Business Model and Strategy
The world of Luxury is changing faster than ever. A new generation of consumers has emerged. What they demand is authenticity, with transparency and constant dialogue across all channels. As a result, Luxury brands must strive to engage more closely and more personally with their customers, sparking emotion and creating exceptional experiences both in brick‑and‑mortar boutiques and online. This approach calls for rethinking distribution channels as well as cultivating customer relations in new and innovative ways.
Three growth levers
Kering’s strong 2019 results once again demonstrate the relevance of a business model that combines agility, balance and responsibility in addition to an approach founded on long-term strategy and responsiveness.
At Kering, we are driven by two guiding principles: enhancing synergies and prioritizing organic growth. Propelled by the Group, our Houses are ideally positioned to capitalize on market opportunities and deliver robust performances. To further support its Houses and improve the efficiency of their activities, Kering has identified three main growth levers: digital; information systems; and the logistics and supply chain.
Accelerating digital transformation
Kering’s new digital strategy is based on three pillars:
– online visibility, across social media in particular;
– the development of online sales;
– leveraging artificial intelligence and big data.
In digital, the Group’s Houses have upscaled their media investment strategy over the past several years. In 2019, digital accounted for approximately 55% of total media expenditure, due mainly to increased presence on social media platforms.
In 2019, for the first time, online sales accounted for more than 5% of brands’ revenue. In growth terms, this represented an average of nearly 50% over the last four years. To offer customers the best possible e-retail experience, the Group made the decision to fully internalize all of its e-commerce activities. Following the test and migration stages that began in Fall 2019, the preliminary rollout is scheduled for 2020.
Lastly, Kering continues to explore new strategies for leveraging customer relations, including through artificial intelligence solutions and Customer Relationship Management (CRM). Against this backdrop, the Group is also working to develop in-depth knowledge by recruiting recognized experts.
Rethinking information systems
The second set of initiatives focuses on the complete overhaul of Kering’s information systems. The process is already underway, and the challenge lies in harmonizing solutions, providing access to real-time data, and increasing security. In 2019, we achieved many milestones. These included:
– The worldwide implementation of a unified infrastructure that grants real-time access to a single data source.
– Adopting a suite of leading-edge, integrated IT solutions. These solutions are more flexible, more cost-effective, and diminish the risk of obsolescence.
– Upskilling in-house expertise.
– Upgrading cybersecurity systems and procedures.
Redesigning logistics and supply chains
To meet increasing volume demands and to manage and streamline the entire logistics process, the Group is developing its infrastructure by investing in new facilities in Europe, North America and Asia.
In October 2019, Kering relocated its North American logistics center to Wayne, New Jersey. These new warehouses obtained LEED (Leadership in Energy and Environmental Design) gold certification, thereby demonstrating the building’s environmental quality.
As of 2020, the Group will also open a state-of-the-art logistics hub in Trecate, in northern Italy. To meet growth in volume, the new platform will have larger storage capacity. Within the next two years, we will inaugurate other centers in the Asia-Pacific region and the Middle East. Once re-engineering has been completed, Kering’s logistics network will ensure faster distribution across all channels, in addition to improved product availability and optimized stock levels. At the same time, the hub will facilitate access to services across multiple channels.
Realizing Luxury’s full potential
Through the strength of its integrated model, the Group supports its Houses so that they can unleash their creative energy and focus on what is essential: creativity, excellence in execution, customer relations and communication. All of these factors strengthen Kering’s capacity to harness Luxury’s full potential and grow faster than its markets.