Kering SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Enhancing E-commerce and online presence: With the advent of technology and consumer lifestyle becoming more digitalised, online shopping is new craze and need of the hour. Brands are enhancing their online reach and developing their e-commerce platform to expand their geographical reach out the customers in a more personalised manner. Kering presently represents about 10% of the global luxury goods market. This can be improved by improving online activities by providing improved online content. As a part of achieving this goal, Kering announced in Novemeber 2018, that it was planning to bring all the e-commerce activities handled by Yoox Net-a-Porter (YNAP) back under the purview of the group by the first half of 2020. The group had been working in partnership with YNAP for the past seven years and the decision to end the joint venture agreement is a result of a new e-commerce internalization strategy being implemented by Kering. Apart from this, advertisement and increased social network activities can also provide good publicity to the brand worldwide across a common platform.

2. Digital transformation to bring new opportunities: Kering is placing great emphasis upon digitalization as a bold digital strategy has become the difference between success and failure within the luxury fashion segment. Consumers in this fast moving fashion era are seen to look at the overall digital customer experience provided by brands as a decisive factor for making purchases. Developing a unique customer relationship and providing exclusive offers have thus become very important. Kering has thus worked upon several aspects of its digital strategy which includes an improvement of its in-store customer experience. The luxury house has set up an alliance with Apple for the developments of a group of apps for its employees which will enable them to give customers customized recommendations and also improve the payment experience. A number of Client Service Representatives teams have also been set up to deal with customer requests. The company is also working on internalizing its e-commerce activities. These transformations will open up new opportunities for Kering by enhancing the overall digital experience received by customers. Efforts made till the first half of 2018 have already resulted in the company’s e-commerce sector generating as much as 6% of its overall sales.

3. Kering’s Sustainability Strategy: Kering aims to emerge as a more sustainable and more responsible brand by 2025. This will be focused more on reducing consumption and giving more importance to human resources. The group plans to incorporate new technologies and processes and follow stringent norms to for environmental conservation. They will focus on high quality collaboration with stakeholders in order to promote ethical and social practices. It will focus on innovative alternatives and influence the entire industry and sharing its knowledge using open source approach. These initiatives of Sustainable growth will attract investors to invest more in the company. These will also attract customers who are conscious for protecting the environment.

Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Strong focus on sustainability reporting: Kering has always been strongly inclined towards maintaining sustainability for its products. The company has been a member of the United Nations Global Compact since 2008. As a result it is always conscious of the environmental impact of its activities. The company has set up the Kering Sustainability Principles which the company suppliers have to follow at all times. The process of shifting to renewable sources of energy is progressing rapidly and a transparency in its supply chain has been achieved by making the sourcing of all its raw materials, like cotton, 100 % traceable. The company’s environmental costs have gone down by 14% since 2015, with a goal already in place to reduce it by 40% by 2025. Kering has also achieved the distinction of being the world’s second most sustainable company at the Corporate Knights Global 100 index 2019. It was also awarded the #1 rank in the Luxury and Apparel and Accessories sector for the second time in 2019.

2. Renewable technology and waste management: Sustainable growth along with environmental protection is the need of the hour. Considering Paris and France environmental conditions, Kering has to adhere to environmental standards. Recycling is an emerging trend in France. With the growing urban population the waste generated out of the production process has to be efficiently managed. Customers are becoming more sensitive to environment friendly brands and therefore Kering has to stick to environmental norms in order to develop its customer base. France provides subsidies to improve a company’s renewable technology. Kering investing in renewable technology to contribute in environmental conservation along with creating a supply chain that is completely traceable. The company has also changed its environmental accounting method and setup several climate goals. However, the exponential growth of the company across brands is proving to be a strong hurdle as it tends to negate any progress that the company makes in reducing it environmental impact.

3. Ethical raw material sourcing: Ethical raw material sourcing is extremely important for luxury brand houses. This is primarily due to the brands higher price points and lower sales volumes. Consumers pay more attention when a large brand is unethical in its sourcing. According to Rupert Hodges, the Oritain executive director, luxury products stand out from the rest precisely because consumers expect the quality and origins of their materials to be different. Consumers thus appreciate it when the source of the raw materials is made available to them. In fact, supply chain traceability has become an almost driving force within the luxury industry, with customers being more likely to buy from an ethical brand. Kering too has recently forayed into sourcing raw materials ethically. It has partnered with Supima, Albini Group and Oritain in 2018 for the procurement of organic cotton for product manufacturing. These partnerships have allowed Kering to ensure that the cotton it is sources is procured sustainably.