May 20, 2020
This episode kicks off a mini series of industry specific expert talks. The objective of industry talks is to help investors to structure their thought process when evaluating companies operating in these industries. It also helps entrepreneurs who are looking to start a company in these industries.
Today we begin with fashion and retail industry. And our expert
guest is Stefaan Le Clair, the Managing Director of Berenike Global
Fashion Management. Stefaan’s past industry experiences include
being the VP of Retail Europe at Espirit Group, the CEO of denim
brand Lee Cooper, the General Manager of Hudson’s Bay Benelux which
is also the parent company of Saks Fifth Avenue, the CEO of Galerie
INNO which is a department store chain in Belgium.
Our discussion is divided into two episodes. In this first episode, we begin by working through the different stages of the value chain in fashion and retail. Starting with product development, looking at how brand positioning influences design and manufacturing arrangements in a business; and how supply chain efficiency became the new norm, so shifting value differentiation to other elements. We then went on to discuss Sales & Marketing considerations, such as revenue mix between wholesale Vs retail and the importance of being present in multiple channels.
Key highlights from our conversation
The cost of a product today is influenced by factors
beyond the direct cost of production
In today’s world, the actual cost of a product is no longer the key
determinant of the price of a product. The cost is often influenced
by the pricing power of downstream sales and distribution channels
and how a product enters such channels (e.g. the number of
middlemen and their commissions). Increasingly, consumer demand and
price sensitivity also play a big role in determining the cost. So,
we often have to turn the box round and calculate margins and costs
backwards.
Efficient supply chain is no longer sufficient to drive
and sustain value
Supply chain efficiency is an important value creator in the past.
But by being more efficient and better controlling the cost are no
longer sufficient in driving and maintaining value for today’s
brands. What are more important for value creation are the speed of
bringing products to market and the process that followed.
Greater emphasis placed on consumer feedback in product
creation
In the past, products were created by product managers within the
company. And today there is a greater emphasis on customer
centricity with an increasing trend of product co-creation using
consumer insights captured through data.
Achieve growth by widening assortment is a better
strategy as compared to creating sub-brands
Widening
product assortment under one umbrella brand is a strategy that will
deliver more value than splitting one brand up in multiple
sub-brands as that will dilute the core DNA. It is better to focus
on your core customer and surround them with a 360-degree product
assortment.
It is important to adopt a multi distribution channel approach
We have seen traditional wholesale business venturing into retail to seek growth and manage risk. At the same time, vertically integrated retail brands are selling via wholesale channels too in an attempt to further broaden its customer base.
Content at a glance with time-code
(02.06) Stefaan’s personal background story
(04.21) Compare and contrast different business arrangements of
product development
(09.18) How supply chain efficiency is no longer a key value
creator today
(12.03) Can luxury brands still create value through unique
designs?
(18.31) How to balance the need to stay true to a brand’s core and
respond to ever changing consumer demand?
(25.26) The future of fashion business is a conglomerate structure
with multiple brands under one company
(30.34) How value has been shifted away from supply chain to later
stages such as sales & marketing
(32.52) What does consumer centricity mean?
(35.26) Wholesale Vs Retail distribution channels
(43.45) How franchising and licensing can help brands succeed in
areas that are outside of their core strength
Episode links
Berenike Global Fashion
Management: https://www.berenike-gfm.com/bio/
Galeria INNO: https://www.inno.be/