The EMEA president of VF Corporation, Martino Scabbia Guerrini, reveals the philosophy and strategy behind the brand owner’s sustainable double-digit growth
“It’s a global dance with customers.” This may not sound like the bedrock of a sustainable change agenda, or indeed the recipe for soaring growth for one of Europe’s largest brand houses, but for VF Corporation’s Europe, Middle East and Africa president, Martino Scabbia Guerrini, this is his mantra.
The 54-year-old Italian believes “there’s an intensity and fluidity” like never before in retail, and brands must change to embrace the new “global agenda”. For VF – which owns 27 brands, including The North Face, Timberland, Vans, Wrangler, Lee and Napapijri – this led to its transformation in 2016 to become a “performance-driven, but purpose-led” business. That purpose is a dual focus on sustainability and consumer-centric retail.
Over an espresso in a London hotel bar, Scabbia Guerrini explains how against this backdrop of change, the dance should be “a never-ending process”, where brands lead by offering a clear narrative about what they represent, but then be willing to stand back, listen, and learn from their consumers and prove their empathy and agility – key words in his mind for future retail – to stay relevant.
The idea is to address the issue of scarcity of resources, and to extend the lifespan of our products to make sure we make the most of them
Having previously held executive-level roles at Tod’s Group and Stone Island, Scabbia Guerrini joined VF in 2006 as president of EMEA sportswear, and has led the regional business since April 2017. He believes much of its stellar performance is down to this new business strategy and willingness to perform the dance.
For the year to 31 December 2017, EMEA revenue rose 13% on a constant-currency basis. The North Face led the charge with an increase of 23%, and was closely followed by Vans, where revenues rose 19%, and Timberland, up 6%. For the three months to 31 March 2018, EMEA constant currency revenue rose 19%. VF does not break down its EMEA profit, but in 2017 its worldwide adjusted operating income was $1.5bn (£1.1bn). As the largest market, the UK represented 21% of EMEA revenues in 2016.
To build on this growth, Scabbia Guerrini is pursuing a raft of sustainable strategies to create a truly circular economy, whereby products are reused and recycled rather than disposed of. These include schemes for clothing recycling, repair and rental, and the increased digitalisation of the supply chain, alongside the prioritisation of direct-to-consumer channels, and the boosting of the strongest and most “energetic” wholesale partnerships.
VF Corporation started as a Pennsylvania glove manufacturer 119 years ago. Today, it produces 523 million items a year and is digitalising its supply chain to speed up production and reduce waste. Scabbia Guerrini cites outerwear brand Napapijri’s Ze-Knit digitally knitted capsule collection of 19 items, which has reduced fabric waste by 30% as compared with the main line.
It was revealed during Milan Design Week in May and will go on sale in stores including 18 Montrose in London, Flannels in Liverpool and Manchester, Label Clothing in Nuneaton and The Business in Leicester, in September. It will retail from £85 for a women’s sweatshirt or men’s T-shirt to £395 for a men’s jacket – slightly higher than the core range.
“The machines can be anywhere,” he explains, “so you can centralise design and localise production, and you can go from design to production in a very short time, even a week. You can even apply customisation to that to bring the customer into that design.”
New generations are less interested in ownership, but they want to have access and to experience
His vision is for this tech to “become a capability on a VF scale”: “Think about doing millions of units with this technology. That’s how we’re trying to diversify through technology, the way we make and ultimately the way we sell.”
To build on this, by 2020 VF EMEA will have retrained all its designers in circular economy strategies, so they can create products that can be recycled and have a longer lifecycle.
Last month in the US, The North Face also launched “Renewed” – a trial in which damaged or defective products received at distribution centres are reconditioned, before being resold at a discount online. If the pilot proves successful, Scabbia Guerrini is keen to bring it to Europe.
Meanwhile, 50 European stores across The North Face, Timberland and Vans are participating in the VF “Take Back” scheme, in which shoppers donate clothing – made by VF brands or third parties – in return for discount vouchers. They are either resold in the secondary market or downcycled to create materials for other industries. In Europe last year, 4,500 kg of clothing was collected, and VF has committed to increase this by 10% by 2020.
A clothing rental pilot is also being worked up. Although a specific brand and region for the launch is yet to be decided, it could be tested first in Europe.
We’re trying to diversify through technology, the way we make and ultimately the way we sell
Sitting across the table from Scabbia Guerrini, Anna Maria Rugarli, VF EMEA’s senior director for sustainability and responsibility, explains: “The idea is to address the issue of scarcity of resources, and to extend the lifespan of our products to make sure we make the most of them. New generations are less interested in ownership, but they want to have access and to experience. This business model brings it to them – it’s a new way to provide services to stay relevant to them.”
Other notable targets include ensuring 50% of the PET and nylon used is from recycled sources, and all cotton will be sustainable by 2025. Brands are also encouraged to work closely with relevant local communities. Vans, for example, has built skateparks in deprived communities.
Guerrini believes it is VF’s responsibility as a dominant player in the industry to lead this sustainability charge: “For companies and brands to be in business and relevant for the next five to 10 years, they need to change and align to the global agenda.
”The impact that large corporations like ourselves can create, through our associates [VF employs 70,000 globally] and the communities around us – there’s a responsibility.”
