Good morning to all of you. Welcome to Kering Capital Markets Day. I hope the morning so far have enabled you to better understand the new engine of Gucci's revolution. For this day, we have decided to bundle together two different parts of our business, Gucci and Kering Eyewear. There was, of course, an element of convenience and opportunity for Gucci specifically, since they have exceeded their 2016 targets, so they were ripe to benefit from an update. Also, as you know, Kering Eyewear is an entity that we have developed from scratch and which is now up and running. It is the right time to shed some more light on this activity. Of course, both of them are specifically and fundamentally Italian. Beyond expediency, this pairing illustrates two different but complementary paragons of what Kering brings to its brands.
Indeed, what is Kering's role vis-à-vis its brands? Actually, we are much more than a business sparring partner. We encourage our brands to do better, to go faster, to go beyond their limits, even though they can sometimes be conservative or risk-averse. Conversely, we bring them back to reality when their ideas are too wild. We help them stay focused and disciplined, partly by taking the responsibility for functions they can't or don't need to carry out independently. We also support them when they are struggling and protect them when necessary. We instill the set of values that are at the core of Kering and maintain their integrity and coherence over time and across geographies. We represent and enforce the search for a better good for the whole group. We arbitrage decisions and investments, and we make sure synergies are attained.
The boldness and swiftness of Gucci's relaunch is a case in point. Gucci was and will remain the anchor of Kering Group. Still, we thought that its rebirth couldn't be achieved through incrementalism, so we helped Gucci to step out of its comfort zone. Others would have gone for the safety of an established outside artistic director instead of Alessandro, who lived and breathed the brand from within. Others would have gone for small steps instead of going for bold and radical. Others would have followed instead of becoming leaders. We assessed Gucci's strength and potential and set about to turn them into reality. We gave it our full managerial support, relocating managers from all parts of the group, first and foremost, Marco, and hiring some of the best people in the industry.
We also give it our full financial support to transform its store network, transform its sourcing and logistics, transform its production capacity, partly through integration of parts of it, in order to make sure that Gucci is ready for the huge transformation and the huge change of scale that we foresaw. Today, Gucci has regained its absolute status as the ultimate fashion authority, faster and with more brio than even we anticipated. Where do we go from here? This is the story that Marco and his team will tell you. Believe me, it's only the beginning of a fantastic journey.
What I can tell you is that we will continue to support Gucci's growth, to provide it with the talents and tools it will require, and to make sure it benefits from the lessons that we learn from Gucci itself, but also from all the other parts of the Kering Group. Prior to Marco's presentation, I will invite you to watch the new Gucci video. Thank you very much.
Morning. Now I read all the disclaimer. Please don't take any picture of the slide. Today we're going to divide the presentation in three parts approximately, in the sense that we're going to talk about the principle that inspired us to reach where we are today. The second part is going to be a progress report of all the functions and the tools and network of Gucci distribution products, sales and operation planning, communication and people. Where we are today, what we plan to do in the future. The last one is, which are the new initiatives that we are going to take. Finally, the figures that I think you are all interested in. The reason why we are here today, first because I mean, Kering asked me to be here. As Jean-François told us before, that we reached the 2016 target.
In reality, the 2017 target, 2016 target, we are a little bit more advanced than 2017. We are here for two main reasons. The first one is to share with you the new ambitions. That doesn't mean that is a full potential. The second one is to talk finally about the longevity of Gucci, because everybody's talking about that. My tan show you how much I'm worried about the longevity of Gucci. It's kind of interesting to see the different questions that comes around in the different moments of the life cycle of Gucci. At the beginning, competition in 2015, they were telling everybody, "No, what happened to Gucci? Such a pity, such a beautiful brand.
What did these two guys did to this brand?" In 2016, when the first results came out and were showing some good double digit, they were saying, "It's not going to last." In 2017, they said, "Now we have a problem," because they were sleeping. Now the only thing that they could say is the longevity about the brand, how is it going to last, this brand. My opinion is so different from the one that I read today in the papers or listening from the competition.
The reason why that I'm going through the presentation afterwards is that Gucci and Alessandro created a demand, a new luxury that is very far away from a fashion moment, and created a styling lexicon that is unique and is going to be the reason why I believe that together with the use of digital, that is very much the center of any activity that Alessandro is doing. He's going to create a longevity for the brand that is going to be more interesting than the other, the longevity for brands that are more so-called established in the industry. Starting from the beginning. From the very beginning, when we started with Alessandro, we didn't look at focus groups. We didn't look at consumers. We just did exactly what we wanted to do. That was our passion.
These values, shared values of respect, joy, empowering creativity through that, was the key that brought us to change the positioning of Gucci. Of course, at the beginning, one of the most risky thing and more important things to do was to protect the creativity of Alessandro. Because in the first 12 months, of course, nobody was really seeing what is going to happen for many reasons, because the shops were exactly the same as before, the product were exactly the same as before. We discussed and we spoke a lot at that time. Of course there was no tangible impact on the market. One of the most important thing that we did, myself and Kering especially, was to protect and to believe in a turnaround that otherwise would not happen if we were looking just at the short term.
From that moment on, and here I would like to mention what Alessandro said at the beginning, that fashion is not about product. Fashion is about an idea that people cannot resist to buy into it. That to me is key. If we refer to Gucci just as a product, we miss completely the point. If you think to Gucci today, you don't think about the product. You think about a world, you think about something that you want to buy into, that you want to belong to it. The way in which Alessandro speaks about it, to me, is very relevant and is very unique as well. It's all about self-expression because you can really create your individuality through Gucci wardrobe.
Also there's a huge pride in belonging and the huge use of symbols and signs of Gucci used by Alessandro are the way in which millennial recognize themselves. That is part of the fact that it may create a lot of sense of belonging. I want to go through with you to these five points. That as you can see, were the points where we started, and none of them mention figures. Figures we always considered in Gucci as a consequence of choices. We never start from that. The reason why I wanted to show this article is not because of my ego. That is still very important. To show you that in January 22, 2015, that was my first interview- Where I was officializing the appointment of Alessandro as creative director after the men's show that happened like a week before.
If you go through these points, you realize that nothing happened by chance. What we were saying here, and that was absolutely shared with Alessandro, we wanted to restore the Gucci one-time position as a major force in directional fashion. Gucci should become again a brand that is in the mind of opinion leaders, of fashion people. They should feel the need to go into a Gucci shop. You invest in a logo for so many years, and then you are going to be ashamed of it because there is a different trend outside. That, you remember three years and a half ago, everybody was ashamed of showing logo products. Today, most of the competition as well is going this direction. Legacy cannot hold you hostage of your history. Emotions versus simple rationality, and that was one of the reasons why I went for Alessandro, Jean-François was mentioning.
That was a bet, a big bet. Willingness to take risks. Brand and industry need to take risks, otherwise it's boring, and we lose traction as a brand and as an industry. In many cases, new and newness are perceived as a risk. To me, in today's world, it's more risky to be boring and to do exactly the same thing in the past than not putting newness. The brand ambition that is, to me, is very important. Alessandro is bringing you in a dream, as we said, luxury is bringing you in a dream. I think that the way in which Alessandro works, capitalizing a lot on archives, using signs and symbols and mixing them together in a very contemporary way, brought Gucci back to a very modern attitude. The code that he invented in today's world, to me, are very relevant.
The most important thing, the reference to the past, not just in terms of symbols Gucci, but also in terms of times of the past, are never seen by Alessandro in a nostalgic way, but are always projected into the future. The fact that, and to me, that's something that I'm going to stress a lot throughout the presentation, Alessandro created a new world. He created styling lexicon that really resonates with all the ages. We talk a lot about millennials in Gucci. Sure, we will see some figures afterwards. All the age brackets in Gucci grew in the last three years, all of them. We didn't lose any customers. Instead, we brought back to Gucci the ones that were shopping in Tom Ford, they disappeared throughout the previous era. Self-expression is a mantra for Gucci as a whole and for Alessandro.
If you look at the casting, for example, of the shows, these are not the usual beauties, to say the least.
The point is, the reason why Alessandro Michele goes for that is that everybody can be beautiful according to his own individuality, and finding his own way is the way forward, and everybody in his own way can be beautiful. The way of expressing self-expression and creating individuality is what today is changing the world. This is a mega trend that is going around the world. Together with the fact that our sense of belonging of Gucci creates the unique power and asset that Gucci has. If you look at the shows, you understand, I think, that from the very first show to the last one in Arles. If you look at the two shows together, they're very different. It's like Alessandro Michele is writing a book. Every single show is a different chapter.
The chapter is different from the previous one, but is linked to the previous one, creating a lifetime possibility for people to wear it. The fact that it's reinforcing the message is a very strong point for me. Of course, the storytelling that is part of all the activities of Alessandro Michele is paramount. Rationality is something that doesn't give added value. Today, what gives added value, especially in our industry, is all related to emotions. Emotions are related to storytelling that is linked to what you see. Everything that is story told is very much linked to the roots of Gucci. This slide, I think, give you a full picture on how many activities, how much they are coherent. If you go through all the activity that we do in terms of art works, the collaboration with what Alessandro Michele called the creative pioneers, more than celebrities.
How many of them have been discovered in the digital world by Alessandro Michele and brought to fame? The windows that became a very important part in the last three years for Gucci. Advertising campaign that are really surprising is a new language. If you think about a luxury brand that was able to put aliens in his advertising campaign, if you go back three years ago, I think you will be quite astonished. We did it. We created a surprise, and that resonates a lot with the values of Gucci still. That creates an engagement that shows you that the reality today outside is very different from the previous past. What is the risk, the associated risk?
Through the company that are risking and changing and moving the bars all the time, or the one that are tending to continue to do what was successful in the past. To me, I don't have a doubt. The world outside changed. Gucci created a world, speaking to consumers that are really engaged with that in a very authentic and passionate way. If you go to the stores as well, and we go through it a little bit later, but the stores that are at the very end, very different from city to city in maintaining the same aesthetic. The reason why we went through it at the very beginning with Alessandro Michele and Jacopo Venturini was very clear. We wanted to break the barriers between customers and shop. Going back to the shops at the beginning of fashion. If you go back to the beginning of fashion, we had multi-brand shops.
