• Olivier Moingeon

Week 21: Digital Fashion, L'Oreal, Depop, Rebecca Minkoff, Gucci, Bugatti, Givaudan, Rent the Runway

Your weekly luxury podcast. We select and summarize for you 10 important news in Luxury !

  1. Beauty trends from the NPD group

  2. Auroboros presents a digital only collection at London Fashion Week

  3. China: L’Oreal opens experiential store in Shanghai

  4. Finance: Etsy buys Depop for $1.6 billion

  5. Retail: La Samaritaine will reopen after 16 years. Goop closes London store.

  6. Rebecca Minkoff launches rental using CaaStle

  7. Gucci debuts a high watchmaking collection

  8. Rent The Runway debuts second-hand resale

  9. Bugatti launches smartwatches on Kickstarter

  10. Givaudan partners with T-Mall

1. I wanted to highlight some beauty trends coming from the NPD Group, especially the good performance of the prestige beauty segment. In the first quarter of 2021, sales of prestige beauty products reached $4.2 billion in the USA, which is an 11% growth vs 2020.

In terms of channel, Online sales increased by 33% whereas brick and mortar sales still increased by 3%. In terms of product category, the data shows that shoppers continue to value self-care. Sales of serums are up by 136%, hair masks by 70% and candles by 39%. As expected, make-up was the worst performing category with a 9% decline year on year, but it is slowly making a comeback as people are starting to socialize again.

The NPD group also released a report on the state of retail in the US. As vaccination rolls out and stores reopen, the overall retail industry is showing positive signs of recovery. Retail sales revenue grew by 17% in the first 4 months of 21 compared to 2020. More surprisingly, retail sales increased by 18% over 2019!

2. In fashion, there is interesting news showing how we are slowly going back to pre-pandemic normal, while witnessing the birth of entirely new and disruptive initiatives.

Upcoming Fashion weeks are getting ready and publishing their calendar. Shows will most likely continue to combine video live streaming, phygital events or closed catwalks, but London wil allow small audiences and also already planned a few physical activations in compliance with government safety guidelines. New York Fashion week already announced it will allow live audiences starting in September. Live audience is slowly making a come back and New York expects to present physically with an audience starting in September.

Then, the experimental studio and brand Auroboros will be the first one to show a digital collection during a major fashion show. As part of London Fashion Week’s discovery lab, the brand will present alongside other up and coming designers or brands, but what is different is that their 14-piece collection is entirely digital, and will be presented in a 10-minute mixed reality show where real life models will be outfitted with the digital designs. It is quite telling that a digital fashion studio is out on equal footing as physical brands. The future of digital fashion has started, be ready for it, and I expect we will cover it very often on this podcast!

3. In China, L’Oreal opened their first ever experiential store in Shanghai. The objective of the store was to provide a new kind of experience, that takes visitors on a mobile-empowered journey across all the best that Shanghai and Paris have to offer.

Visitors can take an immersive bike ride along some beautiful Parisian streets of Paris, while collecting L’Oréal discount points. They can also watch and interact with beauty Key Opinion Leaders who are live streamed from the in-store set.

Each visit is linked to a shopper’s Wechat account, which allows to both personalize the experience, as well as continue the interaction outside of the store.

Visitors can use face-scanning technology to receive a printed skin analysis report and personally-coded key to unlock their beauty throughout the store. Visitors can also use this key to explore their recommendations in-store, and learn how the recommended products help with improving the quality of their skin.Recommended products can be directly picked up in-store, delivered to any address in China, or added to their digital shopping basket – linked to their account on the L’Oréal mini-program – to be purchased at a later moment.

It’s interesting to note that in order to validate the store design, l’Oreal and their creative agency developed an entire VR version to walk through and test it before building it.

For those of you who had doubts, the stores are not dead, Digital will not replace the boutiques, and the future lies in the seamless integration of both to enhance a customer’s experience with a brand, regardless of where and how that happens.

4. On the financial side, the biggest news came from the resale platform Depop, which was acquired by Etsy for an astounding $1.6 billion dollars. The transaction will close in Q3 and Depop will remain a standalone company. Etsy is following its strategy of consolidating its position through acquiring other marketplaces. Depop was founded in 2011, and defines itself as a “community-powered marketplace to buy and sell unique fashion”. Depop now has a community of around 30 million registered users across nearly 150 countries. With 4 million active buyers and 2 million active sellers in 2020.

So, what’s in it for Etsy: first of all, it accesses a younger audience. The average Etsy seller is 39 whereas about 90% of Depop’s active users are younger than 26.Then, it gains a loyal following. Depop’s average active buyer made purchases six times last year, and 75% of merchandise sales come from existing buyers.Finally, it gains potential for scale: Etsy can share its expertise in search and help Depop boost its marketing, which has been quite minimal so far.

