François-Henri Pinault | Photo: Virgile Guinard
On the day of the official announcement of a major joint-venture between PPR and YOOX Group, BoF’s Imran Amed speaks to PPR chief executive officer François-Henri Pinault for a global exclusive interview on how the new partnership fits into Mr Pinault’s digital vision for PPR.
PARIS, France – Tucked away in the back of his office at the global headquarters of PPR on the Avenue Hoche in Paris, chairman and CEO François-Henri Pinault has a one dollar bill, framed, like one might see in a corner shop or deli to commemorate the first hard dollar the business has earned.
On closer inspection, however, Pinault’s dollar bill has a different meaning altogether. George Washington’s nose is covered with a big red dot, making the first US President look like a clown. Pinault says the dollar bill is there to help him keep his feet on the ground and remember that there is more to life than work and making money.
Clearly, Pinault is not your typical CEO. But that doesn’t mean he can’t have a grand vision for PPR. Indeed, PPR is a conglomerate in transition. Pinault is currently in the process of divesting FNAC, a multi-channel retailer of consumer electronics, books, music, and games, and Redcats, a group of 17 apparel and homewares brands, sold online and via catalogue. Having recently acquired Volcom, a California-based surf-and-skate line, for $607.5 million, and Brioni, an Italian luxury menswear label, reportedly for more than $400 million, Pinault’s focus is now firmly on luxury and lifestyle brands.
Pinault has also made digital a strategic, CEO-level priority.
To support this focus, PPR has inked a new joint venture agreement with YOOX Group, a global fashion e-tailer and technology partner, “to accelerate the e-commerce development of several PPR luxury brands,” including Bottega Veneta, Yves Saint Laurent, Alexander McQueen, Balenciaga and Sergio Rossi – but not the group’s luxury anchor, Gucci – according to a joint statement released today. The JV, in which PPR has a 51 percent share, is a key plank in Pinault’s strategy which aims for the group’s luxury and lifestyle brands to hit €1 billion in online turnover by 2020.
A self-proclaimed technology geek, Mr Pinault has enthusiastically immersed himself in the digital world. To wit, among various products by PPR brands like YSL and Balenciaga, Pinault has ‘fancied’ the Pebble e-paper smartwatch on social curation site The Fancy, where he is active and has more than 260,000 followers. Last year, he met the site’s founder Joseph Einhorn and promptly made a $10 million investment in the start-up.
Indeed, perhaps more than any other senior executive I have met in the global fashion industry, Pinault seems to genuinely relish the business opportunities created by the digital revolution.
BoF: I keep hearing about the ‘PPR effect’ from your executives. What do you think that a luxury group like PPR can bring to the table for brands and consumers? What is it that justifies the existence of a group like this?
FHP: First of all, as a group, we’ve been building a vision that is not only about one brand becoming global. It’s about the vision of a global market in luxury linked to apparel and accessories and building a portfolio of brands that covers all the sectors with the most potential for sustainable growth. It’s not a matter of let’s look at what’s available to buy. We are building something that is really meaningful, representative of the best segments of the luxury industry in the world. There are some opportunities that we don’t even look at, not because the brand has no interest, but because it doesn’t fit [into] the portfolio.
BoF: It might replicate something you already have.
FHP: Exactly. And one key things for me is I don’t want my brands competing with each other. It’s not the way I want to build my portfolio. Every brand has a very specific mission to fill. This is the first layer. What we bring to a brand at that layer is an ambition, a worldwide ambition over time, based on the market vision that we have at PPR.
Then the second layer of the ‘PPR effect’ is the operational synergies, such as the management of manufacturing and logistics; a centralised real estate team in the luxury division, media buying and administrative tasks. When any brand joins the group or opens a new market, we already have in place fully functional accounting, payroll and IT to share between brands. This gives very strong advantages to brands joining the group.
BoF: So if we were to continue with that metaphor of the layered cake, where does digital fit in?
FHP: There are two transversal initiatives at the group level, not only at the luxury level, which are CSR (Corporate Social Responsibility) and digital.
We have CSR on one hand, which is called PPR Home, a group level initiative coming from the board of directors. We have experts that we have hired from the sustainability world, from NGOs, from specialist energy, materials and logistics companies. All those people are based at the group level and they work with every branch of the group to change the way we execute our businesses.
The second one is digital. We have a very high level of skill in the digital world, thanks to Redcats and FNAC, to the extent that last year [they had] €2.3 billion of turnover online. We started e-commerce in 1996, so we are very experienced. But because [we are] disposing of those assets, my worry was I need to keep that learning curve and, more specifically, to make sure we use this [expertise] for our luxury and sports brands.
The idea was to build a new business division at the group level, linked to me, to have a 360 degree vision of the digital world. The team here is more about sharing experiences and making sure that the basics of e-commerce are fulfilled for every brand, whatever the size. We are benchmarking all the sites against the best practices in the world and we also have consumers testing our brands and using the sites.
But [because of] differences in terms of the prioritisation of digital – Gucci is much more advanced than Sergio Rossi for instance – we decided to go one step further to make sure that the first step, the e-commerce part of the digital strategy, is completely fulfilled with best-in-class practices on all our sites.
BoF: Why YOOX?
FHP: We decided to partner with YOOX to make sure we can use the same platform and the same technology, best-in-class functionality, brand by brand, without waiting. YOOX is the best player when it comes to e-commerce and logistics platforms in the world of luxury and technology. By mid-next year, we will be able to sell online in 100 countries around the world. It’s as simple as that, thanks to this partnership. YOOX will bring all the technological know-how, plus their e-commerce skills, and [the ability to] deliver worldwide, on time, at a very good level of service.