In the multi-brand shops, there was this possibility, in most of the case owned by founders, of touching the product, of interacting with the shop directors. To do that, we wanted to reduce the distance between product, people, and customers. We wanted to create an inclusive ambience that was something very different from the so-called perceived exclusivity that everybody now is promoting. That to me is a complete fake. The mega trend today is not about exclusivity. The exclusivity can be about a product, but the exclusivity of a brand is something very different. Today, what is going to win is the inclusivity of the brand in all the aspects, shops, advertising, communication, and people especially.
The structure that we created, then going forward, we're talking about website, we go through it, we're taking prices all the time, the engagement with social media, again, we go through it. If you look at the complete picture of this slide, you can see that the impact and the coherence of the message is striking, and is very consistent. I read sometimes the fact that there's some comparison between us and other brands, big brands, where an approach and a strategy that conceive a capsule or pop-ups is the one winning, because it's a more prudent approach to business or to industry. To me, it's completely the reverse. You do a pop-up with a capsule, with a collaboration, with a different aesthetic when you are afraid of blending it together with your own network. When you are afraid, you do exactly that.
You test, then, to me, you dilute the message because the aesthetic that you present is so different from the one that you have on the normal network that the final message is completely incoherent. One of the biggest brands that we normally mention, the one that we started targeting from 2016 to become at least this size, French. Did last year, 88 pop-ups. To me, it's exactly what the company today should not do. The fact that we have one and only Creative Director allows us to take decision very quick, in a speed way, giving the possibility to express his aesthetic in our network in a complete way, either capsule or a collaboration or the normal collection in a unique way.
First and foremost, the fact that we have one and only Creative Director, and we have a merchandising team led by Jacopo that is enhancing the creativity of Alessandro instead of just creating basic pieces and is buying for the shops the creativity of Alessandro, is exactly what we need to do. The reason why we were so successful and so quick is because we bet at the very beginning for all the 500 shops that we have, for all the products that Alessandro did across the board. It was the biggest bet ever. It was even more important than the one of appointing Alessandro, we put on the table EUR billions, we wanted to reach the message immediately. In today's world, if you don't do that, it means that you're risk-averse. You cannot be risk-averse in this business.
Compared to other models, the two creative directors with the marketing, most of the case deciding what the shop should have, not showing the creativity of the creative directors in the shops, to me is exactly the way in which the future will not pay off. I'm being subtle. In terms of values, you know how much I care about people and culture. Everything, even before the strategy, started from the culture. The reason why I decided to go for Alessandro, with the blessing of François-Henri, was because he's a nice person, he's a humble person that respects people, he has very strong values. To me, it was the most important thing. It happened to be that I saw a little bit of talent, so we decided to go for him.
Of course, he became what he became because the talent was much bigger than the one that I was expecting, luckily. Everything starts from here. We created, from the beginning, a culture of respect, of joy, of empowerment, of risk-taking across the organization, that we are far away from being perfect because with 13,000 people, of course, there will always be someone that is not going in the same direction because it's a huge amount of people. This way, we are able to empower Alessandro to foster his creativity. For him, for all his team, that is, as you can imagine, is very important in terms of numbers, that is supporting him in all the decision-making process, but also in the company.
Changing the process, changing the organization, fostering a decision-making company that is faster than anybody else is due to the fact that we don't have layers. We are people that decide. It is true that at the beginning when I started in January 2015, the mantra was no democracy in the sense that if I wanted to be quick, we couldn't look for consensus because we would have waited too long. Now is the moment where we need to empower because if we want to keep on running, that is the way in which we can really empower people because it's clear now what is Gucci. That was not the case at the beginning of the journey. Innovation is the last point of the first part. Innovation goes across everything. For me, it's a mantra in the company, it's a mantra in all the functions that you see here.
We can mention everything. I think what's happened, I will go through it in detail later. The idea is very much we don't like the status quo, and nobody in the company needs to like the status quo because today's world and today's behavior is changing quick. Humankind has never seen a change as we are seeing today. The bureaucratic company that look like dinosaurs, they're going to lose going forward. Until I will be in Gucci, for sure that is not going to change. The risk we can run is to be complacent, because when you grow 45%, 50% per quarter, you say everything is going to be fine, everything is going to happen. Exactly what you cannot do. You need to remain agile, very agile in decision-making process and making sure that something happen, you're able to intervene quick.
That is the mantra that we want to maintain in Gucci, and I'm willing to take any kind of decision to change it in the case in which it's not happening. I really believe that the journey of Gucci is just at the beginning. We just scratched the surface. What we are creating is something unique that, of course, I don't have any crystal ball. I cannot tell you we are going to grow 40%, 50%, 10%, 15%. That is not the point. The point that if we are able to maintain these values and these activities going forward in a consistent way as we did in the last two years, there's no doubt the competition will be following. I don't see anybody in the industry today that is doing a 360 approach as we are doing.
That to me, again, is due to the organization that we put in place. We will go through it later, but the organization we have today is made by people and by creative director that are able to work together and to take decision at the fastest pace in the industry. On that, I don't have any doubt. Gucci has been always typical, I think, in its value for its constant capacity for invention and regeneration. The fact that digital came out in the recent past, thanks to the fact that we were able and we were in the situation to change it and to embrace it at the fullest, was a way to speed up the message in a way that was impossible in the past.
I think that the situation of today is that, as I was mentioning before, if we are able to maintain this kind of decision-making process, this kind of agile company, agile organization, and placing always creativity at the center and staying away from becoming so-called commercial, that has never been the case and will never be the case in Gucci, I don't think that there's going to be a slowdown in the process of growing in the future. I'm too much positive, Marco? No? Okay. Sorry. This is the second part, is I'm going to give you a little bit of flavor where we are in some of the most important areas of the company. Who was here in 2016 amongst you? Not many. As I was mentioning earlier, 2015 was really the year to recreate the dream.
We talked about the dream because we want to emphasize the fact that emotions are key, creativity is key. It's not about rationality. It's never about rationality in fashion. Then together with that, we did so many activities to clean the past. If you may remember, we went in markdown much earlier than anybody else. We cleaned all the inventory. We did an activity in order to have enough cash flow to reinvest in the brand in terms of shops, in terms of people, in terms of advertising, and all the rest. From 2016, we started having some touchpoints, like products or new shops or new communication in the network. We were able to set the ambition, and the ambition are the one that are listed here, that are still the one that we want to push forward because there's still untapped potential in most of them.
We see that any single day in Gucci, in the figures, and in traveling around the world and talking to people. These are the 5 points that I want to share with you in terms of where we are today and some hints on where we want to go before the presentation of the figures. Distribution, a little bit of analysis. We went from an 82% share in retail and e-commerce from 2015, to 85% in 2017. Wholesale decreased 2 points to 14%, and I want to give you a little bit of flavor about wholesale. I am going to teach you later, but I think it is important for you to know it now. I hear sometimes that we pushed a lot in terms of wholesale. In reality, we closed many doors. We closed 10% net, meaning we closed approximately 25% of the old doors.
We had the good ones in the past, we reduced the numbers. When the customer comes in the showroom, they have a capped budget. Everybody's complaining; they want to buy more. If I wanted to push commercially hard, I would have leave it open. That's not the case. I want them to be healthy, sound, have a good sell-through, and being happy. I don't want to have too much product in the structure that cannot be sold. You never know. Especially now that we pushed the no markdown strategy. It's important for me that they sell properly. When I hear we pushed too much commercially, in wholesale, for sure not, because we lose the number of door, we cap the budget. In retail, either I close the shops at 3:00 P.M. or I need to sell. I don't know what to do.
In terms of royalty, we will see. New store concept. The idea about the store concept was, as I told you before, to enhance the inclusivity aspect. That goes through the choice of color, choice of materials, and choice of people. We wanted to have people that are genuinely passionate about the customers and try to have the better experience possible. The fact is that the number of people, the traffic that we have is so enormous in the last 2 years, that despite the fact that we are, last year, net in the retail network, 1,200 people, we still people that are not served. We still product that are sold out in the shops. Despite that, we are experiencing this kind of growth. The reason why we wanted to go for exclusivity is because it's the way in which we are, Alessandro and myself.
I was tired about this business in luxury, where people looks at you a distance. They hardly open the door. I want people to touch and to feel the product, to have people that are selling with a proper and genuine smile. Again, this creates innovation and creativity, even at shop level. I think it's time to finish to talk about exclusivity in our industry. We have multiple access points to every customer, all our brands. It could be silk for someone, could be beauty for someone else. The size that we have today cannot talk about exclusivity or perceived exclusivity. If you want to have an exclusivity of product, you come to us, I prepare for you once something made for measure or something DIY, not a problem. That is just your own, fine.
All the rest today, especially with the new generation, is all about inclusivity, is all about engagement in a genuine way. This is what we experiencing with the new concept. The new aesthetic concept that's been launched in July 17, 2015, the first time, I think, in Monte Napoleone. It's giving us amazing results in all the KPIs. If you compare before and after the refurbishment, the increase in sales is between 20% and 30%. As of today, end of Q1, 42% of the sales are made by the new concept. You do the math. The only KPI that is not exceptional is conversion. We were able to maintain conversion at least slightly above the level of the past.
That means that with the increase in traffic that we had, is an exceptional performance. The reason why we're hiring, and we hired in 2017 so many people, is because we wanted to have the best, training them, having them the possibility to serve the people properly. Even if tomorrow we're going to have a slowdown or maturity of the traffic, I'm sure that with this move, the conversion rate will increase sharply. Our target in these figures is that we're going to increase the conversion rate in the period, four basis point. One basis point, for your information, is 8% of the sales. This is the picture, the geography of the refurbished products, refurbished shops. At the end of the year, we have 165 shops refurbished.
The sales represented by the refurbished is, of course, higher than the other because we started from the more visible and the flagship, instead of moving to the second-tier cities. That, again, is another huge opportunity because normally when we do this kind of turnaround, you have a lot of impact and improvement in the bigger cities, and the effect on the 2 and 3 tiers is going to come later. That, to me, is another opportunity to improve. In term of customer experience, we have a lot to do. We started three years ago, changing dramatically the approach of sales associates with the customer. We recently, together with a new structure, created a new store profiling in order to go in more granularity shop by shop, to create the proper assortment according to the customer and according to brand adjacencies.
