Is it? Yes. Yes. Hello again.
So
I hope you enjoyed the food more than Jean Marc and I could because we had to answer questions and I barely could eat, but Jean Marc couldn't eat at all. And he's very nervous when he doesn't eat. So, okay. Now we are going to elaborate on Kering Eyewear, which we created ex Nihilo. And this creation is an licensing model on its head.
With the traditional licensing model, we left a lot of value on the table, but that was not even the worst part of it. This former licensing model was also an obstacle to brand alignment and also to brand coherence. Also knowing that this product category is particularly key for some customers, the aspirational ones. So that's why we sought a new approach that will close this gap and we are on our way you will see that to success. We were able to see the value of this new paradigm and act on it rapidly and effectively.
And in fact, what I'm particularly proud of is that we did not let anybody distract from our route. We were not afraid by all the challenges and obstructions and Roberto and the team here were very brave into facing those challenges. Indeed, there were many doubters at the start, no longer, I don't know why, you will see. But in fact, this initiative is in my view completely revolutionizing this industry. From day 1, we brought to the party the resources to make the project get off, the licenses and negotiation with former license holders and the support functions as well as the access to talent.
But above all, we dare say that we brought to Kering Eyewear and to the team, Kering credibility and Kering's name. So this is what Kering did and those guys, Roberto, the team here and all over the world did the rest with our continued support. They are the right persons for this transformation and we are very proud and very confident in our success. So now prior to giving the floor to Roberto, I will give the floor to Jean Marc, who will address you for some warning comments and then Roberto and the team. Thank you.
No, Jean Francois, it's not about warning comments, it's just about some organization details. I know that some of you actually quite early to take a plane. So just to give you an indication, the presentation of Roberto should last between 1 hour and 1 hour and 10 minutes to depend on how Roberto is today because it can be 2 hours or 3 hours. So I would be grateful if you have to leave before so that you can do it discreetly because we'll have a Q and A session. And if you want to leave just after the presentation of Roberto, you can of course.
Otherwise, if you want to say a little bit during the Q and A session, please, when you leave, do it discreetly so that the other can ask the question and we have the time and also, yes, we can answer comprehensively to all the questions. So thank you for respecting this. Thank you. I pass the floor now to Roberto.
Thank you. So thank you very much, Jean Francois, to your introduction, your kind introduction to the continuous support and Jean Marc, thank you. I am very pleased and honored and proud to be here in front of you to take you through quickly what we have done in a little bit longer period of 3 years from the start of Kering Eyewear. Before doing that, I would like to introduce my team. I'm lucky enough to have the most representative part of the team here with me.
So I'm here with Anna Zurlo, who is our CFO Roberto Rizzi, who is our Chief Operating Officer and then again, I had the opportunity to have Omar Raggi, who is Head of Centralized Channels Simone Benedato, Head of Marketing and Go to Market and finally, last but not least, David Derregato, who is Head of Hipaaq. Now I'll try to take you through our story and I'll start by saying that most of you must have asked themselves why did you do this? What is the strategic rationale for Kering for Francois Henri Pinault, Jean Francois Palou, the senior management team of Kering to decide to do an adventure like this. There are three main reasons. This is a big market, this is a relevant category and it is very profitable.
So let's start with the market for a second. I think that you know that Eyewear is a big market. It is above €100,000,000,000 retail. It is supposed to be growing steadily, substantially, supposed to be above €130,000,000,000 in 2020. Of course, carrying Eyewear within the eyewear marketplace in the segment of the market, which is frames and sunglasses, which is about €40,000,000,000 And within frames and sunglasses, we are focused on premium frames of sunglasses, which is about €30,000,000,000 retail value €13,000,000,000 at wholesale.
So if you go a little bit deeper into that, within those €13,000,000,000 wholesales, as you know, we are an wholesaler, so we do not have any retail presence as in carrying eyewear. Then our focus is on the high end, which is still very relevant €3,000,000,000 and we are playing in a quite crowded and competitive arena. But in about 3 years, we have been able to become very relevant second to Luxottica only, thanks to the portfolio of brands that Kering has given us from the very beginning. Now I said before, this is a relevant category for Luxury brand. Why is that?
It is aspirational. It is the category which has the highest conversion rate into other product categories. Of course, it does attract new customers, new final consumer for the other brands and it is affordable. Not only that, but this is, and you know it better than I do, a profitable business. The typical standard P and L structure of the eyewear industry is as follows: so 60% gross margin and when we go down to EBIT is in the region of 10%, 11%, so a profitable business.
So with that in mind, Francois Lippinot, the senior management team of Kering said, okay, this is something that is interesting for us. So let's discuss it. And it was clear that we wanted to do something different. So we did not want to do just another eyewear company. We wanted to do the 1st luxury company in eyewear.
I remember discussing with Francois Henri, he told me, Roberto, I have 3 issues with the current business model, the licensing business model. The first issue that I have is on product. I would like the product to be closer to each brand DNA. The second issue I have is with quality. For us, Akari, the goal is to stay true to our final consumer.
And I think that here, things can be done much better than currently what we do with our licensee because if you buy a pair of Gucci sunglasses for €350, then the quality has to be perfect. And the 3rd issue I have, he told me, is with distribution. Why? I travel a lot for business for pressure. He told me, Roberto, honestly, I see our products in places where I don't want to see the product.
So can you do it? And it took me a few seconds to say this is a dream becoming true because I had a team of people, which is expert in the category. They have huge experience. The our dream would be to work for a luxury group and to make a difference and to do something completely new. So off we went, and we started to do a feasibility study, but we had clear in mind our mission.
Our mission was to become the world leader in luxury, high end eyewear, making sure that we were giving the opportunity to our brands to empower their imagination in fully exploiting the opportunity in this very important category. And of course, you see it here, we had a very well balanced portfolio of brands. We're going to be adding Balenciaga starting January next year, January 2019. So with this portfolio of brand, we felt in a position that we could deliver on what Francois Henri Pinault was asking us to do. So November 2013, 3 people together with myself, they are here in this room.
