The current macroeconomic environment presents a strong global growth in the luxury market in general and specially in the accessories segment (ties, shawls, scarves) due to the demand from emerging countries. French Groups (owners/holders of the main brands) play a key role. They are amongst the leaders in the sector due to the customers' perception value. The European productive outlook related to these Luxury Groups, in the manufacturing and industrial sectors, is divided between a few Italian suppliers who organized themselves in order to offer a complete service to these Groups. In France, there is only one organized structure of the chain (controlled by Hermes/HTH). All the other French suppliers, who are positioned as ‘third’ tier suppliers, only manage their know-how. In order to improve their quality, creativity, confidentiality, timeliness and response to changes, some other Luxury Groups can be potentially inspired by the Hermes/HTH approach. This means combining a productive chain with a strong partnership, guided towards the upstream chain, with implications on the overall upstream chain. Nowadays, the market offers the possibility of building an aggregated supply-chain for the manufacturing of textile accessories, controlling investments, while controlling the upstream processes of the value chain. The purpose of the current study is to illustrate the possibilities of such a work based on the current competencies and experiences of the Luxury sector.

1. ZeGroup-partners
ZeGroup-partners
A w h o l e v i s i o n
Accessories products / Luxury market segment
Upstream Vertical Integration, Supply-Chain, Made-in marketing

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Avec le temps et la patience,
la feuille du murier devient de la soie…
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3. ZeGroup-partners
Agenda
 Executive Summary
 Elements of the Environment
 Analysis – Vision
 Business Idea
 Insights
 Key Concepts
 Supply-Chain evolution
 Effects of Made-in
 Value Chain Analysis of key players in the luxury market
 Strategic forces and advantages of the vertical integration …..
 Opportunities and Threats of Current Strategies
 Strategic Plan
 External analysis
 5 forces analysis
 Threats and Opportunity
 Potential ‘Movers’ of the Market: ‘Strategic commitment’ of the Chain (France-Italy)
 Conclusions
 Proposal
 Partners / Project Team – Core Competencies
 References and Sources
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4. ZeGroup-partners
Executive Summary
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The current macroeconomic environment presents a strong global growth in the luxury market in general
and specially in the accessories segment (ties, shawls, scarves) due to the demand from emerging countries.
French Groups (owners/holders of the main brands) play a key role. They are amongst the leaders in the sector
due to the customers' perception value.
The European productive outlook related to these Luxury Groups, in the manufacturing and industrial sectors, is
divided between a few Italian suppliers who organized themselves in order to offer a complete service to these
Groups.
In France, there is only one organized structure of the chain (controlled by Hermes/HTH). All the other French
suppliers, who are positioned as ‘third’ tier suppliers, only manage their know-how.
In order to improve their quality, creativity, confidentiality, timeliness and response to changes, some other
Luxury Groups can be potentially inspired by the Hermes/HTH approach. This means combining a productive
chain with a strong partnership, guided towards the upstream chain, with implications on the overall upstream
chain.
Nowadays, the market offers the possibility of building an aggregated supply-chain for the manufacturing of
textile accessories, controlling investments, while controlling the upstream processes of the value chain.
The purpose of the current study is to illustrate the possibilities of such a work based on the current
competencies and experiences of the Luxury sector.

5. ZeGroup-partners
Executive Summary – Variables and context
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Variables
and
context
Product
Market
Raw
Materials
Supply-
chain
(operators)
‘Made-In’
marketing