Staffing the store has been one of the most important activities that we did in 2017 because we hired 1,200 net people. That is a lot considering the size of Gucci, 10% of the entire company. We're using the retail constant monitoring, that's a kind of mystery shopping, using external agencies to give us a full picture of what's happening according to some framework, shop by shop in all the regions. That is not a control method, is it creates a lot of emulation across the shops and immediately created an uplift of the service in any shop worldwide. What we're trying to do is that in any shop, especially in the biggest one, we tend to have all the function of the company. Visual merchandising, retail people, et cetera.
We tend to see the shop director as someone that is managing a business unit. That to me is key because it's a way to attract people in the shops. One of the weaknesses that the retail network has that the retail is not seen anymore as a place where you want to work. If you see the shop a place where you can interact with different functions, it is not just retail, that change complete the perspective. That what we are experiencing. We are taking action to improve all the KPIs. Of course, hiring is key. Clienteling, the retention rate that we are having is growing day after day in a very interesting way. Store operation is absolutely key.
We're able to change completely the back of house of the shops in order to make sure that it is much easier to find the product, all the usual things that I want to bore. Absolutely key, and many people that we have in the shops were the so-called runners, just people going and taking a product to bring it to the sales associate in order to avoid to lose time with the clients. Training, of course, is absolutely key, and we are working as well, especially in the cross-training, and cross-selling activities, because one of the potential upside that we have for sure is about the UPT. That is growing but it can grow much more, considering the fact that the traffic builders that you will see later are absolutely stunning today, and they are in acceleration.
As I told you before, clustering the shops is bringing us to have assortment of product per shop. That is becoming more and more key. As I told you before, traffic is crazy, as you can see from a few busy shops around the world of Gucci. Retention is growing, and that is a very good thing. Means that the loyalty of any age bracket is growing. The average ticket as well, that is a potential. Conversion, what I told you before. We were able to keep it positive versus the past, but can be much, much bigger. The fact that we hire so many people will bring us this conversion rate because of their training, because of their presence, higher in the future. In 2017, we reached approximately EUR 30,000 per square meter. That is an average.
There are many, many shops that are below that, and that is the challenge of the next few years. There is no reason why we should not reach that in the coming years. A little bit because of the shop refurbishment, a little bit because of the training and the activity in the shops. We are still far away from the best in class. We have a lot of opportunities ahead of us. Just to give you an idea, many times people ask me, especially François-Henri Pinault, that told that we are going to be the size of Louis Vuitton soon. This year, according to the current trend, we're going to reach EUR 9 billion retail.
Meaning, when I say EUR 9 billion retail, to compare apple and apple, converting wholesale at a sell-through that is in the lower bracket of the structure because, it's more easier. The same for royalties. If I put all the revenues that we have at retail value, discounting of course the wholesale one and the royalties one with the sell-through percentage target, this year we're going to be at EUR 9 billion. The point to me is not if we are going to overcome Vuitton, but when. No. Wholesale channel, as I told you, the wholesale channel for us is a choice. It's not something that happened. We want to be in the wholesale channel. I think it's important. We have an amazing exchange of experiences and collaboration. It's a great market indicator because when you are in a multi-brand shop, you are there to get space.
You get space if you are better than others, if you have the best product, the best functionality, the best brand. Very much a sign of the market. If you are just in DOS, you don't have that. Again, I'm not saying that our business model is better than others. I don't really care. There are business models that are working better as well. Everybody needs to follow his own path. To say that wholesale is going to dilute the brand, to me is a mistake for a brand like Gucci. It's always been a great partner for us. Going to help us in becoming even better in the future. Travel retail is outperforming the other channel. We started defining a business unit that is completely focused on travel retail, a dedicated organization that is being just put together with a new structure.
We are going to open, not many doors, just in the right location. In certain cases, we're going to buy back and retailize some of the doors in order to control them better. It certainly is one of the driver of the growth in the coming years. E-commerce is being impressive. In Q1 2018 grew triple digit versus the previous quarter. Doubled the business in between 2015 and 2017, from EUR 120 million to EUR 270 million. The traffic growth is exponential, from 100 million to 224 million. First and foremost, the e-commerce is our center of communication as well, is not any catalog. We use a lot this site to communicate content in a different way and to engage customers, especially the new generation.
We have a progressive launch of new markets. We want to have in the short, medium term, a conversion of most of the e-tailers from a wholesale to retail, to control more the way in which it's going to be presented and sold. China. Gucci China, in terms of e-commerce, is fundamental for us. We are using external agencies to support us. The team there is super strong because, as you know, is a country completely apart. We use that to reinforce the image of the brand in a very natural way. Of course, using store locators of Baidu, integrated with our store, with whom we're working very actively. That is the one more important for us now. As far as we talk about Alibaba or JD, we are in a situation of wait and see. We are not taking any stance for the moment.
I think it's too early. It's too dilutive, what they presented today. We don't want to be for sure the first comer there. We see what's happening in the future. While we stand, we have an active partnership. The experience that we are trying to deliver in the e-commerce has been always paramount. We getting prizes from L2, give us the prize as the best digital company in the last 2 years. Certainly, the way in which we approach the e-commerce has been very heavy in the last few years in terms of investment, in terms of centralization of buying, in terms of exclusive product. We approach different markets with different languages and a lot of investment in technology. Technology that, by the way, 3 years ago, Gucci was certainly, still is today, lagging behind in terms of system information technology, but Kering started 2 years ago.
2 years ago, a huge investment for the entire group, Gucci included, in terms of changing the entire system and consider that we caught up later, we're going to get the best technology. I'm very confident that processing the system in the near future will be an added value for Gucci as well. That is not the case today because too many system interfacing one to the other, slowing down the process. One of the activities that we are working on a lot is about the client service, how we create it. We are working on creating a very important Gucci App, where we are going to channel all the requests or answers to the clients for anything, in terms of both e-commerce and brick-and-mortar.
That is going to elevate dramatically the level of service and perceived service that the client is going to have versus Gucci, that today is not perfect. That's the reason why we are investing quite heavily in terms of people, in terms of system, and that's the reason why the investment that Kering is doing in terms of infrastructure is key, because in that case, we need to have full view of the inventory across the board, across the world, and the full view of the clients in the entire funnel, in the entire history. Outlet. Outlet is a part of our distribution strategy. It was absolutely important, especially in 2015, when we got rid of all the previous inventory, or the previous aesthetic.
It's still very important today because with the choice of not having markdown in our shops, we need to have a channel to sell the unsold product. The overlapping of this channel versus the full price of the clients is 2%. We see that as an entry point for the full price. Frankly, I don't see that as a trivialization channel, because it's a way for us to control what we sell. It's a way for us of not destroying what we produce. That, because of the corporate, for the cultural purpose that we set together, is something that is against our principle and values.
The fact that other big brands don't have the channel doesn't mean that the product is not sold everywhere, because the so-called family sales that we see with certain other brands, with the queue in the back of out of the shops. The point is the definition of family. In Italy, we have famiglia. Famiglia, brother. The point is everybody's famiglia in Italy. The point is how you define famiglia. It's the large definition of famiglia that creates the problem of distribution instead of the channel or outlets. In any case, we reduced the number of outlets in the last three years. At the beginning, we opened pop-ups in order to get rid of all the inventory, in order to create cash flow.
We are closing them, we closed 10% of the number of outlets in the last few years because we want to be in the right places with the right control, and we created a business unit that is following it in order to give the right service with the right presentation, because to us, it's a channel that is part of the company. It's not by chance there. Product, where everything started. As I said before, Alessandro create a unique styling lexicon. He really create a new luxury. It's not at all a fashion moment. If you talk to people, if you talk to kids, if you talk to any age bracket, the fact of buying into Gucci, there is a sense of pride that is related to emotions. It's not simple about aesthetic.
You can argue the fact that many people are buying Gucci, it can be visible or not, but let's compare it. The new Gucci started two years ago, okay? Very successful. Most of the other brands established, they are doing the same thing in the last 20 years. Let's do your math. How many same products you have in the world today of this brand that are there from a long time compared to the two years of Gucci? There's no comparison. There's absolutely no comparison. If the longevity is supposed to come from the fact that we are selling a lot today, we're selling a lot in the last two years.
If the other brands have been there for 15, 20 years, selling the same thing and the same logo and the same product, the same bag, et cetera, can give us 15, 20 years going forward, I will be fine with that. In talking creative inspiration, I want to stress especially, I'm sorry, the second part. I want to read it out with you. "I love couture, but the other side of me love the street, and I think the mix of these two can create something new. When I go to New York and London, I love to see how very brave the young people are. They have no rules." Alessandro always stressed that, and that is the reason why he's created a unique styling lexicon, because he's blending streetwear, that is a structural trend. You like it or not. It's like the sneakers.
Sneakers are a structural trend that everybody's wearing, even the most fashionable and stylish person. Staying away from sneakers or from streetwear today is not luxury, it's stupid. This one is something that I show you already before. The fact that Alessandro is able to create a mix of product, even in the most audacious look. Tom Ford said about these looks that if you look at this exit of the show in a superficial way, it seems that it's something very strange. If you break it down piece by piece, you see that anything can be sold at a very high level. This is coming from Tom Ford, that is one of the most biggest supporter of the new era of Gucci.
As well in the advertising campaign, the product is mixed between street and tailored, in this case, with this campaign of Harry Styles that just came out three days ago, four days ago. This picture reached 1 million likes. That is the record of Gucci in terms of engagement in Instagram. There you have all the categories. As you can see, all the categories have fully transitioned, of course, after three years in the new aesthetic. If we take the average price from 2015 to today, it increased 20%. Not because we increased prices. We just increased prices once in September, October last year, 5%, because we changed completely the collection. It's just a matter of both offering, but especially buying from customers and perceived value of the brand and the product from the customers. I was making a test today to look at the past.
From 2010 and 2017, the average price increase of 50% means that the perceived value of the brand throughout these years went up dramatically. It is not just a matter of offering, it's what is around. Collection development. That is absolutely one of the key success factor of Gucci. The offer is built through the equilibrium between creativity and market needs, which are developed in order to further enhance the creativity of the collection, and not to create just basic pieces, the so-called commercial pieces. That is not the case. The collection is one and only. The communication is balanced between fashion image and volume-driven. We want to support icon, volume-driven together, and altogether because the message is so consistent that there is no reason of not supporting one or the other. Famous question about carryover and the rest. We have a balanced mix about carryover.