We started to do a feasibility study, in that feasibility study. And I wanted to take you through very briefly, please be patient, I have few videos where I show you the milestones of our journey up until the end of last year. So this is where it all started from. So the point here was if we wanted to do something different in eyewear, we needed to have the eye of the tiger. That was pretty clear.
And this is where we're based. This is the beautiful Villa where our headquarter is. Of course, I remember going to see Jean Francois and then explaining to him that this was an opportunity. The villa was completely abandoned. It was supposed to be for weddings and stuff.
So we approached the owners and we said we could do something nice. And to Jean Francois' point before, when they heard that we were carrying, they said, okay, we understand. We started to negotiate and we got a good price precisely for the reason that we are backed by carrying. Then what happened was that in January, we were already 30 people with a very important expertise from the industry. As I always say, 600 years of experience because these 30 people had on average 20 years of experience each.
And that put us in a position to be able in 6 months to officially launch cabin eyewear in Venice June 30, 2014 2015, sorry, at Palazzo Grassi, again, the strong support of our shareholder, and this is what we did. So thank you, Jean Francois, because back then, and it was June 2015, you said you knew it was going to be successful. So we felt strongly your support. And at that point, we launched 8 brands into the market. Our customers were very supportive.
They all liked the different approach we had. They really enjoyed what we were doing. They were really, really satisfied with the product offering that we went into the market, and that gave us and you will see later already the possibility to start making revenues immediately. All of that was in preparation of the big launch of Gucci. As you know, Gucci is the category killer within the eyewear industry.
And so off we went and this is what Gucci did for us to support us on the launch of Gucci October 2016. As you've seen, Marco and Tim, Alessandro and Tim, embraced immediately this project and they were extremely supportive. They did all of this to make us in a position to have a very successful launch of Gucci eyeglasses. From October to December 2016, so last quarter 2016, we were able to get enough orders to cover the first half of twenty seventeen in terms of revenues. So we said we did it well, why don't we do it again With Cartier, October 2017, in the meantime, we had reached this agreement with Richemont.
Most of you know Vancouver and probably invested into Richemont. Richemont really liked what we were doing. They felt in a position to entrust us to give one of the most important categories for Cartier, very relevant in the industry already, 2 carrying eyewear because of the way we were executing on our brands. And this is what we did in Paris, a Petit Palais for Cartier. So the first point was, let's do it.
The second point, let's do it differently, luxury company in the eyewear industry. We wanted to do it through an innovative business model. We were not starting from an easy position because, as you know, this is quite a complex category. Why is it so complex? First of all, the product.
The product is not an easy product to make, many components, many things that needs to be done in order to get to the completion of the product, a number of producers getting involved, then long lead time production, a fragmented distribution, 7 channels that needed to be covered properly and Luxury as a niche. But we said we wanted to have a Luxury approach all the way through. So luxury in the product means uncompromised quality. Luxury in production means we have only the best manufacturers to cover the best clients and certainly to get the teams together to work in different perspective with an integrated approach. Now, if we look at the different components of the value chain, we thought if we want to be innovative coming from a background where we have this relationship licensee licensor, we need, 1st of all, to make our brands happy.
In order to make our brands happy, we needed to have a different approach in getting to the markets and particularly to the boutique to the brand of the boutiques with the product. I still remember my meeting in Paris with Francesca Valentini, telling me, Roberto, super happy you came on board, super supportive of the project, but please make sure that the approach is an approach where we get eyewear together with the other category when we are in store with the collections. So in order to do that, design needed to be at the center stage of everything that we were doing. So marketing and communication, certainly supply chain and operations and sales and distribution were all going around the design. To be innovative, we needed to have multiple people working as a team in different directions.
So first, we were able to get Alessandro to give us an office in Rome to get very, very close to them, to their creative team. So our team doing Gucci eyewear is basically inside the house, and they work very closely with Alessandro. Same goes for Anthony Vaccariello. We have people in Paris working every day with Anthony and the team there. Then we established a team of designer in London to stay close to the U.
K. Brands, Alexander McQueen, Stella McCartney, Christopher Kaye. It was paramount to have a design team to do Asian fitting in order to be able to get out with the proper style for that market. And last but not least, we wanted to have in house prototyping CADCAM facilities. So off we went and through those efforts, we are able now today to have a 360 degree fully integrated process, which starts with the market needs, marketing brand management, the clinician of those needs in order to be able to get out with the correct collections in terms of size and depth.
Then inspiration, creativity and finally, being able to implement what is at the center of our activities. Now in terms of lead time, it was key shorten the lead time to production. We are now down to 10 weeks, and we are the only company that in eyewear that is able to get to the market with the collections together with the other product categories for the brands. So we changed the model. Instead of having the typical 3 collection, which are usually in the eyewear industry, We do springsummer, we do fallwinter.
So springsummer, when our brands, they do cruise in springsummer, we do fallwinter when they do pre fall and fallwinter, and we have a specific effort for the fashion show. I'm sure you've seen what Alessandro and Gucci put together in Arlo last week. 90 exit on the runaway, 87 of them had frames or sunglasses. If you didn't have the opportunity to see it, please take a look. Now that allow us to be in the market with what we need.
In other words, we are able to develop specific product for specific market needs, which is very important. And we do that in such a way where we develop, for example, optical collection for U. S. Consumer. We translate Asian styles into international styles, particularly Korean styles if we see that they are very successful.
We do dedicated collection for travel retail. But very importantly, this is where design gets us to. I wanted to show you for Bottega Veneta. Okay. So design is what we've seen.
Now supply chain. Most of you must have asked the question, how can these guys possibly do it without having manufacturing facilities? Actually, this is what we really wanted to do, to be innovative. We have had previous experience, factories, issues with capacity utilization, cost, overheads, fixed cost and all of that. But the point for us was what we want to invest is into product.
