Shandong Ruyi’s French fashion group SMC P’s successful listing on the Pan-European Stock Exchange in Paris on the 20th of October has become a hot topic in the industry. The current market value of SMCP, which has three well-known luxury brands Sandro, Maje and Claudie Pierlot, is about 16 One hundred million euros (about 12 billion yuan).
How can a new generation of fashion groups create and operate luxury brands in a sustainable way? SMCP has set a good example for the industry.
The two main brands of SMCP, Sandro and Maje, were founded in 1984 and 1998 by Evelyne Chétrite (pictured below) and Judith Milgrom (pictured below).
The love of clothing between EvelyneChetrite and JudithMilgrom stems from the childhood experience of living together in Morocco and grandparents. In the early designs of the Sandro and Maje brands, more of Moroccan local bright colors, crafts and bohemians were incorporated. style.
Evelyne Chetrite describes Sandro and Maje in her eyes: "These two brands are born for women who love fashion and pursue women's outstanding temperament."
In fact, from the original design of the two brands, we can clearly understand their design style: this is a brand designed for women who are busy with life and work. The same piece of clothing can simultaneously meet the various needs of daily commute to dinner. . Typical products include: a tough set of cut lines, a soft leather bike jacket, a versatile little black dress, and a silk shirt. Sandro is more neutral, Maje is more colorful, and feminine features are more prominent. This is a slight difference in style between the two brands.
When EvelyneChetrite was 15 and Judith Milgrom was 10 years old, the two came to France from Morocco. My sister studied law and encouraged her sister to work with her after entering the fashion industry.
JudithMilgrom said that in the early days of the venture, they did not have any source of funds, but the regional design and entrepreneurial atmosphere of the studio is very good, as long as there is enough talent to get the trust of investors, you can get financing. In this way, the personality of the sisters and the passion for fashion have touched some investors, and these funds are very crucial in the brand expansion process.
In 2009, the sisters acquired the eponymous brand established by designer Claudie Pierlot in 1984 and began to form the SMCP Group in 2010. In order to meet the needs of the company's rapid development, they decided to officially start to fund the company's transformation from a startup to a global enterprise. They sold part of their equity to Florac and LCapital, a private equity fund owned by French luxury giant LVMH, to accelerate the company's growth in France and overseas. In 2013, the two private equity funds resold their stake in SMCP to US private equity giant KKR.
In October 2016, KKR sold a majority of its 70% stake in SMCP to Shandong Ruyi Group, with an overall transaction value of around 1.3 billion euros, including part of the SMCP Group's debt. After the transaction was completed, the founders and management of SMCP and KKR retained a minority stake in the company.
According to reports, SMCP sales doubled in three years. Last year, sales increased 16% year-on-year to $925 million, and EBITDA increased 22% year-on-year to $140 million. At the same time, the company actively expands overseas markets outside of France, with 1,223 stores worldwide, and overseas sales increased by 20% year-on-year, contributing 54% of total sales. SMCP CEO Daniel Lalonde said in a September IPO document that the company's success has validated its business model and organic growth strategy: expanding its business into the core market and accelerating the development of digital, menswear and accessories.
The development of SMCP over the past 30 years has witnessed changes in the dress of professional women, from the meticulous suit uniforms of the 1980s (rarely highlighting feminine characteristics) to the more relaxed and casual style.
JudithMilgrom used McDonald's slogan to summarize her ideal commuter dress code "Go to work, wear easy (Comeasyouare)".
The “light luxury†category that the fashion industry has flourished in recent years is theoretically very attractive, but in reality it lives in a small space between luxury brands and fast fashion brands. In response to this situation, the US luxury brands MichaelKors and Coach, which are similar to SMCP's three core brands, are beginning to rethink their strategies to cope with the dilemma of sales decline. The sense of crisis in the fashion retail industry is lingering in the US market, and the weak performance of department stores has dragged down the brands that dominate the wholesale business.
But the good news is that according to the McKinsey Global Fashion Index (2016), the growth rate of the young luxury market (3%~3.5%) outperformed the overall growth level of the fashion industry (1~1.5%). Especially prominent in the Chinese market. This trend is expected to continue into 2017.