Today, we reached, finally, after three years of changing completely the collection, because we need to remember that, we have 70% of collection that is carryover. Very dynamic carryover in the sense that, especially for the last few months, we inject, in any season, 30% of the collection about newness. Newness that is fashion-driven or functionality-driven. Some of this newness, according to the product, can become a carryover afterwards. Some of the carryover that are more slow can go out. This way of managing, very active and proactive, is, to me, a big asset of the way which merchandising is managed today. This is the handbag offer. I will go very quick because I think you know all of them, but anyway, the structure is we have an iconic leather handbags, Sylvie, that is coming from the course of the past, reinvented in a very contemporary way.
We have the GG Marmont, the soft chain handbags with the double G. Fashion logo handbags, Dionysus. Reinterpreted logo combined with the House codes. The two new lines. Padlock less new than the previous one. Overall, Ophidia, that is a new line that is more an entry price point, that is always capitalizing on the logo and the course of the past. The brackets of the pricing, you can see that on the bottom. Luggage offer. Again, very clear definition of the presentation of the offer. There is a logo offer, the Luna is one of new vintage, and the GG Black. You can see the pictures. The animation of the logo, the Gucci Courier, the Night Courier, featuring symbols related to a concept of traveling, the first one, a more masculine fashion clientele, the second one.
The leather offer, the Gucci Print, and the GG Marmont as well. What is, to me, striking is the clarity of the message and the clarity of the offer that we have in our shop, and the clarity of the merchandising grid. Women shoes. Sneakers, as I said to you before, is a structural trend, is definitely a structural trend. The way in which Alessandro defined the aesthetic as we read together before, I think it is paramount that we keep on having a good sneaker offer as we do, and of course, it is well successful. As you can see, the balance between sneakers and the rest is quite balanced in the sense that if you look at the women's shoes, the staple function, the loafers and the sneakers, overall, the slides are the same. Men's shoes, sneakers are a little bit more important.
Again, as well, the loafers and the drivers are playing an important part of the business. Ready-to-wear. As you can see, where streetwear is playing an important role, afterward, we will see together how much streetwear is impacting the business of Gucci and how many people are just buying streetwear. Again, I think the offer and the buying is very balanced as well in all the categories, both the streetwear staple fashion for women and tailoring fashion and prep and streetwear for men's ready-to-wear. Talking about streetwear. If we define streetwear like sneakers, sweatshirt, T-shirt, denim, jersey, and outerwear, 85% of the sales are associated to non-streetwear categories, and just 10% of the Gucci client base are exclusively purchasing streetwear categories. Despite any image that someone could have from outside, the Gucci business is very different from the one that can be perceived.
To me, it is very, very solid. Traffic builders have a huge upside. We started later on this traffic builders to build on the categories, on the product and the collection, because we wanted to focus at the beginning on the most important ones, like ready-to-wear and bags and shoes. We started earlier. The growth of this category started earlier. Now we are at full speed. These are, of course, an entry price point for the more aspirational customer, but are as well a huge opportunity to increase the cross-selling and the multiple selling in a normal sale. As you can see from the pictures, the coherence of the message and the aesthetic is quite striking. Fragrance and eyewear. Gucci went through a perfect storm. Both in eyewear and in fragrance, we changed the licensee.
Because Kering Eyewear took over from Safilo, Coty took over from Procter & Gamble. What happened, in the moment of transition, business went down, and today we are not yet at the level of the previous year or the last year of the previous licensee. Means that the opportunity we have here, Roberto will explain to you, I think, in the afternoon about Kering Eyewear, don't want to overlap, especially to say something that is not magic. We'll talk about fragrance and beauty, the opportunity that we have because of the aesthetic of Gucci to become one of the leaders of the industry, to me is there.
The fact that the size that we have today and the positioning that we have today, especially in travel retail, is the one that we have, show us the possibility that we are going forward, not just in terms of business, but also to attract a clientele that is not purchasing Gucci today. To me, that is a huge, huge leverage for both things, business and image. Communication. Communication has been paramount to deliver this message together with the product of the change and the way in which Alessandro approaches the interaction with customers. The creativity is the one that has been the base and the pillar to touch from and to enlarge the message at communication level. Digital has been the one that sped up this communication in a way that was not even thinkable years ago.
Thanks to this and to the number of people that are giving us data or they coming into our shop through e-commerce and through all the digital activities, we are able today, with new technology, to give a seamless and even more unique experience to any customer that is approaching us. Going through some of the activities in different areas, talking about communication. Collaboration has been absolutely paramount and key in Gucci in the past and still now. I think it's been maybe for the first time that a Creative Director give the possibility to other artists, other designer, to read and to interpret the business and the brand from outside. Including this complete in the aesthetic of Gucci and pushing them in our shops, even in our communication campaigns.
If you think about it, this crowd creativity give us enormous possibilities, enormous opportunities to leverage going forward the creativity of Alessandro, because we don't talk about one single person, but we talk about one Creative Director that is able to interact and to be loved by these digital creative people that can work with them. In most of the cases, they were brought to fame thanks to him. This crowd creativity, to me, has been absolutely key as of today to push Gucci where we are, but it will be even more important because we create a credibility in the industry that nobody else has. All the collaboration are not fake collaboration to sell more. That doesn't make sense together. They are very much linked to the company, to the brand.
The fact that we're putting them in our shops, in our communication campaign, give us the same signal, the same message that is coherence, and to me, again, is an important asset. Yeah, these are true person, two of them coming straight from the digital world, Ignasi Monreal, Unskilled Worker, and Dapper Dan that has been the story. Dapper Dan is quite impressive. I hope you know it. I don't want to bother you. It's absolutely key the way which they interact, and they become friends of Alessandro as a person. That is something, again, quite unique. In terms of connection, we did many things. The Gucci App that engaged with our branded content in new innovative ways, and using as well virtual reality in most of the cases. The art wall in New York, but in many other cities across the world.
Again, utilizing as well augmented reality through the app. The Gucci places, the places that Alessandro loves, that becomes the places where the Gucci community can go and explore. It can be Chatsworth, it can be Sonnino, it can be LACMA, it can be Libreria Angelica that we saw before. It's growing. It's a way to create a world of people interacting, that they share the same values in terms of aesthetic, or in terms of ethical values, and that are the places where they could come and see, and live, and breathe the Gucci world. Digital has been, from the very beginning, at the center of our strategy. Through, of course, the site, where we had a global rollout. We changed the site in July 15, if I remember well.
Again, it become the key for our content, with strong editorial content hub that we have, that is fulfilling every day a rich narrative. With digital media, we do, as everybody, test and learn approach, we are not afraid of taking full risk. If we believe something makes sense, we go for it. Connection is, again, is a must in our world and should be very natural. We try to be more authentic possible, because in today's world, what is not authentic is seen immediately, and if it's fake, it's canceled. These data are quite impressive. Our digital audience, excluding gucci.com, is approximately 60 million people. That is, today, typically this exceeds those of our publishing partners. We are a media company by ourselves.
This is a complex ecosystem that create a long-term value that is difficult to evaluate, but it really create a base to build on the future in terms of content, in terms of engagement, in terms of grass-rooting, in terms of crowd creativity. These are some of the data that reflect the engagement that we have in the digital world. If you look at the Instagram growth, today is even higher than that, so 24.6, I think. Facebook as well, the engagement growth grew dramatically. If you see the share of likes on the right bottom, you can see that versus any other competitor, we are by far away the best. That, apart the number of followers that you have, the level of engagement is the one that makes the difference, of course, because you create real emotional, real engagement.
This is the earned media value in the last 12 months, from February 2018 to February 2017. Again here, what we create in terms of digital content is quite impressive and much bigger than anybody else, especially in 2019, where everybody showed kind of a slowdown. The querying in Gucci, that is where another thing that we look at in order to understand if we are hot enough, if we keep on having the same trend, is a Google search. That is, as you can see from the charts, is quite impressive, and the growth that we are experiencing is growing and growing. The way in which we keep on fostering it is through the continued innovation, the continued creativity, the continued surprise that Alessandro team and Alessandro are doing on a regular basis.
To do so, we put together all the effort and all the tools to allow him to be as creative as possible, and to make sure that this kind of creativity, through him or through the crowd creativity that we said before, through collaboration, always exceeds expectation. That, to me, is a great asset that can be sustained only if you have the right people. That's the reason why the culture remain the key asset of Gucci. People in the creative team, they need to feel the support of the businessman. We need to go very much along. They need to feel that they can experiment, that they can take risks, they can make mistakes. Then you can surprise. You can raise the bar all the time.
That what happened the last two years, and I think it's going to happen again, because there's no reason why, with this culture that we put together, it's not going to happen again. Digital media investment, in 2018, is going to be the most important part of the investment. It's going to reach 55%. It doesn't mean that we cut the print. Print was not cut at all. We do no reduction. We just allocated a new investment year after year on digital first. China is again a country on itself because of the different counterparts. It's very much close in terms of connection, et cetera. We have a very strong local team that is helping us in understanding what is good, what is not good, and supporting agencies.
It's very much helping us in the digital ecosystem in China, to interact with people in the younger generation of Chinese that are very much technologically savvy. Again, if you look at the WeChat Focus, that is, as I told you before, the only one with whom we are really interacting. I think we are doing amazing things through the team, through Robert's team, and through the people in China. If you look at the post of the views, we are the only brand that overcome the 100,000 views. Anyway, I think it's a good sign of the proactivity and rapidity of what we are doing with WeChat. Creativity digital, and data. We have a lot of data. We have many data about everybody that are, of course, signed any privacy agreement.
That allows us to use the best technology in the market in terms of artificial intelligence, machine learning, everything that is possible to use to guarantee a unique customer journey to any customer. We just started. We are just at the beginning. I see that as a huge opportunity. We want to avoid to become mechanical. We want to maintain this emotional side, and we are working on it. I think we are on the right track and that the change in the organization that we did three months ago was as well to maintain this kind of direction. What is absolutely important, we never target an age. We didn't want to target the millennials. We didn't want to target a specific bracket age. We always wanted to target a state of mind.