In order to invest to product, we wanted to have the maximum possible flexibility. So the key word for our supply chain is flexibility. So not owning the manufacturing gives us the flexibility to invest into the product to make sure that we get into the market with a product which is, in terms of creativity, boundary free, which gives us the possibility to exploit all the potential in terms of innovation product development that we got proposed, which gives us the possibility to align lead time. I remember it was around Christmas 20 13 when we were doing the feasibility study, I must have seen 80 factories in the cathode region. And these guys, they were waiting for something like this to happen.
For them, it was a dream to come true because they had a lot of capacity. They've done a lot of investment, they had machineries and they didn't have enough to do. Why? Because the big companies in the recent years were externalizing production to Asia. So they said, guys, we'll do anything for you, product, price, quality.
We're here to do this for you. If you do this project, please consider us at your service. And the result of that is that we have a very selected super qualitative network of 42 suppliers. Italy is the main manufacturing hub, as you can imagine, which indeed does represent 65% of our production facilities. In terms of where we are located in Italy, clearly in the Veneto region, which is the historical district of eyewear, particularly, Valdovy Adene and Cadore region.
And again, what we can get from that is craftsmanship, manufacturing expertise, quality and innovation, of course, reaction to our needs, flexibility again and reduce investment in fixed asset. Take a look again, Bottega Veneta, what these guys are able to do for us. And believe me, to reproduce intrecchato in a pair of frames is not easy at all. This guy was not an actor. He's one guy that actually does the stuff for us.
To complete the manufacturing footprint, as you know, we enter into a strategic product partnership agreement with Safido, which is an agreement where we have set volumes decreasing over the years. At the beginning, it was a little bit difficult in terms of quality and service, a little bit of delays in deliveries. But working together, with a huge effort on both sides, things have improved substantially. So we are satisfied with the agreement. We are satisfied with what we are doing.
We want to be very pragmatic. So our point is, as long as we do well three things: quality, price, service and price, we're happy to keep working with Safilo and this is going to be in the future an important partnership for us. And then we were lucky enough through the partnership with Richemont to get NCL, is a state of the art facility 45 minutes from Paris, Sault Steambre and they speak under the control of Jean Francois, Jean Marc and Claire, but we are happy to invite you to see it. As I said, I've seen many factories, I've never seen anything like this. To be honest, I think that it is certainly the best, the cleanest, the best organized factory I have seen in eyewear, the machinery, the galvanic treatment, cabin, I mean, I've never seen it.
Of course, we need to do things to try to improve the performance of the factory. And for sure, we need to it possible where we will have possibly better higher saturation. We need to get efficiencies, but our point is that we want to make MCL best in class metal production facility in all of the eyewear industry and I think we will be able to make it. Now in terms of marketing and communication, as you probably have already seen from the video that I show you on Gucci, our point here is that we went from external partners to colleagues. This is the part of our brands where people know what is going to happen in the future, the product that will be launched, the campaign that will be done.
So when you are licensee licensor, you don't have access to this information correctly. So because you know you're an external partner, so people will not tell you really transparently what they think they're going to be doing because then you work for other brands and all of that stuff. So they're not so sure. Here, we are colleagues. As Jean Marc always says, the success of getting high risk based on the genuine cooperation.
He always tell us that and to the CEO of the brands between the brands and Caring Eyewear. So we are able through the fact that we are colleagues to have a fully integrated approach completely aligned with our brands. Now that allows us to have everything around what we wanted to develop in terms of marketing and communication with our brands. So we start from the product and around the product we build the communication. Within communication, we go into digital, clearly capitalizing on the skills and the capabilities of our brands.
We go and execute in store visibility and we do PR and events based on their guidelines. And of course, we get a lot of support so that in all touch points with the final consumer, we are completely aligned. Now this also is entailing Caden Iowa to have a tailor made approach to the market and to the customers because we are able to put it together based on customer needs, custom made trade marketing tools, dedicated campaign, go and work with celebrities, be in all of the digital activation that the brands have. So in one word, we are together. Now in terms of distribution, the way we then go to market also here we wanted to be innovative.
The old business model was agent commission, You go out, you sell as much as possible, you get as much organic commission as possible. We didn't want to do any of that. Sorry, but we were not in that business. So we decided to have brand ambassador, which we are representing the values of the brands. We are aligned with the image of the brand and we were in control of the distribution.
So what we did was we put together a link structure, which was able to get to the point where we wanted to do to be, particularly in terms of quality of the doors. The quality of the doors that we cover needs has must be aligned with the values of the brands that we sell. So the selection of the retailer that we have is done through an in-depth questionnaire, which has objective criteria, and they have to do with the position of the store, the brands they carry, the service they offer to the customer when they sell the product, the after sale service. So it is done in such a way where we are able to establish the criteria and we are able to decide the customers that will be able to work with us. Of course, those agreements also imply a minimum order quantity.
Then in terms of distribution, what we did was we were very clear from the very beginning, we needed to do a full segmentation of the market. And we decided that we wanted to approach the market based on the segmentation with different product, trade marketing tools and advertising campaign. So what I mean by that is that and the case of Gucci is very relevant, selective distribution and qualitative distribution to make sure that the guys that were in the segment supreme, we are getting products that the guy that are in the best doors of within the segment of glam, we're not getting. So fashion show collection, they can only get it if they are part of the supreme segment of the market as well as in store activation as well as trade marketing material. They cannot get the guys that have Gucci and they are in ground, they will never get Made in Japan Gucci.
They will never get all titanium. So this gives us the possibility to have a differentiated approach after having segmented the market, taking into consideration the quality of the doors. Price positioning. This is a little bit of the same in the sense that thanks to the portfolio brands or brands that we have, which is very well balanced, we're able to cover all segments. So we start with Puma at around €100 retail, and we go up to Cartier above €650 Now in terms of the team that we have on field, we have a very lean organizational structure.
