The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
PARIS, France — One early Sunday morning last fall, in the middle of Paris Fashion Week, Stella Bugbee, editor-in-chief of New York magazine's fashion and culture publication The Cut, sat comfortably at her home in Brooklyn, flicking through images of Balenciaga's Spring/Summer 2020 show. So stirred — amused? enamoured? — by what she saw, she orchestrated a three-way call between herself, Fashion Director Rebecca Ramsay and Critic-at-Large Cathy Horyn, who were first-hand witnesses to Demna Gvasalia's lamé bell gowns gliding down the blue velvet set that brought to mind the chambers of the European Parliament.
She was not alone in her manic enthusiasm. "Cathy wanted to write about it, Rebecca and I were dying to shoot it," Bugbee said. "The sheer range of it felt really funny, the dresses were so outrageous...the weird denim looks...Everything else that we’d been seeing felt so predictable."
"It felt like a troll, almost," she added. "But more sophisticated."
Four years into his tenure at Balenciaga — whose founding designer's influence on silhouette remains unmatched more than 100 years after he opened his atelier — Gvasalia continues to intrigue, and occasionally surprise, the fashion industry. Luxury consumers, too, remain under the spell of his one-off concepts that are as much a form of media as they are fashion, from those flare-covered platform Crocs to the puffed-up triangle bag.
This year, the label crossed the billion-dollar sales mark. But can Balenciaga continue its growth trajectory and become a multi-billion-dollar megabrand for parent company Kering?
In the past decade, the model for success at the upper end of fashion has changed significantly, with Alessandro Michele at Gucci offering the clearest template for a new approach. The Italian house, also owned by Kering, made the case for aesthetic disruption without dismissing the underlying brand DNA. Michele was given the freedom to completely reimagine the way Gucci looked and felt while continuing to rely upon, and reinterpret, symbols and core products that had long been revenue drivers. (Consider Michele's fur-lined horse-bit loafers, or the double-G belt.)
At Balenciaga, Gvasalia's appointment, which happened less than a year after Michele's, followed a similar strategy. The designer was also expected to disrupt, his work at collective Vetements proving that the Margiela alumnus, who also spent time at Louis Vuitton, understood what it took to create anti-fashion fashion tailor-made for the digital age.
Vetements' pieced-together vintage Levi's, distinguished by a mullet hem, sold out season after season, despite often costing well over $1,000. Alongside Virgil Abloh, Gvasalia came to represent streetwear's transformation into a luxury product. But while Abloh, who studied architecture and approaches fashion with the eye of an industrial designer, has essentially used his post designing menswear at Louis Vuitton to do an amplified, well-funded version of his previous work, Gvasalia — whose background is much more traditional — had the tricky task of fusing everyday clothes with couture ideas first proposed by the house's namesake.
Balenciaga is not Gucci: it may have as deep and compelling of a history, but it is not so well-known.
His challenges didn’t end there. Balenciaga is not Gucci. It may have as deep and compelling a history, but it is not so well-known by the average luxury consumer, who may be less likely to recognise and buy into its core tenets: volume, sculpture and specific silhouettes, not items.
When Gvasalia arrived at the end of 2015, analysts estimated that the brand was generating around €350 million while still recovering from the departure of longtime creative director Nicolas Ghesquière, who decamped for Louis Vuitton in 2013. (American designer Alexander Wang's two-year stint passed by as quickly as an Instagram Story.)
During Ghesquière's 15-year tenure, Balenciaga was the toast of critics and the favourite of fashion insiders. Ghesquière's biggest commercial hit, the motorcycle bag, emerged as a classic with clout rivalling the Fendi baguette or the Celine box bag in the peak It-bag era. But under his watch, Balenciaga remained sub-scale compared to the group's major money-spinners.
Gvasalia’s early collections were promising. Along with outerwear and apparel that spliced his elegant mockery of Thatcher-era fashion with Balenciaga’s revolutionary shapes and techniques, he began dispensing meme-able after meme-able hit, including merch like a Balenciaga sweatshirt, designed in the likeness of Bernie Sanders’ 2016 campaign logo, and sneakers. The Triple S trainer, which helped kickstart Balenciaga’s men’s business, became the leading “dad” sneaker in a sea of worthy competitors when it debuted on the runway in January 2017. Along with the Speed sneaker-bootie, the Triple S is now a significant driver of sales: one that it has come to rely upon.
While these easier pieces read as accessible to an irony-loving audience, they were also expensive, with hoodies exceeding $750 and some sneaker styles hovering just under $1,000.
But that still wasn’t enough to get the brand, which lacked the retail network and merchandising strategy fuelling its competitors, to the next level.
Cédric Charbit | Source: Ezra Petronio
Enter Cédric Charbit, a longtime Kering executive and former head of merchandising at Saint Laurent, who joined the brand at the end of 2016, when sales were in the vicinity of €400 million, according to previous reports. (Kering does not currently break out sales for Balenciaga or any of its smaller brands, choosing to report on them as a group each financial period.)
“The magnitude of Gvasalia’s vision was clear,” Charbit, said, but there was a “misalignment” between the business and creative sides, meaning that the corporate and creative teams were not working hand-in-hand.
He set out to realign. By 2019, Kering said it expected Balenciaga to surpass $1 billion sales, more than doubling its size in the course of just three years.
