How’s this whole situation really going?
We are not doing well this month. But the country’s priorities are different. We tremble and pray for our fellow citizens, friends, colleagues and employees and we hope that this whole tragedy will end up soon.
What are you doing?
We are gearing up, it will be a long spring and we hope to get out of the summer unscathed.
After a more than satisfactory January we now have a really difficult February and March. It has been the worst March from about 20 years now. And March was already a month of great margin for us.
We are selling, for 70% of our who are equipped, ONLY through online sales, but remember that this is only the 23% of our sales.
By doing some math, we will have two months at 16% of the potential.
A minimum drop in collections in one year of 390 million which equates to an increase in leftovers to 180 million.
Fashion is a high initial margin business because it has a seasonal metric. If you miss one season you lose the margin for two and you can’t pay the other. The supply chain is a beautiful thing, but either you look at it all or you don’t look at it, at all.
How do you handle such a situation?
Very tough and nervewracking. Our employees are at home, security measures are complicated. All our owners and partners are on the dashboard.
Nobody left the city. Even with closed shops, families are going to work.
We’re managing the accounting, we’re processing the online files and we’re trying to see the sales projections well. We certainly can’t live long days.
We’re thinking at all our business costs that are alive and we are looking for possible solutions.
We understand well the difficulties of those who govern us, we are close to everyone and we tremble for the health of citizens, customers, employees… but..
But the decree that came out left us very dazed, abandoned. Restaurants, museums and theaters are helped, but clothing retail is not considered at all. We are very impressed. Fashion is a serious matter.
It is not a frivolous thing, there are 4000 employees here.. What can we do?
Given that we still thank everyone for what they are doing, but I would like to remind you that this part of the system is about to enter into serious suffering.
We have not been consulted by Camera Nazionale della Moda Italiana or by other organizations. I understand them have other things to think about, but it’s a shame to think that we can’t make a contribution.
Indirect retail is a business that is worth around 36 billion euros a year in Italy. Italy is the largest market for Italian fashion. And we will be closed for 2 months.
Just to give you an idea.
Affected how? Do you have any first estimates?
Look, even if the system recovers on May 1st, we believe that the SS 20 season is still affected and that without tourists and without economic growth even FW cannot do well.
The most optimistic forecast in my possession is to close at – 26% in 2020. With the reopening on April 15th. If we lose another month, we can reach perhaps – 34%.
In practice online discounts and decay of goods value, we are eroding our margins.
This also considering the great help of the marketplaces platforms.
Yes, but there are a thousand unknowns, including the discount situation.
In this statistic, we do not take into account the impact of a possible further lockdown.
But the biggest fear is for the next steps.
What are you going to do?
First, we need a 60 day “commercial quarantine” to slow down, if not freeze, the payments for March and April.
Consolidate cash projections well, and then make two plans with our suppliers.
The first to make long-term payments for the SS 20 season. To make it clear, 60 days will not be enough here.
In fact, I believe we need a flat-rate economic transaction of values, that is, a 25% ex tunc discount on all stocks on February 25th. Then a payment plan of at least 150 days of the SS.
The second to define a strategic plan with the brands for the FW part:
• Volumes of the FW 20 season already ordered, we cannot absorb it immediately
• Delivery times of the FW 20 season already ordered, we need a different cadence, the times of physical retail are no longer good
• Payments of the FW 20 already ordered, here too, we have to create a very well planned queue
• Margins of the FW 20 already ordered. We cannot go on with these margins if 50% is sold on sale or online, and especially Italians can no longer pay certain prices
• Discount plan and conditions in the current market, we need an absolute new de pricing calendar: we thought about geo pricing, now we think about de pricing
• The merch on consignment for the FW season? Why not. The merch on consignment can help us and above all prevent the turning stock
• Moving the sales calendars might work, but more to align the system with the new calendaring. Needless to think about an SS 21 season in this context
Then we face the running costs: rentals to be renegotiated and home staff to be rearranged. Probably also shops to close.
We have to be cold and realistic. The world has changed and conditions have changed, we must reason with brands.
I repeat, with the brands, we need a Yalta.
A table where we meet with brands and showrooms. Nothing can be done alone. The future will not have a basis on the rules of the past.
Who are you talking to?
We are addressing our ideas to all women and men of good will and common sense. We are retailers and we know very well how big chains are, big brands are and how small brands are.
But at this moment it’s impossible for us to give certainties and/or respect all agreements to the letter. The shops are closed.
This sudden change of scenery and context, forces us to innovative and collaborative solutions. And we are convinced that many partners will be on our side.
New solutions, like never seen them before. And so we ask brands to be close to us and help us in uncertainty. Without a certainty of collection it’s impossible to plan.
We must think about the occupation and the importance we have in the urban fabric.
Do you know that the 39% of our stores are located in the redzone, in Lombardy / Veneto / Emilia area?
What’s the answer?