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Product
Market
Raw materials
Supply-Chain
(operators)
‘Made-in’
Marketing
 Increasing demand (CAGR +10%), growth of the customer base
 Development of the ‘perceived value’ from the client side (immaterial part)
 Customers are paying attention to the different ‘messages’ of the luxury product (significant goods)
 Demand for a better global coherence from the luxury brands
 Strong development of the luxury markets, despite the effects of recent economical crisis
 Necessary differentiation vs. Luxury Competitors vs. Fashion Sector
 Entry barriers on the retail market are becoming more flexible (development of Luxury on internet )
 Internet accelerate the knowledge of brands, as well as comparing and perception of “brand message”
 Increase of costs (direct and indirect)
 Less availability of raw material of high quality, thus becoming a strategic resource
 Reduction of the number of suppliers able to handle high quality raw material (loss of sense of quality)
 Decline of the European chain, instability of suppliers (reduction of the visibility over the continuity)
 Few players, concentration of some big ones (Italy)
 Fragmentation of SMEs which are not chain organized in France
 Complete chain in France, with know-how and productive capacity controlled by Hermes (monopoly)
 ‘Origin’ (Provenance) perceived by consumers as a key value (intangible) and as an element of
coherence between the brand and its history and products
 Strong element used for differentiation, providing an added value to the product and equity to the brand
 Rapid evolution of regulatory framework, with enhanced constraints & protection
Variables Observations
Executive Summary – Variables and context

7. ZeGroup-partners
Executive Summary – Analisys / Vision
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Upstream
Vertical
Integration
Supply-Chain
organization
‘Made-In’
Marketing

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Upstream
Vertical
Integration
Supply-Chain
organization
‘Made-In’
Marketing
 To guarantee and ensure the high quality and quantity of supplies
 Leverage effect on differentiation, additional entry barriers (vs Competitors & New players)
 To acquire knowledge and culture of the upstream cost structure and to integrate the value
chain
 To disturb /Upset competitors’ supplies, reinforce the bargaining power versus suppliers
 To guarantee confidentiality, products homogeneity and quality control, including global vision
along the value chain
 Control of an ‘enterprise network’ and of a know-how (net of savoir-faire)
 Global vision along the entire supply-chain
 Management of the complexities, make leverage on the capillarity for innovation and reactivity
(coordination of complex products manufacturing)
 Allows to improve Corporate Social Responsibility thanks to a better control (i.e. avoiding the
effect of third parties in domino, like the ‘chinitaly’)
 The Origin Labeling conveys the values of legitimacy and coherence
 The strategy of the Marketing of Origin, by leveraging on the intangible part (of the product),
underlines the history background of the brand from which it draws its legitimacy and
particularism
 Reinforces the coherence of the brand with an increase of ‘brand esteem’ and ‘brand equity’
 Increases the perceived value of the product and the brand
 Provides a ‘product and brand’ differentiation in creative interpretation (vs «Fashion»)
Parameters Objectives / impacts
Executive Summary – Analisys / Vision

9. ZeGroup-partners
Executive Summary - Business Idea
 Historic moment with an increase in the demand of Luxury products, along with
an important decline of the supply chain (network of savoir-faire) as well as a
diminution of availability high quality raw material (tangible part of the product).
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OpportunityIdea
Reinforce positions in the upstream textile supply-chain for Luxury by
organizing the control and the support of the supply-chain thanks to Quality,
Exigency and Know-How, through an upstream vertical integration process
with key suppliers, forming part of a process of ‘skills clusters’
Ensure the availability of supplies,
consolidate the qualitative levels
of raw materials and finished
products
Strategic commitment / games theory
(vs competitors, new players and
suppliers)
Driver

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Depth Study
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11. ZeGroup-partners
Key concepts
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Demand becomes more precise and
demanding, entering a period where
'intangible investment' takes greater
importance.
Application of coherence between the
brand and intangible content that
Origin is a distinctive element.
Differentiation
and quality
Extreme need for differentiation in the
market between competitors from
Luxury vs Fashion industry.
Need to leverage the intrinsic and
meaningful product characteristics
including the Excellence in quality.
Brand
perception Vertical
integration
The upstream integration consent vertical
control on the availability and quality of
raw material and confers a competitive
advantage.
It agrees to manage any difficulties in
certain phases of the process, ensuring
supplies and production capacity, and so
the time to market.
It guarantees the confidentiality of creation
/ innovation.
Adjustment
to
competing
model
Vertical integration has already been
activated by one of the actors (Hermes /
HTH), which controls the only organized
network existing today (France).
Elements that contribute to increase the perceived
value of products
Origin
&
“Made in”
Instrument of ‘intangible content in
the product’ ; transmits a message.
Part of the marketing levers to
enhance differentiation.
Privileged
partnership
with existing
players
The objective is to coordinate (strengthen
the link) some key players in the market,
creating strategic partnerships
strengthened or investing with them.
Need to activate strategic agreements with
suppliers to ensure the possibility of establishing
the sector and get the competitive advantage and
considered positioning
… product aspects … sector aspects