That's the reason why all the age bracket are growing, some of them quicker than others, in between 18 and 24, and with the millennials as well. That is the higher part. It's very much, it's cross-generational appeal. That to me is the one that is creating a difference versus anybody else in the industry. In terms of customer base, if you look at the generation, 56% are millennials in terms of sales. We will deep dive on them afterward in the next slide. Baby boomers, less than that, 8%, and Generation X, 34%. If you look at the breakdown by gender, they're very consistent versus 2015, 67% in terms of female, sales wise, very much similar to the one in 2015. Same case for local client base. 63% of the sales are the local based, same of 2015, more or less.
Across nationalities, Chinese, of course, they play the more important role in terms of customer by nationality, 34%. Again, it didn't change much versus 2015. It's very consistent. If you talk about millennials, this is the growth that we are experiencing. 60% of the clients are millennials today, with 56% of the sales. As you can see, you do your math, the average ticket is slightly lower versus the average, but is growing faster. That as well is going against the myth that millennials are spending less. Also in terms of retention rate, retention rate is very much similar to the retention rate of the entire population of Gucci. They are loyal. It depends how you engage them. It's not a matter of generation. Also millennials are getting older because we started talking about millennials five years ago.
Now the millennials are so their available income is growing. Season operation planning. For the one that were with us in June 2016, I don't know if you remember, I told you that the system, especially in the location of product and SKUs, we were very much lagging behind to anybody. It was very much a push model of the product in the showroom to the shops and waiting for the sales. Today, we dramatically changed and reversed this approach. The inventory is mainly kept in the central warehouse and sent to the shops according to the initial consideration, but then the replenishment and the location is based on sales on the week of coverage. All based on system, all based on algorithm, artificial intelligence, et cetera.
That brought us to improve dramatically the sales per SKU, reducing the inventory, because the level of inventory that we need to keep now at a shop level is much, much lower, and we are just at the beginning. I think that the team that we put in place that were completely absent in the past is taking care just about that. 100% of the carryover is managed through the system, as is when the newness will be allocated after the first initial location, thanks to the sales. It could look something simple, but it was not the case. When I joined, I saw that as a huge opportunity, and we are just catching up because, of course, the system that we are experiencing are the ones that are best of breed of the market.
We are able to optimize inventory working capital in a way that was unthinkable before, so less leftover. Thanks to the fact that we use the system, we are able to allocate the time of the buyers in the region in a different way, more qualitative, so less allocating and more thinking to understand what's happening in the market, what kind of brands are working well, et cetera, et cetera, traveling and talking to the shops to have better and better buying throughout the showrooms. Here, we're just sketching out. To me, this area is something that's going to give us very good surprise going forward. You saw Art Lab and all the activity we are doing, the exceptional work made by Massimo's team to catch up with the explosion of sales. If you think, in two years, the production capacity doubled.
There's something unearthed in the business, in maintaining the quality and maintaining the lead time. For this reason, when we moved Massimo from the shoes business unit director to, as well, leather goods director, that the reason why then Art Lab is merging both shoes and leather goods together is because of him managing the two together. We started thinking about the future, because if the idea is to reduce the lead time, as we are doing for the shoe, we wanted to do the same for leather goods. The target that we have going forward for the leather goods is to reduce the lead time of 50%. That is due to investing a lot in internalizing production or every strategic partnership through joint venture or long-term contract, exclusive, with partners that are already working with us. Today, between internal and strategic partner, we are 25%.
The target is going to be 65% in the coming years. We already did 10 M&A acquisition in the last few months. We are targeting even 10 more in the next few months. We doubled the head count in these areas in the last year. As you can see, we are investing heavily into the future. That, thanks to the fact that we have a lot of operating leverage, that is not impacting dramatically the profit and loss. Absolutely not. People and culture is the most important area that I told you before. Today, I have a long list of CVs on my desk. That was not the case two years ago. That, to me, is the most important success that we achieved. Everybody wants to work for Gucci, and nobody's leaving. That, to me, is a great asset.
It's a great asset because the more we grow, the more we give opportunity to the people working the company to grow as well and to take bigger opportunities, but as well to attract the one that can bring us something different from outside. We change many things, and we want to maintain and to remain super agile. That to me is absolutely key, as I told you before. We are doing many different things. One that I just want to mention is the Gucci University that we set up in the U.S., where everybody that is joining Gucci is going to spend time into Gucci University, with people teaching, to have an induction program that is able to bring them at speed immediately as soon as they go back to the shops. Future, finally.
The future is putting at speed the new organization that has been changing February 2018, this year. Right? The reason why we decided to change this is that, first of all, everybody told me that I'm crazy, because when you grow 45%-50%, you're going to change the organization that is working so well. The point that what I saw is that at a certain point, you tend to be complacent. When you grow so much, you tend to sit down a little bit. You tend to become control freak. You need to understand that in today's world, with all the information that we have, you cannot become control freak. The more you become control freak, you want to control everything, you don't control anything. You just slow down the process. That the reason why I decided to change and to blend different activities.
The previous omni-channel structure has been broken down. Jacopo became, together with the merchandising role, market leader. We blended market regions and merchandise together. I think it's the first experiment in the fashion industry. Again, we like to take risk, but we like especially to do that if we have the right people. The organization cannot be something set in the stone. You can change the organization according to the people that you have. We saw that was the right thing to do. We increased the responsibility of Robert, becoming Brand and Customer Engagement, giving him the possibility to fully implement the contact with the clients that is not the one in the personal way, more through digital. Putting at full speed Salesforce that we recently Kering bought. Of course, we are the early-
Not the contract.
Oh, not yet? We are, of course, at the early stage, but we are counting a lot on that in order to enhance the customer journey of our customers. Digital business innovation that is being created and is managed by Nicola, where we put everything together in terms of innovation, in terms of technology, e-commerce, and we try really strategic planning. We try to make sure that all the things that are happening outside are learned and known inside the company, and then spread out throughout the company as well. We created a new structure called indirect channel outlet and travel retail with Piero, that we wanted to give a focus on certain channels and business units that we see there's a lot of opportunity, were not managed with the right dedication in the past.
We think that now creating the structure and properly following, both from a corporate standpoint, a regional standpoint, we can achieve the best results, both in terms of business and in terms of image. At the very end, there are three pillars. We want to be Gucci 25.0. 25 because it's the number that Alessandro loves. That's to you. The quantum leap is not just by numbers. Excellence in execution is just doing the journey of design in the best possible way. The culture is the way in which we change our ways of working, and we keep on pushing people and innovate and not staying complacent or relaxed. We don't like that. The next one is the what is going to happen next? What is going to happen outside? We need to be very careful what's happening outside.
There are many possibilities of disruption of this industry. If you talk about 3D printing, if you think about leather in vitro, they can really disrupt the supply chain of the industry, not just about us. We are very active. We are investing and working with startups that are on this field. We are doing the best what we are doing. We are trying to do the best of what we are doing in terms of operational excellence through people that are able to understand that the status quo is not what we like. We are very much eyes open on the world outside in order to make sure that we don't miss the frame. Some things that we are doing in terms of the future, that doesn't mean that we're going to neglect our 500 shops.
We're going to keep on investing our 520 shops in training, in people, in hiring, in activities, in process, because that is the bulk of the business. In the spirit of innovation and trying to get as well ideas from different ways of working, we created this shop in SoHo, in New York, that is completely unique. The idea behind it is slow retail. We have technology there, but is working in a very seamless way. The point is, in our positioning, technology needs to help us to give the best possible service, but without being in the face of the customers. If you want to continue to be pushing at that level, it's the one-to-one connection that's going to create the difference, is the person in the shop that is going to create the difference. We don't want to be fast fashion.
We want to bet on people, on the right one, on the right talents, that are able to create a blend of emotion and connection with the customers. To me, we are going to take all the possible technology that is going to help these people to give the best to the customers and not to sell through face recognition or this kind of thing. It's not what we wanted to do. This example show how much people are spending time where retail is about experience. All the same stuff is not called sales stuff, but it's called connectors, right? For example, connectors. They're being hired by actor studios, visual effects companies. There's not a single person coming from selling and retail, not a single one. They're there to tell you a story, to help you in enjoying the moment.
If you want to buy, you buy. It happens that they buy a lot as well. We're very happy. Gucci Garden, some of you had the chance to visit it, I think, last night. Gucci Garden, again, is a unique experience. You blend the history of Gucci, the journey of Gucci in the previous museum. You have a shop that is a kind of a bazaar where you can find unique pieces just produced just for that shop, with an atmosphere and decor that really engage you. There's the food area done with Massimo Bottura, that is something unique, with a menu that you cannot find anywhere else in the world. We blend the craziness of Massimo together with all the rest to give an experience that you cannot find anywhere else, I think. Art Lab, you visited, I spoke about it a lot.
To us, it is a very important investment where the innovation will come in the year to come, because all the principle about it is to increase synergies between the two product categories, push people in terms of expressing themselves and creating new ways of working in blending technology and savoir faire. I don't think there is not a single similar thing in the world because of this blending between shoes and leather goods. I think we are very much advanced. In terms of people and talent, we are working on, we already almost finalized, a way to create the different ways of working, smart working, to be more collaborative and more close to what the new generation are asking. They don't want to work anymore from 9:00 to 5:00. They want to have some days off.
They want to work from home, and that is a fact, either you like it or not. We need to make sure that we are flexible enough to get the best talents. If they want to work in a different way, we need to understand that, and we need to work around it. We decided to empower employees, to give 1% of their time, working time, meaning four days per year, to NGOs aligned with the activity we do in terms of Gucci Equilibrium in Gucci, in terms of Chime for Change or anything else that makes sense with the activities of the group. Again, I think it's a way to share our ethical value throughout the company with the 13,000 people. If we are able to do so, and they are engaged in that, the possibility that the grassroots with their friends is enormous.
We have an impact on the world as we want to have in terms of sustainability. Then we decided to have the board of inspiration. We took five, six people around the world, that because of their history, their way of talking, the values that we share together, are going to be invited in our shops or do the right things for us in order to enhance all the values that we put in front of us in terms of cultural strategy, respect, joy, passion, and all the rest. These people are keen to do that, and the fact that they are outside gives us the possibility to really enhance our message. Gucci Equilibrium is this brand that has been recently created by the team of Antonella.
