International Supply chain

disruptions for the period 2002-

2022 for company « La Maison
Valentino »
ANAIS MIEZAN

M1-INBA | 26/01/2023
Table of content
Abstract

Introduction

I. Overview of Valentino’s Global Supply Chain

a. About Valentino
b. Valentino’s Operations Management
II. Disruptions faced by Valentino from 2002-2022
and strategies adopted to mitigate disruptions
a. 2008 Great Recession
b. Covid-19 Pandemic
c. EU energy crisis

Conclusion

Biography

PAGE 1
 Abstract

The paper below will cover the supply chain of one of the biggest luxury brands

out of Italy throughout a period of 20 years, this period will also include 3

disruptive periods. This paper will touch briefly on the history and facts about

La Maison de Valentino (Throughout the rest of the paper “Valentino”), then

cover the operations management of the brand, it will touch on the sales

throughout the years. The paper will also include a model of operations

management, this will give a pictorial view of how their operations

management works and another that will able to compare Valentino with

another luxury brand.

Overview of Valentino’s Global Supply Chain

About Valentino

The name Valentino stands for style. The label has produced successful
collections every year since its debut in 1962. The man behind the label,
Valentino Clemente Ludovico Garavani, was a talented fashion designer who
used his extraordinary talents to build a successful empire and is still favored by
the rich and famous.
What red is to Valentino is orange to Hermès. This signature his brand changed
the course of fashion history and the direction of the Maison. According to
legend, Valentino was fascinated by this color when he visited the Barcelona
Opera House from an early age. He clearly remembers a strong, flashy character
dressed in purple, which allowed him to recognize the effect of color on people
(Luxity, 2021).

PAGE 2
Valentino currently has official Pantone colors that are a mixture of 100%
magenta, 100% yellow and 10% black (Luxity, 2021).

Valentino’s Operations Management

Materials

Valentino's designs are often made of leather or wool, which is typically chrome
tanned to make it lighter and more durable and is primarily used for
Valentino's clutches, belts, jackets and shoes. Wool, on the other hand, belongs
to the ready-to-wear category, which includes cashmere knitwear and sweaters.

On top of that as brands look for sustainable solutions, many, (including

Valentino) are turning to renewable or biodegradable materials for new
collections. Leftovers and deadstock are also breathing new life into many
brands working to reduce their carbon footprint (Jill, 2022).

Valentino is doing its part by awakening an archive of sleeping fabrics with the
Valentino Sleeping Stock initiative (Jill, 2022).

Customers

"We want to open up the brand to different consumers," said Stefano Sassi,
CEO of Valentino Fashion Group, which includes Valentino and Hugo Boss, at
a meeting with foreign reporters (Reuter, 2008).

“With a view to the traditionally more affluent and less price sensitive
clientele...we want to open up to a more modern, international and price
sensitive consumer” (Reuter, 2008).

Valentino aims to appeal to 25-45 year olds due to its high price tag. Customers
belonging to a generation of international jetsetters. both women and men.
middle class and upper class.

Facilities

PAGE 3
Valentino has artisan workshops and certain manufacturing facilities dedicated
to apparel prototypes, leather items and footwear in Piedmont, Tuscany and
Veneto.

The brand is available in over 90 countries thanks to a capillary retail network

charted out over the decades of 160 directly-operated stores located in the most
elegant shopping streets in the world as well as in over 1300 points of sale.

Staff

2,680 Employees

Improvement

In the 1970s he chose the "V" as his logo.

His signature, along with his passion for red, has become synonymous with
class and haute couture, making him one of the most recognizable brands in
the world. His perfect women's dresses accentuate the hips, embellished with
bejewelled décolletés and romantic accents such as ruffles and embroidery,
conveying unconventional femininity and ultimate elegance, which is how he
lived his life. Became (Luxity, 2021).

Valentino has expanded the brand following many of his fashion groups,
launching a watch collection in April 2008.

Today, Valentino offers a wide range of luxury goods, from haute couture and
ready-to-wear to his extensive collection of accessories including bags, shoes,
eyewear, silk and perfume.

PAGE 4
Strategy

One of Valentino’s strategies is to keep Valentino at the same level that (the
founders) set it. Meaning high reputation, Haute Couture, delectable etc

One must remember that Valentino excellence is not only in haute couture and
ready-to-wear. It is also now in jewellery, perfumes, watches too (Tsai, 2018).

Disruptions faced by Valentino from 2002-2022 and strategies adopted to

mitigate disruptions

2008 Great Recession

The global financial crisis of 2008-2009 is commonly referred to as the "Great

Recession." It started with a housing market bubble caused by an overwhelming
amount of mortgage-backed securities pooling risky loans (Reuters, 2009).

Reckless lending has resulted in an unprecedented number of loan defaults.

Overall, the losses collapsed many financial institutions and required
government bailouts. Efforts to revive the economy were made through the
American Recovery and Reinvestment Act of 2009 (Reuters, 2009).

