Bluebell CEO Ashley Micklewright: Price differences between markets are a real problem
today Dec 11, 2018
Ashley Micklewright, CEO of the Bluebell group since 2011, was passing through Paris in December. As the leader of a company which has supported the development of big-name luxury brands like Louis Vuitton in Asia, and which is currently the partner of some 150 labels (including Jimmy Choo, Clarins, Brunello Cucinelli, Loro Piana, Kenzo, Castaner and Narciso Rodriguez) throughout the Far East, the executive has a well developed business expertise.
In this second instalment of a two-part interview with FashionNetwork.com, he discusses the short-sightedness of investment funds and digital strategy. Having shared his views on the development of different Asian markets, their relationships with the luxury industry and the influence of the Chinese market throughout the region, Micklewright moves on to speak about the need for the industry's big hitters to keep on top of their price policies, both in their brick-and-mortar networks and on online market places.
FashionNetwork.com: In your opinion, what are the prerequisites for a brand wanting to launch in Asia?
Ashley Micklewright: It's not a question of revenues. That's important but the most important thing is still the product – it needs to stand out. That's the first thing. If we think that a product has potential in Asia, we look at the management team, we look at the shareholders and we see if an investment fund is involved. And, in general, if a fund is involved, it's negative because that means there's a short-term vision. In the luxury industry, brands don't usually work with short-term strategies. They have a plan spanning 15-20 years, not 15-20 months. Very few of the investment funds that come into the sector understand it. We're not against funds but we know that there needs to be a long-term plan. And they also need to be on top of production and logistics. Brands understand now that this is essential for accelerating growth and I think that, these days, it's something that people have in mind from the outset.
FNW: So the Bluebell group doesn't have a fund linked to its capital?
AM: No, it's still a family company. These are specific values that are important when we're in discussions with brands and companies which are also family businesses. Another important point is that we don't have any real estate operations. So when we place a brand in a mall, the location has been chosen purely for its potential.
FNW: Do you have a tried and tested process for developing brands, line Manolo Blahnik for example, in Asia?
AM: No, we can't just do a copy-paste. There's a very simple reason for that: each market is different, in terms of physical retail but also in terms of e-commerce and communication. Depending on whether they are in Taiwan, Hong Kong or mainland China, Chinese consumers buy different things. So you have to be relevant in each country by evaluating what consumers a given brand should be addressing and then by thinking about how they can approach these potential customers. Another important factor is that it's very rare for us to manage a brand throughout all of Asia.
Sometimes our strategy also depends on what a brand's positioning is on another market. So you always have to communicate with the brand to make sure that their positioning isn't completely different from one market to another. In terms of our "process", we are supported by a network of local partners on each market who lend their expertise in retail, or communication, etc. The idea is to use these local resources but also our own strength as a group in order to implement the development of a brand as quickly as possible. We've carried out evaluations of what our structure can offer, and we believe that we achieve in six months what a brand can do for itself in three years.
FNW: And how do you choose between retail and wholesale? Is that case by case too?
AM: Yes, and it depends on what the brand wants as well. Sometimes some brands decide not to do wholesale. They just want their stores. You have to be very careful when you're working with brands like that because, in some countries in Asia, it's a business model which doesn't really work for certain product categories. It's happened to us before. A brand wanted to open its stores in Japan, but only having a presence in retail with the kind of product they were offering doesn't work there. We knew about and explained this specificity of the market to the brand but they said "no". We had to respect their decision. Wholesale also depends on the market. In China, which is always relevant, it's all about franchisees. You don't have a network of select stores. In Japan, it was very big but it's in decline now, potentially because of digital retail. It's the same in Taiwan and Hong Kong. In Malaysia, Indonesia and Thailand, however, it's still going very strong.
FNW: And what about digital retail?
AM: Digital is the same. There are brands which start out in digital and then develop a brick-and-mortar presence. Some only do physical retail and don't think about digital. The majority of brands try to adapt to the local market. What we've been seeing is that new brands which are under five years old have a different approach. These brands have already embraced the omnichannel model. They know that a consumer can shop around on one channel and make a purchase through another, and they arrive with a model which can be applied as it is. Established brands have to face up to a more complicated situation. They have to reinvent themselves. Some have control over the whole value chain, from manufacturing to retail, and can make changes. But if you have partners in between, it's very complex. It's interesting to see the way things are evolving because everything is moving very fast. Digital marketplaces have been around on some markets for two or three years and are set to keep growing. What we're seeing in China at the moment with ultra-specialised third-party sellers is on its way into other markets.
