Late lessons in luxury
As Diego Della Valle, the CEO of leathergoods group Tod’s, mulls stepping back from the day-to-day running of the company, he considers how the market has matured – and says he has changed his mind about what luxury entails.
When Italian leathergoods and footwear company Tod’s announced in April that LVMH Group had bought a 6.8% stake for €75 million, taking its share from around 3% to 10%, observers speculated this would be another example of a brand being swallowed into a large group as the market consolidates. But Tod’s CEO Diego Della Valle has insisted he has no plans to sell the company – yet – and if “something happened” in the future, it would only be with LVMH under long-time friend Bernard Arnault. Mr Arnault agreed: “The friendship with Diego Della Valle and his family goes back over 20 years, a relationship cemented by common human and professional values. We are very happy to further reinforce this partnership.”
Mr Della Valle owns 63.64% of shares in Tod’s, a company launched by his grandfather in 1920 and which now includes the Roger Vivier, Hogan and Fay brands. Speaking as part of the Financial Times Luxury Summit, he explains that as the luxury market has changed markedly over the past three to four years, his thinking has had to do the same. “Companies are bigger, growth is now in the double digits. Before, successful luxury companies grew less quickly, in the single digits, and the product was super exclusive. Now, that’s changed.”
While the company’s results for the first quarter 2021 showed 19% growth, with strides in ecommerce as well as in China – where it was also up 28% over the pre-pandemic Q1 2019 – it has been struggling with declining sales over the past few years. Mr Della Valle admits it was time for a rethink on strategy and on where growth will come from in the future. He steadfastly believed in the power of its classic shoe design, which changed very little from year to year, and which had been sought after through the generations. But now, he admits that change is necessary. “I now think that 50% of designs need to stay close to our story – super quality, Italian lifestyle,” he says. “The other 50% is still high quality but has more creativity, a cool product that speaks to the younger generation. This formula will guarantee longevity of the company but will still reach new customers.”
He says the company misjudged some factors in recent years: the expectations of the 20 to 30-year old consumers, the power of the Chinese buyer, and the dominance of shopping through a smart phone. One other change he resisted but has since revised: his view on sneakers. He believed they had no place in a luxury footwear brand – but the market told a different story. “When I was at university in Bologna, I was one of the few who wore blue jeans with white sneakers. I didn’t believe sneakers were luxury,” he says. “Now, we make 100,000 pairs of sneakers per month!”
Digital dominance
Younger customers have an evolving view of luxury, and to capture that audience means the company has had to embrace ecommerce. “Four years ago, I told my managers that the web will be dangerous for luxury companies, in terms of timeframes; we work slowly while that works quickly. This was the wrong decision, but now we are working in the right way, we work quickly to arrive at our goals.” Does this mean he is risk averse? asks Financial Times editor Roula Khalaf. “I need to guide with a prudent touch as I have 10,000 employees,” he replies. “But at the same time, I have a lot of curiosity.”The company has now invested in digital strategy and marketing, as well as changing the frequency of collections. Rather than launching two per year, products are unveiled every two months or so, backed by heavy marketing and social media campaigns.
Fresh view
In April, Tod’s appointed Italian style influencer and digital entrepreneur Chiara Ferragni, who has 24 million followers on Instagram alone, to its board. She represents the voice of youth, says Mr Della Valle: “The appointment was an easy decision. We want the young people to understand what we do; so we ran through ideas about solidarity, welfare and younger people.”
A youthful input has also been injected through a partnership with London-based arts school Central Saint Martins, where students have been given free rein to design small collections, tested in Tod’s T Factory, its ideas lab. The designs can be created quickly, with a number reaching the shelves in limited editions. “I try to test what I like. It is about new ideas, new communication. Everyone is free to do what they want,” says Della Valle.
Post pandemic, the retail strategy will also have a shake-up. It is thought traditional stores won’t provide the level of experience that customers expect – stores in the future will not be ‘an experience’, with a focus on pop-ups, showcasing young designers and limited editions, alongside the traditional stores and digital sales.
Changing of the guard
Tod’s has had a particularly tough 12 months due to the pandemic, like most in the sector, but it can now “see the light” and expects 2022 to be an important year in terms of a sales turnaround. Despite the challenging global economic scenario, it is confident in its product and strategies.
As Mr Della Valle approaches 70, will he be willing to retire from the family company he has steered for so many years? The answer is yes, he says, putting full confidence in his brother Andrea, the vice-chairman. He needs some time to prepare a succession team, but he is hoping to relinquish 70% of the role in the near future – although letting go completely will be difficult. “I love to have some control over what people are doing, thinking of new ideas, marketing – it stops you getting old,” he confesses. “Nobody believes that I will step back! But I am ready.”
MameKurogouchi x Tod's is a new capsule collection created with Japanese rising star MameKurogouchi.
Credit: Tod’s
