MILAN — For luxury industry executives, today more than ever, the customer is king.
As Milan Fashion Week kicks off on Tuesday, luxury brands are grappling with current and potential uncertainty, making it more important than ever to ensure customer loyalty through personalization, communication and premium service.
“Luxury is about exclusivity, rarity, uniqueness, and for the customer to feel that the product was made almost exclusively for him,” Brunello Cucinelli often says.
Analyst and bank reports, consultant surveys, and general news are enough to make even the most experienced executives flinch.
Last week, the European Central Bank cut its key interest rate by 25 basis points after cutting it for the first time in June on expectations that inflation would ease and euro zone consumer price growth would slow to 2.2% in August. But it forecast the region’s gross domestic product would grow just 0.2% in the second quarter of 2024.
This is in contrast to the United States, where inflation has slowed to 2.5%, while the Federal Reserve is expected to cut interest rates this week as the job market shows signs of weakness and consumers remain financially challenged.
HSBC’s September report noted a weak macro environment and predicted organic growth for the global luxury sector would be just 2.8% in 2024, down from a previous forecast of 5.5%.
Earlier this month, Italy’s Camera della Moda forecast that sales for the fashion and related industries – including textiles, clothing, leather products, footwear, jewellery, eyewear and cosmetics – would fall 3.5% in 2024 compared to 2023, to 97.7 billion euros.
Chairman Carlo Capasa said the 6.1% decline in sales in the first half of 2024 follows a slowdown the industry began experiencing in the second half of last year.
He said geopolitical instability and weak domestic demand were the main factors affecting performance, but acknowledged that industry sales have grown by double digits since COVID-19 and that this pace is unlikely to be sustained in the long term.
Exports remain a bright spot and will continue to be the driving force behind Italy’s fashion industry, forecast to reach €93.7 billion in 2024 compared to 2023, up 5.5%.
Many question marks hang over the coming year as executives and investors watch China try to weather a slowdown in its domestic luxury goods market while wars continue in Eastern Europe and the Middle East.
Despite the cloudy skies, several listed Italian brands reported strong first-half results, including Brunello Cucinelli, whose revenues increased 14.1% to €620.7 million and net profit rose 31.1% to €66.1 million, and the Prada Group, whose net profit rose 26% to €383 million and revenues increased 14% to €2.55 billion.
Develop a strategy
For Prada and other luxury brands, in this scenario it remains important to build the brand, stay the course while making strategic investments, and pursue strong, direct relationships with customers.
“Our priorities for the Prada brand are very clear and will not change: We will continue to cultivate the brand’s appeal, building on its unique creativity and solid roots in contemporary culture,” said Gianfranco Datis, chief executive of the Prada brand, which holds its spring show on Thursday. “At the same time, our dialogue with our audience will continue to benefit from sharp communications, coupled with marketing and retail efforts to further amplify Prada’s voice later this year.”
The company plans to open 10 stores and relocate six stores in Asia, the United States and Europe by the end of 2024. “We will continue to leverage our existing retail network and elevate customer experience towards retail excellence,” Datis said. “From an organizational perspective, people are at the heart of our business and we will continue to encourage internal development and attract new talent.”
Brunello Cucinelli, chairman and creative director of his eponymous company, is also focused on “keeping the brand fresh,” with his only concern being to avoid offering “stale products” at all costs. He expects his company to post 10 percent sales growth this year and into 2025, and as a longtime advocate of Italian manufacturing, Cucinelli is investing in the company to double its manufacturing capacity by refurbishing an existing factory in Solomeo, Italy, ensuring production through 2035.
The company plans to open new manufacturing sites in Penne and Gubbio, Italy, between 2024 and 2025, supporting its projected plan to double sales by 2030. It will open stores in Toronto and Wuhan, China, in the second half of the year, and will expand its boutique on Sloane Street in London by the end of the year.
The Importance of Retail
Fendi is also gearing up for a busy and landmark year after the brand made some executive changes in June, naming Pierre-Emmanuel Angelo Gloup as CEO, succeeding Serge Brunschwig after six years in the role.
In 2025, the brand will celebrate its 100th anniversary with Rome as the centerpiece, as the company was founded and is headquartered in Rome and has funded several restoration projects over the years, including that of the Trevi Fountain.
But in Milan, a key moment in the celebrations will be the reopening of Fendi’s renovated and expanded space on Via Solari in early 2025. The brand has held its ready-to-wear shows there for many years, and on Tuesday it will present its spring show at Superstudio Maxi.