To achieve this lofty goal, Charbit expanded the retail network dramatically, increasing the global store fleet to 180 stores, up 63 percent from 110, over the course of his three-years leading the label. While he would not disclose the brand’s wholesale-retail split, he said that, generally, he believes 25 to 30 percent wholesale is healthy for a luxury brand. With wholesalers, Charbit said there are no special exclusives or what-have-you, but that each arrangement needs to feel collaborative, like an early project with Colette or a more recent one with Farfetch. “Right now, there is more demand than supply,” he said.
He also bet big on menswear — shoes, luggage and ready-to-wear — which now makes up over 30 percent of the business and is a big hit in Asia, the region that is driving a significant portion of sales. (He wouldn’t say how much.) He also capitalised on Gvasalia’s ability to hit right on the zeitgeist. The brand boasts over 10.7 million followers on Instagram, up from 2.6 million in the same period. And today, 60 percent of Balenciaga’s customers are Millennials, and 70 percent of the sales are generated by that group.
Balenciaga’s low-fi approach to social media has helped with its engagement.
“Balenciaga’s content strategy can be described as consistent if not bizarre, in terms of luxury fashion,” said Danya Klein, vice president of brand partnerships for social analytics firm Preen.Me. “This is not your typical well-curated, 'perfect' Instagram page. Images don’t have captions, the brand rarely tags other users in the account, and none of the posts have links to shop the look.” And yet, high engagement per post — measured by likes and comments — proves that the approach is working.
Balenciaga's content strategy can be described as consistent if not bizarre, in terms of luxury fashion.
But unlike Gucci, Balenciaga doesn't have a stack of iconic products that can be reimagined season after season to sell to that audience. There is no equivalent to the Gucci loafer, the Burberry trench or Chanel's 2.55 bag. The motorcycle bag might be considered a classic among handbag collectors and fashion insiders, but it has yet to display serious resale value. And Gvasalia is not a basics purveyor: his products are not staple items, which means building a core collection à la Saint Laurent, filled with evergreen Chelsea boots, skinny jeans and denim jackets, was out of the question.
“We are here to challenge the status quo,” Charbit said.
That meant creating a new model that played to Gvasalia’s ability to spit out hit items. Charbit says there have been seven Balenciaga major hits thus far, including the Triple S and Speed sneakers, the Hourglass bag and the Sanders-inspired sweatshirt. Charbit sees some of these items as the opposite of timeless.
"After three seasons, it should go," he said. "The mission is about providing newness."
Consider the handbag strategy. Instead of relying on familiar, universally popular silhouettes, the merchandising team has focused on selling Gvasalia’s concept-driven runway styles.
Today, the two top-selling Balenciaga bags are Gvasalia’s designs, not the old-reliable moto, which now makes up less than five percent of overall sales. “We’re not using the usual tricks,” Charbit said.
But empowering Gvasalia to lead product, not just conception, is only one element of the formula. Scaling also required reconfiguring the supply chain — which had not been a priority for the previously small brand — to focus on speed-to-market. (Since Charbit’s arrival, the team working on the supply chain has grown the most in size.) Lead times have been cut by 30 percent, with product arriving in stores more frequently than in the past.
“People see something, and they want it,” Charbit said. “We need to cut the timing between what you see and when you will be able to get it.”
The hard part comes in maintaining. Gvasalia has an uncanny ability to create emotional one-off products, but there is no guarantee he will be able to consistently do so. Trends, like dad sneakers, come and go, and while hero products often have a longer tail than observers may imagine — certain regions of the world adopt products more slowly than others — newness remains an imperative. For instance, the brand’s “Speed” trainer is dipping in popularity with influencers and consumers alike, according to visual data firm Heuritech. (There was a 5 percent decrease in posts among those with more than 500,000 followers and a 11 percent drop among users with less than 1,000 followers.) However, the triangle bag’s visibility on Instagram increased by 58 percent in 2019.
Balenciaga has gone through one of the most significant growth booms of recent industry history.
“Balenciaga has gone through one of the most significant growth booms of recent industry history, and I believe the brand is continuing to grow in the double digits, despite consumers walking away from bulky sneakers,” said luxury analyst Luca Solca. “The key to maintaining momentum for Balenciaga is to continue to feed its product innovation pipeline and create more blockbuster successes down the road.”
And as the brand expands, so has discounting, at least in the US. During the May 2019 sales season, Balenciaga.com’s US website had more products marked down than it had in the past two years, according to e-commerce tracking firm Edited. However, the size of the reductions was not as aggressive as they had been in the past.
As high-fashion moves away from logo designs and other streetwear tropes, the key will be to remain creative-led, diversifying enough in both category and region in order to ensure that Gvasalia has the space to make what he wants to make: "I'm not going to Demna, asking him about his next bestseller."
However, keeping the grip loose will not be easy. Even if some of Gvasalia’s trendy items morph into iconic designs, it will take years for them to take permanent hold. Until then, it’s all about the new.
The Spring/Summer 2020 show, which happened just weeks after Gvasalia announced he was exiting Vetements, brought hope that focusing solely on Balenciaga may allow him to keep apace. Now, he only has one place for his original content.
“The brand may be 103 years old,” Charbit said, “but it’s about things that have not been seen before.”