We have direct subsidiaries and then, of course, the direct subsidiaries are leveraging on the presence of Kering around the world Kering Group around the world. We have a highly selective network of distributors that are helping us to reach those places where we're not directly involved. Strong focus from the very beginning on centralized channels. What are the centralized channels for us? The centralized channels for us and this is also the reason why OMA is here with us are those channels where we can extrapolate synergies with our brands for their other categories.
So department stores, so if we go to Harrods, of course, Gucci, Saint Laurent, Alexander McQueen are very important for Harrods. So we get there with our products in a different position. So department stores, I was saying travel retail when we go and talk to these guys Dufry, DFS, Again, we extrapolate synergies as well as multi brand fashion stores. Of course, in centralized channels, we have the brand boutique, which are key and where it was evident from the beginning that we could have improved the performance and of course, international key account, which are relevant to our category like Luxottica or GBBB. In terms of new channel, we prefer to have an approach where expertise counts more than geography.
So for example, in e commerce, we have a central team that covers e commerce through the biggest partnership that we have, YNAP, MyTeresa matches fashion. Now in terms of what we have been able to put together, we have clearly a fully dedicated team. And as I said before, we have a unique and dedicated approach for each of the brands that we represent. Of course, we are able to deliver best in class service in terms of our presence in the market. And particularly when we talk about the brand boutique, as we were never able to do before, we are able to be in store together with, as I said a few times already, the other categories, not only with dedicated product to the boutique, with dedicated focus on the material that we have, with a dedicated team, original expert that look after training of the salespeople, look after optimization of the space, optimization of the production.
So a huge effort in trying to extrapolate as many synergies as possible on our brand boutique. Now this is the way we thought we could have done it. So innovatively on the part of the value chain, we talk a little bit briefly about the key achievement. Let's start with sales. Sales in 2017, 3 years from start, so from 0 to €352,000,000 which contributed in terms of consolidated revenues to the group for €272,000,000 taking out royalties and intercompany.
We were able to get a profitability in the region of about 5%. And we launched 7 collections, more than 3,000 styles, which translate into 14,000 SKUs. And last year, we added 500 people to our company with no disruption for the business and people is the key asset that we have. As I always say, our real luxury is that we built this company from 0, so we were able to select the people we wanted to work with, each and every one of them. So talking about people, this is the picture.
This is the ramp up that we had. So we were at the end of 2015 about 198 people and then end of last year, we were about 1,000 people. Most of our team is women, 60% international and average age is 36 years. What do we look in the people that we hire? 1st of all, entrepreneurial spirit.
2nd, resilience. As I always say, this is not for everybody. We work 20 fourseven. We need people that are fully committed to the project and they believe into the project and they want to make it to change the history of the eyewear industry and of course, skill and competencies. Then if we go and take a look at the progression of the revenues, as I said, thanks to the successful launch, we were able to generate a little bit of revenues in the 1st year, €74,000,000 in the 2nd year and €352,000,000 on last year.
We cover more than 100 countries, 20 through the 10 direct subsidiaries that we had at the end of 2017 and the rest through distributors. We have in the field more than 200 brand ambassadors. Now if we look a little bit at the split of our revenues by area, centralized channel is the most important part of our revenues. We said from the very beginning, we wanted to be focused there. And then EMEA is about 25 percent of our revenues with Americas, which include Canada and North America together.
It's about 20% of the revenues in Asia Pacific, 15% of our revenues. Now looking at the split of the revenue, Trios, you might be familiar with the definition. So, optician, ophthalmologist, optometrist is the bulk of our business above 50 percent. And Global Travel Retail, International key account, again, people like Luxottica, Grand Vizion, those Fulfillment, those guys are together with the boutique DOS and department stores are about 35% of our revenues. Then if we look at the category, 70% of our revenues are in sunglasses and 30% are in optical frames.
And then if we look at gender, the majority of our finer consumer are women. Unisex, which include men and women in gender fluid are very important as well. So men represent 30% of our business. Now if we look at the result of the internalization versus the previous business model in licensing, you can see that it doesn't really matter the brand, but all in all, the performance is much better than before. So if you take Bottega Veneta plus 200%, if you take Stella McCartney plus 350% or Saint Laurent plus 2 50%.
Gucci 1st year with the internalized model compared to the previous year under the licensing model plus 15% on a number which is as you can imagine extremely relevant. Now in terms of achievement for based on the different parts of the value chain, let's start with design and product development. As you can see here, our offering has increased substantially as we grew the brand and as we grow our presence in the market. Spring summer 2018, 650 styles, full winter 2018, 450 styles. Then if we move on into supply chain and operations, volumes increased substantially in terms of production.
Acetate is still the most important material that we use. In terms of what we have implemented for marketing and communication, I like to give you an example of a 3 60 degree project that we did with Cartier, where the eyewear presence is in all of the brand communication platforms, so be it Instagram, Facebook, Twitter. And this allow us also to implement a number of extra outdoor activities. Take a look at what they did. Okay.
In terms of where we are in the market, we have end of 2017, 13,000 customers and we cover a total of 30,000 doors. Then we have as I said, what we are working on is additional direct subsidiaries in the world. So we finished 2017 with 10 direct subsidiaries. We now have 13 direct subsidiaries. And of course, we have a strong presence in department stores, and we have been able to develop specific projects for specific customers.
So Boucher Hero for travel retail, the project with Zitao in for Saint Laurent in Asia and the special collection for Boucheron in the Middle East. In terms of luxury approach, as I said from the very beginning, this is not another eyewear company. This is a luxury company within the luxury group in the eyewear category. So the approach has to be consistent all the way through and specifically on the way we go to the market. So amazing venues, impeccable execution and of course, obsession for details.
I want to take you a quick look at the way we go to middle, which is the most important fare in the industry in Milan. Okay. I remember when we discussed with Jean Francois about a different approach to go to middle, To be honest with you, it was mainly because we had a slim P and L and so we wanted to try to maximize. So the request of the mid organization was huge and we said, let's do it differently. So Mr.