5. On the retail side, LVMH will re-open the iconic department store La Samaritaine on June 19th, after 16 years of closure for security reasons. The group invested 750 millions in the renovation of the famous building. It will include a 72-room Cheval Blanc hotel, as well as social housing units, office space, 4 restaurants and a nursery.

Then, Goop will close its London boutique located in Notting Hill. It was initially opened as a pop-up in 2018, before being turned permanent in 2019. Company’s filings show that the brand has been struggling financially and lost 1 million pounds before the pandemic.

Finally, off white will open their first store in Paris, on rue de Castiglione.

6. In terms of nice innovations, Rebecca Minkoff entered the rental market through a partnership with CaaStle. If you don’t know CaaStle, it is a B2B retail tech platform which powers and manages rental services on behalf of brands. Rebecca Minkoff is the first brand to use CaaStle’s new service called Borrow. Borrow allows customers to wear items as many times as they like during the rental period with the option to buy at any time, while at the end of the prepaid period, they can either return the items or continue with a daily fee to extend the rental. Daily fees are applied as a discount to the buy price. If paid daily fees equal the buy price, the consumer will own the item with no penalties, ever.

CaaStle currently powers subscription-based rental services for major retailers in the U.S. including Banana Republic, Express, Rebecca Taylor, and will soon partner with Vince.

7. On the product side, Gucci launched a high watchmaking collection made of 33 models designed by Alessandro Michele himself. The fashion brand is entering a lucrative product category where it will obviously face steep competition from watch Maison’s already dominating the field. So what are the reasons behind the move ? First of all, product expansion is an obvious way to add top line revenue. It is also a way to keep surprising the industry and further celebrate its 100th year anniversary. The collection includes Tourbillon and jumping-hour movements, as well as typical aesthetic icons from the brand, such as gems, bees or stars. Watches are manufactured in Kering’s Swiss watch factory. This news was welcomed with some skepticism. Why? First of all, Given Gucci’s lack of legitimacy in the high watchmaking segment, Industry experts are wondering if the brand will be able to sell its timepieces, knowing that the positioning ranges from $10k to $300. Gucci doesn’t a second hand market yet, which might deter collectors who are expecting their iconic pieces to gain value over time. The industry is dominated by brands like Rolex or Patek Philippe and it will be challenging for Gucci to take market shares against these strong brands.

Also, one of Gucci’s strengths has always been to capture the attention of a younger audience. In the case of the watch industry, reports show that gen Z and younger millennials are more likely to spend money on smart watches.

8. Rental platform Rent The Runway announced that it was now making it possible for users to buy second hand products, without a subscription. Historically, users had to pay a subscription fee to be able to rent and also buy items from the website. While the rental subscript business will most likely remain the core business driver of the platform, the new resale service will attract a new clientele on the website and allow rent the runway to differentiate from other actors in the resale economy. Unlike some of the dominating platforms in that space, rent the runway offers products sourced directly from brands instead of coming from other customers. It acts as a retailer with seasonal collections, a wide range of items and sizes. Rent the runway suffered during the pandemic and was forced to cut costs, shutter all its retail stores and lay off staffers. The strategic objective here is to add a new growth engine, capture new clients through the second-hand market and ultimately convert them to the rental subscription business once they have experienced the quality of rent the runway’s products and services.

Rent the runway is also interviewing banks in preparation for an IPO filing which could happen this year.

9. Bugatti developed 3 smart watches in collaboration with Viita which specializes in manufacturing connected watches. What caught my attention is that the watch launched on the crowdfunding platform Kickstarter, which a campaign that has already received $600k dollars in 20 days from more than 500 backers ! Buyers on kickstarters will see their watch engraved with a special marking to identify that their watch is a limited edition. I wonder if that kind of go to market strategy will become more popular, as a way to test a product’s appetite and produce only what can be sold. watches are made of a ceramic case, a sapphire glass touch panel. They are waterproof and have a 2 week battery life. The watch connects to a custom app where users can track tons of health, go’s and sports kind of metrics. The watch face can be changed for another one in less than a minute, to create a different look.

10. Finally, perfume and aroma’s supplier Givaudan signed a partnership with Tmall. They will create a lab called T-lab innovation source. The objective is to leverage both parties strengths to develop and market new scents in record time. Givaudan brings their local factories and innovation expertise, whereas T-mall offers a vast digital ecosystem and an immense data set which will allow them to identify trends and develop products accordingly in as fast as 4 weeks. Givaudan will make these scents available to T-Mall and its partners, as well as its own existing customers.

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