China is high on the agenda for many brands seeking growth – and even more so at Italian accessories company Furla. The firm recently
embarked on an ambitious mission under CEO Eraldo Poletto to drive sales in the
Chinese market following the signing of a joint-venture deal to open 100 shops
in four years in more than 40 cities across Greater China.
The deal with Fung Group – the private investment firm of
Hong Kong-based entrepreneurs Victor and William Fung – was signed at the
beginning of 2013, and Furla holds 51% of the JV. Execution of this plan is
starting now, and Poletto is positively beaming at the prospect of the
potential in the vast Greater Chinese market.
“We celebrated a big launch [into China] at the beginning of
this year with our Fung Group joint venture,” he said, speaking to me at the
TFWA World Exhibition in October. “We are starting now. Our strategy calls for
100 doors in four years, in Hong Kong, Macau and China. Our plan is quite
aggressive. We are in good shape and we monitor developments every day – it is
an interesting business.”
Opportunity lies in premium brands
Poletto added that the wider Asia Pacific region was also important
for Furla. Asia (excluding Japan) currently accounts for 13% of the company’s
turnover, a figure he described as “quite small”. “We can grow our retail and
wholesale turnover by triple digits,” he said. “It can be developed significantly.
China should be much higher when you consider that Japan made up 27% of our
sales in 2012. China can grow more and can exceed Japan.”
He continued: “China has already been for a while a key
destination and we can see interest [from the Chinese consumer] outside China
in our international business. The Chinese know Furla as a premium Italian
brand which is not in the luxury space. Our brand is for the middle classes
where there is big potential in terms of population – the number of people who
want affordable luxury. Our timing is good because there has been some slowdown
in China’s overall economy. The opportunity is on the premium side.”
Poletto describes Furla as a family business with a strong
Italian heritage and a retail-focused international mindset. “We have a
retailer mindset, which is unique,” he said. “We use Italian craftsmanship and
we can compete with the luxury brands. We are closest to the luxury feeling, in
terms of our products and our in-store environment, for example, but we are a
value-for-money proposition. Our price/product perception is value for money.”
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| Furla CEO Eraldo Poletto |
At this point in our interview, we are politely interrupted
by an executive from China Duty Free Group (CDFG), who wants to show Poletto
the plans for the operator’s impressive Haitang Bay retail and entertainment
complex on Hainan Island, a resort off the Chinese mainland, where Chinese travellers
can buy goods at duty-free prices. This tourist facility – which will house the
biggest duty-free shopping complex in the world – will boast 70,000 sq m of
retail space with boutiques for Louis Vuitton, Prada, Cartier, Gucci, Ermenegildo
Zegna and Ferragamo. And Furla, of course. The grand opening will be held in
the June-August period in 2014, the CDFG manager revealed.
Poletto’s face is a picture as he looks at the presentation
on the manager’s iPad. “This is incredible, incredible,” he enthused, almost
open-mouthed at the sheer scale of the project and its luxury ambience.
Poletto has a lot of experience of the Chinese market and
first started visiting China in 1996. “I admire China as it has moved from a
factory to a market. I go every three months and I discover something new -
every time it’s more exciting. The Chinese want to win; they have ambition, and
I like their curiosity and their energy.
“Things have developed at amazing speed since I first
visited, when there were no highways or cars. They’ve done in 10 years what
Europe did in 100 years. They have a desire to learn and become better.”
The China challenge
By all accounts, operating in the Chinese market is
difficult, so what are the challenges Poletto has faced so far? “You have to
have a proper understanding of the market and a proper partner who understands
China. It is a complex market – the north of the country is different from the
south and west.
“You have to understand real estate, you have to give the
right training and get the right people in the shop. You need a strong partner,
like Fung Group. They know the country, the rules, how it all works. We put in
the brand expertise and they put in their expertise in the market, the consumer
and logistics.
“You also need to understand the culture and respect the
culture,” he added.
“China is evolving at incredible speed – they travel and
they know. Their education is getting more sophisticated. The Chinese are the
most elegant editors who visit our Milan showroom. They know what they want and
what to expect. We can underestimate them but they are sophisticated and ahead
of the curve.”
Furla offers its regular product assortment in China but
there are plans in the pipeline to produce something specific for the market,
noted Poletto. Furla boutiques in China offer the brand’s new store design concept,
now being rolled out across the world, and do not feature special VIP rooms.
Social media in China
In terms of marketing, Furla stores are always the focus.
“We have a focus on digital marketing and we use social networks such as Weibo
to create a community. But the store is always the centre of interest and we hold
special events. We act very local and we use national celebrities.”
At this point, Poletto shows me images on his iPhone from
WeChat – the Chinese equivalent of the WhatsApp mobile messaging service -
showing Furla products customised in different ways by Chinese women. He is
fascinated by these live alerts showing Furla products becoming part of women’s
daily lifestyles.
Besides China, Indonesia has been a dynamic market for
Furla, but currency issues have weighed on the brand’s performance in that country.
Poletto describes the Middle East as “phenomenal” in terms of the speed of the
region’s development and its “faster pace”.
Opportunities beyond China
Perhaps surprisingly, Poletto calls Japan a “terrific”
market for Furla. The country represents 27% of the brand’s business and is its
biggest market.
In Thailand, following an agreement with the prestigious
Thai partner, Central Marketing Group (CMG), the distribution division of the
multinational Central Group, the first Furla flagship store began trading in
Bangkok in 2012. And further proof of Furla’s growing presence in the Asia
Pacific region was the inauguration of the first mono-brand store in Mumbai,
India.
The US makes up only 9% of Furla’s sales, but here again
there is a “great opportunity”.
“We are getting organised and we are opening a store in New
York next spring 2014. It is located on Fifth Avenue and we are finalising it
now,” enthused Poletto, who, before joining Furla, was a member of the
executive team and the Board of Retail Brand Alliance Inc, owner of the Brooks
Brothers brand, based in New York.
In other retail news, Poletto revealed that a Furla concept
store would be opening in London’s Regent Street at the end of November 2013.
“This will be a big event in one of the key tourist cities.”
Regarding future company strategy, Poletto said: “It’s time
for us to get focused on the countries we’re in. China is an amazing focus for
us and the US is a focus, but we need to get deeper and stronger in the markets
we’re in.”
Travel retail a top priority
Turning to the travel retail channel, Poletto noted: “Travel
retail is absolutely one of our top priorities. We believe in a global shopper
and we follow the customer during her journey, at the airport and in our shops.
So travel retail is a key strategy. More than 60m Chinese travelled this year so
it’s a must.
“Airports have become entertainment centres, not just
shopping. It’s all about entertainment when your waiting time is so long.”
Asked about his personal highlight in the past year, Poletto
said: “It’s all about the team – it’s a team effort. We look for the long term
and we all have that attitude. 90% of our staff live outside Italy and 85% of
these work in the stores.
“I love retail and travel; I’m a merchant. I love seeing new
shops and concepts.”
Furla fact file
Consolidated turnover: €212m in 2012* (+18%)
Ebitda: 15% in 2012 or €32m* (+28%)
Sales by region: 24%
Italy; 76% abroad
Of which:
• 27% EMEA
(excluding Italy)
• 27% Japan
• 13% Asia
• 9% US
Turnover travel retail: +93% (2012)
Turnover e-commerce: +158% (2012)
Countries in which Furla products are distributed: 91
Mono-brand boutiques: 328, of which 153 direct and 175
franchises
Multi-brand distribution: 1,290 points of sale
Employees: 925 (95% women)
*Forecast at the close of the financial year.
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