FNW: What advances and what obstacles have you been seeing?
AM: Price differences between markets are a real problem. New brands don't have large price gaps but established labels have a gap of around 30% between Europe and some countries in Asia. Brands can't increase their prices in Europe, otherwise they wouldn't make any sales. On our side, we can't lower our prices because our cost structures are linked to established models. Some brands are willing to make compromises but others bury their heads in the sand.
FNW: What do you mean by that?
AM: A lot of the work we do on our business models revolves around working out compromises. But it's not simple. One time, a very cool brand came to see us and we knew that for this Italian brand, e-commerce was a very strong element of its business. When they told us they wanted to open in Hong Kong, we said "perfect, that could work well in Hong Kong". But we also said, "if the first product is bought in a store in Hong Kong, the second will be bought online, so when you make that sale, it's our sale too". They were against it. They ask us to operate a store, establish the brand on the market, but they want online sales to be kept separate. It doesn't make any sense.
That's why we're offering a new model where we're remunerated in accordance with the key elements of a business and we state our interest in the development of online sales. Often, negotiations are hindered because brands think that e-commerce belongs to them. Historical brands have to rethink that. You have to share the revenues you make on the internet with the partner that developed your store network and your brand reputation in a given geographical zone.
FNW: In this sense, is it harder today to sign a deal in Asia than it was ten years ago?
AM: No, I don't think it's more complicated. The only thing that's really difficult is what's happening with digital and e-commerce. First of all, the brand has to be able to develop its reputation through a site of its own. The second step is selling through online marketplaces. A good example is Net-A-Porter, which has most of the big European brands as its suppliers. They sell in our zone even if they're not on Net-a-porter.hk. But brands have to make sure they're selling their products at the right price. And then there's Farfetch, which is a platform that is exploited by opportunists aiming to make profit through price differences. I'm not criticising Farfetch, or even the opportunists. It's business. But brands have to stop just handing it over to them.
FNW: Clearly there's growing tension between the different players in the industry. How do you think that could be resolved?
AM: Brands are the only ones who can make the move. They don't have the courage to make a decision about ceasing to work with certain retailers. It's not fair to ask someone to invest in a brand and put their energy into developing it in a territory and then authorise someone 8,000 kilometres away to send a product into the zone at a lower price. Sometimes, they're even selling at lower prices than the brands themselves. Brands have to control that because, at the end of the day, we're talking about their brand value.
These days, you have to find win-win deals up front with brands and distributors or operators in order to make sure the latter have an interest in global, and particularly digital, revenues, and avoid all conflict of interest. I'll give you a concrete example. A customer tries on some shoes in your store in Hong Kong and loves them but wants some time to think. A month later, she comes back with these same shoes that she didn't buy at your store. She managed to get them direct from Europe. She doesn't know that the owners of the two retailers aren't the same and so when she comes to have her shoe repaired at your store, you have to say "yes" and give her this service – but it's a cost for you and you don't make any profit from it. That has to change, otherwise brands will lose their brick-and-mortar networks in Asia.
FNW: Bluebell used to own Carven. What's your analysis of what happened to the brand?
AM: Carven belonged to the family but wasn't part of the division that I manage. As a distributor, my analysis of the Carven brand is that it arrived ten years ago with a vision of Parisian chic as interpreted by Guillaume Henry which was very appealing. When Henry left for Nina Ricci in 2014, Carven recruited a duo [Adrien Caillaudau and Alexis Martial] who, in my opinion, weren't able to appropriately reinterpret the DNA of the label. Sales weren't very good. And then there was another designer, Serge Ruffieux. I think his first collection captured the essence of Carven and that his second collection was very interesting. I think he didn't have time to express his true potential. It was too late. Compared to Europe, in Asia you can act very quickly when things aren't going well. In Hong Kong, we go through crises every six or seven years and, on two or three occasions, we've fired people only to reinstating them again later. Sometimes you have to protect the company. In Europe, it's much more complicated to do.
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