manager, assistant manager, client advisor and store operations.

Store manager is increasingly complex role, one of the most transformative one in terms of the success

of the brand. It is a key player, combining people and performance management, store operations and

clientelling skills. Client advisor is more than a sales assistant, it is a role that must successfully

combine product knowledge, passion for the brand, proactivity and customer centric mindset. So, this

is a role that transcends interaction in store but aims at developing trusted relationships with clients.

Why developing the retail channels is more important than ever?

Today we are very much focused on the mono-brand directly managed store. Indeed, this is where

the brand can fully express its potential and brand representation.

What is the retail performance management?

It is not finance, but retail, not just sales but KPIs and not reporting but management. Hence, we want

data that help the decision-making. Planning is the first thing, namely proactively plan key calendar

events, it defines KPIs to evaluate data.

It is important to plan ahead to ensure focus on key events, across various areas (e.g., Chinese new

year). Few characteristics that make KPIs essential are:

- Measure performance in relations to company’s goals;

- Effective to identify areas of improvement;

- Relevant to support the decision-making;

- Specific and defined by the company;

- Clear milestones to track the performance;

- Focus actions and motivate teams.

Hence, there are multiple KPIs for one business. Different areas define and monitor essential KPIs to

track the performance and determine if retail performance is on track to reach the goals. They refer

to the store performance, operations, training, merchandising and CRM 8which is becoming one of

the most important drivers).

Store performance essential KPIs

Average Ticket Value = total sales / total tickets average amount of sales per ticket in a

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specific period

Unit per ticket = total quantity / quantity tickets

o Conversion rate = total tickets / traffic

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These first 3 say the quality of the store.

Cross-selling = multi category tickets / total tickets

o Average unit retail = total sales / total quantity

o Productivity by FTE = total sales / FTE

o

KPIs stand alone do not tell anything, it is important to see them in a more integrated way. Everything

starts from the sales penetration, namely traffic and conversion rate. 30% would be a great conversion

rate, a minimum of 10% is good while below it is extremely low for a luxury store (e.g., in Zara is

different). Then there is the quality of sales, given by the AUR (which category mix we sells the most)

and UPT. After, the team performance given by the average sales by sales assistant. Finally, the store

performance given by store sales. The store teams and managers most of the time focus more on the

single KPI, but sometimes it can even be worse improving one without looking at all the others. KPIs

should really interact, in order to have a sales improvement.

Key processes and tools to drive performance

There are 4 layers: →

1) Performance goals annual, key KPIs objectives to achieve yearly business goals, cascaded

from the global teams to regional ones as part of an integrated and cross-functional plan;

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2) Monthly targets monthly, commercial planning which define the monthly sales target to be

achieved by each store, they are cascaded from retail directors;

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3) Retail Contests ad hoc – monthly, ad hoc activities designed to push certain product

categories or KPIs improvement in specific phases of the business, cascaded by retail

directors; →

4) Store activations weekly, day to day focus implemented and monitored by store managers

to improve effectiveness, implemented by store managers in store.

Luxury is a very specific strategy

This is because luxury products are very different to other types, since they involve a very emotional

components and it is about the essence of a brand build upon scarcity. The luxury industry is so

different because when you sell a not luxury product, we have to conform to specific standards. In

case of non-luxury, we evaluate a product according to the logics and efficiency (i.e., its performance).

Instead, in luxury we evaluate emotions and exclusivity, Hence, how can we measure emotions?

WHAT IS THE LIMIT OF SATURATION OF THE MARKET?

In consumer electronics, we buy a single fridge. In the luxury industry, we do not buy only a product

even if they cost more than consumer goods. An entry level LV costs more than a size-by-size fridge,

since this market has no saturation. Moreover, products are not developed by a focus group but they

rely on the genius of an expertise. For example, perfumes are developed by noses. Instead, other

industries try to address needs rather than anticipate them. So, they use focus groups and surveys.

Products have an industry behind their development, such as the Berkin bag of Hérmes. The purpose

of marketing in luxury is to suggest needs, to anticipate trends (since they are not trend-followers,

rather trend-setter) and to persuade consumers. Other industries try to meet needs, by understanding

customers’ expectations.

WHAT IS LUXURY MARKETING?

WE MUST ALWAYS TRY TO BE A LITTLE BIT AGAINST CURRENT. WE DO NOT MARKETING…

WE ARE A GROUP THAT CREATES. THE CREATION OF OUR INNOVATIONS IS WHAT

CREATES THE MARKET AND NOT VICE VERSA …WE CREATE, INVENT, AND FROM THERE,

AS OUR INVENTIONS ARE QUITE SUCCESSFUL, THE MARKET ADHERES. Bernald Arnault

The anti-laws of Marketing

Kapfer came up with the so-called “Anti-laws of Marketing”:

1) Luxury is not comparative! in luxury, it does make sense to compare products (e.g.,

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Lamborghini and Ferrari), since brands have their own identity and heritage, we buy based on

our own taste. A product is not better than others, it is not a matter of brand positioning, since

each one has their identity. In fact, this is the difference with the mass market. Luxury means

incomparability and is superlative, not comparative.

2) Does the product have enough flaws? the function of a product is not the main goal

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3) Do not pander to your customers’ wishes

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4) Keep non-enthusiasts out brands do not advertise so much

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5) Do not respond to rising demand Hèrmes stops to sell products to people who buy many

products, since it makes difficult to customers to buy so that it boosts the exclusivity and it

stops im