The answer of people who are aware…the answer of those who want to help. Many brands, especially the Italian ones.
There is a desire to listen, there is a desire for collaboration. This was an earthquake. We must first wait to do the math and then reason.
But all in the same way?
I point out that I am surprised that while all the big and small Italian brands and all the great entrepreneurs (Prada, Gucci, Herno, Armani, Cucinelli, etc) are still showing us listening, some large foreign multinationals, perhaps out of fear of the stock exchange and international superficiality in not seeing problems, have made many stories. We will not forget about them.
On the contrary showrooms and small designers, we would like to find a way to help them.
Some alleged “big” have remained with Bourbon methods. There are those who impose cash payments for non-salable goods, there are those who ask for advances for the production of new goods, there are those who show us the contractual clauses.
He sees, in short, that perhaps someone who pretends nothing is more harmful than he who foreshadowed the problem. Strangling a trader is like cutting flowers. Spring will always come back.
There are many people unprepared for normality, let alone extraordinaryness.
How do you see the future of the system?
I stayed in my place in Milan. I see the composure of this city that has hosted me and made me a son for 38 years.
I see that this has been a great page in history, where nothing will be as before and where we either evolve or disappear. I see a lost population that is trying to understand the near future well.
I see fashion entrepreneurs, giants, with tears in their eyes. They all have my respect. I see my associates focused on the day, full of worries like all of us.
If the minister talks about war economics, let alone the scenario. You need sobriety and emotional timing.
Fashion is creativity, it is show business, but if NBA, f1 and soccer stop, maybe for a few months we must stop too. Maybe for a little while.
We need new leadership?
Listen, we need someone who wants to help the system. I think of a holistic leadership and I think of a noble father on the one hand who can give a slogan, like we save fashion.
At the same time, I think we need a bank and an institution that can help us restructure the debt of these two seasons with the brands. A bond could be issued to allow the non-performing values to be divided into 12 installments.
If we can have the resources to not tremble we can all go on.
So yes, we need a less festive, more pragmatic leadership to face the possible extinction of the Wholesale. I hear a lot of negative voices.
I feel everyone says that Wholesale is a problem. Let us remember that the little ones will take care of the big.
In practice would you like to blow up the market for a season?
Not necessarily. But I think doing fashion shows and fairs while we have field hospitals at home is very unnecessary and even offensive. We think not three months. Let’s think about three years.
Let’s treasure this moment, let’s strengthen the old system and build a more solid one. We need a generational, cultural change right now. We need more modern and open thinking above all made of professional and non-professional bonds, stronger, deeper. Less events, less approval, more quality in discussions.
Fashion cannot be rated by a like on Instagram. Fashion is a cultural and social phenomenon especially for us Italians.
It would be very appropriate to consider a gentler timing. Maybe reopen the show system and showroom fairs all in mid-September, also leaving companies time to bring people back and institutions time to reason about new security procedures. After all, we have plenty of goods until January between FW20 and SS20.
But how will the system react?
Listen I am nobody, but I can say that Giorgio Armani (who has been my mentor for many years), was courageously the first to understand this situation during the last fashion week.
He had the courage to put health before money. This is the leadership we need. Concreteness.
The system should react very simply: general states of fashion, brands, retailers, showrooms, marketing united and a team that tries to understand what is the good for the country and the fashion system.
Not of the individual. We built the system with our teachers and we are called to save it. Not a London consulting company.
In truth, do you think that many traders will not be tested?
The trader is the worker bee of the system, we must all work together first and then we must fight to defend this category, our employees and our investments. We wait the help of the institutions.
Marcus Aurelius says, “what does not help the swarm does not help the bee”. We must be united.
In difficulty, it is there that we see the quality of people.
It is a moment where we can put the unifying values to good use and remove the old parochial conflicts.
We are receiving many adhesions from Belgium, Germany, France… They are also entering an emergency.
If we are united, practical and helped, we will be able to resist. We have great professionals among us and we are, I repeat, the only ones.
True omnichannel in operation. We are the only ones, who ship from the same place simultaneously to many countries, but at the same time we know how to interface physically with the local consumer.
Being omnichannel means being slim and making investments in people and technology. All this has a value especially for the future.
If the brands supporting us and the showrooms, (especially those in Milan that are suffering so much) will want to make a system then we will resist.
If CNMI definitively considers us part of this system then we will resist.
If we are all shareholders of a new method, we can go on. Each sacrificing his part.
But if the fracture theater starts again then yes, we will have losses.
But with those of the merchants, those of the brands will also trigger.
Sometimes self-harm is stronger than associations.
After what we’re experiencing, seeing people who don’t want to work together to make a system would be depressing. We will have to take as an example that collaboration that we see in Milan.
What do you dream about the future?
I haven’t hugged my daughter for a month, I dream of holding her in my arms but I don’t know when I’m gonna do it.
#DontForgetFashion #CBINeverStops #SaveMadeInItaly #SaveItalianFashion