Sarah Ditty, head of policy at sustainability lobby group Fashion Revolution agrees. She says having these values enshrined at the top is “critical to move the needle”, and allows the benefits to cascade down the business. As brands are competitive, seeing one take this leap will inspire others to follow.
Wholesale is not an option, it’s a must
She adds that The North Face, Timberland, Vans and Wrangler were among the top five highest-risers on the group’s Transparency Index for 2018. The review of the top 150 biggest global fashion brands and retailers, ranks them according to how much they disclose about their social and environmental policies. The brands rose 22% with a combined score of 46%, putting them just behind Levi’s and Asos. But she warns VF could do more to communicate the results of its initiatives to consumers and stakeholders.
Despite this intense sustainability focus, Scabbia Guerrini has not lost sight of the core retail principles. Rather, his strategy for EMEA again feeds into his efforts to embrace consumer-centric retail, with the prioritisation of direct-to-consumer.
“Putting that at the heart of our strategic choices is a clear direction,” he says. Direct-to-consumer channels including digital represent around 27% of EMEA revenue, and wholesale the remaining 73%.
Guerrini refuses to be drawn on specific plans for individual brands’ store expansions and digital growth, but says VF had 90 UK stores at the end of 2017 and they “are still a very important part of our business and drive a lot of the best experience that customers can have with our brands”.
He insists this strategy will not come at the expense of wholesale, which is a growth area: “Wholesale is not an option, it’s a must. We are in growth mode, so it doesn’t mean one or the other. It’s both.”
VF’s key stockists include JD Sports, Blacks Outdoor Retail, Cotswold Outdoors and Office.
Scabbia Guerrini cannot discuss how many UK accounts VF has and how this number could change, but adds: “The consolidation happening in the wholesale and distribution market is clear, so, yes, on one side we will consolidate as well with the strongest relationships. But on the other side, to be more diversified and engage with new consumers and generations, you have what we call ‘the energy area’ where maybe smaller retailers, independent retailers or new retailers create those edges that are very important for our brands.
“Most of our design and creativity is looking at the energy coming from there rather than the maturity of the business that you can find in the mainstream.”
This emphasis is heartening for independent stockist Tower London, for which Vans and Timberland are in its top five men’s brands across its five stores and website.
Head of omnichannel Rink Bindra says: “It’s nice to hear big corporations recognising the importance of independents and what we can do to help their brands”.
The consolidation happening in the wholesale and distribution market is clear
He adds there is more VF could do to filter its sustainability message down to its stockists so they can better promote it to shoppers, comparing VF’s messaging to footwear brand Toms’ well-known “One for One” shoe donation strategy.
Lee Bagnall, managing director of Blacks Outdoor Retail, a key The North Face stockist, says VF is “very progressive and has a clear strategy in terms of the different channels it wants to participate in”: “[Sustainability] will become more important over the next few years. They are very good at reinventing themselves and being at the forefront of everything they do, making sure they are relevant.”
VF is also creating more collaborations to raise brands’ profiles, focused on designers that share its sustainable ethos. Scabbia Guerrini is clearly proud of the latest tie-up, between Timberland and his “personal friend” Christopher Raeburn, for a capsule collection of reworked vintage Timberland pieces shown at London Fashion Week Men’s last month.
“That’s a clear direction and how we look at our brands to stay relevant,” he says. “There has to be a little more than just a collaboration and Raeburn is a great example of that purpose common ground.”
Don’t be afraid of change. Be afraid of not doing it
The acquisition of new brands is also on the cards for Scabbia Guerrini, and he believes the latest purchase of New Zealand outdoor and sportswear brand Ice Breaker, for an undisclosed sum in April, is the blueprint for future deals and was the first purpose-led acquisition for the business.
“The purpose they have as a brand, using natural merino wool to deliver performance and the belief in nature as a place for a better solution – that connects very well with our sustainability conversation. There’s definitely a different way to look at acquisitions.”
As the UK is Scabbia Guerrini’s largest market, confusion surrounding Brexit is a concern, although he remains upbeat: “We are clear that there’s been an undeniable currency effect over the last year and a half, and that has an impact. But London is still the major city in Europe and our business here is growing, and we keep looking at the UK as the main market.
”There’s no perfect answer. The only attitude is to stay very close and to monitor on a daily basis … Businesses are very connected to London and the UK. There’s no breaking it.”
Despite this uncertainty, the evolution of VF EMEA will continue under Scabbia Guerrini, and he is clear others should join him.
Offering advice to retailers that wish to transform to become purpose-led, he enthuses: “Don’t be afraid of change. Be afraid of not doing it. Keep it simple. You need to create something that is very focused, and make it part of the narrative. The language is the biggest missed opportunity in many businesses. Companies not only have to transform, they have to become better at telling how they are doing it.
“In every industry it’s clear that whoever wasn’t open to change and embracing new generations is gone.
”It’s about keeping this new generation of consumer conversation open to determine what your internal culture change should be, before it’s too late – before someone wakes you up with a bomb.”
Click here to download Drapers’ special report on sustainability, exploring the systemic change that needs to occur as fashion moves from a linear to a circular model.
The VF brand powerhouse: purpose behind the profits