Blockbuster sales, industry awards, and a recent New York Times profile have put Bottega Veneta creative director Daniel Lee in the spotlight. Those same elements paired with his new-found high fashion fame have led some to question – explicitly or otherwise – whether Bottega’s 34-year old wunderkind can go beyond the “it” bag, which is precisely the thing has brought about so much of the sales and praise being attributed to this relative new-comer to the big leagues of the fashion industry.
It is a valid question. After all, branching out beyond bags is largely what François-Henri Pinault, the Chairman and CEO of Bottega Veneta’s parent company Kering, and Bottega’s former chief executive officer Claus-Dietrich Lahrs (who has since been succeeded by Bartolomeo Rongone) aimed to achieve when they hired Lee a year and a half ago. As the New York Times’ Vanessa Friedman wrote this week, “In 2018, Mr. Pinault and [Mr.] Lahrs had decided that if the brand were ever to move to the next level, Bottega had to become known not just for leather goods … but also for its ready-to-wear.”
So, when the top creative spot was left vacant after longtime Bottega creative director Tomas Maier’s departure, they “started looking for someone who was really good at clothes.” As of July 1, 2018, Lee’s anticipated tenure was underway.
Part of the “irony” here, as Friedman states, is that Lee’s hottest selling creation so far is not ready-to-wear: it is a slouchy, supple leather bag called the Pouch, which, according to Kering’s recently-released annual financial report, has nabbed the title of “the fastest-selling bag in Bottega Veneta’s [54-year] history.” That same report revealed that of the $1.27 billion in sales that Italian leather goods brand generated in 2019, 83 percent came from leather goods, suggesting that the Pouch not only sold in 2019 – it sold really well. Rongone told the Times that months after the bag’s debut, the brand is “selling hundreds of [them] per week.”
Another irony in the smashing success of the Pouch bag and in Kering’s push towards Bottega Veneta-branded ready-to-wear is that the latter comes against the well-established reasoning that despite the dozens of outfits that brands send down the runway each season, garments are not the core – or even the second place – drivers of sales for most of the industry’s established fashion brands.
This brings us back to the question of whether Lee can successfully go beyond the “it” bag. Time will tell; Kering breaks down the revenue for its top houses, meaning that will be very clear what product divisions sales are coming from and where there is growth. This question ultimately raises another – equally relevant – one: does Lee (and Bottega) really need to go beyond the “it” bag?
Speaking in a strictly practical capacity, the need for ready-to-wear is … well, impractical. Kering’s annual report demonstrated the well-established fashion principle that despite the dozens of outfits that brands send down the runway each season, garments are not the drivers of sales. The revenues of Kering-owned brands – including Gucci, Saint Laurent, Balenciaga, Alexander McQueen, and of course, Bottega, among others – predominantly come from leather goods (i.e., bags). A whopping 53 percent of its than $17 billion-plus in revenue for 2019 came from sales of its brands’ leather goods. After that, the next biggest driver of Kering’s total sales for the year was shoes (18%), and then ready-to-wear (15%).
At Gucci, Kering’s largest label, 14 percent of its total $8.95 billion in sales for 2019 came from ready-to-wear. Now compare that to 57 percent of sales that are tied to Gucci leather goods. (18% comes from shoes).
Interestingly, despite a larger emphasis on ready-to-wear in recent years by top brands, including Gucci, the percentage breakdown for clothing sales versus leather goods has largely remained unchanged in recent years. For instance, for the 2012 fiscal year, 59 percent of Gucci’s sales came from leather goods, followed by shoes (13%) and ready-to-wear (12%). A few years later in 2015, the breakdown was similar: 57 percent of sales for leather goods, 14 percent for shoes, and 11 percent for ready-to-wear.
By 2018, in peak Alessandro Michele for Gucci splendor, Gucci’s ready-to-wear sales were up to 14 percent – with leather goods still amounting to 57 percent and shoes at 18 percent.