Marcolhin, the Chairman of Mido came to see us and he said, guys, we want you at Mido. Again, that price position, he always made us a little bit sad, so we said, let's go for the full approach. Now, as you might have seen, some people are following us, so we're very proud of the choice we made. In terms of sales, also here, the reason why I've asked David and Omar to be here is that they do represent practices. In APAC, through product marketing approach and go to market strategy, we are really making it different from before.
In terms of product, we have styles and product fully dedicated to the Asian market. They do represent more than 80% of our revenues, so they are very successful. In terms of marketing approach, we are able in coordination with our brands to have brand ambassador that are typical to the Asian market, Nini for Gucci, Zitao for Saint Laurent and of course, we are present in all the different communication tools of the brands. And also very importantly, as David, if you have questions later can explain to you, we are able to have a tailor made approach to customers. I don't know if you're familiar with Hong Kong.
I see some of you coming from Asia. Puy in Hong Kong is one of our best client. We were able to do dedicated windows, dedicated collection. When we went to discuss with Alexander McQueen the possibility to do a collection Alexander McQueen for Bui, they were immediately listening to us because they know who Bui is and they appreciate the fact that in order to make it successful we need to work together. And same goes for OMR and decentralized channels because they are thanks to the strong effort in terms again of product marketing and go to market, we have been able to become the leader in eyewear, in particularly the travel retail, where again, we were able to put together product dedicated to certain customers, Avant Premiere for certain customer.
You probably have been traveling here through planes in the airports at the moment. There is a full campaign on a special product that we did for Gucci, which is also which has been very successful and it was developed for the travel retail environment only. Of course, we did a huge Cartier domination in the Middle East. We did a project for Gucci Hero for other environment and we do exclusive agreements with the biggest players and also very important, we do cooperative planning in order to maximize sellout. Okay.
So now we want to talk to you a little bit about our ambition. Sales, we want to get to a level of sales which is above €750,000,000 Of course, as you can imagine, we're here to make money, so we need to improve profitability and the goal is to get to a profitability for cabin eyewear above 10%. Then in order to get to this point, clearly, we need to strengthen and expand our core business. In order to strengthen and expand our core business, first of all, we need to have a tighter control of the value chain overall. 2nd, we need to consolidate our worldwide presence in those markets where at the moment we are not direct, we are through distributors, so we want to be there directly.
We need to enhance the distribution in new channels, particularly in those channels that are becoming more and more successful e commerce namely. We wanted to improve our product offering and we know that we can do that. And finally, something very important, sustainability and innovation. As you know, sustainability is a core value of Kering Group and it is also a core value of Kering Eyewear. So that is one area in which we will need to keep improving and progressing.
As I was saying, improving of the product offering and finally, improving of the profitability. Let's go into a little more details on how we are thinking about these possibilities of future growth. Let's start with the fact that we have decided to have a fully integrated, automated logistics center. This will be completely up and running from January 2019. It will represent for us end to end control of logistic and distribution.
It will be extremely efficient to compare to the externalization model to outsourced model. And it will be certainly in line with having eyewear quality standard. Not only that, it will give us the flexibility to serve at best the needs of our customers. So the point here is that we're going to be able to have smart automation in order to overall improve our operation. Now in terms of the presence in the market, we cover directly the most important places, countries, markets in the world already.
But there is certainly room to improve and to have a better performance, particularly, I would say, in Southeast Asia and in the Middle East. With a group of brands that we have for different reasons, we think that we want to further expand our distribution footprint going direct in those areas. Now if we look at digital, this is very important. We do realize that this is going to be becoming even more relevant in the future. We already work very well with some of the biggest players.
We develop for them specific absolute collections, special colors, avantprevier, but and this is what I wanted to show you, we think that we have a huge opportunity there, specifically and particularly in China. Why? Because China is huge and if we wanted to get to Tier 3 and Tier 4 city, this is the way to do it. That's the reason why we did this partnership with jd.com. I don't need to tell you jd.com is, but certainly they reach more than 290,000,000 and this is what we did with jd.com.
We wanted to show you the way it actually looks. You can see that this is very qualitative. We only recently started March 12 very successfully already, more than 650,000 unique visitors and we sell more than 300 units a week. So again for those of you that have access to jd.com, I see some of you coming from Asia, but this is the way our online store looks. JD is the only authorized distributor online of carrying eyewear products.
Now the other thing that we wanted to expand is our shop in shop. We developed a store concept. Let me be very clear, there is no intention to go retail here. We will keep remain an wholesale company, but for the best client, we are proposing this concept for store in store. As you can see, it's very qualitative.
It's different from anything else that you've probably seen because it's not a crowded place with many brands, many sunglasses, many frames. This is a way to give importance to each of the style and of the brand. So again, under the control of Jean Francois, Jean Marc and Claire, if you happen to be in Milan, you are invited to our offices in Milan and you can see in real this concept store that we have developed for our customers. Now in terms of sustainability, as I said before, our core value for the group and for Kering High Work. So you might have seen we have developed a partnership with Bio.
Ong. The goal of that is that we want to be able to develop an acetate which is 100% sustainable. So we are investing into this research and development effort and we want to come up with something tangible for our company and for our industry. Of course, we're working with our suppliers in order to reduce the environmental impact and also with our employees, so that into their day to day activities, sustainability is in the DNA of what they do every day. Categories, we think we have potential in prescription frames.
The market is about fifty-fifty. At the moment, we do 70% sunglasses. We want to focus. We want to be able to get there with our brands. We think that the market is there.
The market is waiting for us. So of course, we are doing many things, but this is a focus that we want to have and we're going to be able to certainly get an additional market share in prescription frames. Then gender. Gender fluid is becoming more and more important for our brands. So being fully aligned means to be able to exploit further this opportunity and this is precisely what we want to do.
So we have potential to do more unisex and to expand into that segment of the market. We will be adding Balenciaga, as mentioned before, at the beginning of 2019. Again, timing is everything in life, so we are launching Balenciaga in a moment where the brand is super hot and has an extremely good momentum. We have developed a collection which is precisely in line with Balenciaga brand DNA. I'm really curious to see what you think when you will see it in the stores.
