Kering Group follows a multi-brand business model strategy. The central holding helps the brands and Houses part of its portfolio leverage economies of scale while creating synergies. At the same time, those brands are run independently. Kering is today a global luxury brand that made over €20 billion in revenue based on this multi-brand strategy. Within Kering Group are brands like Gucci, Bottega Veneta, Saint Laurent, and many more—the primary operating segments based on luxury and lifestyle.
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Kering multi-brand business model strategy
When you look under the hood of the Kering group, one of the most striking things is the variety of luxury brands it holds.
In fact, throughout the years, Kering has developed a business model strategy of aggregating several brands under the same corporate umbrella.
However, each of those brands is managed independently.
That allows the company to be diversified while at the same time guaranteeing the operations to be agile (via the separately managed brands) and to take advantage of synergies between those brands.
Another critical aspect is that the business model of the group is its family-owned structure, which guarantees a fast decision-making process.
Therefore, the change of direction can be steered quickly. Indeed, Kering didn’t start as a luxury company at all. Its beginnings were related to lumber trading.
Only in 1994, Kering started to reposition its brand.
After that, Kering consolidated its position in the Luxury brand industry by buying several other fashion luxury brands.
This process is still ongoing, even though Kering is among the largest luxury holdings in the world.
Brands like Gucci, Bottega Veneta, Saint Laurent, Alexander McQueen, Balenciaga, Brioni, Christopher Kane, McQ, Stella McCartney, Tomas Maier, Boucheron, Dodo, Girard-Perregaux, Pomellato, Qeelin, and Ulysse Nardin are part of the Kering galaxy. Kering also develops Sports & Lifestyle brands PUMA, COBRA, and Volcom.
Kering is a luxury goods multinational founded in France by François Pinault in 1963. The company, which initially specialized in timber trading, grew via acquisitions and was listed on the Paris Stock Exchange in 1988. Two years later, Kering merged with a French conglomerate interested in furniture, department stores, and bookstores.
LVMH is a global luxury empire with over €79 billion ($83 billion) in revenues for 2022, spanning several industries: wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, and selective retailing. It comprises brands like Louis Vuitton, Christian Dior Couture, Fendi, Loro Piana, and many others.
This decentralized model attempts to foster rapid growth for those brands.
The logic is to enable agility, balance, and responsibility across those Houses.
Indeed, while each of them keeps its identity expressed in its unique characters, the Group provides the infrastructure to support the operations of those brands while allowing them to scale up via distribution networks that leverage the Group’s economies of scale.
Also, the Group acts as the mediator that encourages the brands to form synergies with each other and share best practices to drive innovation.
The key three pillars of Kering’s multi-brand business strategy
Agility: Kering provides its Houses with an organizational structure that unlocks their potential for excellence.
Balance: Now a fully integrated Group, Kering’s multi-brand model is reaching optimal efficiency.
Responsibility: All our operations are founded on a responsible economic model. A comprehensive, sustainable approach is a structural competitive advantage.
For instance, the group purchased leather tanneries to secure raw materials sourcing. Also, logistics activities for Couture & Leather Goods brands have been centralized.
Why do companies choose vertical integration even when it implies a significant capital investment? Vertical integration allows to achieve more control over the whole process; it also helps the company to keep high-quality standards.
At the same time, it will enable an organization to maintain control over those processes. So, one of the main reasons for vertical integration is control!
Kering organizational chart
The vertical integration and multi-brand strategy are reflected in the Kering organizational chart.
On the one hand, the holding controls the major geographical areas. Kering Corporate controls two main segments: Luxury activities and Sports and lifestyle activities.
Kering key financial figures
Kering generated €20.35 billion in revenue in 2022 and €3.6 billion in profits, €17.64 in revenue in 2021, and €3.17 billion in profits.
In 2022 the companies made over twenty billion euros in revenues for the overall group.
Who’s going to be the next brand to add to the multi-brand strategy of Kering?