The company plans to open a new flagship store, Palazzo Fendi Milano, on Via Montenapoleone at the corner of Corso Matteotti in late 2025. Palazzo Fendi opened in Seoul and Tokyo’s Omotesando district last year.
Starting Tuesday, Fendi will be selling its new Peekaboo Soft bag, the focus of a fall ad campaign that will debut in February, be photographed by Steven Meisel and star Vittoria Ceretti.
Collaboration Help
Roberto Cavalli CEO Sergio Azzolari also stressed the importance of “building a deeper connection” with customers: “All our activities are focused on increasing the visibility and importance of the Roberto Cavalli brand at a global level. New store openings, product launches and collaborations are all aimed at strengthening our presence in strategic markets and maintaining a continuous dialogue with our customers.”
It’s all about making the brand more relevant and adapting to different contexts such as beach clubs, events and festivals, he continued.
Cavalli, for example, inked a four-season collaboration with LeSportsac as part of the American brand’s 50th anniversary celebrations, which debuted at Dubai Fashion Week in September, where the Italian brand, designed by creative director Fausto Puglisi, was a guest at the event and presented a runway show.
The second half of the year will be “particularly tough and demanding,” Azzolari acknowledged, but investment hasn’t stopped. A new store is set to open in Los Angeles by the end of the year — a strategic location, no doubt, given that Puglisi’s Cavalli is worn by Taylor Swift, Miley Cyrus and Beyoncé — with additional product launches planned to follow. Azzolari is also accelerating store openings in Dubai, described as a “strategic and fast-growing” market for the brand and a “vital” city for increasing brand awareness in the Middle East and North Africa region.
The executive also plans to capitalize on the launch of Interparfums’ first licensed fragrance in 2023, before focusing on accessories and menswear later this year.
Etro CEO Fabrizio Cardinali agreed with his colleagues, acknowledging that the first half of the year had been “challenging” and saying the company would maintain “a cautious approach, with the utmost caution” to deliver even stronger growth towards 2025.
“The ongoing crisis in the Chinese market and parts of Southeast Asia, as well as central banks’ wait-and-see attitude amid a complex global geopolitical scenario, are the main factors behind the division’s growth falling short of expectations. In this scenario, we choose to place special emphasis on CRM activities and further strengthen our direct and business-to-consumer sales channels,” the executive said.
Etro has opened its first Etro concept boutique in China at Shenzhen’s MixC Mall.
“We are relocating our New York headquarters to new offices and will be opening a new store at the Houston Galleria in the coming days,” Cardinali said.
Etro will expand its line of accessories made from a resin-treated cotton jacquard fabric to celebrate the 40th anniversary of the launch of its signature Arnica. Without offering details, Cardinali said the brand plans to put more emphasis on its home collection through a new partnership agreement in 2025. Meanwhile, in Tokyo, the first floor of the Etro Ginza boutique will be dedicated to the home collection.
Cardinali also highlighted the launch of a collaboration with Coty, the licensee for the beauty and fragrance line.
Uniqueness
Bally is under new ownership for the first time in 16 years and will present a spring show designed by creative director Simone Bellotti on Saturday. In August, an affiliate of Regent, owner of Club Monaco and Escada, reportedly announced it had acquired Bally International AG from JAB.
Nicolas Girodt, who has led Bally as CEO since 2019, said the company is “working on a global business strategy for 2025, which will allow us to strengthen our network and optimize our operations.” He waved the flag of “Swissness,” saying Bally will increasingly leverage this characteristic in the future. “This strength makes us unique and stands out in the eyes of our international customers. Our goal is to lead Bally into the future without ever losing its identity as a Swiss brand.”
Bally will open a pop-up store at Hankyu Osaka in October to sell selected products, and at the end of November will launch a “Mountain Capsule” inspired by the Swiss village of Appenzell and Swiss nature, reflecting the company’s traditions.
Girotto praised the positive reception of the fall 2024 collection and the “clear” creative direction of Bellotti, who will take up the role in 2023. “Despite the global social and economic situation which has seen reduced foot traffic in stores and shifting shopping trends, the new collection has been very well received. The fall collection has just arrived in our points of sale and online outlets such as Net-a-porter and is showing great results.”
In a climate of evolution and uncertainty, Girotto said, “our primary focus is on the customer and providing a more personalized experience. Our mission is to stay connected with our customers, even as we face challenges.”