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Key concepts
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Presence of
industrial
operators
Context is characterized by a
concentrated number of
operators -converters with
industrial dimension: Ratti, ISA
Seta, Mantero ... Concentrated
on their core business printing,
supply and licensing finished
products.
“Evolution of the industry”
Italy
Unique
example
France
SME
network
Concentration risk (due to M & A operations
or closures) with increased bargaining power
of key suppliers
Risk of strengthening the monopoly of
Hermes / HTH or closure of small operators
 Need to consider the approach of the
upstream vertical integration
The only structured sector is
the one owned by Hermes /
HTH
Presence of SMEs, small non-
integrated operators,
unstructured with vertical
approach but by professional
sectors
SME network
Challengers that serve various
markets with an approach of
subcontractors.
The current market environment has :
 Ability to structure (one) new sector, rapidly
activating strategic agreements to achieve a
competitive position

13. ZeGroup-partners
Effects of “Made In …”
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Brand coerency Perceived Value from customer
Cognitive valueBrand Story telling
Label of
Origine
(Made In …)
• Increases the Perceived Value from
customer of product and brand
• "Made in" brings Meaning and Content
• As a result, Equity Brand increases
• Key element of the message conveyed
through the product
• Objective element that communicates values
of authenticity and coherence
• Significant message, simple and easy to
convey
• Information sign and thus, the valuation of
the product and/or of the brand
• To guarantee a product with a specific “Made
in …” increases the global coerency for the
Brand
• Increases the Brand Reputation and Brand
Esteem
• Acts as a link between the brand and the
continuous business
• The "Made In"… transmits the complete
‘dream’ within a product, a piece of culture
and history, style and savoir-vivre
• Marketing tool to reinforce the authenticity
and the differentiation of the brand
Label of
Origine
(Made-In…)
Luxury
Creates
Brand Equity
Fashion
Not (so)
Important

14. ZeGroup-partners
Value Chain analysis for Accessories (Key players)
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Hermès/HTH
LVMH
Kering / Gucci
Group
Richemond
Raw
materials
Weaving Engraving Printing Confection
Finished
products
Supplier
Partnership
JV
In House
Supplier
Partnership
JV
In House
Supplier
Partnership
JV
In House
Supplier
Partnership
JV
In House

15. ZeGroup-partners
Strategic impacts and benefits of vertical integration upstream
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Vertical
integration
(stream)
Guarantee
supplies
Stability of the
ecosystem
production
In a context of scarcity of raw materials, it is
necessary to ensure their supply to the desired level
of quality and on time.
Increase the
competitive
advantage
The process of vertical integration is a Strategic Engagement (game theory).
Importance of speed of implementation, the existing risk of other competitors or suppliers will seize
the opportunity to 'win' on the front control of supplies and / or differentiation.
With the weakening of the European production
chains, allows the guarantee of maintaining the
diversity of skills, culture, capacity for innovation,
quality and production capacity.
Has a higher entry barriers, better visibility into the
cost structure, greater bargaining power with
suppliers, as well as disruption of competing supplies.