And profitability, As I said before, the key words here are scalability, which is the most important one and efficiency. What I mean by that is that we need to exploit the full revenue potential that we have, capitalizing on the current structure. And 2, we need to make sure that we optimize the supply chain, be it the agreement with Safilo, MCL, the supply chain overall in order to be able to be more efficient and to get to our ambition of having an EBIT above 10%. So this is what I wanted to say. One last thing, I said before that we started from a position where this was a very consolidated and somehow slipping industry and this is the way we saw it from the very beginning.
So thank you very much for your patience and we are here now for Q and A. Before I get to that, I wanted to say a special thanks to the team that has been working here. So particularly to Federica, Head of Trade Marketing and to Celeste, Benedetta and Massimo that have helped us to put together all of these for you. I hope you enjoy. Thank you very much.
Erik Karlsson, CIO of Industrial Equity Partners. What's your plans for Gucci post 2020 when the agreement expires?
[SPEAKER CARLOS
GOMES DA
SILVA:] Roberto, do you want to answer? The agreement with Safilo, the supply agreement, yes.
[SPEAKER CARLOS ALBERTO PEREZ DE SOLAY:] So basically, as Roberto already mentioned, we consider Safilo a good industrial partner. We are discussing with them the condition to continue the agreement provided that there will be top notch in the three elements that we value in the supply chain, which meaning timely delivery, undiscussable quality and competitive price.
Luca Solca from Exane BNP Paribas. Thank you, Roberto. I was wondering what kind of implications do you see on the business mid- and long term from the proposed merger of Luxottica and SLO? And what areas is that potentially going to impact your business? And maybe a second question, more financial.
When do you anticipate that the Kering Eyewear activity, which is growing so strongly, is going to be above the return on invested capital hurdle rate of the group? Thank you.
Okay. So maybe I'll take the first one. I think that the merger between Acelo and Luxottica makes a lot of sense. We work extremely well with Luxottica. As I said, the look at it is one of our best customers within key accounts.
We have our brands represented in the best quality point of sales that they own around the world and we are very happy with the relationship. So I think that in terms of relationship with distribution, nothing will change. Hesilo, we work well with them as well because they are one of our suppliers of lenses. Not only that, but they distribute some of our products in certain areas. So they put together a specific sales force for Puma, for example, in Iberia.
So Spain and Portugal are covered by a sales force of Essilor. Not only that, but in places where we are not direct like in the Philippines, our brands are distributed by Essilor. So once again, given that the brands that we have have very little competition with what Luxottica has, I don't think it will be an issue. So if anything, the company will become stronger. And therefore, we have good relationship with both.
We think that we will benefit and enjoy some additional value from the merge between the 2. Then I give it to probably Jean Marc Horana for the second part of the question. Yes.
Maybe it's at group level that we should answer. Thank you, Roberto, for passing me the floor. Now just as a to remind the situation, we paid EUR 90,000,000 to Safilo. We had some compensation to Cartier, but at this time, Cartier contributed also. In fact, after that, you see that it's just not so much capital intensive, but it's more a question of financing the inventories.
And considering the expectations that have been shown by or the ambition shown by Roberto, which are on a standalone basis. So the above 10% EBIT margin is at carrying everywhere levels. So you should add also the royalties earned by the brand to have a full picture of the situation. You can imagine that with more than 10% of EBIT margin on 7 €50,000,000 of sales. The payback is quite rapid.
You know that we have decided to depreciate the indemnification to Safilo over 3, 4 years. So we can assume that after this period of depreciation, considering the capital employed that should be quite limited, the return on capital employed should be on par with our expectations and in line with the average of the group or even above.
Thank you very much. I just forgot to ask. The net working capital requirement of this activity as a percent of sales, is that possible to know?
[SPEAKER CARLOS ALBERTO PEREIRA DE OLIVEIRA:] I mean, we don't disclose the percentage the exact percentage on top of sales, but we can say that due to the fact that we are still increasing a lot on our top line, the requirements in terms of working capital is still there, mainly receivable and inventory due to the fact that we are a wholesale business.
Maybe what we can add there is that the customers really appreciated the different approach. So we were using our past life to be in a situation where we had less control of customers in terms of payment terms and all of that as well as on the other side suppliers. So I think we've done a strong improvement on both, thanks to the different approach.
Hi, Antoine Beyers from HSBC. Three questions. Honestly, I don't really get the calculation that was made by Jean Marc, because it's a profitability at group level that counts. And so 10% is not really impressive compared to what you would have get from a licensor, which is usually you've got distribution not only you've got the royalty, but also the contribution from advertising. So considering everything you're investing, I think it will take a while for that to get some decent returns.
So in other words, does it will it work only if you can get other brands from the other groups than Kering? And then from a quality standpoint, I think you mentioned that from a product standpoint, you could have your own designer, but I'm sure that Luxe etique would have provided would have been happy for you to have your own designer collaborating with them. And same in terms of distribution, usually it's the brand that set up the number of point of sale. So I'm a bit surprised that it's so revolutionary.
Sorry, Anton, maybe I was not clear enough because when I said 10%, it's after the payment of royalties to the brand. So if you compare now the contribution of the eyewear activity as a whole, if you add the total sales in stores plus the wholesale sales and you combine the above 10% of Kering Eyewear plus the royalties in the brand, we are above 20 percent of almost at 25% if we consider more specifically Gucci. So 25 percent of EBIT margin, I think it's quite relevant. And I'm not sure that we would have got this profitability in the previous model. I'm sure it was not the case.
So just to clarify totally, above 10% And you know that Roberto is quite cautious when he say above 10%. So it's after payment of royalties to the brand. So it means that you need to combine the P and L of the brand plus the P and L of Kering Eyewear. So sorry if I was not clear.
Yes. And again, if I may add, we've been in this market, as I said, 600 years or 20 years each. There is no contract in the previous business model that gets to this level. So it is actually all addition of value, if that makes sense to you. I hope it's clear.