Before the Great Recession of 2008, Valentino had a specific demographic they
targeted, their target market was limited as it had only planned to carter to the

PAGE 5
wealthy, to keep the luxury style reputation. Valentino was a name that was
always seen at great events and fashion shows across the fashion cities of the
earth.

Every year they participated in the Paris and Milan fashion week, but in 2008
Valentino braced for the recession, the fashion house announced that it will not
show during Paris or Milan fashion week in the new year and will instead hold
"commercial appointments”.

During the recession Fashion house Valentino's finances could withstand the
economic crisis, according to a partner at Permira (the private equity fund that
owns the group). But current market conditions mean investors will stay longer
than planned. That was right, Valentino, being a strong brand, with years
behind them was and is well positioned to bounce back in the increasingly
polarized luxury market, while weaker brands are struggling with liquidity
issues and stiff competition (Jolly, 2009).

The recession caused a new trend to rise, “The startup minimalism” that has
become the dominant branding style in the direct-to-consumer world. It was
perfect for digital consumption on a small screen. It has a lot of sans-serif
characters and white space, and although it is reduced, it is warm. (Arnett,
2019)

Moreover, these brands were attractive. Their advertising and product copy
were friendly and colloquial. This felt appropriate as it is primarily run by
millennials, targeting people of the same generation, and creating shared
values.

Minimalism was also a feature of clothing that emerged from the recession.
Basic Clothing items like simple tees and navy-blue sweaters were pushed in
the fore front. With a 2013 launched brand, Cuyana reverently encouraged
shoppers to buy "less, better," but this wasn't the new impetus after the
economic shock (Arnett, 2019).

PAGE 6
Even though Valentino wasn’t affected this event, one could easily some
changes in the way Valentino started working. It was during this time that
Valentino launched into watches, as well as enlarging their target market.

Covid-19

The supply networks for luxury goods were significantly impacted by the global
COVID-19 outbreak (Shen and Minner et al, 2020). Luxury brands had to deal
with supply chain delays, factory and shop closures, trade show and fashion
week cancellations in the whirlwind of city lockdowns happening all over the
world. There were also other challenges, such as the increase in online sales,
the decline in travel-related spending, and issues with long-term commercial
agreements. All of them together made up an unprecedented situation that was
characterized by uncertainty and made it impossible to predict what will
happen in the near future (Shen and Minner et al, 2020).

Supply and demand issues can cause a domino effect whereby declining retail
sales result in suppliers not being paid, plant shutdown results in order
cancellations, and eventually the entire supply chain is affected (Shen and
Minner et al, 2020).

Valentino was able to find a way around it with a few strategies such as

1) extending the presence of Spring-Summer collections in-store well into the

months typically reserved for early sales of the Fall-Winter collections,

2) skipping the launch of some collections, and

3) developing new collections largely based on colour variations of models from

previous collections or avoiding new materials were required to find a solution
(to reduce time to market and allow the creative team to work at a distance).

4) the improvement in full price sales

5) the bolstering of the brand's individualized concierge service (which is also

available online and allows customers to enjoy a customized experience)

PAGE 7
6) most importantly the label's repositioning into the very high-end segment of
the market, initiated two years ago by CEO Jacopo Venturini.

Valentino made €1.231 billion in revenue in 2021, a significant 39.5% growth over
2020. At constant exchange rates, growth was 41%, while revenue increased by
3% from 2018 to 2019. Sales in the final quarter of 2019 alone climbed by 11%,
and in the direct retail channel of Valentino, they increased by 29%. In a press
release, Valentino emphasized that "December 2021 was the single most
successful month in the Roman label's history."

Valentino is concurrently expanding its clientele by luring younger customers.

The regions with the fastest growth rates were the Middle East, North America,
and Europe.

EU energy crisis

An unforeseen problem is affecting Europe's energy system. Russian gas

supplies, which are essential for power, industrial processes, and heating, have
been reduced by more than 80% this year. Since early 2021, wholesale prices for
electricity and gas have increased by as much as 15 times, having a significant
impact on both homes and businesses. The issue might get worse. The first
winter without Russian gas might be upon Europe soon, posing the threat of
substantially higher gas prices, gas shortages, and a severe economic downturn.

Factories, shipping, warehousing, and distribution are complex and energy-

intensive businesses.
Times have never been tougher for the fashion supply chain. Already affected
by widespread delays in the wake of Covid and the war in Ukraine, the lack of
availability of raw materials and disruptions to international freight routes, they
are now facing an energy and We are also facing rising labour costs. It puts
ever-increasing pressure on an already overwhelmed business.

