High-end Italian footwear group Tod’s is striving to halt a trend of descending revenue figures. Changes in the luxury shoe segment have affected the group but some new initiatives are in place to turn its fortunes around.

In August, luxury footwear group Tod’s reported a 4.7% decline in sales revenue for the first six months of 2019 compared to the same period in 2018. The flagship brand, Tod’s, was down by almost 10% year on year. For fiscal year 2018, the group’s sales totalled €958.3 million, down from the year before when they totalled €963.3 million, and the 2017 figure was down 4.1% from fiscal year 2016.

This is not a trend to celebrate, but Tod’s unflappable chief executive, Diego Della Valle, does not seem too concerned. Despite what he calls a “fiercely competitive landscape” (more about that in a moment), Tod’s has spent the last year implementing new initiatives and philosophies that promise to turn next year’s numbers around.

Competition in luxury footwear

The luxury footwear market poses a particularly challenging dynamic between consumers and brands, according to Mario Natarelli, managing partner of marketing agency MBLM. He says this is because luxury brands do a poor job of building emotional bonds with the customers.

In MBLM’s recent Brand Intimacy Study, luxury brands ranked second-last out of 15 industries. “This may seem surprising considering the iconic nature of these brands,” Mr Natarelli tells World Footwear. “When you dig deeper, you see that they typically use anti-marketing strategies. Luxury brands, especially any with long traditions, like Tods, are rethinking their values and ethos to find ways to compete.”

Speaking in August, Mr Della Valle attributed the lower half-year results to money spent on increasing the brand’s visibility, particularly among younger consumers, who he said are now the “major spenders on footwear”. This investment has been necessary, he continued, because of the “fiercely competitive landscape, where the leading global brands are increasingly prioritising leathergoods and, even more, footwear”.

In Mr Della Valle’s comments, he did not mention any competing brands by name. But a survey of what is happening right now in the luxury sector suggests a few standouts. Loro Piana, for example, has been having quite a year. Long known as an Italian luxury brand specialising in cashmere and wool clothing, Loro Piana was bought by LVMH in 2013. At the time, coverage of the $2.6 billion deal made no mention of shoes. LVMH emphasised it was absorbing six generations’ experience and access to some of the world’s most exclusive raw materials.

This year, however, Loro Piana surprised New Yorkers with a pop-up footwear shop in the city’s Meatpacking District. Called The Long Walk Store, the space presents Loro Piana’s iconic Open and Summer Walk shoes, along with other sneakers and accessories. It was there that Loro Piana debuted its made-to-measure personalisation programme through which consumers select from a variety of colours, linings and materials — and even letters, if monograms are desired.

Annual reports from LVMH from 2014 through 2018 say little about Loro Piana other than store openings and good general growth. But this year, in reporting first half 2019 results, the Paris-based group said: “Loro Piana recorded steady growth with, in particular, the success of a new personalised shoe service and a temporary boutique in New York.”

LVMH did not provide specific numbers but these must have been significant: Loro Piana’s temporary location was intended to last just under two months, from mid-May to early July, but has been extended through the rest of this year, remaining open until January 5, 2020. At that point, the pop-up will close and construction on a permanent store will begin.

Pop-ups as a concept may be adding to the competitiveness of today’s luxury shoe market, as exclusive brands are able to more easily mobilise and reach a wider customer base. Tamara Mellon, the co-founder of Jimmy Choo, who is now building her own eponymous brand, has been taking a mobile store across the US, from Boston to Los Angeles. The ‘Mobile Closet’ is intended to give consumers a chance to touch, feel, try and buy shoes that are typically sold online.

According to Fortune magazine, Tamara Mellon raised $50 million in series C funding, and plans to use some of the capital to open five stores by the end of 2021. In the meantime, the company expects the Mobile Closet to attract new customers and to see a substantive boost in website traffic and sales.

Mr Della Valle might also be feeling the pressure from flagship LVMH brand, Louis Vuitton, whose autumn-winter 2019 show by Nicolas Ghesquière at the Louvre showed the brand’s relevance to a spectrum of consumers. According to LVMH, there is “remarkable momentum at Louis Vuitton; profitability remains at exceptional levels”.

