Same Shoes, Half the Price!

On our group’s first day back in Milan, we listened to a comprehensive presentation from Bottega Velasca which is an 100% Italian shoe producer. Velasca was established in 2013 and prides itself on high quality. All of the shoes they produce are handmade and take roughly four full weeks to produce one pair. Furthermore, Velasca emphasizes how their quality is similar to the brands that charge roughly 500 Euros for one pair but the difference is that Velasca cuts out the middleman (generally a retailer) and sells directly to their consumer from their website. Their co founders are Enrico Casati and Jacopo Sebastio who both knew the difficult environment that comes with building a successful start-up in a country like Italy which tends to be a much more bureaucratic and slow in process compared to the United States. Last year the company made 1.2 million euros in revenue and their plan is to double that number each year. Their plans for growth are lofty but also achievable.


The business to consumer model is much more efficient in comparison to a business to business model that requires a retailer. That being said, this model also comes with a variety of drawbacks. Obviously, a retailer provides a physical marketplace for the consumer to try on a brand’s product and see if they like the look and fit of the shoe. Furthermore, having a brand’s product be carried by a retailer allows some of the marketing of the product to be done on sight. Without a retailer, brands need to find new avenues to market their product to new consumers who are not familiar with it (this can be done in a variety of ways including: Google ads, Facebook ads, and word of mouth reviews). These are things that companies, like Velasca, must consider when deciding on the direction of their business moving forward. Interestingly enough, Velasca recently opened up a flagship store in Milan and has plans to open up more in other large Italian cities. Our presenter explained how 70% of the stores revenue came from online orders last year while 30% came from flagship store purchases. She then explained how 30% is an incredibly high number for such a new store and that the store gives the brand a much more complete feel (something tangible that the consumer can go and experience) She also explained how Velasca is committed to pricing their shoes at roughly 185 Euros and this does not change in the store (the brand just eats the price of operating a flagship stores so they can remain consistent with their customers). Since Velasca is considered a startup company, they have many parallels to those in the US. Often their leadership team is youthful and their resources are limited. Their online presence is strong (thinking along the lines of Generation X and Millennials) and their focus is a minimalistic approach both on their website and in their physical stores.
With regards to an Industry Analysis for Bottega Velasca, their situation is quite unique. It is rare for start-up companies to thrive in the Italian fashion industry where so much is predicated on brand loyalty and history. Their progress is important and our presenter seemed optimistic that the firm will be able to expand their annual revenue quite significantly over the next few years. Velasca’s major competitors are luxury shoe brands but their unique advantage is how they sell directly to the customer which lets them keep the same quality as their competitors but at a fraction of the price. The greatest threat to Velasca (other than other luxury shoe brands) would be saturating the market of Italy and failing to expand to other locations across Europe and even into the United States. Personally, I would not be surprised to see Velasca get purchased by a larger brand and then possibly still operate with a business to consumer model but with a much more solid financial backing. It will be interesting to see if Velasca can continue their momentum and build a loyal following even though the number of legitimate flagship stores is limited. The most important part to this would be fully satisfying the customer and then hoping they recommend it to friends or would be interested in continuing to buy shoes from this specific producer.Hooverm02


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