Meanwhile, for one of Kering’s other key brands, Saint Laurent, the ratio of sales for ready-to-wear versus leather goods is noticeably shrinking. The Paris-based brand generated 69 percent of its $2.21 billion in revenue from sales of leather goods in 2019, compared to 13 percent from ready-to-wear, a breakdown that is significantly skewed in favor of leather goods compared to say … 2014, during Hedi Slimane’s tenure, for instance, when 24 percent of its sales came from clothing and 44 percent came from leather goods. Even as of 2016, the percentage of ready-to-wear sales was higher: 23 percent compared to 53 percent for leather goods.
While rival LVMH does not break down revenues by its individual brands and does not separate its “fashion” and “leather goods” offerings in terms of its results, if an August 2017 report from Bloomberg is any indication, this general breakdown carries from one big brand to another in the industry. Louis Vuitton – the world’s largest single luxury goods brand and another one of the large, established houses that routinely shows ready-to-wear collections on a multi-annual basis – “knows fashion is a money pit and yet, keeps throwing money in it.” Citing Exane BNP Parabas figures, Bloomberg’s Robert Williams and Carol Matlack noted that “ready-to-wear generates less than $480 million of [Louis Vuitton’s] $8 billion to $9 billion in annual sales.”
These striking sales numbers – which drive home the point that the full collections of garments that brands trot out every season are, more often than not, loss leaders for their beefy accessories businesses – do not mean that there is not merit to the desire of Pinault to fortify the Bottega brand with stronger offerings on the ready-to-wear front and put forth a more comprehensive luxury brand.
Kering’s crown jewel, Gucci, after all, boasts a whole array of categories – from an expansive ready-to-wear collection, in connection with which it shows four core runway shows each year, to footwear and fragrances, among other offerings. It is those over-the-top runway shows (paired with pricey and expansive marketing efforts to promote the highly-limited clothing that is put on display during those shows) that have traditionally enabled brands like Gucci to create an aura of exclusivity and aspiration that positions them in the upper echelon of the fashion industry. More than merely a token, though, brands turn around and parlay that sense of fashionability, luxury, creativity, artistry, etc. tied to their names (and other trademarks) into more accessible – although still expensive – creations, such as handbags.
As of late, Bottega Veneta’s more accessible offerings – i.e., its hot-selling bags and buzzy women’s footwear – do not necessarily seem to depend on the cache built around the clothing shown on the runway either by Lee or his predecessor. That is partially because, to date, Bottega has been known as a leather goods brand. It is also because much of the recent buzz of the #NewBottega has been helped along by off-the-runway hype.
The interest in and sales of Lee’s accessories have almost certainly been spurred by their widespread adoption by celebrities, influencers, and editors. Rihanna, who yields just as much if not more cultural prowess than a runway show, has a Pouch bag. Kim Kardashian has worn the strappy, square sandals. Nary is there an influencer who has not been caught with the Pouch in her hand in recent months. The same can be said for Instagram-happy fashion editors, with the brand confirming that it “send[s] some bags and shoes to editors as ‘thank yous,’” per the Times, and “occasionally [sending] gifts [to] close friends of the house,” while noting that “some e-tailers, like Net-a-Porter and Matches had deals with influencers to promote products on their sites and might have facilitated the acquisitions.”
Strategic gifting aimed at building street cred and awareness is at the heart of the fashion business and the sales-driving buzz that brands depend on, and that is not changing anytime soon. At the same time, the enduring relevance of individual “it” accessories is fickle, and it certainly does not last as long as it did in the halcyon days of “it” bags, such as Proenza Schouler’s PS1 bag or the first iteration of Dior’s Saddle bag. And while this tactic has become a sure-fire way to reach younger, digitally-driven consumers, there is still clearly a reliance by brands on the traditional set up: putting carefully-crafted clothing on runways on a seasonal basis to create a halo effect for their more commercial offerings.
As for whether brands need to consistently rely on regular runway offerings to drive hype and maintain their luxury pricing power for leather goods and footwear, as well as for other key money-makers like licensed goods (i.e., eyewear, fragrances, etc.), that certainly seems to be the implication here (albeit a less environmentally sustainable one), even for a brand like Bottega Veneta, which has historically derived almost all of its appeal and its sales from leather goods.