3 questions for . . . Daniel Harari Lectra CEO

‘It’s essential that French fashion businesses start innovating and stop fearing the future’.

As director, along with his brother André, of the world’s leading CAD/CAM provider with €203 million turnover annually, Daniel Harari, Lectra CEO, is at the centre of fashion brand strategy decisions. Lectra is present in around 100 countries, with 1,400 employees of 50 nationalities, so the international economy is a subject he’s very familiar with. We met and spoke with him.

Lectra is an integral part of 80 percent of France’s fashion businesses, making it a key player. Can you tell us about your company’s activities?

Lectra is a global technology business and we target every market that works with textiles and leather. Fashion is first on our list, but the automotive industry is also important since, in a manner of speaking, we dress car interiors, and then there’s the furnishings sector. Europe is our main market, followed by Asia and North America. Today, we sell the most new systems in China, but for a long time that record was held by Italy. A third of our business is with cutting equipment, a third with collection development software (almost exclusively for fashion), and a third is service-related.

In the beginning of 2010, we launched a new strategy to bring our fashion expertise to our clients. This campaign is built on our familiarity with the markets and processes – knowledge gained from working with around 20,000 clients from all over the world. (. . .)

We notice that technology is not frequently updated in France and Italy. It’s clear that fears about the future and a lack of vision are responsible for this hesitation in making decisions. And by continually putting off taking action, businesses fall behind. I think that shows a poor understanding of the fashion market’s evolution.

What directions should fashion businesses have already taken, especially in France?

First, we can say that businesses have locked themselves into a pessimistic mood, without considering the market from an overall standpoint, and without anticipating the needs of emerging countries. Yet, on a global scale the fashion industry is doing very well, with 5 percent annual growth over the last few years and a forecasted 4 percent growth for the coming years. And that’s just for ready-to-wear. In the premium sector, we can double those forecasts, and it’s even better for luxury products. These markets are, however, international. In France we always think of China as a country for manufacturing. That’s true, because half of all clothing is made in China. But today, three quarters of the ‘made in China’ garments are for the Chinese market. Five years ago, three quarters were for export. This huge market is increasingly dominated by Chinese brands, since, for the most part, they are located in smaller cities than the ones Europeans would consider for setting up.

The next pitfall is talking about textiles and not fashion. When we talk about textiles, it’s the factory price we keep in mind. If price is our only parameter, then French companies aren’t competitive compared to the fast fashion companies like H&M or Inditex; nor compared to brands that manufacture where labour is cheap. But fashion is the creation of an image. It’s a brand, the status a garment confers, and the development of a universe. And the world of brands is far from a crisis situation. With this in mind, the lack of optimism and market forecasting is very costly for French businesses today. It’s true, in France the percentage of the household budget allotted to clothing has dropped considerably. If a French brand today focuses only on its established territory, it will miss out on the market’s energy. But the added value of that brand, which is simply being French, gives it an international advantage. For much of the world, fashion is first and foremost French.

So, as well as the problems of not anticipating fast fashion’s impact and of a poor grasp of the international market, I would add inadequate understanding about Internet. Internet today has repercussions on retail and the entire chain. To meet the challenges of the online market, it’s not enough to upload a catalogue; you have to think about every part of your business model. Internet lets businesses personalise their products and also create a loyal consumer base with functions for recommendations, past purchases and preferences. That’s what Amazon does today. To succeed, businesses will have to go further than Amazon. Today we talk a lot about big data. Big data doesn’t just mean a lot of information about consumers; it means you have to draw conclusions from unstructured data. And those conclusions let you segment your clients and give them an arena for personalized spending. It lets you adapt your products, anticipate sales volumes, and more. In each of these areas, the reflexes of French businesses have not met the grade.

How do you think French fashion businesses can turn that around?

In general, a lot of French fashion businesses have focused on their retail network to minimize risks, especially by thinking business assets will grow and that’s a sure investment. But they haven’t rethought their business model. I think resistance to change is the biggest problem. In the future, it will be impossible to be a fashion business if you function according to past concepts.

Italian businesses have been quicker to find their place in emerging markets. In France, the luxury brands have understood, but examples in ready-to-wear are much rarer. The economic crisis is real, but don’t forget that in Chinese, the word “crisis” means both problem and opportunity. Of course we’re in a precarious situation, but a lot of businesses are not questioning themselves. Yet, if you want to succeed, you have to know how to take risks. And from this standpoint, innovation is a big plus. Since innovation can be the result of new technologies, it’s especially valid for updating business models and rethinking business strategies. Technology, while not an end in itself, lets businesses accomplish what they couldn’t do before. Fashion is part of France’s heritage and has a very strong international image. So, it’s essential that French fashion businesses innovate and get free of this paralyzing fear.

That’s why in January we started the Fashion and Technology Chair in partnership with the ESCP Europe business school. Many future business leaders are attracted to the fashion and luxury sectors. We stay in touch with fashion schools, but we lacked a link at the economics and management level. This is an opportunity to underscore the fact that we cannot remain immobile.

Doing new things means taking risks and you can’t take risks without making decisions!