2nd question was if we're thinking to get brands from other brands. No, The answer is that we want to stay true to what we said, which is that we're going to be doing the brands of our shareholders. We have received a number of requests. I always discuss them with Jean Francois and Francois Henri. But again, we want to be nice to everybody, but we want to do the brands of our shareholders.
That's it. 3rd, I think probably I wasn't clear enough. It's interesting that you say there is nothing innovative on the way you approach the market because at the end of the day, the brands are deciding the doors. It's actually not true. We have been doing this in a different position being licensee of licensor and trust me, if you give me your brand and I use it and I pay royalties, you're not going to decide the doors I'm going to be in because I need to make money.
So it is a discussion, there is some guidelines, but it is completely different. So being internalized means that because of the fact that we work together, we want to be fully consistent with the brand image. So if I am a licensee, I need to try to get to the minimum royalty guarantee that I give to you. Therefore, I need to sell as many glasses possible to get the money to pay what I have promised you here, I don't have this problem. The problem I have here is that I need to have the right distribution based on what the brand wants me to do.
So this is a completely different approach, is very much focused on preserving brand equity for each of the brand that we work with. Does that make sense? Does it clarify? Okay.
Thank you. Flavio Cheda from Jefferies. Just three quick questions. Firstly, on I noticed 14,000 SKUs, quite a lot. I noticed in terms of the number of styles, the last 4 winters contracted a bit.
So I was wondering in terms of complexity, what level are you comfortable managing? Secondly, if I can go back on the issue of Safilo, I'm afraid. If when Safilo is no longer going to be able to deliver the product, how flexible are you in terms of replacing them without impairing your ability to deliver the product? What do you actually manufacture in China? Because I noticed you use it manufacturers in China.
And lastly, in order to go to fifty-fifty more or less, some prescription, obviously, prescription requires rather more complex distribution. Are you in a position to do that now in terms of the client base that you work with? Or is it just a question of fine tuning production? Or is there more that you need to do to get there? Thank you.
Okay. So maybe I start from the last one. In order to get there, we needed to fully exploit the potential of the current customer base and to expand customer base in certain markets. So for example, in the U. S, where the market other than department stores or multi brand stores is mostly prescription frames, as you know, these stores are not in the street, they are on the 2nd level.
And they have doctors that suggest you what to do. They do the visit, they propose you we need to further expand our customer base and to improve productivity in the customers that we serve already. In terms of the rest, production of that is not an issue at all. So I don't think that is complicated. As you can imagine, we've done all of these in 3 years.
So we focus on what was really what was the focus also of our brands, which are much more into sunglasses in terms of image communication and all of that. The frames are a medical device somehow, so it takes a little bit of time to get the brands there, but we have the full support and little by little we're going to be able to get to 55%, 45%, I would say that's the idea compared to now. Then in terms of the second question was what happen if Safilo doesn't deliver, right? If Safilo has problems to deliver. Again, maybe you want to take this and also complexity in terms of number of styles and SKUs, yes.
[SPEAKER CARLOS GOMES DA SILVA:]
Yes, the rest of the questions. So with regards to Safilo, as I explained before, there is the willingness to continue cooperating. That said, clearly, in case this scenario will not be feasible, we don't see any risk of capacity shortage. We are working with 42 different supplier across the world. There is capacity in Italy available to replace Safilo.
As you may know, the SPPA with Safilo is stating decreasing volumes. So the most critical years are over with 2018. We have 2019 2020 with decreasing volumes commitment with Safilo. So this is to say we are already arranging some partial substitution of saphilo volumes. That said, we are working and this is the strategy to keep our flexibility, which we believe strongly is very added value to serve better our customer, being flexible in the time to market.
We are developing a network of suppliers and with the most, I would say, important, we will work in a very deep partnership. That means reserving capacity, which will enable us not to have any shortage. When and if Safilo will decide or will not be able anymore to provide the decreasing volume that we are counting on so far. When we come to China, as was shown by Roberto in the presentation, today China represents 5% of our purchased volumes, mainly it's Puma and MCQ and mainly it's injection. So it's this technology, the injection frames.
And as far as the brands are concerned, it's the entry level brands, Puma and MCQ. When we come to the complexity, you were mentioning the 14,000 SKUs. Clearly, this is a feature of our business to be complex. We believe that the number of SKU will be basically coming from the maturity of each brands. Now we are coming there.
The beginning, we were growing fast the number of SKU. Now, of course, with Balenciaga, we will add something on top. But for some brands, we are already at the maturity level, meaning that a certain number of new SKU will come in and a certain number of SKU basically the slow mover will go out of collection. So we shouldn't see in the next years increasing dramatically increasing number of SKUs. But there would be more a substitution of SKUs, the slow moving with the new collections, except for the new brands where we have to build the maturity on the market.
Melanie Flouquet, JPMorgan. I have three questions, please. I wondered, from an eyewear total market perspective, whether you could share with us whether trading up is still going on or whether we're starting to see disruption from the Warby Parker, whether we are actually seeing trading down in this industry. I apologize because I'm not an expert in anywhere. Number 2 is on the P and L structure.
I was quite surprised by how high other G and A are, 19% to 20% of sales. So I was wondering whether there is some leverage that we could get out of that and whether your 10% target is actually pretty low given the industry is in reality overspending on this specific line by quite some distance on other industries from what I can gather? And my third question is on Gucci, the growth in 2017 under short growth of Gucci brand. Clearly, this was a year of transition. So I imagine you changed some of the points of sales.
There was quite a lot of work. Can you now converge in gross rate or beat the gross rate of the Gucci brand standalone in Gucci eyewear? Thank you.
[SPEAKER CARLOS GOMES DA SILVA:] Okay. So the first question was on these players, these new players in the arena if they are challenging our business model, right, the luxury? Sorry? Yes, absolutely. I think, first of all, nothing to apologize.
