Earlier this month, when Italy’s Tod’s announced it had appointed Chiara Ferragni – arguably fashion’s most powerful influencer – as a board member, shares in the luxury leather goods company jumped by more than 12 percent on the news.
The move, which was applauded by many, was seen as part of Tod’s’ efforts to broaden its appeal to younger consumers, who are expected to make up 20 percent of the personal luxury goods market by 2025, according to consultancy Bain and Company.
“We are sure that Chiara’s knowledge of the world of young people, combined with the experience of the other board members, can build thoughts focused on solidarity towards others, with a strong focus on younger generations, which, now more than ever, need to be listened to,” said Tod’s in a statement.
Two weeks later, LVMH increased its stake in Tod’s to 10 percent, adding 6.8 percent to the existing 3.2 percent stake it already owned since Tod’s public listing in 2000. Tod’s Founder and Chairman Diego Della Valle said in a statement that the transaction consolidated the friendship between the two family-owned companies and “may represent an excellent reason to consider further opportunities to be taken in the future ahead.”
Shares in Tod’s jumped as much as 16 percent on the hopes that LVMH might help relaunch the brand and a potential takeover might be on the cards.
According to a report from Reuters, Della Valle elaborated further in an online conference that "the (stake increase) deal was pretty symbolic but the idea is to see whether we can do something together, we would be happy to do so."
In its latest financial results, Tod’s – which had embarked on a new strategy nearly four years ago to overhaul its offering to appeal to younger consumers – posted sales of 637.1 million euro, down 30.4 percent from 2019. The company said its results were heavily affected by the ongoing effects of the global COVID-19 pandemic such as store closures and low traffic even during opening periods due to the lack of tourist purchases.
So, when Tod’s revealed the appointment of Ferragni to its board, it came as welcome news to a company which has struggled to keep pace with its peers. And despite initiatives like Tod’s Factory – an ongoing series of designer collaborations much like Moncler’s Genius collections, the Italian group was in need of something a little stronger to turnaround its fortunes.
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“When you look at the headline numbers for Tod's, they weren't that great. Revenues have been declining for quite a long period before the pandemic,” said Neil Saunders, managing director at GlobalData Retail, a retail research agency and consulting firm.
“I think it was performing okay, but there was some underlying weaknesses in the business,” he added. “And it was clearly attempting to restructure and reinvigorate the business, however when the pandemic hit, that process wasn't anywhere near complete. So, it was a brand that wasn't in a terrible state pre-pandemic but it definitely wasn't a business firing on all cylinders either.”
"Tod’s heritage and history are very rich; the Maison is home to the finest materials and expertise, and the way they value tradition commands some respect” said Fabrice Gautron, CEO and Founder of Executive Advisory firm TRinSTY.
“On the one hand, like many other luxury brands, they’re doing an extraordinary job on their craftsmanship, storytelling and quality of their products. Nevertheless, we live in a very fast-paced environment, even more since this year has passed. Luxury brands need to be much more agile, innovative and more importantly, they need to never lose sight of needing to attract and renew their customer base. They have to speak differently to new audiences and regularly challenge their internal structure and organisation.”
A large part of Tod’s problem was its over reliance on wholesale distribution, as seen with many of its peers, explained Saunders, and despite its efforts to shift its focus to a more direct to consumer and digital sales, growth from these channels have not yet been able to outstrip the declines it was seeing in wholesale.
The appointment of Ferragni it seems, could not have come at a better time. The Italian influencer, who began her career with a fashion blog – theblondesalad – is a digital entrepreneur whose businesses span retail and digital media. She has more than 23 million followers on Instagram, and is the chairman and chief executive of digital publishing business TBS Crew and chief executive of her eponymous brand Chiara Ferragni Collection.
“Chiara Ferragni is exceptional, even in the world of influencers,” said Hana Ben-Shabat, Founder of Gen Z Planet, a research and advisory firm, and the author of upcoming book Gen Z 360. “She's extremely successful, has huge influence, has huge followers. And not only that she is successful in her own right, having her own brand, and running her own company. So, the appeal to Tod's is really clear.”
