Week 19: Bain, Prada, Richemont, Firmenich, Gucci x Roblox, Ralph Lauren, Time Vallee, Loewe
1. Bain capital & Altagama Fundazione latest report on the Luxury industry
2. Prada launches outdoor collection in their experiential space in Shanghai
3. YouTube first ever Beauty Festival
4. Firmenich launches digital ingredient traceability tech
5. Gucci taps into the metaverse, and creates an immersive garden on Roblox
6. Technology: Facebook launches live video shopping for brands. Snapchat launches new try-on tech
7. Ralph Lauren launches customization service for their polo shirts
8. Loewe x Sotheby’s collaboration
9. Retail stores. Innisfree exits the US Market. Richemont will open 100 Time Vallee stores within 5 years
10. Richemont’s solid Q4 and annual results
1. Consulting firm Bain, along with the Altagamma Foundation, predict that luxury will make a come-back sooner than what they initially anticipated in their last report. In the first quarter of 2021, the luxury sector grew by 1% over 2019. According to Bain, there is a 30% chance that luxury rebounds above 2019 levels, depending on speed of vaccine roll-out and tourism. The overall luxury market could reach between 305 to 360 billion dollars this year, after falling 23% last year to reach $217 billion, which was the largest drop ever and the first decline since 2009.
As covered countless times on this podcast, China drove much of the recovery, and online channels grew by double digits. The unexpected bright spot came from the US, posting stronger-than expected sales due to consumer confidence, stimulus checks and vaccination roll-out. However, the recovery has been uneven by country, region and also at the brand level. Europe and some Asian territories such as Japan or Hong Kong are lagging behind. So are Macau and Taiwan, or South Korea which is highly dependent on Travel Retail.
In terms of trends, the second-hand market grew by more than 7% in 2020 alone and offers a huge opportunity for luxury brands. This is directly correlated to a strong rise in consumer expectations around sustainability. Luxury brands have to put circularity, eco and social responsibility as well as overall sustainability at the core of their future strategies if they want to continue winning consumers hearts and wallets. Another interesting trend is the raise in spending at second-tier cities as people started leaving the big luxury capitals like New York or Milan during the pandemic.
Finally, while handbags, leather goods and jewellery have been driving the recovery, spending on clothes, makeup and perfumes is also expected to pick up as lock downs ease and people start going out again.
2. Regarding new retail trends, I wanted to highlight Prada’s recent initiative in China. They launched an outdoor ready to wear collection which was launched in their experiential location in Shanghai. To give you the background info, Prada spent 6 years renovating a historical landmark building called Rong Zhai, and they opened it in 2017 to serve as a social and cultural hub for the brand in China, just like they have done in Milan and Venice. To feature this new collection, a series of events took place around the theme of the garden, from concerts to outdoor cinema screenings. The brand will host workshops that clients can book on a Wechat mini program. The workshops will feature activities such as gardening, horticulture, camping, coffee making and mixology. The products Prada is offering with this collection are very diverse, ranging from Picnic baskets, hammocks, blankets, hats and bags. This is another way to show that brands are building their cultural capital by offering valuable experiences, underpinned by new product categories which respect a strong brand DNA.
3. YouTube hosted its first ever beauty festival on May 14th. With a star-studded cast, the event live-streamed for more than 2 hours and is still available on YouTube’s fashion channel. The objective was to entertain, inform, and pay tribute to the beauty creator, founders and influencer's communities, which is so prominent on YouTube.. Guests included Selena Gomez, Jen Atkins, Gwineth Paltrow, Pharrell and many others. On the program, there were beauty tips panel discussions around skin care, hair care, mental health and more relevant topics. Viewers could also watch beauty tutorials, gadget reviews, haircut challenges, and ‘90s makeovers. The event seemed to be a success and I wouldn’t be surprised if it was replicated in the future.
4. In the fragrance world, Firmenich unveiled a new proprietary tech called Path 2 Farm, which allows them to digitally trace ingredients sourcing, from producers to factory. As part as of their overall ESG initiative, they are now developing this capability to strengthen their responsible sourcing commitment. Path 2 farm provides access to secure and reliable information and ensures the end-to-end traceability and transparency by connecting Firmenich directly to its suppliers eco-system. By collecting farmers’ profiling, field locations, agricultural practices, and environmental data, Firmenich will enable customers to visualize the origins of a product, including the social and environmental impact of its production.
5. Gucci partnered with Roblox to develop a digital interactive exhibition, accessible on Roblox from May 17th to May 31st. There is a lot to unpack with this news. First of all, for those of you who don’t know Roblox, either you don’t have children, or your kids are in college, or, you are amazing at managing video games and you need to tell me how you do it. Roblox is a game platform which was founded in 2006 and recently IPOd at a $42 billion valuation. It is unique because it is an open source, where anyone can both create and play games. There are currently 40 million games available on Roblox, and it boasts 42 million daily visitors. Roblox is one of the leading companies in developing the metaverse. What is the metaverse you ask? It can be defined as a digital universe made of 3d virtual experiences where people can get together and interact just like they would do in the real world. Think of it as a place where users can lead a parallel life to their real-world existence. Remember this concept because I am a firm believer that the metaverse is luxury’s next big frontier. To share a few numbers, a few months ago, artist Lil Nas hosted a concert on Roblox, which was viewed 33 million times. Travis Scott also hosted a concert on Fortnite, another metaverse gaming platform, and was viewed 46 million times.