16. ZeGroup-partners
Opportunities and threats of current developments on the "Made-in ..."
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Made-in Italy Made-in France
• Inside the textile / clothing Luxury sector, there is
an active Italian lobbying to highlight the 'Made-
In Italy' with a potential risk of creating confusion
over brand consistency for those not Italian.
• The 'Made-In Italy' has a good resonance in the
fashion industry, creating a "pollution" of the
message for the French luxury sector, the values
of the two sectors being frequently associated
similarly
Exploit the opportunities, investing on vertical integration, levering on the
possibilities offered by the respective national chains
• The 'Made-In France', contains a distinct identity
and particularities and specific
• Should be considered as an element of
differentiation against the 'Made In Italy,' even if it
promotes similar values and details
• Emphasized, not the "French Touch", but
"French Exigence" in Luxury, Quality and
Creativity
• The evolution of the legislative framework at European level, guided by the lobbies of the dispute and Luxury Textile industry
moves towards greater protection of Made-In ...

17. ZeGroup-partners
Potential movers of the "Strategic Commitment" in the industry [France-Italy]
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Players Strategic Objectives Impacts
• Upstream vertical integration
• Strong differentiation in the market
• Strategic Commitment vs competitors/
suppliers
• Secure supplies
• Take advantage of the monopolistic position,
uniqueness
• Saturate local resources
• Disrupt supplies competitors
• Increase market share with a complementary
and differentiated offer vs. competitors
• Take a unique position
• Submit a dual sourcing approach on the 'made-
in'
• Enter the market and take market share
• Take advantage of 'entry barriers' lower in
France than those present in Italy
• M & A transaction with the objective of
financial return and exit-strategy, no
industrial objectives
• Limited investment on the beginning with strong ROI
potential output in a short time
• Take a position on the market, becoming differentiated
'unique' player and making it necessary, amending in
the same time the 'rules of the game'
• Becomes a 'One stop shop'
• Increases its market power
• becomes essential
• Acquires a greater power on the control of prices and
costs
• Visibility on the value chain structure
• Balancing market power with key suppliers
• Take the initiative has a competitive advantage against
competitors
• Increases own structure and production capacity
• Strengthening / Holding the 'Unique‘ position
Luxury groups
Suppliers
Private Equity
- LVMH
- Kering
- Richemond
- Hermès
Italians
industrials
(Ratti, Mantero,…)
Challenger
Italian / French
PE operators

18. ZeGroup-partners
The time is right to consider the upstream vertical integration, both ‘direct control’ and the
‘coordination of the sector’ should be integrated into a skills center approach or Center of
Excellence.
Conclusions
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Analyzes previously described can be summarized as follows:
• Prospective difficulties for the availability of high qualitative raw materials (including silk)
suggest to invest in the control and mastery of supplies.
• Consumer preferences suggest the need for major coherence between brand and product
characteristics (quality, original label).
• The natural historical sectors are largely weakened, and the ecosystem of suppliers can be
further reduced (closures) or move to a concentration with a possible threat in terms of
continuity, reliability, price and quality.
• The increase in costs and prices of raw materials carries to secure margins through mastery
of the real costs of production.
1
The Franco-Italian industrial network offers spaces to strengthen the privileged partnership
relationship or invest in productive structures or realities that belong to the sector of Luxury and
Silk.
2
The time window to operate is narrow, it is necessary to work quickly, anticipating competitors.
3
Consequently, the analyzes suggest that:

19. ZeGroup-partners
Information sources
Sources :
SMI / Sistema Moda Italia
Camera della Moda
Pambianco news e studi
IFM / Institut Français de la Mode
Comité Colbert
Altagamma
Euratex
UIT / Union des Industries Textiles
Assolombarda / Confindustria
Ipsos Public Affairs (World Luxury Tracking*)
Datamonitor
Journal du textile (Francia)
Fashion Mag (Italia e Francia)
Fashion Magazine (Italia)
Usine Nouvelle
Les Echos
Il Sole 24 ore
Rapport Yves Jego
Rapport Clarisse Perotti-Reille
Fashion Luxury Insight (Altagamma, Ernst&Young, S.d.a
Bocconi)
BCG / Boston Consulting Group
Bain Company
OCDE et Eurostats
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20. ZeGroup-partners
Profile
Linkedin : http://it.linkedin.com/in/huguesbartnig
Hugues Bartnig / Executive Business Advisor
Business Development - Global Sales & Market Strategies - Management & Team Leadership