Luxury brands confront the rise of the robot

European manufacturers take varied approach to automation as they seek increased efficiency without losing cachet

At a Gucci production site on the outskirts of Florence, a robot makes $650 sneakers.
 The patented machine, dubbed Reingenious, assembled the shoes, turning them over and manipulating them as it did so, while “avoiding the handling and stress of our workers”, said a Gucci guide during a recent tour of the site. Gucci, the fastest growing of Europe's biggest luxury brands, cites as inspiration Facebook and Google; lean manufacturing at Toyota and Kia; and Israel's Silicon Wadi.
 For an industry that retains roots in cottage manufacturing and was slow to appreciate the disruption from ecommerce, this is a big change of mindset. And the rise of the luxury robots has only just begun.
 The next wave of technological revolution is likely to be even more dramatic, according to executives and analysts, with opportunities and threats posed by frontier fields such as artificial intelligence. The response by Europe's luxury goods companies is as varied as their runway styles.
 Gucci, owned by France's Kering group, reckons only 30 to 35 per cent of its production can be completely automated — the rest needs some human input. But Marco Bizzarri, the chief executive who, with designer Alessandro Michele, has revolutionised the ageing Florentine brand, is alive to tech threats. At its Art Lab prototype factory outside Florence last month, as workers dressed in white coats labelled “Maison de L'Amour” scurried around, Mr Bizzarri said “3D technology would be a big change in development and prototyping, and even production”.

'There are some things you can use a robot to make. But a luxury product like a handbag? Impossible'

 He also cited in vitro growth of leathers, a development that would eradicate the need for tanneries. “We are investing in start-ups because we want to make sure that if that happens we are not left behind,” he added.
 Mr Bizzarri, who expects Gucci to make €10bn ($11.6bn) in sales in the longer term, argued that the rapid sales growth at the brand showed it had created a new luxury business model “with a new demand and new luxury and new styling lexicon”— one that gave it confidence to deploy more technology without under mining its brand equity.
 Also in Tuscany, the centre of production of European luxury leather goods, Patrizio Bertelli, the co-chief executive of Prada, was less taken by technology as he opened the Milanese brand's new industrial headquarters last week, a futuristic factory melded into the countryside surrounded by vines, jasmine flowers and fig trees.
 “Robots are on the lips of everyone. It is something we will evaluate later on,” he said. “There are some things you can use a robot to make, like sneakers, or to run a warehouse, but to use one to make a luxury product like a handbag? That is impossible.”
 Instead of prioritising technology, Mr Bertelli — who, with his wife and designer Miuccia Prada and family, owns 80 per cent of the group behind Prada, Miu Miu and Car Shoe—said he had spent “something less than €70m” on the new factory “for the psychological and general health of the workers” in the belief that it would inspire them to make better products.
 About 300 miles away on the outskirts of Venice in north-eastern Italy, Edoardo Caovilla, third generation scion of the Caovilla luxury shoes brand, saw artificial intelligence and big data, rather than robots, as disrupting his manufacturing process.
 On the walls of Caovilla's main production centre, located in an area known for its craft-based production of haute couture women's shoes, were huge spreadsheets, with coloured bar charts showing how fast each shoe design had sold, via data harvested from ecommerce. “Big data helps us design more of what people want,” he said.
 Mr Caovilla said he had increased salaries four times in three years as competition for artisans increased with a skills gap looming. Industry executives say artisans who, for example, know how to stick tiny diamanté stones on shoes or paint a minute design on to handbags, canearnmorethan€6,000amonth.
 Stefania Lazzaroni, managing director of the Italian luxury goods association Altagamma, said 50,000 people working in luxury artisanal manufacturing were due to retire in the next five years. She said she and her team were working with industry HR directors and the Italian government to identify the skills of people needed to replace them. It would be different from the past.
 “We are looking for new talent that unites a sensitivity to Italian life style and Italian culture with an ability to use new technology,” she said. AI and3Dprinting were going to have a game-changing effect on the industry, she added. Brands, including Gucci, argue that robots will help to fill the skills gap by taking on low-value added work.
 Not all executives are so upbeat about the future. Luisa Delgado, recently retired chief executive of the Italian high-end eyewear group Safilo, has a front row perspective on the fine line the industry is treading — between gaining the increased efficiency of a consumer goods company but not losing cachet. She is also on the board of Ikea and a former senior executive at Procter & Gamble, two of the world's biggest consumer groups.
 “In the short term would it not be easier to do everything with robots? Yes. But in the end what you would be left behind with is zero,” she told the Financial Times in an interview. “There would be robots and no atelier and you would miss the story and luxury is about the story, and about content and authenticity.

