Angelo Trocchia believes that it is possible to achieve significant sales and cost synergies by better aligning the digital communication strategies and platforms of the licensees and the licensors. It's an area that offers a potential for “huge synergies,” he stressed.
So, although fashion houses are often reluctant to grant access to third parties, he sees room for further integration between the parties to boost omni-channel sales, while slashing the related costs.
Safilo's management has already underlined the importance of eyewear and other accessories as an entry point for a brand, because of frequently lower price tags for consumers and because they can help generate traffic in virtual and physical stores.
Fashion houses previously considered eyewear as a segment that was far removed from their core interests, but Trocchia noted this has changed with the appearance of sunglasses in the catwalk shows, leading to increased integration in communication strategies. Safilo recently organized side events to the fashion shows held by Tommy Hilfiger in Shanghai and Kate Spade in New York, in a joint effort to boost visibility for the brands and the associated eyewear collections.
After the recent purchase of Versace by Michael Kors Holdings, which has been renamed Capri, Trocchia expects the consolidation in the fashion industry to continue, with an impact on the eyewear industry and more generally the brands' licensees. This should increase the need for “a stronger bond between fashion houses and licensees,” he predicts.
The eyewear industry is also facing the elimination by some licensors of their secondary lines, largely due to difficulties met in developing and nurturing them. Safilo had to tackle this problem when Marc Jacobs dropped its diffusion line. The process can be “painful” for the licensees in terms of lost revenues, Trocchia said, because the remaining collection will not reach out to all the consumer segments previously covered by two lines.
Trocchia expects a decline in the number of “big brands” operating in the market because of a surge in the cost of developing them and greater difficulties in reaching consumers who are increasingly distracted by a continuous “background noise” from advertising and promotion. Conversely, he foresees a rise in the number of “small brands,” which are finding it easier to cover niche markets thanks to lower barriers to market entry, resulting from the expansion of digital communication and e-commerce and a growing demand for “personal brands” by consumers.
The consolidation of major fashion houses heralds a similar trend for eyewear manufacturers, said Trocchia.
Trocchia declined to comment on the creation of EssilorLuxottica and on Luxottica's takeover of Barberini, but claimed that the market is eager to have a strong second-tier manufacturer in operation.
We know how to work with brands and fashion houses. We were the first to do it and we will continue to do so in the future,“ he said. Meanwhile, independent opticians want Safilo to offer a well-structured and diversified product range, he added. “We have to improve our customer service and let it become customer care. That is our number one priority,” he said.
Regarding the decisions made by Kering, Richemont and LVMH to set up partly or fully owned sourcing and manufacturing units for their eyewear businesses, Trocchia does not believe that this model can be replicated by many other fashion houses. He warned that making eyewear is not a “straightforward” process and that entry barriers are “very high.”
Safilo “is working well with LVMH” and “will stay in the running until the last minute” to retain its licenses, Trocchia insisted. Safilo lost the license for LVMH's Céline brand in 2017 after the French group set up a manufacturing joint venture with Marcolin. Safilo still has the licenses for LVMH's Dior, Givenchy, Fendi and Marc Jacobs brands, which will start to come up for renewal at the end of 2020. The group is aware of the risk of losing these licenses and is aiming to be streamlined and “fit” to handle such an outcome, said Trocchia.
Safilo has already pointed out that there are many opportunities to gain significant and minor fashion and luxury goods brands to reinforce its portfolio, as shown by its recent announcement of a strategic licensing deal for the Levi's brand (see the related article in this issue). The group claims that it has the skills to help existing brands enhance their positioning in the eyewear market.
Trocchia expressed confidence that, by the end of its business plan through to 2020, Safilo will have reduced its costs by 10-20 percent along the value chain, from the design stage to the delivery of the glasses.
Safilo's Italian factories, which bear high manufacturing costs despite efforts to reduce them, need to be supported by a high number of top-notch and high-margin brands. The demand for Italian-made eyewear remains strong, especially in China and other parts of Asia, but Trocchia admitted that producing in Italy is a “challenge” due to competition from lower-cost countries.