“On the other hand, it's one thing to be a great influencer and even a great businessperson, It's a completely another to be a board member, and part of the governance of the company. For Chiara to be an effective board member will depend a lot on how Tod's team actually listen to her and how they actually use her skill and knowledge,” Ben-Shabat added.
Indeed, such appointments in the world of luxury are not unheard of. Last June, luxury conglomerate Kering appointed actress Emma Watson to its board of directors to oversee its sustainability committee. But the most pertinent question is whether luxury companies will act upon the skills, knowledge and advice of the likes of Ferragni and Watson and whether such appointments are enough to significantly impact their strategies in a transformative way.
“I do struggle to find any example where there's a very tangible impact,” said Saunders. “To be quite honest, I think that a lot of this is very marketing driven. And I struggle to come up with something I can point to and say: oh yes look, this person has joined this company and this is how it transformed the business. It always has to be part of a wider strategy.”
“Just appointing influencer is interesting, but don't think it has success,” added Saunders. “Unless it is part of a much wider strategy and everything is aligned.”
It’s a view shared by Ben-Shabat and Gautron. “Having her on the board that means you got to be really serious on how you listen to what she has to say,” said Ben-Shabat. “And in that sense, she has a huge opportunity to influence how Tod's develop products, how Tod's communicates to this audience. She could play a very important role.”
“Chiara can bring a fresh view, a new approach, from product collaborations to marketing and communications projects, and will, with no doubt, help to raise very interesting topics, especially for Gen Y and Z,” said Gautron.
“A successful board is an aggregation of very diverse people who all bring something different, who not only ask important questions but also have to commit (far beyond the usual four annual meetings) and really support a strategy on the long run; they use their network to the benefit of the company they represent, they all work together towards the same goal,” he added.
Helping Tod’s to understand the mindset of younger consumers is likely to be one of things that Ferragni will be responsible for, as well as product development and communication. But for Tod’s to really be able to turnaround its fortunes, Saunders and Ben-Shabat believe that Tod’s need a rethink of its brand image, and its core products.
“I really think that their products need to be realigned with this generation,” said Ben-Shabat. “One thing that is very important to Tod's, and to other brands, is to really understand the signals that we see coming from the market so you're not missing important trends. For that to happen, you really need like a major capability in-house that really follows this generation. You need to have a community of young people who are actually part of your product development and either by co-creation or by giving input or by giving a feedback on what you're doing.”
“They've got to think very carefully about what the younger consumer wants, and they've got to think how they develop products, collections and assortments that are relevant for that younger customer, if that's who they want to chase,” said Saunders. “They've also got to think of how their brand image connects with those younger customers, and they've got to then put that together into a cohesive strategy.”
And while the recent news of the appointment of Ferragni and LVMH’s investment may signal the start of a new chapter for the brand, will these changes be enough to help Tod’s turnaround its fortunes?
“The recent changes are very welcome; it may begin with Chiara Ferragni joining the Board but we think it may also be step one of some transformation with expected pragmatic inputs at other levels of the brand, so overall this is extremely positive,” said Gautron.
“On one hand, it's not rocket science, but on the other hand, we see how difficult it is to so many of these brands to actually catch up with this audience, and it is an audience that cares about a lot of things and that's what I think makes it extremely complex,” said Ben-Shabat.
“They have a range of issues that they care about. So, you've got to address all these things. When they like brands, they want to be part of the conversation. So how do you communicate with them. You need all these capabilities in house, to actually resonate with the generation that wants more than simple product.”
“When you look at the majority of Gen Z and you look at the Instagram, and the TikTok generation and what they're wearing it's not really kind of the ascetics that generation is attuned to,” said Saunders. “The brand kind of jars with some of what Gen Z is about. And that's a big problem that I always have with it. It looks very good on paper but how does your brand actually resonate with these younger consumers, and sometimes the answer is, it actually doesn't. So, there's a very big job of work to do to make that connection.”