Bulgari overhauls its distribution
Bulgari is swiftly moving closer to the typical Louis Vuitton business model, with a distribution blueprint that is increasingly selective and controlled. The Italian jewellery label, bought by the LVMH group in 2011, is in fact in the midst of an in-depth overhaul of its distribution network. For over a year, Bulgari has been withdrawing its jewellery collections from its habitual multibrand retailers, not without causing a certain amount of displeasure among them.
Bulgari began to deploy this new strategy in spring 2018. In the last few years, the Roman label had started to sell its most prestigious jewellery collections uniquely through its own boutiques, but the more affordable lines, like for example B.zero1 and Bulgari Bulgari, had been still available at multibrand jewellery retailers until recently. A year and a half ago, Bulgari decided to put a full stop to selling jewellery through the wholesale channel.
“We wish to concentrate jewellery [sales] exclusively in our monobrand stores, while in the past our collections have been sold through the wholesale channel in the USA and in Europe. We are keen to tap multibrand retailers where their expertise is stronger, for example in watches. Conversely, jewellery must be at the heart of our brand, hence of our own stores,” Bulgari CEO Jean-Christophe Babin told FashionNetwork.com.
Downsizing the wholesale network
Part and parcel of the new strategy is a drastic downsizing of Bulgari’s wholesale network, which is set to be cut in half: “Previously, we were sold via some 600 multibrand stores. We will reduce the number to 300, and they will only sell our watches. It is a three-year-long process. We began it a year and a half ago, and we are planning to complete it in another year and a half. It is a matter of identifying the best partners,” said Babin, who also underlined that, in Asia, Bulgari watches and jewellery are already sold separately. A watches retailer in Asia, he observed, is able to make a fine living with watches alone.
Bulgari’s fragrances are also involved in this distributive make-over. The number of stores selling the label’s perfumes is set to diminish from 24,000 to 18,000.
Babin isn’t worried about a shortfall in sales volume: “In the short term, we will lose some market share, but our stores’ revenue growth is so strong that they will enable us to compensate for this. Our customers will shift to our own stores and our e-shops. From the point of view of brand perception, it is very important. This reorientation will also go to the advantage of our watches business, since our partners will not yield to the temptation of selling jewellery too."
Bulgari has accelerated the deployment of its e-tail business, which was launched in 2006 in the USA and currently covers eight countries. “It has become our number one store, with a growth rate in excess of 10%. We wanted to make it easier to buy jewellery online, by introducing 3D images, 24-hour returns and a genuine integration with the operations of our physical stores,” said the CEO of Bulgari.
“Limiting the impact”
Regarding the impact on sales of the reduction in the number of retailers, in October, at the presentation of the LVMH group’s quarterly results, Group CFO Jean-Jacques Guiony, stated that, in the watches and jewellery division, “Bulgari’s organic growth remains very strong, more or less at the same levels of the first and second quarter.
"We had an impact of about, I’d say, 2% or maybe a little more from the cleaning up of the wholesale channel, an effort which is ongoing both for jewellery and fragrances. It isn’t over yet. We are keen on limiting the impact.”
Guiony added that the effort “is being spread over a very long period of time. It will therefore have some effect on Bulgari's future growth. But, if we look at [Bulgari's] monobrand stores, their growth is very strong, with significant double-digit increases. We think we are on the right track, and we’ll continue in this direction.”
In the first nine months of 2019, the watches and jewellery division of the LVMH group recorded an organic sales growth of 4%, reaching a revenue of €3.2 billion, driven by the jewellery category. After being acquired by LVMH, Bulgari doubled its revenue in five years, growing from €1 billion to €2 billion between 2011 and 2016. By the end of 2019, the label will be operating nearly 324 stores worldwide, between directly owned and franchised ones.
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