I hope that we gave you a little bit of sense of the eyewear industry. So thank you for asking the question. Warby Parker specifically is a very successful company. They have done very well. They have disrupted a little bit the industry, but they have with all due respect very little to do with Luxury.
As you know, their business model is to go for bestsellers, produce them in China, send 5 to the final consumer and then make them try and then you can send back all of them or you keep 1 and then they do a huge work, very successful home service. So it's a different perspective, it's for a different consumer target, it's not where we play, plus being connected with our brands in terms of style, in terms of what we propose to the market, we will never be into a situation to get towards those sort of potential competitors. Then as I said before, we do realize the importance of e commerce. Maybe, David, do you want to spend a few words given that you've done the agreement with jd.com very successful and then we go into the other?
Well, when it comes to e commerce for us is clearly a very important segment or channel because it's growing fast. We approach it in 2 different ways. So we use e tailers such as Net A Portfolio for example or MyTeresa And there we have the same approach that we have with customers such as Puyi, for example, Capsule Collection, Avant Premiere, etcetera. But then in a market like China, which is today the first e commerce market in the world, we go direct, meaning that our retail base does not allow us to cover China in its entirety. We cover barely Tier 1 and Tier 2 series.
So we decided to use JD platform, but we managed directly the flagship store to cover the rest of China. And it was it went above our expectation. I'll just give you a couple of indicators. We already serve on a regular basis. And bear in mind, we only started 2 months ago.
All of the 31 provinces in China, all of them are covered already. We sell to all of the 31 provinces every week. In the past 4 weeks, we covered Tier 3, 4 and even 5 cities. Tier 5 cities in China, I've never been to one of those and trust me, I lived in APAC for 7 years now. Because there is customer demand, there is consumer demand that we cannot satisfy through the normal channels.
There are simply I don't have a single point of sales in a Tier 5 scenario, right? So basically, we're seeing business develop there that is above our expectation and we see that as a huge opportunity for growth in the future. Of course, this has nothing to do with the Warby Parker model, as Roberto was saying, because they play on a different game actually. Well, they don't even play in China, to be honest, right now. But they play a different game to what I'm telling you now.
We use the e commerce to reach consumers that otherwise we would find very difficult to reach.
Ana, do you want to go G and A?
Concerning the other G and A line of the P and L, maybe it's a little bit misleading the way we call it, but in reality in that line we are considering our total personnel cost, because in sales force, you have only people on the field. So maybe it's a little bit misleading the way we call it at the end.
And
Gucci?
Yes.
With reference to Gucci, of course, that brand is our strongest brand is the in 2017. What we can say is that we if we consider Gucci, Saint Laurent, Bottega Veneta, Puma, which are the pillars brand in our portfolio, the total amount of sales related to best brands is 70%. Of course, this percentage will decrease in 2018 due to the fact that we have Cartier. So also the weight of Gucci will be lower in 2018.
Did we answer the question, Melanie?
Lara Peninni, Capital World Investors. I was wondering whether you could just share with us what is the behavior among millennials in terms of replacement cycle in prescription, but also in some? I mean, you target the millennials more than others, and I wonder whether you could share that.
Thank you. Yes.
Do you want to take that?
Actually, millennials in China was for us a huge surprise, because Gucci got a lot of traction on Millennials in China and are really looking forward to get Balenciaga too. What's happening is that they have completely different trend. So that's why we do dedicated campaigns in Asia with local celebrities, local Asia design product for Asia. And what is happening is that these are customers that they don't buy just a pair of sunglasses a year. That's the point.
We have like the shopping shop that Roberto was showing you is in Beijing. So we are in San Le Tung, one of the heap neighborhood in Beijing and the average ticket is not 1. So people that's a millennial area, right? People come in and buy, I think we were at 1.4 last time we checked, so more than 1 pair at a time, which is completely different from what I was used to that you go inside, you buy your one pair of sunglasses and now we have people coming in and buying 2, so that the average goes up. So I think this is happening a lot to other categories.
Right now, in the luxury industry, you may have your customers buying 2 pair of Triple S. For sure, we know one guy that is doing that. So it's in that perspective, going back to the cycle that you are mentioning, it's pretty disruptive compared to what we were used to that frames. It was you buy a pair every 2.5 years, not happening anymore. A Chinese millennial, which is 70% of my sale, will not buy will not keep the same frame on its face for 2.5 years.
I can guarantee you this. They are difficult to track because they change their they change fast. They really they are into something, then they can change their mind. But if you get to them successfully, then it's a very interesting market. And this is why for Saint Laurent, we use Huang Zitao, which is a millennial.
He is a millennial. He is a rapper, and we use him as a celebrity to promote the brand. And just to give you an idea, once we introduced that sales in China tripled for the brand, okay? So you get that segment right, it's going to be happy days. Right now, this is how it works for our business as well.
And the same applies to the rest of the world because the thing is that this is an affordable product, but it gets you into the brand. And we are lucky because it goes into your face. So in those social networks, as you know, most of the pictures talk about your face, the way you look, but from here up and not from here down. So I got the question and they told me, but who's going to give to those millennials the money to buy a pair of €350 sunglasses or €500,000,000 or €600,000,000 The answer is the same people that are giving them the money to buy triple ISO speed. So you have it there.
We are very lucky that we are working on this category, which is enjoying a lot of success with millennials.
Okay. Thank you, Roberto. Thank you to the team. I also want to express my gratitude to everyone at Gucci, Kering Eyewear and also Kering who worked tirelessly in the past 2 or 3 weeks to make this day possible. Also very big thank you to Claire, to the Kering Investors Relations team, to Bernard also.
And of course, they will continue to be available for questions You might still have after this day of a very insightful day. Thank you to you for your interest in Kering Gucci and Kering Eyewear. Your support is a very significant part of our journey and also a part of support to our transformation. We are deemed to become the purest and fastest growing luxury group in the world, and we will show that to you in the near future. So now it's the end of this day.
Safe travels back home, and we'll talk to you on the 26th July. Thank you.