PAGE 8
During crisis Valentino seems to have a few strategies and they seem to be
recycling it too.
Internal and external tactics were the two basic strategies that Valentino
utilized. While external ones were consumer-focused, internal ones improved
business procedures and culture, reduced costs, and improved product quality.
Valentino attempted to streamline operations, reduce costs, and in certain
circumstances, even lower pricing.
Valentino made the decision to take advantage of the crisis by entering new
markets and introducing fresh products. Valentino, built new locations all over
the world. The move was successful, and Valentino is currently doing fairly well
despite the global economic downturn caused by the energy crisis. To appeal to
a less affluent demographic, Valentino created a new, less costly product range
(Som, 2022)

Presently, more than 200 directly owned outlets for Valentino are located in 100
different countries. The label opened 15 new locations in 2021, and it plans to
open another 21 locations, mostly in Asia (China and other countries), but also
in Europe, in 2022.

Adding to their various strategies, Valentino has followed in the footsteps of

French luxury giant LVMH (LVMH.PA) by spending nights to save energy and
create a "green" mark. Valentino decided to turn off the store lights early.
Lights in about 95 Valentino boutiques worldwide will have to be turned off at
10pm each night, the company said Friday, estimating a reduction of more than
800kWh in energy use per day (Reuters, 2022)

PAGE 9
With the diagram above, the 4 v DIAGRAM was used to show the difference
between two luxury power houses, one from Italy (Valentino) and another from
France (Louis Vuitton). Valentino shows to have high repeatability volume
compared to Louis Vuitton, that has a higher unit cost and low repetition
(counterfeits are not included in any of these findings). Valentino scored high
in variety due to them branching out to accessories, watches, perfumes and
including “more affordable” items for the middle class. Valentino variation in
demand is higher than LV, because of its flexibility, anticipation and how it is in
touch with each demand from either public or after market research. For the
visibility both brand scored high due to the fact that the satisfaction is
governed by the customer’s perception and the waiting tolerance is short.

Conclusion

In conclusion, due to its size, rapid growth, and enticing margins, the luxury
market is one that (from the research while writing this paper) practitioners,
investors, and scholars are interested in. The global luxury market was
estimated to be valued 1.2 trillion euros in 2019 with an average annual growth
rate of nearly 4%. (McKinsey, 2019). Luxury goods are produced in today's
globalized economies and markets through extremely intricate supply chains
that span the entire world and involve a wide range of participants, including

PAGE 10
numerous small-scale, highly specialized suppliers who are closely supervised
by powerful brand owners such Valentino. For instance, raw materials may
come from one nation and then be processed in another (for instance, leather
from Australia or Latin America may be tanned in Italy).

With all that said the challenging times throughout the past 20 years has
allowed Valentino to strengthen their brand and business by lowering costs,
better controlling inventories, getting out of underperforming areas and finding
new areas they can proper in.

Biography

1- Jolly, D (2009, October o1) Valentino owner say company will survive
recession.
https://www.nytimes.com/2009/10/02/business/global/02valentino.html
2- Jill, E (2011, December 15) Valentino becomes the first couture house to

offer deadstock to the public. https://the-ethos.co/valentino-first-

couture-house-deadstock/
3- Luxity (2021, July o7) Fashion facts about Valentino.
https://luxity.co.za/fashion-facts-about-valentino/
4- Mira, N (2022, March 21) Valentino climbs back to pre-pandemic levels
in 2021. https://us.fashionnetwork.com/news/Valentino-climbs-back-to-
pre-pandemic-levels-in-2021,1389562.html
5- Reuters ( 2009, April 17) Valentino Fashion Group 2008 turnover up 3

pct. https://ww.fashionnetwork.com/news/valentino-fashion-group-
2008-turnover-up-3-pct,60495.html
6- Reuters (2008, May 08) Galmourous Valentino targets less rich client.
https://ww.fashionnetwork.com/news/Glamorous-valentino-targets-
new-less-rich-client,41981.html

PAGE 11
7- Shen B, Minner S, Chan HL, Brun A. Logistics and supply chain
management in the luxury industry. Transp Res E Logist Transp Rev.
2020 Nov;143:102095. doi: 10.1016/j.tre.2020.102095. Epub 2020 Sep 30.
PMID: 33013184; PMCID: PMC7525258.

8- Som, A (2022, March 01) The Luxury Industry: in crisis or thriving?

Https://knowledge.essec.edu/en/strategy/luxury-industry-crisis-or-
thriving.html
9- Tsai, C (2018, May 01) Brand Strategy- Valentino

10- Valentino, The Store. https://www.valentino.com/en-us/world-of-

valentino/the-stores
11- Wightman-Stone, D (2022, January 18). Valentino “streamlining” as it
restructures business.
https://fashionunited.com/executive/management/valentino-
streamlining-as-it-restructures-business/2022011845107
12- Yuu (2016, Jan 05), Case study and Business analysis of Valentino and
Simone Rocha in the global fashion marketplace.
https://issuu.com/yuu28/docs/report_print_yuu_4c96a5c1b92c7b

PAGE 12