Gucci footwear is also on the upswing. According to Kering financial reports, most of the brand’s main product categories showed growth in the first half of 2019, but particularly leathergoods and jewellery. “Sales of shoes were up sharply year on year,” the parent group said, “despite extremely high bases of comparison and fierce competition.”

Or consider Armani. Some years ago, Giorgio Armani paid tribute to Tod’s when he began to express an interest in including more leathergoods and footwear in future Armani collections because, he claimed, footwear ranges are “easier” to make than clothing collections, which have to change constantly. “Look at the Kelly bag by Hermès or the classic men’s moccasin by Tod’s,” he said. “They are eternal; they never go out of fashion.”

Bottega Veneta is also back in the luxury footwear fight. Following last year’s appointment of Daniel Lee as creative director, Bottega Veneta mules have been flooding social media and fashion circles. Vogue declared that Mr Lee’s square-toe shoes had become “It” items overnight.

The numbers back this up. Parent group Kering reported that, while Bottega Veneta’s overall first half of the year revenue was down 1%, when pre-autumn shoes hit the shelves in May the numbers began to rise. Second quarter earnings were up 3%. Women’s ready-to-wear and shoes were gaining traction due to “renewed creative content”.

So, yes, the field of luxury footwear does seem to be getting a little extra crowded lately. To stand out in this landscape, Tod’s has been busy improving consumers’ shopping experience and expanding its shoe selections.

Evolving how consumers shop

Tod’s Studios is Tod’s most recent major effort to keep the brand visible and relevant. This boutique flagship store overlooks Via Montenapoleone in Milan and aims to engage consumers with the ‘story’ of Tod’s — its shoes, its ethos, its history.

A semi-circular pop-up area is what the company calls “the heart and soul” of the boutique, with video screens “to tell a multitude of stories, breathing life into the sets created in the shop”. Capsule collections, guided activities and previews of upcoming seasons will be presented in a futuristic amphitheatre designed to represent an Italian luxury goods workshop.

The opening of Tod’s Studios in May is an important milestone for the company. Mr Della Valle said the “highly innovative concept will enable the transformation of the store into both a communication and customer service tool.”

For consumers unable to get to Tod’s Studios, or the group’s similar concept instalments — Tod’s Apartment in London and Tod’s Library in Manhattan — the company is also investing in making it easier and more enjoyable for consumers to shop online. This is one area that is already paying off; despite falling overall numbers, ecommerce has been steadily growing.

More shoes, more often

Tod’s has long been a seasonal company, putting out a collection every six months or so. In early 2018, Mr Della Valle alluded to plans to augment that. “We are increasingly convinced that our business model to present more than two collections per year is effective,” he said, while commenting on fiscal year 2017 results. A few months later, in September last year, he unveiled Tod’s Factory, a series of collaborations with artists on capsule collections to supplement Tod’s more traditional biannual collections with fresh offerings every six to eight weeks.

The debut capsule collection was called Alessandro Dell’Acqua x Tod’s, and the most recent collaboration is with Israeli fashion designer Alber Elbaz. Mr Elbaz’s “Tod’s Happy Moments” collection is splashed colourfully all over Tod’s website, with playful short videos and charming vivid photos of sequined shoes in quirky poses. Before the launch of Tod’s Happy Moments, Mr Della Valle said the collaboration was “an important step forward” and referred to Mr Elbaz as “one of the most important designers”. Since its launch, he said: “Tod’s Factory’s operating model is delivering on its promises and moving in the right direction.”

High expectations

His grandfather Filippo Della Valle started a shoemaking business in the1920s; it is the same business that Diego Della Valle has since built into Tod’s. In an interview with Financial Times correspondent Rachel Sanderson at last year’s FT Business of Luxury Summit, he made clear that he will avoid sacrificing the brand’s rich history in pursuit of trends. 
The challenge is, as he put it, to balance the company’s “DNA, story, new ideas, capsule collections [and] limited editions”. These initiatives by Tod’s appear to be achieving that balance. Time will tell how quickly these investments are reflected in rising revenues.

Tod’s Studios in Milan is the group’s newest concept store. 
Credit: Tod’s Group

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