The idea was very much to put under the same umbrella all the activities that we did and we are doing in terms of sustainability, in terms of environment, in terms of people, in terms of new models, because we realized that we are doing so many things and nobody know it. We decided to, especially for internal message and external message, to create a brand about it, like an umbrella. People know that they can go and scout through the site, what is happening, what they want to do, how they want to spend their 1% of their time, et cetera. It's the last one, otherwise you are not to follow me. Financial outlook. These are the magic figures. Our next ambition is going to be EUR 10 billion, a 40% plus EBIT. Why and how?
What I presented up to now is the base that we share with all the team, with all my management team, in the last few months, and that becomes our target internally. When it's going to happen, I cannot tell you, otherwise Jean-François is going to ask me the budget next year, but it's going to happen. The growth to EUR 10 billion is going to be through license. As I told you, there's a huge opportunity. It's completely underexploited. Organical sales, I think that is going to grow organically in terms of sales, because of the sell-through is completely amazing what we are doing there. Travel retail is growing faster than any other business unit that we're having. Space increase because I forgot to tell you, we are going to increase, where we can, the space of certain flagship.
The idea in between that, and in between buying back some travel retail doors, we're going to increase in the period 10% of the square meter overall, 3% per annum approximately. E-commerce, the idea is to move from 4% today to 10% in the plan through organic growth, new markets as well, and retailization of the wholesale e-tailer that we have today. The new store concept, the rollout in the period of all the shops with the new concepts, I told you, on average, the sales increase of between 20%-30% from previous aesthetic and new aesthetic. You know, I told you the figures, how much we are in terms of sales at end of Q1 2018, you can do the math about the rest. Retail KPIs, all the KPIs, but mainly conversion, as I told you before.
There is huge opportunity there in conversion to be increased, even if it is positive. I think it is a great achievement that we did despite this traffic. Together with that as well, the cross-selling, thanks to the traffic build that we created, the collection are amazing. All the people that we are in the last 12 months, they are going to give their full support to the growth in the coming months. In a snapshot, the weight of sale will be 80% between retail and retail excluding e-commerce, and the growth is the one that I just told you. The e-commerce is going to become 10% of the business through conversion of key retailers and rollout of gucci.com and organic growth. Wholesale, the organic growth will increase because of the productivity. We are not planning to open new doors, not at all.
License, again, there is a huge opportunity, both in eyewear. We are not yet at the level of the last year or the previous licensee. Especially if you think about beauty and fragrance got all the prizes possible with the only fragrance launched by Alessandro Bloom. That has been one of the best launch everywhere in the world today. Of course, in terms of visibility, we are still blending previous products with the new ones, so it is not easy to get the right positioning in the doors. The plan that we have in the next 18 months, from here to the end of 2019, is very aggressive, both in terms of fragrance, in terms of beauty. I am very confident that we will become, again, a leader in that industry as well.
In terms of sales base, the ambition is to go to 45,000, still below the best in class that are the usual suspects, so you can understand who they are. Of course, Q1 2018 is already higher than the 30,000, as you can imagine. I cannot tell you how much, but you can do the math. In terms of OpEx, despite all the investment that I told you in terms of people, personnel, investment in information technology, and continuing investing in communication and digital, we expect a decrease of 5 basis point in OpEx. We want to maintain a level of CapEx below 5%. 70% of this in CapEx will be going to store-related CapEx that we want to become fully refurbished by the end of 2021.
As I told you, there is going to be important investment in information technology and industrial, that is the other 30% of the bunch. In terms of inventory, because of the system and because the way which I told you before, allocation by pulling and not by pushing, is going to create a reduction in days of coverage of approximately one month, to free up cash flow. These are the key drivers. The idea is to grow twice the market, having a gradual margin expansion. We want to target the EUR 10 billion, the 40% plus in terms of EBIT, maintaining the CapEx below the 5% and improving the working capital. This is to finish, and I want to read that with you, because I think it is important. I am not here to convince you.
I've come to tell you the truth, my truth, because there is no other, but one's own truth, and that's the truth. It's clear, right? Thank you.
Thank you. Thank you very much, Marco. Thank you very much for having accepted to organize this session. It's a huge work for you and for your team. Thanks to the agility of the organization you have set up, you have been able to manage both the operations and the organization of this day. We had an amazing visit this morning, I think you made a very inspiring presentation, so thank you for this. We are now ready to start the Q&A sessions, as usual, I will be the bad cop and I will remind some basic rules. First, I would like to ask you to focus your questions on this presentation on Gucci.
As time is limited, as we want to take as many questions as possible before the hard stop at around 1:30 P.M., please refrain from asking too many questions so you know what is the magic number you have generally in mind, two or three questions and no more. Finally, please clearly state your name and your title before asking a question, as a transcript of this session will be made available by the end of the afternoon. On that note, I pass the floor now to Marco and to the team.
Who is choosing the person? I am? Thanks. See.
Hi. Can everyone hear me? It is Louise Singlehurst from Goldman Sachs. Thank you very much, I think firstly, for such a comprehensive presentation pack this morning. That is very helpful indeed. One question. Just in terms of the online and the virtual concessions that you highlighted in terms of the distribution strategy, Marco, can you talk about where you are now, what kind of projects you have in mind, and perhaps how that will incrementally drive the online business? You clearly have a big chunk of your business coming from millennials, a tiny proportion which comes from online today. Thank you.
You want to answer, Nicola? Can answer? I try to allocate the question if I can to my team in order for you to know them as well.
The online concession is not at the beginning a new business that we are going to create. It is very much following the same process that we followed in retail, that is transferring some business we have with partners into a concession that we operate. It starts from business that already exists because we have a huge business today with e-tailers such as NET-A-PORTER, U.S. department stores, Mytheresa. The idea is to work with them to transfer this business into concession in a close partnership, of course, and we believe that by doing so, we can increase their business by bringing our expertise and also by bringing more fluidity in the inventory, obviously. The idea is that this should contribute to more or less half, slightly more than half of the growth that we expect and that we presented.
Yes. Sorry.
Hi.
Ladies first.
Hi, Helen Brand from UBS. You gave us a growth for the pricing up 20% over the last couple of years. When you think about the sales density uplift, how much do you think of coming from pricing over the long term? Maybe a little bit of a breakdown. Obviously, we saw the 5% like-for-like price increase this year. How much do you think about coming from mix shift versus a like-for-like pricing within your price uplift going forward?
It's very difficult to give you an answer on that. In 2018, it will be very much volume driven. We don't expect to do any increase in pricing in 2018 because we did it already in September 2017, we're enjoying a lot of impact in terms of margin, of course. I think there's a role for improvement on the pricing going forward. Not necessarily this year, because we decide to wait and see. In terms of the past, I think the increase has been driven approximately one third from pricing in the last few years, and two third from volumes. This year is going to be mainly volume driven. Did I answer correctly, more or less?
Look, the point is, it's very difficult to give you an answer on that. I can throw you numbers, but then in today's world, you need to be very flexible, also currency fluctuation will change, of course, the decision-making process. I don't have a plan to tell you, in 2019, I'm going to increase 5%, it's very difficult to say, frankly.
Yeah.
Ask.
This is Erwan Rambourg from HSBC. Three questions. First, on sector growth. Two years ago, you gave an indication of what you expected for the sector for the coming years.
Yeah.
It turned out to be much better than expected. What do you see coming forward after two years of strong growth in the sector? Secondly, on your EBIT margin guidance, are we to understand that the growth margin should remain broadly stable and the margin will rise essentially through leveraging OpEx?
More or less.
Secondly, I wanted to ask, you gave two targets, 10 billion sales and 40-plus % margin. Do we consider that they should take place at or happen at the same time, or one before the other?
Which is the first? I forgot the first one. Was it the first one?
Sales and growth.
Sales and growth. What I learned in my experience, that if I try to do a forecast on the growth, I'm going to make a mistake. There's no doubt. Everybody's saying, I tell you what everybody's saying, like Bain, Boston Consulting, the expert on the industry growth, that the growth will be continued, even a little bit stronger than in the past, because of many reasons. Because of the availability of millennials, because the Chinese middle class, they're entering the market, et cetera. I cannot tell you if it's going to happen. The point is that, for me as a company, I need to really focus on what we do and which is the reaction of the customers always, and remain agile enough. If there is any external shock that could happen, I'm very flexible to react.
On the rest, if it grows 5%, 6%, 7%, to me, it changes all the time. If you look at any, Bain presents the forecast twice a year, I think, right? All the time, they're different. Okay. Fine. I have an idea. I can tell you the 5%, 6%, whatever it's going to be, look at what happened in 2017. It's very difficult to I cannot bet my strategy on someone else growth. I need to be very focused on what I do, on what I can control. That, I cannot control it. That is my answer. I saw Luca. There's three questions, I need to remember all of them. Gross margin.
I think gross margin, we are experiencing, if I can say, Jean-Marc, and his study, it's not just OpEx. I didn't mention the gross margin, but I think gross margin is going to improve as well. You will see that at the end of this semester. By the way, they told me that I can say, we are not seeing any sign of slowdown, just for your information, in this quarter. Percentage wise.
Excluding aging and
Last one is the same time, right? EUR 10 billion and 40%. My guess is that 40% will be much quicker than the EUR 10 billion. Not much quicker, will be quicker. Note that much is can be misleading. Quicker than the EUR 10 billion. Yes.
Maybe, sorry, Hello. Just on the point of the gross margin and about your question on aging. As you know, aging is managed centrally.
Exactly.
Marco cannot react on the aging point. What Marco says is that thanks to the work done on the supply chain, plus the distribution mix, and the fact that his online channel is accretive, we can expect additional improvement of the gross margin. As regards the aging, it's managed centrally at corporate level.
Thank you, Jean-Marc Duplaix. Thank you. I see Luca wanted to ask a question.
Thank you very much. Luca Solca from Exane BNP Paribas. Marco, I found your point about inclusivity and exclusivity very intriguing. I wonder if you could elaborate on that, and if you do see that inclusivity is going to be far more relevant going forward versus the usual foundation of the luxury industry being based on providing exclusivity and status recognition. Is that, in your mind, going to be very different from saying that the codes and the reason why fashion is, in a way, embracing also leather goods, but the reason why one was buying, I don't know, Dolce & Gabbana or any other designer brand is now the reason why one is buying leather goods brands that are successful in hitting the spot of the current zeitgeist? Second question on-
The third one.
