Dynamic Marketing Communiqué

Luxury with a Mix of CARING: Find out what this company does to attract a new generation of consumers! [Monday: Marketing Marvels]

September 6, 2021

Creative. Authentic. Sustainable. 

This is how one company describes its portfolio of luxury brands. 

With a creative vision that focuses on authenticity and audacity, this group sets trends that define the future of luxury. 

… but it’s not just the typical luxury that you might be thinking of right now. 

For this company, it’s the kind of luxury that offers “powerful and creative content and allows people to assert their individuality.” 

Kering SA is a French multinational corporation that specializes in the design, manufacture, and sale of fine luxury goods in the leather, shoes, ready-to-wear, watches, and jewelry sectors. 

At present, the company owns some of the iconic luxury brands in the world such as: 

  • Gucci
  • Saint Laurent
  • Bottega Veneta
  • Balenciaga
  • Brioni
  • Alexander McQueen
  • Pomellato

Since its establishment in 1963, Kering has had strategic focus points for embracing creativity for a modern vision of luxury. These are: 

  • A focus on luxury. Kering focuses its attention and resources on its Houses (brands) to strengthen their value-creating capacity. 

[The reason why the company refers to its portfolio brands as “Houses” is because in Breton language, “ker” means “home.” Therefore, “Houses” implies these brands make up Kering’s home or company.] 

  • A focus on growth. The company gives its Houses the space they need to thrive so they can become some of the foremost players in the luxury market. 
  • A focus on expertise. Kering develops its expertise in an accessories category that is paramount to the image and strategy of its Houses. The group also invests in strategic acquisitions of tanneries to supply its brands with the highest quality raw materials. 
  • A focus on employees. The company gives its employees a chance to hone their skills and realize their full potential by providing them the tools and support they need to advance and express their creativity. 
  • A focus on sustainability. Kering cares about its impact on the planet and collaborates for the good of its employees, suppliers, and clients. 

Speaking of sustainability… 

In 2018, Kering ushered in a new environment-friendly path for its luxury brands by implementing a next generation sustainability strategy, which would improve the company’s operations and supply chain! 

This strategy was guided by the UN Sustainable Development Goals (SDGs) and incorporated quantifiable targets under three themes: Care, Collaborate, and Create. 

According to Kering’s CEO François-Henri Pinault, 

“Our strategy outlines how we will redesign our business to continue to thrive and prosper sustainably into the future, while at the same time helping to transform the luxury sector and contributing to meet the significant social and environmental challenges of our generation.” 

Let’s take a look at what the company does under the 3Cs: 

CARE

Kering makes sure all its Houses promote sustainable design, create open-sourced tools, and minimize negative environmental impacts of a product at every stage―from sourcing and manufacturing to transportation and consumer use. 

Additionally, the company has also established a Materials Innovation Lab (MIL) for watches and jewelries to offer sustainable alternatives for next generation consumers! 

COLLABORATE

Kering collaborates with the society it operates in by: 

  • Supporting the craftsmanship traditions of communities that support the company. 
  • Developing a performance metric system that measures the company’s achievement of the UN Sustainable Development Goals. 
  • Leveraging partnerships with various universities such as Tsinghua University in China, HEC Paris School of Management in France, and London College of Fashion in England to identify sustainability solutions. 
  • Maintaining gender parity at all levels of the company’s business operations. 

CREATE

Kering creates new business models through new and sustainable solutions for sourcing raw materials. 

This includes exploring biotech and promoting a circular economy by turning recycled textiles into new clothing! 

Thanks to these efforts, Kering was able to foster “planetary boundaries,” a concept that promotes safer operating spaces for sustainable development, and communicate to its luxury customers and next generation consumers that it is a “company that cares.” 

Aside from a sustainability strategy, what else did Kering start doing in 2018 to attract consumers to its portfolio of brands? 

It created new developments in its digital strategy

Kering believes consumers draw inspiration from today’s hyper-connected world and engage with luxury brands through several digital tools. 

That’s why in the company’s perspective, the success of its Houses depends on their ability to: 

  • Offer bold and creative propositions. 
  • Provide exceptional customer experience that is consistent across all distribution channels. 
  • Establish a unique customer relationship through digital devices. 

Here are some of the initiatives under Kering’s new digital strategy: 

  1. In-store customer experience

Kering partnered with tech giant Apple to create a suite of apps that in-store staff could use to access stock levels in real time and provide customers with a fully personalized service. 

Through the app, in-store representatives know if a specific size or color of a product is available or if it can be ordered from other stores. The app also enables employees to give customized styling recommendations to customers! 

  1. Client service

Kering developed a new approach to customer service with centralized teams focused on addressing customers’ requests. 

Gucci, Saint Laurent, and Bottega Veneta have dedicated teams, while other brands grouped their efforts under a single customer service unit. 

All Houses use best-in-class tools that provide their client service representatives with a 360-degree view of each client, enabling them to deliver fully personalized experiences. 

