Do you ever wonder — why Italians don’t have a Luxury Conglomerate?
Irrespective of major luxury brands belonging to Italy, we haven’t yet seen a strong Italian conglomerate.
Despite this high density of billion-euro brands, Italy is yet to produce a conglomerate of the scale of LVMH, which is worth 261 billion euros as per Dec 31, 2020, while Kering generating a total revenue of approximately 13.1 billion euros in 2020.
The two French conglomerates now own four of Italy’s billion-euro brands arguably big enough to act as a “core” brand. LVMH owns Bulgari and Fendi; whereas Kering owns Gucci and Bottega Veneta.
This question struck me during my Masters in Milan, as I was discussing it with my professor.
Thanks to a great conversation, I gained some insights into the Italian sense of luxury and the way of approaching business.
So why is it that the get go-er of iconic fashion brands has not yet managed to build a conglomerate of its own?
Product Category
The French brands are more concerned with accessories and have a diverse product portfolio. On the other hand, Italy is known for its exclusive tailoring and silk, Italian brands are more focused on ready-to-wear.
Accessories offer various diverse product categories which have a higher gross margin, giving a significant competitive advantage to the French companies.
This is why we usually witness brands creating their range of beauty, fragrances, home decor and other categories.
French luxury brands range from luxury luggage, accessories, bags, footwear, wines, fashion whereas Italians are more restricted to shoes and fashion.
Italian brands are comparatively younger
The majority of Italian brands were created after WWII, most after 1975. Brands like Salvatore Ferragamo, Ermenegildo Zegna, Armani- are still led by their founders or their founder’s relatives. Founding designers tend to be more rigid in their practices and far less prone to group integration. And yes, Italians love to keep it in the family!
Better Business Approach
French managing product portfolios of leather goods brand, or jewellery brands, tend to have typically more of a business mind. Therefore, they are more inclined towards building an empire rather than a single brand.
Italians — a different school of thought
Italians have forever pioneered an innovation dating back to Renaissance times. Sometimes, Italians do not even like the use of the word “luxury” for their product because they don’t want to come across as inaccessible products. They would rather be perceived as a product that stands for its excellence. Something of “very high quality” and “very innovative”.
The growth strategies for Armani, Salvatore Ferragamo, Dolce & Gabbana and Ermenegildo Zegna do not have the ambition to drive the expansion of an Italian group. Even Prada is now focused on its remaining portfolio: “sister-brand” Miu Miu and shoemaker Church’s.
The goal for Italian brands is not to be the biggest, but to become the coolest keeping that oomph factor and dictating the trends.
Why is it that Italy is supreme in creative craftsmanship, yet management skills seem to lie on the other side of them. As seen in the case of Bulgari — a jewel in the crown of Italian style — was acquired by LVMH in March 2011 for €3.7 billion, doubling the LVMH jewellery and watch business, there already was a wringing of hands about why such
Craftsmanship comes first — the luxury of Italian fine taste
Italians can cut pieces by hand for each trouser leg, they are strong in the how-to-do-it, their craftsmen have products worldwide — and they have the heritage and the legacy. Whichever way you look at it, Italian craftsmanship and skills rule the universe of men’s wear style and skills.
And what we witness is the French conglomerates buying into “Made in Italy”. A compliment rather than a signal of competition!
I love the ease with which Italians has crafted luxury in its unique way and keep reminding the world, that every beautiful does not need to be scalable.