Key Highlights
Kering’s Multi-Brand Business Model:
Strategy Overview: Kering Group employs a multi-brand business model, gathering various luxury brands under its corporate umbrella while ensuring each brand’s independent management.
Synergy and Independence: This approach allows for economies of scale and synergies while maintaining agility and brand independence.
Repositioning and Growth: Originally focused on lumber trading, Kering repositioned itself in 1994 and acquired Gucci, beginning its journey into luxury fashion.
Expanding Portfolio: Kering continued its expansion by acquiring several other renowned luxury fashion brands, solidifying its position in the industry.
Diverse Brand Portfolio: Brands like Gucci, Bottega Veneta, Saint Laurent, Alexander McQueen, and others are part of Kering Group, along with Sports & Lifestyle brands like PUMA, COBRA, and Volcom.
Brand Independence and Creative Autonomy:
Decentralized Approach: Similar to LVMH’s model, Kering’s decentralized strategy maintains the creative independence of each brand.
Fostering Growth: This model aims to facilitate rapid growth for individual brands, offering agility, balance, and responsibility across the various Houses.
Shared Infrastructure: While retaining unique identities, Kering Group supports brands with infrastructure, leveraging economies of scale for distribution networks.
Segment Control: Kering has two main segments: Luxury activities and Sports and Lifestyle activities.
Financial Success:
Revenue and Profits: Kering generated over €20 billion in revenue and €3.6 billion in profits in 2022, reflecting the success of its multi-brand strategy.
Element
Description
Value Proposition
Kering Group offers the following value propositions for its customers: – Luxury Brands: Providing access to luxury fashion, accessories, and lifestyle products. – Quality and Craftsmanship: Offering products known for quality and craftsmanship. – Sustainability: Commitment to sustainable and responsible business practices. – Brand Diversity: A portfolio of diverse luxury brands catering to different tastes. – Innovation: Incorporating innovation in design and materials. – Heritage and History: Brands with rich heritage and history. – Exclusivity: Exclusive and limited-edition products for discerning customers.
Core Products/Services
Core products and services provided by Kering Group include: – Luxury Fashion Brands: A portfolio of luxury fashion and lifestyle brands. – Accessories and Footwear: High-end accessories, handbags, and footwear. – Jewelry and Watches: Luxury jewelry and watch collections. – Eyewear: Premium eyewear products. – Sustainability Initiatives: Commitment to sustainable and responsible practices. – Brand Collaborations: Collaborations with artists and designers. – Retail and E-commerce: Physical boutiques and online shopping platforms. – Customer Experience: High-end customer service and shopping experience.
Customer Segments
Kering Group targets various customer segments: – Luxury Shoppers: Affluent individuals seeking high-end fashion and lifestyle products. – Fashion Enthusiasts: Individuals with a passion for luxury fashion and accessories. – Collectors: Collectors of limited-edition and exclusive luxury items. – Global Audience: International customers across regions and demographics. – Retail Partners: Partnering with upscale retailers and boutiques. – Fashion Industry: Professionals and stakeholders in the fashion industry.
Revenue Streams
Kering Group generates revenue through several revenue streams: – Product Sales: Earnings from the sale of luxury fashion, accessories, and lifestyle products. – Retail Boutiques: Revenue from physical boutique sales. – E-commerce: Earnings from online sales through e-commerce platforms. – Licensing and Franchising: Revenue from licensing and franchising agreements. – Brand Collaborations: Earnings from collaborations and special collections. – Sustainability Initiatives: Investments in sustainability with long-term financial benefits. – Customer Experience: High-end customer service and loyalty programs. – Investments and Divestments: Capital gains from investments and divestments.
