Today was our first full day back in Milan. It is exciting to be back in the city where we started this trip. I feel that I have learned so much about Italy, business, and traveling within the span of five days of not being in Milan.
Valasca was the business focus of the day. It was a fascinating day because we started with a business overview from their head of marketing, then toured their logistics warehouse, and ended at their storefront in Milan. We were able to experience the entire process from start to finish.
Valasca’s main product is men’s leather shoes. These shoes are 100% made in Italy by artisans. This speciality company has a very innovative business model that has allowed them to experience large growth.
Valesca was started by two men who were simply looking for high quality leather shoes at a lower price. They came up with an idea that would eliminate the middle man of traditional brands, which was driving up the cost. In order to do this, they started their company entirely online. By focusing on their main product and a tailored brand, they have created a company that earned $1.2 million in revenue last year.
They have also improved the production process of the shoes as well. Valesca designs their own shoes, then they take these designs to Italian artisans who produce the product. The product is then shipped to their logistics service provider, Fiege. From that point, Fiege ships either directly to consumers who have ordered online or one of the two retail locations of Valesca (Milan or Rome). It takes about four weeks for the production of their product, not only because of shipping but because the entire product is handmade by the artisans.
Only two steps of this process are outsourced, production and logistics. Everything else is done in house by about 11-15 employees for the company. They are not unlike other Italian companies in the industry because they value quality, craftsmanship, and style; however, they are unique because they are bringing digitalization to the artisan craft. As we have learned, artisanship can be considered a dying art; therefore, it can be difficult for artisans to find sustainable work. Valesca has provided artisans with a high demand for production of leather shoes. Unfortunately, like all the artisan based companies we have visited, this is an art passed down from generation to generation. Valesca has big plans for expansion, doubling revenue each year, so they must find an artisan organization that can fill this capacity, or they may become stagnant. Valesca is taking advantage of the modern world to help revive this craft while also making a profit.
Valesca considers themselves to have a new type of business model called direct to consumer. They have no middle man company or producer that stands in the way between a consumer’s order and the final product, unlike business to business models. The logistics company, Fiege, told us there is roughly a 24 hour turn around time from between the order is placed and then shipped out for final delivery. This has enabled them to have lower prices compared to other authentic handmade Italian shoes, which hover around €500 compared to theirs, €185.
Their marketing head explained that all of this is possible only because of the Internet. They do not need any help when it comes to IT, marketing, design, etc. because they can do it all themselves. They need only the product and shipping done externally. Valesca is therefore vertically integrated because they control their entire supply chain. This too has enabled them to have efficient and direct contact with their consumers. When marketing their brand they focus not only the product, but also the entire experience with the product. They target businessmen who are older, knowing that they are capable of purchasing their product. Through the use of various social media platforms (primarily the use of Facebook, email, and their website which is suitable on all devices), they are consistently and strategically communicating with their audience. While Valesca will not change their audience in hopes of expanding their business, they hope only to build the markets in which their product is offered. The company is trying to expand its international markets, for example into the United States and France. In order to do this, they are looking to open small shops there, similar to the one we visited in Milan today. Valesca wants to retain their premium brand image, so they will only be able to expand successfully through increased marketing tactics.
The idea of direct to consumer business models is also used in the United States with companies such as Bonobos (specializing in men’s pants and expanding to shirts and suits), Everlane (clothing company emphasizing transparency in where clothing is made), and Warby Parker (producing designer eyewear). All of these companies were founded for the same reason, the founders wanted something they couldn’t find, so they figured it out in a cheaper way. They all utilize the same business approach, a completely digital experience. All focus on a simple brand that eliminates the middle man of traditionally designer products, ultimately lowering prices. The companies all offer similar amenities such as free shipping both ways, personalized shopping experiences, and quality products. A major difference between the companies is investing. In Italy, investors are less likely to invest in companies because of higher tax rates, while this is not the case in the United States. However, according to Valesca’s marketing head, this has enabled them to be mindful about spending and expanding.
The Internet has changed the way in which business is done. It is the simple reason young companies such as the ones mentioned have experienced tremendous success. Direct communication with consumers has driven up the demand, while strategic and internal business structures have lowered costs. It may be difficult as years go on to maintain their signature characteristics without either drifting away from complete internal control or low prices, but the innovation, passion, and drive will hopefully push them forward.