Okay. Third question on how you see your position on multi-brand digital retailers. I see that some of your competitors are securing ownership of multi-brand digital retailers. Do you anticipate to have a few partnerships, or do you anticipate to have a broad presence across multi-brand digital retailers? How you see that evolution. Thank you.
In terms of the question about inclusivity and exclusivity, as I tried to touch briefly throughout the presentation, I think there's a myth of exclusivity in the industry today, in the sense that everybody's talking about exclusivity, but the size of our companies, in most of the cases, is so big that talking about exclusivity to me is a kind of a misunderstanding. We moved in terms of definition to perceived exclusivity. I don't understand what it means exactly, frankly, myself. What I see happening outside is that, especially in the younger generation, in Millennials, the thought of having something that is unique to you is important, but is not as big as the possibility of being part of a tribe, or being recognized of part of a tribe, still showing your own individuality.
If you look at any mega trends for any scenario company, inclusivity is the one winning over exclusivity in any kind of industry. All the culture of the company, of Gucci, despite this mega trend, has been set according to inclusivity, in terms of approach in the shops, in terms of fostering the creativity, in terms of opening the brand to collaboration that were not normal to look at. My impression is, especially in the younger generation, that by the way, are the one influencing the oldest one. I think the values of inclusivity in terms of having the possibility to touch, having the product immediately, not waiting, having a closer connection with the product in the shop and the people in the shops, I think is going to win versus the think of being distant as it was in the past.
That's my take about that. In terms of back company, ready-to-wear company, I said the way which Alessandro structured the image, the perception, and the shows, and events and communication of Gucci, brought the cause and the aesthetic of the ready-to-wear into the bags. That is something quite unique. The two together, they speak the same language. It is true that historically, Gucci has been a bag company because the roots are clearly in the leather goods. If you think today, in your perception about Gucci, you have a complete different image. You have an image of a brand that is more umbrella, driven by the shows and the communication that is delivering very much not a product, but a lifestyle. That, to me, is again, one of the reason why we've been so successful so quickly. The third one, please. You know everything.
The multi-brand, et cetera. I think we are fine where we are. We are working with the best today in terms of multi-brand. Today, to me, is a liquid society in the sense that in the past when digital was not present, the niche brand, they needed to have just two, three shops, and you say, "If you want to buy, you come in my shops." Today, even the smaller brands, they are so visible because of the digital, because of the social and the rest, that this kind of supposed exclusivity, again, is not existing anymore. The real differentiation is how much you can engage with the customers and how much you are able to create this kind of connection. That to me is different. We are not expected to increase the number of multi-brand online activities.
Whilst we, as Nicola was saying, we are thinking of some of them, with the biggest ones especially, to transform them in concession in order to make sure that they have the right content, we can deliver the right product, the right inventory instead of them buying a little bit part and not satisfy the customers. Celia.
Hi, it's Antoine Belge, HSBC. Two questions for once. The first one is relatively basic, is now when you look at your regional profitabilities, are they significantly different? Because, again, you're bullish on Chinese consumption-
Yeah
I guess you imagine that you probably acknowledge that there will be volatility on one of the shops. That's my first question. On China, I'd like to know if you're happy with your current store network or if part of the 3% increase in the square footage will come also from China. I think also maybe more specifically on e-commerce in China, what's the strategy between your own capabilities and the one of third parties?
Okay. Can I talk about it? Yeah. My essentials. In terms of profitability or sales density, let's put it in this way, at regional level, the average that you saw, the approximately EUR 30,000 per sq m is very much scattered. We have regions where we are far away from being there and where we have the biggest potential. The regions where we are below that are Japan, because it's the one that started later, as you remember. Japan was the one because of the way we see fashion, they want to see it's going to be consistency throughout the time. They don't want to have fashion, they look and see. Strangely enough, the U.S., where we are experiencing huge growth. It means that the potential that we have in the U.S. is enormous, despite the growth that we are experiencing.
In terms of China, I think overall, we are fine with the network. We are fine with the network. Despite the fact we're going to maybe close one shop or the other, there are some places that we are doing an important investment, especially in Shanghai, to create a flagship. It's already signed the contract, so it's something that's going to happen. To give a better visibility in terms of branding at shop level. Overall, we're going to close some doors and open some doors, about three, four. It's not a major change. Strategically, what we want to do is to create point of sales in terms of size and image that are better than in the past, mainly Shanghai. It's been signed already, so it's going to be open soon. Thank you. Want to talk?
E-commerce in China, we believe we are just in the beginning. We launched the site last year. We are operating locally. It's working very well. The first thing, I think, is that the primary role today of our website in China is to drive people to the brand and drive people to stores and to educate consumer. A big part of the e-commerce in China happens through the platforms. There is a mix of counterfeit, resellers, et cetera. The portion that we capture on our website is, for the moment, tiny, but it's growing very fast. Over time, we see a lot of potential, and we don't see with the appetite for digital why it shouldn't be as big as our website and penetration in other regions.
In terms of the external platforms, it's what Marco was saying, for the moment, we are not present and we have no short-term plan to be present on Alibaba or JD. We are partnering a lot with Tencent. We have a WeChat store integrated with our website. We are growing a lot this partnership and the other. We are, of course, having relationship with them, wait and see when the environment improves to be present.
Okay, sir.
Thank you. Edouard Aubin from Morgan Stanley. Marco, just one question on operating leverage. If we look last year, 2017, I think your EBIT margin expanded 550 basis points, and if I recall, your organic growth was around 44%. If we look at consensus this year, consensus is expecting only half of that expansion, I think around 230 basis points. Everything else, I'm not going to ask you for guidance, but everything else being equal, if you were able to post the same type of organic growth, because you told us that there was no slowdown so far, would the operating leverage be similar this year as it was last year?
Let me check with Kering. No, I cannot. Sorry. Sorry.
Marco, thanks very much for the comprehensive presentation. John Guy from MainFirst. Just a question, first of all on CapEx. You highlighted that you were going to sustain the CapEx below 5% of sales. I think historically, in the last couple of years, Gucci's been generating free cash flow of over EUR 1 billion. It's been incredible achievement, tripling the free cash in the last two years as a group. Going forward, you say below five, are we talking three and a half? Maybe can you give us an idea over the next few years as to where CapEx will effectively play out? What will you do with all the cash?
I don't know. I don't manage the cash. These two manage the cash.
My second question is on the internalization of production. You've given us some targets and ambitions, obviously for footwear and for leather in particular. Are there any other areas where you see opportunities, on the ready-to-wear side, for example? Maybe you could share some thoughts there. My final question, given the change in the organizational structure and the new pillars that you've put in place, what's been the biggest positive surprise for you so far?
Of course. Don't worry. Low the CapEx level, CapEx percentage.
I will address also the question on the EBIT margin expansion, so that I can provide you some. You know that, as clearly explained by Marco, we are still at Gucci in a phase of investments. Last year, we have recruited a lot of people in the organization. You mentioned the number of people in the stores. We're absolutely needed to improve the quality of service. This year, we had the full year impact of this cost. We have decided also to anticipate some initiatives. You have mentioned all the work done about CRM business intelligence, data mining. It's true that we have anticipated these initiatives. We could have waited what was initially planned, and we have decided to expense sooner in the process to keep the advance that Gucci has gained on the market.
That's the reason why we are quite cautious in terms of reinvestments of the gain or the gross margin, and as clearly stated, and we will stick to that message, we want to gradually expand the EBIT margin. As mentioned by Marco, there is a mission to exceed 40%. As we mentioned also, it's true that already, as during the presentation of Q1, during H2, the comb base will become tougher for Gucci in terms of sales. We prefer to remain cautious, but we believe that we could deliver a very solid operating leverage this year. As regards the cash and the CapEx, you know that what has changed in the organization of the group is that many initiatives now are managed by Kering as a corporate organization, thanks to the impulse and the support of the brands.
There are a lot of CapEx, in fact, which are now carried on by Kering as a corporate organization. The percentage of CapEx at Gucci and in the brands tend to decrease, but there are also massive investments at group level. Part of the cash generated by Gucci also is invested at corporate level to finance all the transformation programs we have, be it in terms of logistic, in terms of supply chain, in terms of information systems. You mentioned Salesforce, which is a group initiative, of course, with a big contribution of Gucci in terms of expertise. What we could say also is that despite what has been mentioned by Marco regarding the inventories, we have now a cash generation at Gucci, which should remain very high if you compare the EBITDA and the free cash flow.
We are still keeping this ambition to deliver a very solid cash conversion, and I think that's exactly what we have agreed on. It's not detrimental to the investments you have mentioned and the CapEx investments you have in mind.
I think I need to finish the question. In terms of looking at maybe internalization, ready-to-wear or other categories, we are very careful to see if there is any opportunity, of course. At the moment, there's nothing in the pipeline in terms of ready-to-wear especially, that is perfectly managed by Clio, that is managed by Kering directly. It's not under my direct responsibility in terms of the top line. Not the top line, the top people. Of course, we are there. There are some suppliers that are doing 95% of their work with Gucci, and they are critical, and we were going to buy them, of course, but it's not the case today. In terms of industrial organization, of course, we are scouting always in terms of accessories, in terms of tanneries. We are very in the market.
In terms of what I saw, what I realized in terms of organization, I think we, in such a short period of time, we were able to improve the decision-making process very quickly because now the regions have just one person to talk to, that is Jacopo at the end. That's the one deciding both on the location of the merchandise and they choose the buying and the retail streaming. Of course, there's no challenge anymore. You can do that because of the person that is in charge, that is more critical than anybody else, so there's no problem of not creating challenges in any case.
The second thing that I realized is when you do these kind of changes in a company that is growing 40%, 50%, and you are bold enough to do these changes, the impact that you have from a mental standpoint of the organization is impressive. Because if everybody's listening, is watching that, they say, "If he has the courage to do this kind of change in this situation, I should do the same." You create a kind of a virtuous circle in the organization that is something that is very intangible, but what we realized. Also, the third one, I think I created a team that was there before, apart Jacopo, that has been the addition, that is really working well together and is, to me, is a unique asset in the industry. It's not bureaucratic at all.
They work together, and they are empowered to take decision and in a very seamless way. To me, it's key for the success of Gucci today because of these people and the people below them.