Distribution Strategy
The distribution strategy for Kering Group focuses on exclusivity and brand presence: – Physical Boutiques: Operating upscale boutiques and stores in key global locations. – E-commerce Platforms: Maintaining online shopping platforms for global reach. – Luxury Department Stores: Partnering with luxury department stores and retailers. – Brand Collaborations: Collaborations with artists and designers for exclusive collections. – Fashion Shows and Events: Participating in fashion shows and events to showcase new collections. – Sustainability Initiatives: Promoting sustainability through products and practices. – Customer Engagement: Offering high-end customer service and loyalty programs. – Global Brand Promotion: Global marketing and brand promotion campaigns.
In 2022, Kering generated €20.35 billion in revenue, of which €10.49 billion from Gucci (50.6%), €3.3 billion from Yves Saint Laurent (15.9%), €1.74 billion from Bottega Veneta (8.39%), and €3.87 billion from the other houses.
Bernard Arnault’s wealth is around $203 billion. Indeed Arnault is the CEO and chairman of the luxury goods conglomerate LVMH Moët Hennessy Louis Vuitton, a massive luxury group that generated over €79 billion in revenue ($83 billion) in 2022, spanning across wines, fashion, cosmetics, and retail. The Arnault family group owns 48.18% of the capital for LVMH with 63.9% voting power, making Bernard Arnault the principal owner and decision-maker. His stake is worth over $203 billion.
Slow fashion is a movement in contraposition with fast fashion. Where in fast fashion, it’s all about speed from design to manufacturing and distribution, in slow fashion, quality and sustainability of the supply chain are the key elements.
Patagonia is an American clothing retailer founded by climbing enthusiast Yvon Chouinard in 1973 who saw initial success by selling reusable climbing pitons and Scottish rugby shirts. Over time Patagonia also became a fashionable brand also for its focus on slow fashion. Indeed, the company sells high-priced clothing items built to last which it will repair for free.
Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.
Fash fashion has been a phenomenon that became popular in the late 1990s and early 2000s, as players like Zara and H&M took over the fashion industry by leveraging on shorter and shorter design-manufacturing-distribution cycles. Reducing these cycles from months to a few weeks. With just-in-time logistics and flagship stores in iconic places in the largest cities in the world, these brands offered cheap, fashionable clothes and a wide variety of designs.
With over €27 billion in sales in 2021, the Spanish Fast Fashion Empire, Inditex, which comprises eight sister brands, has grown thanks to a strategy of expanding its flagship stores in exclusive locations around the globe. Its largest brand, Zara, contributed over 70% of the group’s revenue. The country that contributed the most to the fast fashion Empire sales was Spain, with over 15% of its revenues.
The Ultra Fashion business model is an evolution of fast fashion with a strong online twist. Indeed, where the fast-fashion retailer invests massively in logistics and warehousing, its costs are still skewed toward operating physical retail stores. While the ultra-fast fashion retailer mainly moves its operations online, thus focusing its cost centers on logistics, warehousing, and a mobile-based digital presence.
ASOS is a British online fashion retailer founded in 2000 by Nick Robertson, Andrew Regan, Quentin Griffiths, and Deborah Thorpe. As an online fashion retailer, ASOS makes money by purchasing clothes from wholesalers and then selling them for a profit. This includes the sale of private label or own-brand products. ASOS further expanded on the fast fashion business model to create an ultra-fast fashion model driven by short sales cycles and online mobile e-commerce as the main drivers.
Real-time retail involves the instantaneous collection, analysis, and distribution of data to give consumers an integrated and personalized shopping experience. This represents a strong new trend, as a further evolution of fast fashion first (who turned the design into manufacturing in a few weeks), ultra-fast fashion later (which further shortened the cycle of design-manufacturing). Real-time retail turns fashion trends into clothes collections in a few days or a maximum of one week.
SHEIN is an international B2C fast fashion eCommerce platform founded in 2008 by Chris Xu. The company improved the ultra-fast fashion model by leveraging real-time retail, quickly turning fashion trends in clothes collections through its strong digital presence and successful branding campaigns.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
The vertical integration and multi-brand strategy are reflected in the Kering organizational chart.
