from Financial Times, Aug 4, 2017
The 31-year-old chief executive on brand garbage, luxury’s ‘dirty secret’ and why he refuses to drink the ‘poisoned water’
Guram Gvasalia co-founded fashion label Vetements with his brother Demna Gvasalia in 2014. In just three years, the brand has emerged as one of the most disruptive in the industry, abandoning the show schedule, combining its men’s and women’s collections and building a business model based on the sale of limited numbers of very expensive clothes: the heated debate as to whether its £1,025 jeans in recycled denim should even be described as luxury items still rages.
According to Women’s Wear Daily, Vetements’ revenues are approaching $100m, although the privately owned company doesn’t release financial data and Gvasalia maintains “the amount speculated in the article was neither confirmed nor denied by me”. Its rapid growth has been driven by rigorous wholesale management and a digital strategy that daily connects the brand’s 1.9m Instagram followers to its global inventory. This year, it relocated from Paris to Zurich, and Demna, who combines his role of creative director with the same title at the Kering-owned Balenciaga, commutes between the two cities.
For its latest project, the brand worked with US department store Saks, filling its Fifth Avenue store windows in New York with clothes donated from employees or out-of-season “deadstock” from Saks merchandise, to highlight the issue of overproduction and waste. The clothes are on show until August 7 when the unwanted items will be donated to RewearAble, a New York-based organisation that recycles clothing and provides employment to adults with developmental disabilities.
Could you explain what you’re doing with Saks?
Vetements partnered with Saks Fifth Avenue to underline one of the biggest problems of our generation — garbage. Garbage is what most brands produce today. Mountains of stock are buried in outlet stores and stockrooms and have little chance of finding anyone who will want to pay for them. Overproduction is a huge problem that the industry tries to hide as it chases after fake numbers and reports of constant growth. Saks was brave enough to support us to start a conversation about it by offering its main windows. We need to realise that sometimes less means more.
Why is deadstock an issue?
Fashion is a very dirty industry. Deadstock in the US amounts to $50bn every year. After the oil industry, fashion is the second-biggest polluting industry in the world. Fashion chief executives scream about sustainability, and how they plan to cut carbon emissions by 40 per cent and reduce environmental impact by 50 per cent in every interview. But none of those brands seem to understand that a much easier solution is just in front of them. Preventing overproduction in the first place would have an immediate effect on reaching those sustainability goals. The industry talks about conspicuous consumption — buying for the sake of buying — as the reason behind the growth in the luxury segment. But brands are producing more product than there is demand for. I call it conspicuous production, producing for the sake of producing and artificially inflating the numbers.
What would you say to people who think Vetements is also contributing to the problem by producing more clothes that people don’t need?
Supply meets demand is the basic rule of business and one the whole industry seems to ignore. Sales are the first indicators of overproduction. The goal should be to reach 100 per cent sell-through before discounts, though figures over 90 per cent are acceptable, as no one can predict the exact demand down to each SKU [stock-keeping unit]. What’s shocking is that most brands in big stores don’t even sell 20 per cent of their merchandise before discount, yet continue to report wholesale growth. Stores and brands are trying to hide the truth by opening outlet stores, which sell unsold merchandise and sometimes even similar collections that never went to the full-price retailers. Outlet stores then have the same problem: they end up with deadstock that they resell to other countries and the same scenario repeats itself. If nobody wanted something full-price, it doesn’t necessarily mean that anyone will want it half-price. Recent reports show that more than 30 per cent of merchandise produced by fashion brands will never be sold. The clothes end up in landfill. It affects consumer buying behaviour as well. Pieces bought on discount appear to be less valuable psychologically to the consumer, which makes it easier to throw them out.
At Vetements we control how much merchandise we sell to each store to make sure they don’t overbuy. At the end of the day there are only a certain number of clients globally: if the consumer doesn’t manage to find an item in Hong Kong, he will get it in San Francisco or from a small store in New Zealand. In addition to controlling the orders placed by each store, I have created a system to put a maximum number on the pieces we are willing to put on the global market. If the number exceeds what was planned, I reduce the orders until I get to the initially calculated goal. In some cases I have had to reduce orders by 80-90 per cent, leaving 10-20 per cent of the original order in production. Although everyone is trying to sell more, I believe that the slower you drive, the further you can get.
How valuable is desirability?
Luxury is like dating. If something is available and in front of you, it’s less desirable. Scarcity is what defines it. One of the ways to create scarcity is to reduce the supply curve. The more demand there is, the more desire it creates. Desire is the key value in luxury business.
You’ve talked previously about the parallel market. But what is it, and why is it an issue?
The parallel market is one of the dirtiest secrets of the fashion industry. More and more luxury stores have become a beautiful façade to cover the real business going on behind the scenes. In addition to selling a small part of the merchandise directly to the final consumer, they also play an intermediary role in reselling the biggest part of their order to horrible stores, often in remote locations all around the world, which cannot get brands through the official channels.
Traditionally it was understood that Italian stores played a big role in the parallel market. There are stores in villages there that magically turn over millions and millions, placing orders that are sometimes bigger than even the largest departments stores or online retailers. But the paralleling trend has now spread to established stores in other European countries and the US.
Brands are perfectly aware of the parallel market, and the stores involved in it, but are closing their eyes in order to further report growing sales numbers. Officially those brands are sold only in the best stores in the world, and claim a limited and exclusive distribution, but in reality their merchandise ends up in horrible places. There is a certain obsession with reporting the growth for fashion brands no matter what the true cost.
I once described you as being “one of the most difficult people in fashion” and you replied you were very easy and “respect the rules”. How would you describe the way you do business?
I respect rules as long as they make sense and are honest. It is important to do the right thing and not to follow others. There is an ancient Sufi legend about a man who refused to drink poisoned water that was making everyone insane. When he was the only sane person left, all the others considered him crazy, as he was different and not doing what everyone else was doing. Sadly, he gave up and drank the poisoned water. This is when the insane people began to look upon him as a madman who had miraculously been restored to sanity.
Do you think of Vetements as being a disruptive brand?
Vetements has a clear direction of what the brand represents. We never wanted to step on anyone’s toes, we just wanted to make things that make sense. The industry has fallen into a state of hibernation. The values and goals have mutated so much that things that simply make sense start to look abnormal or disruptive. Historically, brands produced clothes to sell to a final consumer. Today brands produce runway collections to sell a perfume or a wallet in a duty-free store. They stuff stores with unwanted merchandise to report artificial growth. They keep overproducing while talking about sustainability. They claim exclusive distribution while paralleling their own merchandise. They are slowly killing their brands in the long term to have a quick profit today. When someone calls Vetements disruptive, it is actually not a comment about Vetements, it is a comment about the current state of the industry.
How has moving your operations to Zurich changed your outlook? Personally, or of the industry?
Being outside doesn’t necessarily mean to be an outsider. Sometimes you need to step further away to see the full picture. Our move to Zurich was a necessary action to keep a clear vision on our future steps. You need a point outside of this world to be able to describe it.