Our first day back in Milan started in a pretty relaxed fashion as we sat down for a mid-morning presentation from a representative of our next company of interest, Velasca, a high-end shoe company with a unique business to consumer business model. After the presentation, we were able to visit locations of different stages of their process of delivering to their customers, including their contracted logistics company as well as their store in Milan, named Bottega Velasca. With their high-end shoes being handcrafted by artisans of Italy, it was an interesting education in how a company can work to deliver a high quality product at a lower cost than its competitors.
Velasca’s main strategy behind cutting costs for their customers is to cut out as many middlemen in their supply chain as possible. Velasca employs an in-house designer to create the shoes they would like to sell. The designs are then sent to artisan shoe makers from the region of Montenero in Italy, whom they contract to produce their shoes. Once the shoes are completed, they are sent to Fiege Logistics company, which Velasca contracts to house products as well as prepare them for shipping. Aside from these two outside components, Velasca’s operation is completely self-driven. They do not sell wholesale to retailers or to other businesses, opting to sell to consumers directly instead. Because of this, most of the business that Velasca does is through its website, though its few “bottegas” located in Italy are also quite profitable. Not selling to other businesses helps to cut costs for the consumer because a retailer would have to mark up the price of a pair of shoes in order to profit, while Velasca can make the same profit, selling to the customer at a lower price. This results in Velasca’s shoes never costing too much more than 200 euros. For the same level of quality, competitors of Velasca sell shoes at prices upwards of 400 euros, quite a significant increase without an increase in quality. This unique operation has become quite successful in recent years, which has brought various investors to back Velasca, allowing it to grow as a fledgling company.
In the early days of their business, Velasca was solely an online entity, marketing to potential customers entirely through digital advertising as well as simple word of mouth. Through advertising on Facebook and other social media as well as targeted emails to potential customers, Velasca has worked to connect with customers with a medium that is most suitable for analysis. Because of this, Velasca is able to gain information on the effectiveness of their marketing and improve it to give the best return on investment possible. In addition to simple ads on social media, Velasca has turned to “influencers” of fashion online. These influencers are those on social media who are not quite celebrities, but have quite a large following that respects their opinions on fashion. Velasca has worked with one such influencer who is well known for his good taste in high end fashion for men. Together, they produced Velasca’s shoe line entitled “The Gentleman”, which this influencer advertised for to his followers, successfully reaching a huge amount of people that were in Velasca’s target audience.
After about two years of doing business online, Velasca decided to open a storefront in order to futher expand its business through its exposure that it could get from people simply passing by it. This storefront, or “Bottega”, was supposed to be just a temporary store in Milan, but after it became very successful, becoming profitable in only two weeks, the company decided to keep it open. We were lucky enough to go and visit this bottega near to the end of the day, as well as meet on of the co-founders at the store. Stepping inside the small store, it was clear that this company was continually marketing to the young, sophisticated gentlemen. Dispersed around the classy leather shoes were small models of vintage cars, empty bottles of fine gin, and other quirky but masculine decorations. The co-founder explained to me that this was yet another way that Velasca works to connect with its customers, connecting beyond the level of just shoes.
Velasca very closely resembles a startup company that one would see in the U.S.. It provides an innovative method of doing business, while remaining quite small in terms of number of employees. Though start-ups seem to be pretty common in the U.S., this concept is much less apt to happen in Italy. Due to bureaucratic inefficiency and a much more extensive process when it comes to a company being recognized in Italy than in the U.S, creating a small business comes with a great deal of difficulties, as well as a lot of apprehension from investors do to many start-ups in Italy failing. Working through these obstacles however has made Velasca a much stronger, stable company than it may have been without them. What doesn’t kill you makes you stronger I guess. Overall I thought that Velasca was quite an interesting company with an admirable entrepreneurial spirit that any business would be lucky to have.