Thank you so much. Susanna Busch from Berenberg. I have three questions, please. First of all, on your retail staff incentive system. I guess, you have the 10% e-commerce target, and given historically how the incentive system for the employees has been, let's say, on commissions, is there any change that you're introducing? Because technically, what is the incentive for someone that the customer actually shops online? I guess it's one of the challenges the industry needs to address. Secondly, just to clarify on the number of directly operated stores. You mentioned the 3% space growth. There will be some takeovers, but at the same time, are you going to close some more outlets? Shall we expect the number of stores totals to stay flat or actually increase?
Finally, well, this one maybe is a bit cheeky, you mentioned initially 10% space growth, you said it's actually around 3% per year, which means around three years. I know you didn't give out a target for your financial.
You are listening.
Does it mean that the EUR 10 billion and plus 40% EBIT margin, is it a three-year target, am I trying to read too much into it?
Yes. As for the commission, one of the issue of giving the possibility to the people in the shops to being really omni-channel is to give the possibility to find new products elsewhere or through the e-commerce. Of course, they are incentivized to do it because of the commission. We are changing the commission scheme everywhere in the world in order to make sure that the experience is going to be seamless, even from that point of view. For sure at the beginning, was certainly an obstacle in the development. The second one was the-
Store network.
Sorry, store network. Store network, I think overall is going to remain the same. Of course, if we buy back some travel retail, they're going to be counted. They're going to be counted like doors, of course, are going to increase. The other thing that we say, the way in which we count doors in Gucci is that if you are in the department stores, you have four doors in the different floor. You have shoes, bags, and the rest etcetera, four doors. If you compare that with some other brand that have the same shop that goes across the floors, it's one door. It's not exactly apple versus apple. In terms of the 3% and 10%, I think you are good in math, but I cannot give you an answer, no.
Again, what I said before, it's very difficult to plan which is going to be the year. Maybe tomorrow is going to be an external shop, we cannot forecast. The current situation is going to create a problem with the traffic flows. I don't know. Overall, as you see, as you saw in the last few years, we are very ambitious. We are not there to stay second. By the way. We try to push, of course, but I cannot tell you that it's going to be three years, four years, five years. I don't know. The trajectory is the one that I told you. I think this person second. Yes.
Good afternoon. Thomas Chauvet from Citi. Three question. The first one, Marco, you spoke about this tribe of millennials that make, we saw about 60% of your business. The two risks I see to your future growth is, one, a macro shock that would probably impact that group of clientele more than the other. Two, that rapidly their taste and desire for the Gucci brand changes, and they move to another brand which is trying to capture that good luxury demand that we're seeing. How are you mitigating this risk on that particular group of clientele? Secondly, you showed us a slide on the outlet channel, which is a strategic channel, as you said.
It's a channel.
It's a channel, but it's an important one, I guess, from a profitability standpoint. Could you just give us two numbers? How much does the outlet channel represent of your retail sales? Can you confirm that it is for the Gucci brand, more profitable than your full price store business? Thirdly, as Gucci brand desirability is increasing, we're seeing your products being resold pre-owned in the pre-owned online market. I guess that's a good sign, but it's something difficult to control. We're seeing extremely good growth in that channel. How are you thinking about the development of that channel? Is it something you would like to control?
Which is the channel?
The pre-owned resale market.
Okay.
The RealReal, Vestiaire, etcetera.
Okay.
Is it a channel you think you need to pay a closer eye to, maybe to control more directly? How do you think about the resale of pre-owned Gucci products?
Yeah.
Thank you.
In terms of millennials and consumer taste and changing and behavior, the only thing that I can say to you that I think was through all the presentation, I tried to outline. The way in which we, Alessandro, create the aesthetic that is completely unique, the way in which we engage any age bracket, millennial and not millennials, I think is so strong and so consistent and so genuine and so authentic that the only way in which I can mitigate that is continue to do exactly that. I continue to do that, exactly with the company, with the culture. If I'm able to maintain this kind of culture and able to give the possibility to anybody in the company, especially creative team and the product team, to express themselves in a very natural way using crowd creativity as we did in the past with very authentic collaboration.
The possibility we have in terms of creative aspect, creative aesthetic going forward is endless. Everybody now recognize that Alessandro is the one that is putting these creative pioneers on the spot and give them fame, so everybody wants to work with him. Inside the Gucci brand. Frankly, I think that the risk is always there for everybody. We are in fashion. We are not in something different, automotive or whatever. The point is, of course, the risk is there. The way in which Alessandro created Gucci, from aesthetic standpoint, from a prose standpoint, I don't think it's a fashion moment. It created a demand that was not existing before, impacting all the fashion industry. If you go back three years ago, the aesthetic of the industry was completely different. Everything now has been impacted.
The point is that the way which it's been conceived, which is a 360-degree, in any single aspect, due to the fact we are an agile organization, when we take a decision, it goes from the beginning to the end. Shops, communication, social, everything is communicated, and goes across the board. There's no layer that is deciding in a different way, like in some competition aspects. If I'm able to maintain that, and setting the bar every time higher, and using the huge creativity and engagement talent that Alessandro, together for him, the people within the team, and the other people around the world, pushing him in terms of new aesthetic, I don't think that is the only way in which I can see a mitigation. I don't see change in aesthetic. No, not at all.
I think what is doing Alessandro is a reinforcing of the message. I think it's going to create even a more sustainable business. In terms of outlet, I don't think I can answer. Outlets. No, I cannot. Just to reinforce what you were saying, that I told you before, I think it is a part of our strategy for many reason, because deciding to stop the markdown in full price shops, I think is an important outlet to get rid of it at the right price in controlling the sales. Also in terms of sustainability and ethical value, we don't want to destroy the product, so we want it to circulate. I think as well in blending with the Gucci Equilibrium, I think is a good way to go forward. In terms of number of shops, we are not planning to open more shops.
More probably, we're going to close some of them. We're going to just keep the one that we feel better. The third one is? Secondhand. There's this big discussion about secondhand rental today. We know that. I think it's going to be something that we're going to look at. I don't think we need to be the first comer, in a sense. We wait and see. We discussed a lot as well with Kering about it because, of course, many brands, there's a possibility to manage directly or to blend. At the moment, we are not. We are just looking from outside. Let's see what happens. I think you're right. I think it's something that is growing. At the moment, we don't see any negative effect on us for the moment.
Maybe just, Thomas, regarding the profitability of the outlet, the rationale for keeping this channel is the one that has been presented by Marco. It's not a question of profitability, because at the end of the day, with the end of the markdown activities in the full price stores, it has boosted the profitability of the full price stores. The difference between the two channels is not significant at all. That's not the rationale supporting the decision to keep an outlet channel. What has been said by Marco is really the real reason behind this.
Yeah. That's all.
Hi. Mélanie Flouquet at JP Morgan. I have two questions please. The first one is regarding production. Can we go back to production? You mentioned a 50% cut in lead times. I was wondering whether you'd share with us what your lead times are, and how much of this minus 50% you've already achieved? Linked also to production, sorry, an extension of it, what does the supervised production brings to you? How critical is it to the lead times, to the inventory management, to quality control? Share maybe a bit more on that side. My second question is a bit more strategic. You mentioned how important it was to have your eyes open to the outside world. I was wondering whether you could share with us what you're seeing as big opportunities or big risks to your business beyond the shocks to travel-
Yeah
in the next three years, that are coming from the outside that we might not anticipate. Thank you.
Thank you. In terms of the 50% reduction lead time, it is key, especially in the development cycle, but also in the production side. Of the 50%, we didn't achieve anything. It's just a target. It is coming from the fact that we just invested in Artlab. When we sit down together with Massimo, we put all the money to do the investment. We sit down as well to set some targets. What we are experiencing in the shoes business unit, that is the one that we control the most today, because we have 60% that is internalized in a way or the other, both through strategic partners or internal. We see that the lead time is much, much quicker than the one that we are experiencing with the suppliers, external suppliers. In that specific context, the cost of goods sold of our factories is even lower.
The two together brought us to think that if we can apply the same methodology strategically, because as well of the investment that we did here in ArtLab on the leather goods, we could expect a dramatic increase, a reduction in lead time and potentially, but it's not the main objective, a reduction in the cost of goods sold. That is what we're seeing on the other side. That was the shoe, the internal production. The one, the strategic. Oh, yeah. One of the main potential disruptions that can happen to the industry is everything related to the tanneries and the leather in vitro. There are some startups that are working on that. The level of the leather today is not good at all. Considering the speed of technology, it could happen. Kering is looking at it together with Gucci.
Gucci is helping in terms of research and development. Kering is investing actively in order to make sure that if something happens, we are there to protect our business because that is going to create a potential disruption, also in a good way from a sustainability standpoint, of course, because we're going to pollute much less than what we do now. I think the other one is going to be 3D printing, especially for the prototyping and all the rest. Again, we are still far away from having technology that is able to give the speed or the series that we need at our scale and the cost that we expect. Something's going to happen because the development there is quick as well. I see that these two things are, in terms of industrial, are the more impactful.
There's all this world of artificial intelligence in terms of forecasting, in terms of customer journey, in terms of customer journey in terms of buying and also in terms of following the e-commerce and the site, that we started experiencing 12 months ago with some good results and some bad results because we are not a repetitive business. The change that we have in terms of consumer taste, of aesthetic or new product, et cetera, brings you to be very careful in applying bluntly the artificial intelligence. Of course, we are working on it with also external companies, and Nicola is the one leading internally. We are keeping an eye on this because, of course, that could help in many ways, especially in the location and the forecasting that we do for our shops. Last one. This will be the last one. Last one? Last one.
Done. Sorry.
Hi there.
Hi.
Working. Michael Pike from Baillie Gifford. We're a long-term shareholder. One question, you'll be pleased to hear. Clearly, a very rapid evolution and success under your leadership. Your presentation's entitled Quantum Leap. I was wondering what would you like to still be the same about Gucci in 25.0 years, and why?
What I don't want to change is the kind of culture and the way in which we work. Everything in Gucci started from the why, not from the how or from the what. Why we go to work in the morning, why you want to really do what you do on a daily basis. To me, culture and people remain the most important aspect of Gucci, and that is going to be differentiation factor whatever happens. If we are able to maintain this team and the way with the team is working together and approaching the problems and approaching the activities and the processes, there's no way we can slow down. No way. That is what I would like people to say in 25 years in terms of Thank you. Okay. Thank you very much. Thanks a lot. Thank you.