Some fashion brands want to survive the tide of reshuffle in the wholesale business and begin to re-examine their business models. In this process, SMCP has established a model of global thinking strategy:
Think like a fast fashion brand
Describe the positioning of SMCP's three core brands in one sentence, which can be summarized as: the quality of luxury goods, the product cycle of fast fashion.
Evelyne Chetrite believes that the valuable experience gained by the two sisters in the SMCP wholesale business at the beginning played a crucial role in the creation of a luxury brand model, effectively combining the characteristics of luxury and fast fashion brands. Fast fashion brands for the mass market need to have a keenness, quick response, fabric knowledge, and familiarity with the production process; while luxury goods are more focused on stimulating consumer desire, more emphasis on quality and customer service.
SMCP's brand is rooted in the development model of French modern light luxury fashion brand, which emphasizes reasonable pricing, advanced quality, high-end brand image and first-class customer experience. It is reported that SMCP's three core brands have their own workshops in Paris, and the stores are located in well-known shopping streets to bring consumers a high-end shopping experience.
The production cycle of the SMCP Group brand is about 3 months, which is much longer than the high street fast fashion brand Zara (2 weeks), but significantly faster than other traditional brands (from design to shelf sales usually take 6 to 12 months) ).
At the same time, for fashion brands, it is crucial to present the right products to customers at the right time. The new speed is critical. For this reason, SMCP follows Zara and the British fashion e-commerce Boohoo, and has about 25 new models every week. In order to make the production faster and better, SMCP chose to produce most of the goods in Europe and some basic models (such as T-Shirts) in Asia.
Occupy the emerging Chinese middle class market
Chinese luxury consumers are now starting to buy luxury goods locally, and some luxury brands have seen such a trend to test the water and electricity business in China. According to data from consulting firm DaxueConsulting, for the younger generation of Chinese consumers, those “expensive, but not too expensive†items are the most attractive. Natasha Zhang, an analyst from the company, believes that middle-class and above families account for the majority of Chinese cities. This group of people will choose to save money to buy high-priced goods, but will not buy a lot of luxury goods, they are most inclined to design, good quality, positioning luxury brands.
Last year, SMCP Group's e-commerce business grew by 80% year-on-year. Among them, Maje and Sandro contributed a lot to the flagship store of Tmall in China's e-commerce platform. Overall, the company's e-commerce business accounted for 10% of the total business; but in China and the United States, e-commerce sales accounted for 15% of the total sales of the two places.
In terms of physical stores, SMCP plans to increase the number of retail outlets opened in China from 221 to nearly 400 in the next few years, matching the number of European stores.
Of course, SMCP's efforts in the Chinese market are not unrelated to the strategic layout of its controlling shareholder Shandong Ruyi Group. Qiu Yafu, president of Shandong Ruyi Group, said in an interview recently that after listing, SMCP will maintain its controlling shareholder status and its holdings will not be lower than 51% to continue to support SMCP's future growth strategy.
However, the competition in the global luxury market is still extremely fierce. The rapid expansion of retail stores is also a no-risk risk. There are potential problems such as over-exposure of brands and rising management costs. If the control is not good, it may dilute the overall profit margin.
Get rid of fashion brands' dependence on wholesale business
An important milestone and turning point in the development of Sandro and Maje is the transition from wholesale to retail. Millions of years ago, these two brands were basically sold through department store retail networks and boutiques. In 2002, Maje opened an independent store in the sixth district of Paris's left bank, followed by Sandro's opening of the store in Marais, a fashion district in Paris, in 2004, ending a heavy reliance on the wholesale business.
Evelyne Chetrite admits that she has been very anxious when she got out of this step: "I hid behind the counter after opening the first store. I was embarrassed and didn't know if it would be successful."
The positive effects of direct marketing include: responding quickly to customer needs and clearly defining the direction of market expansion. For fashion brands, the business model is too dependent on wholesale, which means away from their own customers.
In this regard, Rony Zeidan, founder of the brand consultancy ROYN, commented that fashion brands need to focus on two things, cash flow and their customers; careful consideration of their retail partners means that customers can find you directly.
Now, the company implements a vertical integration strategy and establishes its own e-commerce and store network, which accounts for up to 94% of direct retail sales.
Editor in charge: Xu Yuehua
Guangzhou LIDONG Garment Industrial Co., Ltd. , https://www.lidongapparel.com