  1. CRM and communication

All Kering’s Houses launched WeChat mini programs to build close relationships with Chinese customers. 

The brands also used this tool to offer social commerce to its customers. 

[Social Commerce: A subset of electronic commerce that involves social media and online media to support social interaction as well as online buying and selling of products and services.] 

  1. E-commerce

Kering internalized its e-commerce activities through its joint venture with online retail company YNAP (YOOX Net-A-Porter Group). 

Thanks to shared expertise with YNAP, Kering’s Houses were able to enhance their e-commerce services by offering check availability, reserve in store, store appointment, pick-up in store, return in store, and exchange in store! 

  1. Digital capabilities

Kering formed a China-based Client and Digital Team for adapting digital practices to the Chinese market and identifying and promoting Chinese innovations to other markets. 

This team helped instill a culture of innovation in the company and develop an ability to work on disruptive technologies to further improve customer experience. 

[Disruptive Technology: This refers to an innovation that alters the way consumers, industries, or businesses operate. This sometimes even creates new markets and value networks, eventually displacing established market-leading firms, products, and alliances.] 

According to Kering’s Chief Client and Digital Officer Grégory Boutté, these initiatives helped the company improve its services and attract more customers to its brands. 

In his words, 

“These exciting new initiatives have been designed to meet—and exceed—the needs of our Houses’ customers and to ensure we continue to offer them an exceptional experience across all channels in a fast-changing global market. These opportunities have been made possible by the experience and know-how that Kering has gained over the years.”

In the past five years, Kering SA has recorded revenues of:

  • EUR 12.4 billion in 2016
  • EUR 10.8 billion in 2017
  • EUR 13.7 billion in 2018
  • EUR 15.9 billion in 2019
  • EUR 13.1 billion in 2020

Based on the company’s annual revenue in 2018, we can see that the sustainability and digital strategies contributed to Kering’s growth as it recorded a higher revenue that year compared to 2017. 

Kering SA’s Earning Power: Valens Research vs. As-reported numbers 

Kering SA (KER:FRA) makes for a great case study that we come back to regularly. One great reason?

The company has proven itself to be a better earning power generator than investors might think.

So, how well has Kering been growing its business in the past years?

The research doesn’t lie—nor do the results. Earning power (the blue bars) continues to show results higher on average than what traditional databases show.

The blue bars in the chart above represent Kering’s earning power (Uniform Return On Assets). Historically, Kering has seen generally robust profitability. Its Uniform ROA ranged from 10% to 91% in the past sixteen years, or an average of 51%. Uniform ROA is at 15% in 2020.  

The global ROA is just 6%. 

The orange bars are the company’s as-reported financial information. If you relied on these numbers, you will see a company with understated profitability. As-reported ROA (return on assets, a measure of earning power) only ranged from 2% to 12% in the past sixteen years. Its as-reported ROA in 2020 was only at 7%, which is lower than its Uniform ROA in 2020. 

That’s what you’ll see in Yahoo Finance, Google Finance, and most other databases.

The company’s stock price also performed better than the rest of the stock market over the decade, which we can see in the blue line in the chart below. Its returns have been well above the market.

The numbers show that Kering has been doing well and making a profit. 

The company believes that as mega trends emerge, the world of business and marketing evolves―cultures collide, disruptive technology appears, and a younger generation of “always on” consumers emerges. 

In fact, Kering thinks this type of generation is changing the rules by bringing new expectations and desires to the market! 

… and they are continually searching for meaning and a way to stand out and be heard. 

This, according to Kering, is the kind of generation that influences people of all ages and are beneficial for the company. 

That’s why Kering’s vision of luxury aims to enable every individual to express what makes him or her unique! 

With creativity at the core of everything it does, the company strides toward its ultimate ambition. That is… 

“To be the world’s most influential luxury group in terms of creativity, sustainability, and economic performance.” 

About The Dynamic Marketing Communiqué’s
“Monday Marketing Marvels”

Too often, industry experts and the marketing press sing the praises of some company’s marketing strategy. 

…Only for the audience to later find out that their product was a flop, or worse, that the company went bankrupt.

The true ROI in marketing can’t be separated from the business as a whole. 

What good is a marketing case study if one can’t prove that the company’s efforts actually paid off?

At the end of the day, either the entire business is successful or it isn’t. And the role of marketing is always paramount to that success. 

Every Monday, we publish a case study that highlights the world’s greatest marketing strategies. 

However, the difference between our case studies and the numerous ones out there, is that we will always make certain that the firm really did generate and demonstrate earning power worthy of study in the first place (compliments of Valens Research’s finance group).

By looking at the true earnings of a company, we can now rely on those successful businesses to get tips and insights on what they did right.

We’ll also study the greatest marketing fails and analyze what they did wrong, or what they needed to improve on. We all make our mistakes, but better we learn from others’ mistakes—and earlier, rather than later.

Hope you found this week’s marketing marvel interesting and helpful. 

Stay tuned for next week’s Monday Marketing Marvels!

Cheers,

Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
Powered by Valens Research
www.valens-research.com