It’s the same engine, the same logistics platform that we will be using, for all the brands, but the brands will each decide the [product] assortment, the pricing, the design of the site. These will be the responsibility of the brand, as they are part of the brand identity. Everything that is linked to technology or e-commerce functionality will be completely outsourced. This is really the sense of the partnership.
BoF: What motivated this kind of coordinated approach at the group level?
FHP: It is based on a very strong assumption. [According] to the group vision, in the digital space, we are talking to the same customer as we are talking to in the offline world. It’s just a matter of adapting ourselves to the reality of our customers.
It’s not an option. It’s not about ‘Should we go online or not?’ This is completely meaningless. We need to enter this new digital world with different practices. [Digital] is used by our customers, so we should be there with the best practices.
Today, everybody, whatever their age, uses the web for information. We know at least 20 percent of a store’s turnover [is linked] to online information, even if it’s just to find the store. So at the very least [we need to] inform our potential or existing customers of our products and brands with very basic information such as where can you find a store. We need to be best-in-class.
BoF: But clearly brand and product information is only the first step. How does e-commerce fit into your plans?
FHP: Some of [our customers] want to be able to, in certain situations, buy online. So we need to have an e-commerce experience that is part of the overall buying strengths of our customer online. We will be destroying value if our e-commerce functionality is not perfect. It has to be at the level of the shopping experience in store. So this is why I want, even for my small brands, the best-in-class functionality on e-commerce. I’m talking about basics, nothing revolutionary: easily finding a product; the checkout process has to be very efficient, on-time delivery. Until you reach that level, you harm your shopping experience in store if you have a bad experience online.
BoF: The words that you just used – efficiency, easy checkout – these may be the basics, but these basics are a completely new set of skills for luxury brands. People often talk about translating the luxury experience online, and I think there are certain elements of it that are the same, but there are certain elements that are very different.
FHP: These first steps are the basics, so you have to be there very fast to make sure your shopping experience, globally, is on the right level. But that’s not enough. The problem that you have online is that your level of differentiation [from] mainstream brands is not visible.
I think the best checkout process [online] would be Amazon.com, for sure. But, as a luxury brand, should we be compared with those guys? We cannot stop there. The vision has to be much beyond this in terms of re-creating the differentiation of a luxury brand online.
BoF: What do you have in mind, specifically, to deliver a truly luxurious experience online?
FHP: There are two dimensions, which are linked together. First, to make sure that the shopping experience online improves the store experience offline.
The second dimension is that we need to invent new services to fulfill the needs of the customers buying online. If you want to sell ready-to-wear online, how does it work today? We have Redcats in the mass market field [where] people buy three sizes, four colours. You try [them on] and then you send back the product you don’t need. If this is the way we do it [as] a luxury brand, it’s wrong. You are damaging your brand.
How do you deal with this? Two considerations, your customer is close to a store, so at least you should have a service for making appointments and being received on time, or if you’re not close to a store, why don’t we think – and it’s not done yet – of a network of professional tailors that come to your home, based on an appointment online to do the alteration for you. This is the type of service that will be completely inaccessible for mainstream brands, but will make the difference between a luxury brand and an accessible brand.
BoF: Interestingly, both of those examples have nothing to do with technology. Rather, they have to do with face-to-face personal relationships, something that luxury has always been known for. I get emails all the time from companies that are creating virtual fitting rooms and all of this technology to solve the same problem, but your approach is rather to bring it back to the human experience.
FHP: It’s a one and only experience. Technology can help, of course, but one of our key learnings is that the areas [where] we are the strongest in e-commerce are the areas where we have a store. It’s not intuitive, but it’s been verified every year.
Now, you have to create a completely seamless experience between the store and the site to make sure this creates value for your customer. At Redcats, we have been working on this for many, many years to make sure it’s possible to deliver your product to a store or to your home.
BoF: You’ve talked about the infrastructure to support the strategy, but at the end of the day, your brands are run by people who are used to doing things a certain way. Can you tell me how you are empowering and educating the people within PPR to make this shift? That’s probably the most difficult thing to change.
FHP: First, we had to look at the organisation that had been put into place to deal with the digital world. Sometimes we found that the communications team was in charge of e-commerce. Now all the brands have an e-commerce head worldwide, directly linked to the CEO. We make sure that each country where we operate an e-commerce site [has] links with the offline stores and we make sure that they work together.
For instance, how do we think the customer will react in a country where the image of the brand is mainly built on the biggest store in the country, like the Fifth Avenue Gucci store in New York? What would be your reaction if what we proposed online was not as good as what we offer in the store? When you look at most of the luxury brands in the world, [online] they offer less than the biggest store in the country. Always.
What we’ve been putting in place at the group level is the digital academy, a training programme for the different categories of people involved. First were the CEOs. Every year, we have a training session for all the CEOs about the digital strategy of the group to make sure that everyone is at the same level of understanding and [we discuss the] vision of the group, to make sure that everyone is aware that this is the vision.
We also built a digital academy for the e-commerce managers of all the brands and the more technical people in charge of the sites. [We have also established] some long-term relationships in Silicon Valley, with some key people and some key venture capitalists, to make sure we are up to date on what’s happening in new technology, new practices, new sites.
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief, Imran Amed