'Luxury is about the story, and about content and authenticity. Consumers will pay for the story'

 “Consumers will pay for the story and all the inefficiencies that come with it. Technology in luxury needs to be about moderation.”
 Johann Rupert, founder and chairman of Switzerland's Richemont, owner of Cartier and one of the world's largest luxury good groups, has been among the most vocal about the threat posed by AI and robots.
 In Milan 18 months ago, the tycoon nicknamed “Rupert the Bear” for his dystopian outlook on the global economy, warned that Europe's failure to defend its craftsmanship from AI and robots would have dire consequences. “If we don't do this the luxury industry will die in Europe,” he said.
 In an attempt at defence, his Michelangelo Foundation is staging an exhibition in Venice in September highlighting European craftsmanship with the aim of showing “what human beings can do better than machines”.
 Diego Della Valle, the billionaire behind Tod's and Roger Vivier, also warned last month about what he saw as the threat of product development being driven by big data.
 The trend has been dubbed the “sneakerisation” of luxury goods, as consumer preferences gleaned from big data lead product development. The standout result is the rise of the luxury sneaker, which consultants at Bain have identified as one of the fastest growing categories among millennial consumers.
 Mr Della Valle criticised “some brands that have had incredible reputations in fashion over the last 50 years that have now transformed their business into a company that makes rubber shoes”.
 Underlining the tensions in the industry brought about by technology disruption, Mr Della Valle, who is tackling a sales decline at Tod's, said unnamed brands were producing “numbers that are fantastic”, but were taking a “very dangerous” strategy as it “may be impossible to go back” and reclaim their brand heritage based on craftsmanship.
 Speaking at an FT event in Venice, he warned that it was “not possible to win the game this way . . . over the long term”, adding: “This is charming for one year and afterwards you destroy the company.”


Change of style


Streetwear that luxury brands are investing in


Estimated distribution of automatable occupations


Job declines have been offset by growth in other sectors

Sources: McKinsey; Bain

 

Taking control
More production moves in-house
 Manufacturing provenance is a longstanding subject of debate in the luxury industry. The role of robotics is the new frontier.
 An older tension is the decision by luxury companies to subcontract a minor proportion of their manufacturing.
 This has given rise to a few highly publicised instances in which illegal foreign workers, often Chinese, have been reported to be found to be making well-known brands.
 In a rare comment on the controversy, Patrizio Bertelli, co-chief executive of Prada, argued that it was impossible to have 100 per cent certainty about its subcontracted production.
 He said Italy's police and local authorities did not “do enough” to regulate subcontractors' factories and it was against the law for business owners “to raid factories [of subcontractors] at midnight.
 “The problem is the system and not the entrepreneurs.”
 Still, disruption caused by ecommerce may provide a solution to the controversy.
 Luxury companies are taking more production in-house as a faster fashion cycle demands greater control of manufacturing to achieve shorter lead times, say luxury executives.
 Prada now had 80 per cent of its manufacturing in house, Mr Bertelli said. Gucci said last week that it aimed to increase its fully controlled and supervised leather goods production to 60 per cent, from 25 per cent now.


BY RACHEL SANDERSON — MILAN

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