SMCP, the Parisian brands group comprised of affordable luxury labels Sandro, Maje and Claudie Pierlot, has built a business that can serve as a blueprint for the next generation of contemporary fashion.
The company filed its IPO with Euronext Paris earlier this year, and as it begins trading shares on the stock exchange today, the brands group has been given a valuation of $2 billion. Last year, SMCP grew sales by 16 percent, doubling them over three years to $925 million. As sales grew, the company expanded outside of its home base of France. Thanks to a global e-commerce presence and a network of 1,223 stores, international sales were boosted by 20 percent, and those sales now account for 54 percent of business.
“This success confirms the relevance of our business model and strategy that aims to pursue organic growth, expand our network in our key markets, accelerate on digital, menswear and accessories,” said president and CEO Daniel Lalonde in a statement in September, at the time the company filed for its IPO.
“Accessible luxury,” while nice in theory, has been identified as somewhat of an oxymoron, and squeezed as a formidable middle territory between true luxury and the fast-fashion brands that quickly churn out knockoffs. Brands that play in the arena, like Michael Kors and Coach, have had to rethink strategies to right slipping sales. But the problem is largely concentrated in the U.S. retail industry, where department stores are sinking and dragging their wholesale brands down with them. Overall, the global market for affordable luxury is growing at a 4-percent-a-year clip, outpacing the overall luxury market that’s growing at a rate of 2 percent annually.
Brands that want to survive the wholesale shakeout have been forced to rethink their business models, like Theory, which launched a “2.0” program to position itself for growth. SMCP’s strategy is an example of forward, global thinking.
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Think like a fast-fashion brand
SMCP’s brands’ positioning is that they blend luxury-quality clothing with a fast-fashion production cycle. SMCP brands have a production cycle of about three months — longer than Zara’s two-week cycle, but faster than most traditional brands, which go from design-to-sales-floor in between six and 12 months. They also mimic the cadence of brands like Zara and fast-fashion online retailer Boohoo by adding about 25 new styles on a weekly basis.
For all fashion brands, speed has become critical in getting relevant product in front of customers at the right time.
“Speed has always been the bane of the fashion cycle over the years,” said Erich Joachimsthaler, CEO of branding agency Vivaldi Partners. “It’s not just Zara, it’s how we all shop these days.”
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To get products made that quickly without making them cheaply, SMCP manufactures most products in Europe and sources some of its basics, like T-shirts, from Asia.
Own the rising middle-class Chinese market
As China’s luxury shoppers are spending more money domestically, luxury brands are finally starting to test the waters of e-commerce there.
Beyond the well-known logos like Gucci and Louis Vuitton, affordable luxury is having a moment in China. According to a report by Daxue Consulting, “expensive, but not too expensive” is the sweet spot for modern Chinese customers.
“The middle and upper-middle class account for the majority of the urban households in China,” said Natasha Zhang, an analyst at Daxue Consulting. “Many in the middle and upper-middle class may save their salary to purchase luxury items, however, they will not purchase a large number of luxury items. Better design, high quality and affordable luxury brands are in their favor.”
SMCP grew its e-commerce business by 80 percent last year, after opening up stores for Maje and Sandro on Tmall. Overall, the e-commerce business for the company accounts for 10 percent of business, but in its China and U.S. markets, online business is worth 15 percent of overall sales.
In store, SMCP plans to up the number of physical retail locations in China from 221 to closer to 400 over the next few years, to match the number of stores it has in Europe. The expansion is coming with the guidance of local knowledge: SMCP is partly owned by the Chinese textile manufacturing firm Shandong Ruyi, which has helped shape its strategy there.
Nip wholesale reliance in the bud
SMCP’s main brands, Sandro and Maje, were founded in 1984 and 1998, respectively. Until the early 2000s, the brands were sold entirely through retail networks of department stores and speciality boutiques.
Now, the company is vertically integrated, operates its own e-commerce stores and store network, and direct retail sales account for 94 percent of business.
That level of control feeds to the brand’s other strengths, like responding quickly to customer trends and knowing where to expand geographically. For fashion brands, a business reliant on wholesale means you’re distanced from your customers and wed to the performance of those retailers.
“Fashion brands need to follow the money and follow their customer,” said RO NY founder Rony Zeidan. “That means rethinking retail partners, and a lot of times it means convincing your customer to come to you.”