Gucci is one of the first luxury brands partnering with Roblox, and I expect it won’t be the last. They created an immersive digital version of an exhibit they are currently hosting in Florence called Gucci-garden, in celebration of the brand’s 100th anniversary. Users control an avatar in the shape of a mannequin and can walk through the gardens and rooms to discover the world that Alessandro Michele created. The avatar can absorb the patterns and colors of the rooms ; users can access exclusive and limited items to dress their avatar; virtual rooms display videos and elements of previous iconic Gucci campaigns. In a nutshell, it offers limitless creative possibilities for a brand to express their vision, as well as provide a unique and emotional experience.
6. Facebook launched a new program called Live Shopping Fridays, where it will run shopping events with the biggest brands in beauty and fashion. It started last week with Sephora, Abercrombie & Fitch, and Bobbi Brown Cosmetics all being part of three rotating categories: Glow Up, New Fashion Finds and Self Care Spotlight. In partnership with various influencers, artists and creators, the live events will feature all sorts of tips, educational material and product presentations. Consumers will be able to shop directly from the live stream and interact live with the presenters to ask questions or seek some advice. Consumers will access the live stream on the brand’s facebook page or on the Shop tab on the facebook app. More brands are already slated for future streams, such as Clinique and Dermalogica.
Then, Snapchat presented a new voice controlled virtual reality technology allowing users to try on and swap through clothes using their voices. The first test was done in collaboration with Farfetch and Off-White which presented 3 jackets to be tried on virtually. Snap is investing heavily in virtual try ons to lure fashion brands. Prada and Piaget are early adopters of this technology.
7. Ralph Lauren launched a manufacturing-on-demand program allowing customers to custom make their own polo shirt. The service is available on the brand’s website, where consumers can select details for each part of their polo, and add monogramming. The brand will add more customization options in the future. To provide this service, Ralph Lauren developed new machines which are able to knit the threads and create the fabric based on the size needed for each piece. It allows to reduce fabric waste, limit inventory as well as mark down costs. These custom orders take 2 weeks to produce and deliver, and customers will have to pay a premium. While a standard polo goes for $90, a custom-made one will start at $120. This new service will be launched through pop-ups in existing Ralph Lauren stores, as well as a Snapchat augmented reality feature and social campaigns with Tik Tok personalities.
With this move, Ralph Lauren is at the forefront of another angle of the sustainability trend, which is made-to-order production.
8. Let’s review a few interesting collaborations. First of all, Loewe and Sotheby’s unveiled a collection of traditional clay chestnut roaster celebrating the Spanish tradition of such objects, and designed by 3 artists from around the world. Sotheby’s is displaying the unique objects in its galleries and is also making 7 of them available for direct purchase on their online marketplace called Sotheby’s Buy Now.
This collaboration is at the convergence of art, commerce and luxury, and captures what consumers are looking for nowadays in modern brands. If they want to win, brands need to develop cultural and social capital in order to deliver relevant value to their target consumers.
9. Let’s review store openings and closings.
K-Beauty brand Innisfree, owned by Amore Pacific, announced that it was exiting the US market and will close all of its North American stores. The process started last week and the brand will remain available on Sephora.com. After launching their US presence in 2017, sales have been hit hard through the pandemic. The brand is also suffering in China, where it also closed 140 stores and will close another 170 this year.
In the watch industry, Richemont plans on expanding its multi-brand watch store concept by opening 100 new locations across the globe in the next 5 years. This store concept is called Time Vallee and already operates 15 stores in China, through partnerships with local companies. The US is currently under-served and will be a strategic target for the opening of these stores. Talking about Richemont, Piaget also announced this week that it planned on opening some stores this year, including Beverly Hills, the middle east and Asia.
Finally, Balenciaga opened in São Paulo their first store in South America.
10. Richemont published their Q4 and full fiscal year results and it was all very positive, beating analysts expectations. For the quarter, sales were up by 36% and the group reported accelerating trends across all business areas. For the full fiscal year, sales reached 13.1 billion euros, down only by 5%compared to the prior year. Profits also exceeded expectations and increased by 38% to reach almost 1.3 billion euro. This great performance was driven by the jewelry Maison Cartier and Van Cleef and Arpels, as well as China which grew by 19% year on year, and strong results in the US. The group’s digital transformation is also paying off with most brands’ Ecommerce websites delivered triple digits growth, off-setting the lower sales in physical retail and wholesale. Early results show that the new fiscal year is starting off strong. Analysts continue to see upside for Richemont, as high jewelry, wholesale and Specialist Watchmakers normalize during FY2022.
Also, Richemont confirmed that Kering did approach them to discuss a potential merger, but Richemont showed no interest in that move.